RAP MODULES 2023 FOR CSC EXAMINATION

History of Life Insurance

C S C T R A I N I N G

Insurance In India

Insurance was practiced in India even in the

Vedic times and the Sanskrit term

“Yogakshema” in the Rigveda is in reference

to a form of Insurance practiced by the Aryans

3000 years ago.

The first Indian Life assurance Society was

called “Bombay Mutual Assurance Society

Ltd.”

ℜ “Oriental Life Assurance Society Ltd” in

1874,

ℜ “Bharat Insurance” in 1896 and

ℜ “Empire of India” in 1897 followed it.

CSC_TRAINING

HISTORY OF LIFE INSURANCE

In the Swadeshi Movement of 1905 Mahatma

Gandhi’s call to Indians to give their business

only to Indian Companies gave a boost to the

new companies and they consolidated their

position.

More Indian companies entered the Life

Insurance sector namely

• Hindustan Co-‐operative,

• United India, Bombay Life,

• National and

• Laxmi Insurance.

These companies had to compete with 150

foreign offices including some of the largest

Insurance groups in the world.

Ø Government started exercising control on Insurance business by

passing “Insurance Act” in 1912.

Ø This Act was comprehensively amended and passed as New Act in

1938 for controlling Investment of funds, expenditure and

Management.

Ø The Office of Controller was established. Again, this Act was

amended in 1950.

By 1955, 170 Insurance offices and 80 P.F. Societies registered

companies were doing Life Insurance business in India.

In view of surge in malpractices in Life Insurance business, due to the

illiteracy level being high and lack in will for penetration/ spread of Life

Insurance business, it was nationalised by Government of India and LIC

Act was passed in June’1956, and this Act came into force from

1.9.1956.

CSC_TRAINING

HISTORY OF LIFE INSURANCE

General insurance (which deals with non-life business i.e

insurance of property) also nationalized in 1972 after merging of

55 Indian and 52 Non-Indian companies were nationalized by

forming four general insurance companies.

The Govt. Of India, while liberalizing the Indian economy, also

felt the liberalization of insurance sector because of lower

penetration of insurance as compared to Indian population and its

size and other developing countries.

Initially the Govt. formed a Malhotra committee in 1993 to study

whether the insurance sector should be opened for private

players.

The committee recommended to Liberalized, Privatized And

Globalize (LPG) the insurance sector. In 1999, the Authority

known as Insurance Regulatory & Development Authority

through IRDA Act 1999 was formed.

Liberalisation of Insurance industry will undoubtedly benefit

Indian economy, the Government, Industry, Employee, and

Consumer & Society in the following manner:

CSC_TRAINING

HISTORY OF LIFE INSURANCE

Benefits to Economy

Rapid investment

Improve Quality to Life (New risk covers)

Competition will bring Consumer Friendly Products

Large Scale Mobilisation of Funds

Insurance & Reinsurance Facilities to Major Projects

Export Projects covered at Home

Benefits to Government

� Long Term Funds for Infrastructure

� Long Term Debt Market Instruments Available

� Increased Employment Opportunities & Compensation

� Reduced Financial Burden of

� Rural, Social & Backward Classes

� Contributions in Calamities (Sharing of Social Responsibilities)

Benefits to Industry

� Transfer of Technical Expertise

� Innovative Products and Pricing Options

� Improved Prospects for National Cos.

� Market Driven Economy will Benefit Customer the most.

Benefits to Consumer

� Superior Quality at Lower Prices

� Wider Choice of Products

� World Class Service to the Consumer

� Increased Penetration of Insurance

Benefits to Employee

� Human Resource Development

� Exposure to ‘State of the Art Practices”

� Greater Job Opportunities

� Higher Remuneration

� Professional Management Practices

Benefits to Society Insurance Companies Act as Guardians in number of Ways: -

Ø Risk cover for Large Industry, Trade & Property

Ø Environmental Risks get Reduced

Ø Hit – and – Run Compensations

Ø Crop Insurance for Covering Risk of Nature – Poor Rainfall etc.

Ø Socio Responsibilities Burden shared

Ø Education � Medical � Health �Accident

Government has prescribed the norms as to how Insurance

companies can invest their funds. The norms are as follows:

Every insurer carrying on the business of life-‐insurance shall invest

and at all times keep invested in the following manner:

§ 25% in Govt. securities

§ Not less than 50% in Govt. security or approved securities

(including (1) above)

§ Not less than 15% in Infrastructure and Social Sector b) Not

exceeding 35% in others capital market Investment in “other

than approved Investments” can in no case exceed 15% of the

fund

§ From the above, it will be observed that the Govt. has asked the

Insurance to channel the funds to State and Central Govt.

Infrastructure sectors social sector and rural sector and capital

market. (For details refer the Investments regulations issued by

the Insurance Regulatory Development Authority)

a) Long term funds and debt instruments are available to develop the

economy.

b)Infrastructure funds are available to create roads, bridges,

communication housing etc. It reduces the burden of the Govt.

c) Investment in Rural and Social sector supports Govt. efforts

d)Capital market: If the insurer is investing the fund in the capital

market then industry can enhance their production capacity,

which will have the multiplier effect on the growth of the economy.

v Insurance has become the necessity tool for our life.

v It not only provides security but also saving for future.

v At younger age the necessity may not be felt but as the man grows

old it starts feeling the responsibility towards his family.

v Insurance also helps the economic development of the country

v Moreover, if the people are taking care for themselves about their

present and future needs then Government will spend their funds

in more productive manner.

1. Choose the correct Option

a) Old age is only certain in life.

b) Old age and death are certain in life.

c) An accident is certain in life.

d) An Illness is certain in life.

2. Life Insurance business was nationalized in India in

a) 1956

b) 1947

c) 1972

d) 1938

2. General Insurance business was nationalized in India in

a) 1956

b) 1947

c) 1972

d) 1938

3. Life insurance companies are investing funds as per norms prescribed by the

a) IRDA

b) Government

c) Insurance Company

d) Parliament

4. Insurance is a social security tool. (True/False)

5. Insurance works on law of probability (True/False)

6. Select the correct statement

Ø Statement A: Insurance is relevant only if there is possible economic loss

Ø Statement B: An event, which will certainly happen cannot be insured.

Answer.

a) Only A is true.

b) Only B is true.

c) Both are true.

d) Neither of two

7. Select the correct statement

Ø Statement A: Insurance provides sense of security.

Ø Statement B: Insurance ensures that no loss will take place.

Answer.

a) Only A is true.

b)Only B is true.

c) Both are true.

d)Neither of two

8. Select the correct statement

Ø Statement A: Insurance reduces social costs.

ØStatement B: Insurance is an instrument of social security.

Answer.

a) Only A is true.

b)Only B is true.

c) Both are true.

d)Neither of two

9. Insurance Regulatory & Development Authority was formed

through the IRDA Act in

a) 1999

b)2001

c) 1977

d)1956

CLAIMS HEALTH INSURANCE

In this chapter we look at the

procedure to be followed for

claims.

The

process

for

accident insurance will also

be covered.

Learning Outcomes:-‐

1. Claim process

2. Policy

specific

documents

3. F.I.R.

4. Death certificate &

Post

Mortem

certificate

5. AML Guidelines &

KYC documents

It is important to note the

requirements

under

the

policy for all claims.

Claim process

1.1Health insurance claims

In health insurance, a claim is admissible when the insured

person undergoes, hospitalization. This hospitalization may

be planned i.e. the patient is having a problem which is not

responding to home treatment or requires an operation.

In such a case the TPA/insurance company must be informed

about the sickness or treatment along with the doctor’s

certificate

mentioning

the

illness

and

reasons

for

hospitalization. This must be done before admitting to

hospital. The policy number must be mentioned in the

intimation letter.

Intimation is essential so that the TPA can approve Cashless

facility i.e. direct payment to the hospital for the treatment

and/or set the limit for payment by insurance company [In

case of cashless facility].

C S C V L E T R A I N I N G

CSC VLE TRAINING

HEALTH INSURANCE CLAIMS

1.1.1 In case the insured person is admitted to hospital in

an emergency, [an accident or heart attack], the

TPA/insurance company must be informed within 7 days

of the admitting to hospital.

It must be ensured that information be sent to the TPA

Insurance company as soon as possible. The notice can be

given by the insured, family members or agent or friend of

the insured.

1.1.2 Where the hospital is not on the approved list of the

insurers, the insured will have to bear all the expenses

initially and submit all the documents to the TPA

insurance company for reimbursement, within 15 days of

discharge from the hospital.

It is important to note that the Hospital where treatment

is taken meets the definition of a hospital under the

policy.

1.1.3 Once the TPA is informed a claim form will be

issued which needs to be completed and given back

to the TPA. The TPA will collect all the original bills

from the hospital with all the medical reports and

cash memos for purchase of medicines etc required

for the treatment during the hospital stay.

The original bills, receipts, consultation fees,

prescriptions, diagnostic tests and cash memos etc.

for pre hospitalization must be preserved by the

insured and submitted to the TPA on completion of

treatment. The amount of past hospitalization

period will be reimbursed to the insured. [falling

within sum insured]

1.1.4 If the policy has an excess or co-‐pay the

insured will have to pay the relevant amount at the

first stage and balance will be paid by the insurer

through the TPA.

CSC VLE TRAINING

HEALTH INSURANCE CLAIMS

1.2 Personal Accident Claims

1.2.1 For PA claims the procedure is similar to health with a few differences:-‐

On intimating the insurance company, will provide a claim form which is to be completed by

the insured and by the treating doctor.

The accident needs to be reported to the police authorities if major injuries or death has

occurred whether in public place or at home/private place.

If death has occurred, a postmortem may be required. If insurers are informed immediately

they will guide the persons on the requirements. A death certificate is required. If the policy

had a nomination, the nominee will be paid the claim amount; otherwise legal evidence of

the title is required.

The payment to the insured will be made directly into the bank account, this is done to

meet the requirement of the Money Laundering guidelines.

In the event of death of the insured, the amount will be paid to the legal heirs after they

satisfy the insurers of this fact by submitting the KYC documents and proof of

succession/probate

1.1.5 Life Insurance health claims: As these are benefit policies, the requirement is to

inform the TPA as stated above and on completion of Hospitalisation to submit the

discharge card to enable payment of daily hospitalization allowance and compensation if

illness/injury entitles such paymen

CSC VLE TRAINING

HEALTH INSURANCE CLAIMS

1.2.2 If the accident has resulted in permanent

disablement

the

treating

doctor’s

certificate

mentioning the disability will be required.

For

temporary

disablement

the

period

disablement and fitness certificate will be required.

1.2.3 In family personal accidental policy, in the

event of death or major disablement, the policy in

the name of the injured person will be cancelled. If

the injured person was the insured and other family

members were also covered, the insured’s name

will be deleted. One of the family members must fill

a fresh proposal form to designate them as the new

insured.

1.2.4 If the deceased person is a parent with minor

children, the details of minor children needs to be

given to the insurers for consideration of the

Education Fund benefit under the policy.

1.2.5 If medical expenses extension has been taken,

the medical report, bills, cash memos, prescriptions

etc. must also be provided to the insurers.

Policy specific documents

2.1Health Insurance: -‐

Health Insurance claim is processed after the

following documents are submitted:-‐

Claim intimation letter: this mentions the policy

number, the name of person to be hospitalized,

the nature of the sickness or disease or injury

and particulars of hospital.

a. Doctor’s certificate mentioning the health

problem and the need for hospitalization

b. Claim form duly completed.

CSC VLE TRAINING

HEALTH INSURANCE CLAIMS

Health insurance policy claim proceeding is done in following ways:-‐

2.1.1 Cashless basis

2.1.2 Reimbursement Claim

2.2 Personal Accident

Claim intimation letter: the policy no, the

nature

accident

and

injuries,

hospitalized or home treatment

Claim form duly completed-‐ by

insured and treating doctor and F.I.R.

b. Death claim-‐ Post Mortem, Death

certificate, legal heirs certificate with

identification. If minor children are

survivors

their

particulars

(for

education fund benefit)

Other Capital benefit claim-‐ doctors

certificate of nature of injury and

disability

d. Permanent

Partial

Disablement

claims-‐ doctors certificate on nature

of disability and percentage

Total

Temporary

Disablement-‐

duration of total disablement and

fitness certificate for resumption of

activities.

Original policy for cancellation.

g. Medical

expenses

extension:

all

medical

ills,

prescriptions,

cash

memos, receipts etc in original.

2.1.1 On a Cashless basis: -‐ For a claim

on cashless basis, the treatment must be

only at a network hospital of the Third

Party

Administrator

(TPA).

Necessary

authorizing for availing the treatment on a

cashless basis as per procedures laid down

is required. The procedure is provided

along with policy document.

The TPA will directly collect the other

original documents from the hospital:-‐

a. Hospital discharge card

b. All pathological reports

Hospital bills and receipts

d. Prescriptions and cash memos

e. Indoor case summary

all consultants, specialists etc fee

bills and receipts

g. All pre and post hospitalization

expenses as above must be submitted

by the insured on completion of

treatment or 60 days (whichever

occurs first).

2.1.2 Reimbursement Claims: -‐ In

Reimbursement

Claim,

following

documents are required:-‐

1. Claim Form

2. Discharge summary

3. Prescription/s and cash memos for

expenses

4. All pathological Report

5. Original Diagnosis Report

CSC VLE TRAINING

HEALTH INSURANCE CLAIMS

The F.I.R. is essential for accident claims in

public place or criminal incident like theft,

murder etc. It must be obtained for PA claims

for death and permanent disablement. It is

also required for theft or liability losses.

Death

Certificate

Post

Mortem

Report

The death certificate is issued by the

municipal authority or local authority where

the last rites are to be performed. It contains

the details of the deceased person like name

and parentage, age, sex, address present and

permanent and nature or cause of death.

The certificate is necessary to prove a PA

claim for death due to accident.

Post Mortem report is issued by the coroners

department of the local medical authority

where the body is sent to ascertain the cause

of death. It is issued for cases where cause of

death is suspicious or occurred within 48

hours of accident.

This document details the particulars of the

corpse-‐sex and approximate age, if identified

the name and other particulars; the time of

receipt and conduct of the autopsy. The

condition of the corpse and the various vital

organs and contents of digestive system. The

nature of any trauma/bleeding etc. The

possible cause of death and approximate time

of death.

This document is required for PA death claim

to ascertain the injury was not self-‐inflicted

or under the influence of intoxicants

2.3 Overseas Travel Policy

The

travel

documents

like

ticket,

passport etc copies, claim form are to be

submitted along with the following:-‐

a. For health related claim the TPA is to

be contacted, the excess amount to be

settled directly with the medical

service provider balance paid by TPA if

consent

obtained.

Otherwise

all

expenses to be borne by insured and

submitted to insurer on return home.

Other procedure as above for health

claims

b. For PA claims as detailed under ii)

above

For loss of baggage/delay of checked

baggage-‐ complaint to airline, copy for

insurer

d. For theft claims or liability claims-‐

Police complaint,

plaint or other

documentary proof including incident

report

First Information Report

(F.I.R.)

This document is in the nature of a

complaint made by the insured/injured

party to the police. It is allotted station

diary number by the police authorities

and will be taken up by them for

investigation.

The document contain the name, age,

address of the complainant. The date and

time of complaint. The date and time of

loss or injury. The description of the

incident. The persons(s) involved. The

nature of loss. The suspects with full

particulars. The witnesses, if any, to the

incident.

CLAIMS NON LIFE-‐ PROCESS AND DOCUMENTS

Learning Outcome

1. Intimation of claim

2. Survey Report

3. F.I.R

4. Death Certificate & Post Mortem Report

5. Policy Specific Documents

6. KYC Documents

Claims – The Moment of TRUTH

Intimation of claim

In non life insurance if there is a claim under the policy the same needs to be immediately

reported to the insurance company. This reporting or information is called ‘Claim Intimation’.

Few policies state specific time for intimation of a claim but all do state that the intimation is to

be given forthwith i.e. at the earliest. Health insurance policies state time for intimation which

is generally for planned hospitalization – before admission and for non planned hospitalization

within 7 days of the admission.

1.2 Timely intimation of a claim, even intimation of a likely claim, is very important.

1.3 The intimation enables the insurers to take quick actions for:-‐

Loss minimization

ii)

Claim investigation

iii)

Survey and assessment of loss

iv)

Enforcing rights against third parties.

1.2.1 When intimation is received by the insurers they may send surveyor or their

representative to see the loss. In case of property losses the insured is suggested to carry out

loss minimizing measures like fire fighting ( fire loss), shifting of property to elevated place

( flood loss), segregation of damaged property and shifting of property to a safer place etc.

CSC-VLE Training

CLAIMS NON LIFE-‐ PROCESS AND DOCUMENT

In case of cattle insurance, insured is advised to seek help of

qualified veterinary doctor when to give treatment to the ailing

animal. In case of spread of epidemic in the area, the insured

may be advised to shift cattle to other area which is free from

epidemic, carry out immunization of remaining animals who

are healthy but likely to get infection if remain in the epidemic

area.

1.2.2 Early intimation helps, as evidences may be at the place of

loss and are not destroyed. In case of fire loss the cause of fire

can be better investigated, if questions are asked to eye witness

at the site. In case of flood losses the water flooding the place

can be seen by the investigator and insurance company can be

sure that rain water damage claim is not passed on to them as

flood losses.

In case of epidemic in an area the investigator can collect the

first hand data about the epidemic and can also see the dead

insured animal, if the claim is for death.

In case of accident, early site inspection, becomes important as

all the evidences and witnesses to the accident may be present

there. .

1.2.3 Surveyor assess the loss and prepare an estimate of loss

and prepare preliminary report, if he reaches early. If any item

requires to be tested, samples can be collected and sent for

laboratory test.

In case of cattle insurance in epidemic situation surveyor can

advise the insurance company about the likely loss, due to

epidemic. If the insurers wish they can take up the matter with

appropriate government authorities to control the epidemic. In

case of insurance of poultry or birds local animal husbandry

department may be alerted and request to take appropriate

action to avoid spread of the epidemic.

CSC-VLE Training

CLAIMS NON LIFE-‐ PROCESS AND DOCUMENT

1.2.4 If any third party is responsible for the loss, steps may be initiated to take action against

them for recovery of the loss.

Example: if a cow dies due to negligent driving of the truck owner, police complaint can be made

against the owner and driver of the truck so in future recovery of loss from them becomes easy.

Survey Report

2.1 Under Insurance Act 1938, if the amount of loss is Rs 20,000/-‐ or more, a licensed surveyor

is to be appointed to assess the loss.

Surveyor’s role is very important. In case of property insurance, Surveyor has to visit the place

of loss, collect relevant information and document and submit a report. In case of motor

insurance surveyor has to visit garage for inspection of damaged vehicle and submit his report

on assessment of loss. In case of commercial vehicle surveyor has to visit spot of the accident

and conduct spot survey and report to the insurers. In case of major vehicle losses he may

required to do re inspection survey to report whether all the damaged parts have been

replaced or not. He has to report whether the repair has been carried out or not.

2.2 Survey report contains following intermediaries:

The cause of loss

ii)

The quantum of the loss

iii)

Comments on policy conditions to be followed for completion of claim.

iv)

Comments about admissibility of claim and compliance of terms and conditions of the

policy by the insured

First information report – FIR is the document which gives

information about the intimation of crime to police by the insured. It gives

details of circumstances and likely cause of loss and likely persons involved.

It also gives approximate value of loss.

Of Importance

CSC-VLE Training

CLAIMS NON LIFE-‐ PROCESS AND DOCUMENT

First Information Report ( FIR)

First information report is information to police authorities about accident or

claim.

It is generally done in following cases:

Theft, burglary or housebreaking cases – Property Insurance

ii)

Major vehicular accident injuring third parties or damaging their

properties – Motor Insurance

iii)

Fire incident involving injuries to any persons or causing major property

loss – Fire Insurance

iv)

Cases involving financial frauds by employees or others cause loss to the

insured – Liability Insurance

Death due to accident of an individual – Personal Insurance Policy

3.1 The information to police is required became on intimation police conducts an

investigation and issue their report about the findings of investigation.

In case of thefts and frauds they arrest the culprits and try to recover from them

the lost property or misappropriated money or goods.

3.2 In case of accidental death they conduct investigation and report whether it was genuine

accident or case of suicide or murder.

3.3 For investigation police may take help of forensic department to establish exact cause of

loss incase of fire losses. In case of death of individuals, insurance company may send

dead body for post mortem to find out cause of death.

3.4 3.4 When investigation is completed the police authorities issue final report and if it

takes longer than three months for police to issue the final report, by practice insurers

settle claims on the strengths of FIR.

CSC-VLE TRAINING

Death Certificate and Post Mortem

Report

4.1 Death Certificate is required as a

supporting document for claim under

personal accident policy which covers death

due to accident.

Death certificate is issued by Municipality or

Grampanchayat of the area in which the

deceased was residing or died. It gives the

name, age, address and date of death of a

person.

In case of death of insured person covered

under health insurance policy, settlement of

claim with nominee for hospitalization

expenses incurred for the treatment of the

deceased, the death certificate is necessary.

In case of cattle or other animal insurances,

death certificate is also required. However

the death certificate is issued by a veterinary

surgeon treating the animal or who attended

it at the time of the death.

4.2 Post Mortem report is examination of

dead body of a person and testing various

organs to find out the cause of death.

Generally it is conducted in case of accidental

death or doubtful death at any place. The

post mortem is performed at government or

local body’s hospital in nearby area by the

surgeons trained for that.

In case of insurance of animals post mortem

report is required, which is conducted by a

veterinary surgeon.

5.1 Motor Insurance Claims

In motor insurance, claim can arise due to injury or property damage to third party is

loss/damage to insured vehicle is known as Own Damage chain.

5.1.1 Third Party Claim

In a third party claim, it is necessary that accident is reported immediately to the polce and to

the insurance company.

5.1.2 Own Damage Claim

In the event of an own damage claim [damage due to accident, theft, etc] must be immediately

inform insurance company and police.

5.1.3 In Motor claim cases, following documents are required:-‐

Claim form

ii)

Estimate of repairs, repair bills,

iii)

Survey report

iv)

Vehicle documents

FIR incase of theft of vehicle or injury or damage to third party/ property

5.2 Death Claims for Cattles: -‐ Following documents are required for making claim for cattles.

Claim form.

Death Certficate on insurance company’s form.

Post mortem report.

Ear tag.

Valuation certificate by veterinary doctor.

5.2.1 In case of death of animal insured under Integrated Rural Development Programme

(IRDP) or other similar scheme, death certificate may be issued by Panchas consisting of any

two of the following:-‐

Sarpanch of village.

President or other senior officer of Co Op Credit Society.

Official of milk collection centre.

Supervisor or officer of banking or credit institution.

DRDA or it’s authorized nominee.

Secretary or vice president of panchayat.

Village revenue officer/ village accountant.

Headmaster of a primary school.

In case of claims for disablement veterinary doctor’s certificate with treatment details

required.

5.3 Poultry Insurance: -‐

Following documents are required in Poultry Insurance claims cases:-‐

Claim form

Veterinary doctor post mortem report of sample birds

Daily records of mortality, feeding etc

Purchase invoice for birds

Photographs, medical bills etc.

5.4

Agricultural Pump set Insurance: -‐

Following documents are required in Agriculture Pump set Insurance claims cases:-‐

1. Claim intimation letter to insurer

2. Claim form

3. Repair estimate an bills ( in case of damage)

4. Police report ( in case of thefts)

5. Survey report.

5.5 Other package policies and property insurance: -‐

Following documents are required in other package policies and property Insurance claims

cases:-‐

Claim form

ii)

Other documents as per type of loss: -‐

a. Damage-‐ repair estimate bills

b. Theft-‐ FIR

Survey report (wherever applicable)

d. Treating doctors certificate (accident claims)

e. Post mortem and death certificate (accidental death claims)

6. KYC Documents

In general insurance due to threats of money laundering at the claims stage. KYC norms are

carried out at settlement stage, where claim payout/premium refund is more than one lakh

per claim/premium refund. In cases where payments are made to service providers such as

hospitals/garages/repairers etc., the KYC norms are applied on the customers on whose

behalf they act.

Documents that are obtained from customer for KYC are:-‐

Proof of Identity

b) Proof of residence

The details are in the next page

6.2.1 Proof of Identity

Passport

ii.

Pan Card

iii.

Voter’s Identity Card

iv.

Driving License

Letter from a recognizes Public Authority [as defined under section 2(h) of the Right to

information Act, 2005] or Public Servant [as defined in section 2(c)] of the ‘The

Prevention of Corruption Act,1988’] verifying the identity and residence of the

customer

vi.

Personal identification and certification of the employees of the insurer for identity of

the prospective policyholder.

vii.

Letter issued by Unique Identification Authority of India containing details of name,

address and Aadhar number

viii.

Job card issued by NREGA duly signed by an officer of the State Government.

6.2.2 Proof of Residence

Telephone bill pertaining to any kind of telephone connection like mobile, landline, wireless,

etc. provided it is not older than six months from the date of insurance contract.

ii.

Current passbook with details of permanent/present residence address (updated up to the

previous)

iii.

Current statement of bank account with details of permanent/present residence address(as

downloaded)

iv.

Letter from any recognized public authority

Electricity bill

vi.

Ration card

vii.

Valid lease agreement along with rent receipt, which is not more than three months old as a

residence proof.

viii.

Employer’s certificate as a proof of residence (certificate of employers who have in place

systematic procedures for recruitment along with maintenance of mandatory records of its

employees are generally reliable)

6.2.3 Proofs of both Identity and Residence

Written confirmation from the banks where the prospects are a customer, regarding identification

and proof of residence.

6.2.4 For Micro insurance policies, following documents are sufficient as proof

of identity and address:-‐

Current passbook with details of permanent/present residence address (updated up to the

previous month)

ii.

Current statement of bank account with details of permanent/present residence address

Classification of insurance

Classification

Insurance

There are various types of

insurance products that

are offered by insurance

companies.

Insurance

policies

[insurance

products]

have

been

conventionally

classified

into Life Insurance and

General

[Non-‐Life]

Insurance.

1.1

“Life

Insurance”

business

means

the

business

effecting

contracts

insurance

dependent upon human life.

This

includes

contracts

whereby the payment of

money is assured on death

[except death by accident

only].

Life

insurance

business

includes

Term Insurance

policies,

endowment

policies, whole life policies,

money back policies, unit

linked insurance policies

[ULIP], Annuity policies etc.

NOTE: Module 5 discusses

these products in detail.

1.2.

"General

Insurance

[Non life]” business means

fire,

marine

miscellaneous

insurance

business, whether carried

singly or in combination

with one or more of such

businesses.

In this module we will study about various classifications and sub-‐classifications of

insurance.

Learning Outcomes:

1. Classification of Insurance

2. Types of Insurance in today’s market

Personal lines of Insurances

Personal Lines of

Insurance

The above types of

insurances can be

categorized differently

from the policyholder’s

point of view.

For Example: the Fire

Insurance needed by a

large petrochemical plant

would be different from

that of a small-‐scale

factory in an industrial

estate. The insurance

needs of a dwelling house

or a shop would be still

different.

Based on the consumer

segments that buy

insurance, insurers

categorize their products.

General insurance

products are classified as

commercial and personal

lines. Another way of

categorizing would be:-‐

[i] Corporate sector

[ii] Small and medium

enterprise [SME] sector

[iii] Personal lines and

[iv] Micro and rural

insurance

The components of General

Insurance business have been

traditionally identified as

follows:

1.2.1 "Fire insurance” business

means the business of effecting

contracts of insurance against

loss by or incidental to fire.

In simple words, fire insurance

covers physical loss of or

damage to property due to

various causes like fire,

lightning, flood, earthquake etc.

Causes like robbery, theft, riots

etc also are customarily

included under fire insurance.

Property means fixed assets like

houses, shops, factories, offices,

hotels and other buildings.

Movable assets like furniture,

television, refrigerator,

machinery used in factories,

office equipment’s like Xerox

machines; computers,

jeweler etc. are also part of

property.

1.2.2 ‘Marine insurance”

business includes:-‐

a. Marine Hull which

means the business of

effecting contracts of

insurance upon all types

of vessels [ships, boats,

etc.].

b. Marine Cargo which

means insurance of

goods during transit, by

land or water and

during incidental

warehousing.

1.2.3 "Miscellaneous

insurance business"

originally meant the

business of effecting

contracts of insurance on

all kind of risks other than

life, fire and marine

insurance policies

Classification of Insurance3

Types of Insurance in today’s market

As time passed, many branches of general insurance business developed in the

Indian market and today, we have some insurance companies dealing with life

insurance only, some others dealing with general insurance and some dealing

only with health insurance.

IRDA has identified ten major lines of general insurance business. Insurance

data is compiled and published by IRDA under [i] Aviation, [ii] Engineering,

[iii] Fire, [iv] Health, [v] Liability, [vi] Marine Hull, [vii] Marine Cargo, [viii]

Motor OD, [ix] Motor TP, [x] Personal Accident and the remaining products are

grouped under [xi] All Others.

2.1 Aviation: The insurance of airplanes and the airlines liability to others due

to accidents is covered under Aviation insurance.

2.2 Engineering: Buildings and projects during erection/ construction, working

machinery and equipment, operational risks etc come under this type of

insurance.

2.3 Fire: Explained under 1.2.1 above.

2.4 Health: Costs of treatment on account of illness or accident are under this

type of insurance. Some products cover all kinds of treatments including out-‐

patient treatment, some cover only hospitalization; while some cover only

major surgeries.

Health insurance is provided by both life and general insurers.

2.5 Liability: When a person is affected by the action or inaction of another person, he can

ask for compensation for the loss suffered. Paying the compensation to the affected person

is the liability of the person who caused the loss.

2.6 Marine Hull: Explained at 1.2.2 above.

2.7 Marine Cargo: Explained at 1.2.2 above.

2.8 Motor Own Damage [OD]: Accidental damage to a vehicle can cause financial loss to the

owner of the vehicle. Such losses can happen to private cars, two wheelers, passenger

carrying or goods carrying commercial vehicles or other vehicles. All these are insured by

Motor OD Policies.

2.9 Motor Third Party [TP] Liability: Motor accidents can cause loss damage of someone

else’s property. Motor accidents can cause loss of life or injury to other people as well. It is

the liability of the owner of the vehicle to pay compensation to person’s affected by

accidents caused by him. Such liability to other people [third parties] is insured through

Motor TP Insurance.

2.10 Personal Accident: Due to accidents, one can lose his life. He can be permanently

disabled by loss of a limb or a vital body part as well. This can make him bedridden

permanently or for some period. Though such losses cannot be compensated, due to the

accident, he would be suffering loss of his livelihood and facing difficulty in carrying out

his normal functions. Personal Accident Insurance pays financial benefits to those affected

by such accidents.

2.11 Others: There are many miscellaneous insurance products that are not classified

under a particular type. The larger among these are:-‐

[i] Crop insurance

[ii] Cattle insurance

[iii] Travel insurance.

There are specialized insurances to cover special risks like satellites, large public events,

film production etc.

Classification of Insurance5

3.1 Generic Personal Lines of insurance: Health insurance and personal

accident insurance are personal lines of insurance as they deal with the person, his

physical well being and treatment costs. Personal line insurances are those which are

suitable for individual insured and taken in their own personal names. Personal line

products could be life insurance products, general insurance products and health

insurance products.

3.2 Other Retail lines: There are a few more lines of business that are considered by

insurers along with personal lines of business. Beyond giving protection to individual

lives and treatment costs, they protect financial loss of personal properties.

3.2.1 Travel Insurance: Health problems that occur during overseas travel is a major

part of travel insurance. Additionally, there are risks like loss of baggage, loss of

passport, missing flights etc. associated with travel. Domestic travel also can be

insured. There are variants that cover employment and study tours -‐ covering

employees on deputation overseas and students for medical expenses and

accidents

during their study period overseas.

3.2.2 Householders Insurance: This is a package policy covering assets of a household.

i.e. The dwelling unit – the building and its contents against various risks.

3.3 Social sector and Rural insurances: These are specially customized versions of other

insurances sold to rural populations. Examples include hut insurance, pedal cycle

insurance, sheep and goat insurance, bee hive insurance, poultry insurance, agricultural

pump-‐set insurance etc. For instance, Cycle insurance covers loss/ damage to pedal cycle

and third party liabilities for physical and property damage.

There could be some overlap in these types of insurance. For instance, though Health

insurance is a personal line of insurance, it can also be purchased by an employer to

cover all his employees and their families all across a state or the country, when it is sold

CONCEPTS OF BENEFITS AND

DEDUCTIBLES

Lorem Ipsum Dolor Sit Amet

I) LIFE INSURANCE

Bonus

1.1 In Life insurance valuation of life insurance fund is done

by an Actuary, periodically. At the end of valuation, the

surplus [if any] is distributed to the policyholders as Bonus.

Policyholders, who have opted for participating [with profits]

polices, only, are entitled for bonus.

1.2 There are many methods of paying bonus.

1.2.1 Simple Revisionary bonus is a method in which the

declared bonus is added to the basic sum insured. If sum

insured Rs 50,000/-‐ and bonus declared for the year is Rs

5,000/-‐ the sum insured will become Rs 55,000/-‐.

In Compounded Revisionary bonus the bonus is calculated

not on basic sum insured but on previous year’s sum insured

with added bonus declared up to last year.

Revisionary bonus declared after each valuation, are paid at

the end of the policy term along with the sum insured.

1.2.2 Insurers also declare interim bonus on policies, which

become claim after the valuation date but before the date of

declaration of valuation results. If valuation results are

declared in September for the year ending 31st March, the

policy becoming claim in May will get interim bonus so

declared.

C S C - V L E T R A I N I N G

insurance

there

are

benefits available to policy

holders in addition to basic

cover. In both the types,

certain policies also reduce

amounts out of the benefits

available under the terms of

policy. In this module we will

see these concepts.

Learning Outcomes:

I) Life Insurance

1. Bonus

2. Guaranteed Additions

3. Surrender Value

4. Paid up Value

5. Mortality Tables

6. Premium

payment

Term

7. Assignment of Policies

II) Non Life Insurance

1. No Claim Bonus

2. Excess

Franchise/Deductible

3. Depreciation

II) Health Insurance

1. Cumulative Bonus

2. TPA Fees

3. Co-‐pay

CSC – VLE TRAINING

CONCEPTS OF BENEFITS AND DEDUCTIBLES

Guaranteed Additions

2.1 In some life insurance policies guaranteed additions are

provided. They are guaranteed by the insurance company.

They have to be paid whether any surplus is declared or

not.

2.2 Guaranteed additions are calculated at a rate per every

thousand of sum assured. They are added to the basic sum

assured and are payable along with claim.

Surrender Value

3.1 In life insurance policies if policy holder wishes to

cancel his policy and take back his money, he can do so. The

return of cash value attached to the policy is called

“Surrender Value”.

3.2 Surrender value is generally calculated as a percentage

of paid-‐up value. This percentage is called surrender value

factor. The surrender value factor depends on type of

policy; period elapsed from the start of policy: age of the

life-‐assured etc.

3.3 The surrender value is paid, only if three annual premiums

have been paid.

3.2 In Unit linked Insurance policies the surrender value is

Cash value [Net Asset Value multiplied by number of units]

reduced by surrender charges. IRDA has prescribed

maximum surrender charge under ULIP policies. The lock

in period for ULIP is minimum 5 years.

Paid Up Value

4.1 In case of nonpayment of premium the policy lapses. However, if the premiums have been

paid for three years, the policy acquires value, this value is called paid-‐up value and the policy

becomes paid up. The policy remains in force for the remaining term with reduced sum

insured.

4.2 Normally sum assured is reduced in proportion to the number of premiums paid and

number of premiums payable.

Example: Policy with sum insured of Rs 50,000 if number of premiums payable are 50 and after

payment of 25 premiums if the insured cannot pay the further premiums and the policy becomes

paid up the sum insured will be reduced to Rs 25,000 as paid up as under:

Premium paid

-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ X sum insured = 25/ 50 X 50,000= Rs. 25,000

Premiums payable

4.3 In ULIP policies the concept of paid up value does not apply.

CSC – VLE TRAINING

CONCEPTS OF BENEFITS AND DEDUCTIBLES

Assignment of the policies

7.1 A life insurance policy is a

property. It represents rights. These

rights can be transferred by insured

person in favour of other/s by way

of assigning the policy. Assignment

is transfer of rights, titles and

interests in the policy to other

person.

7.2 Assignment can be done by

endorsing

[signing]

policy

after

writing the deed of assignment i.e.

stating that policyholder wishes to

assign the policy to the assignee. It is

to be witnessed and signed by him/

her and sent to insurers, along with

the

policy,

for

recording

the

assignment. In the event of any

claim policy money is paid to the

assignee.

assignment

the

policy,

previous nominations are cancelled.

Mortality Tables

5.1 Mortality table shows the rate of deaths

occurring in a defined population during a selected

time interval.

In other words the mortality table show the

probability of a person dying before their next

birthday, based on their age.

5.2 Mortality table helps in preparing premium

tables. These premium tables are used for

determining premiums to be paid by individuals

for purchasing life insurance.

A mortality table is also known as a "life table,"

and "actuarial table"

Premium Payment Term

Premium payment term is the period up to which

the insured has to pay the premium under a life

policy.

This term is normally equal to the policy period.

However, insurance companies give the insured,

option to choose a premium paying term lower

than the policy term. If entire premium is paid in

lump sum, it is called as “Single Premium”.

CSC – VLE TRAINING

CONCEPTS OF BENEFITS AND DEDUCTIBLES

II) Non Life Insurance

No Claim Bonus (NCB)

1.1 No claim bonus is generally given under the

Motor insurance policy for every claim free year.

A discount in premium is given, for every claim

free, completed policy period, If any claim is

made during any year, full accumulated NCB is

withdrawn It is available only for Own Damage

section and not for third party liability section.

1.2 The no claim bonus generally ranges from

20% to 50%. An example of rates of no claim

bonuses is:-‐

i) 1st Claim free year 20%

ii) 2nd consecutive claim free year 30%

iii) 3rd consecutive Claim free year 40%

iv) 4th consecutive claim free year 45%

v) 5th consecutive Claim free year 50%

1.3Example: Ms. Kavita has taken a motor

insurance policy for which she is paying premium

of Rs 15,000. If we take indicative rates given

above, in case there is no claim during first year,

her renewal premium in second year will be

reduced to 12,000. If n second year also there is no

claim for third year premium will be 10,000.

Deductible/ Excess / Franchise

The concept of Deductibles/Excess/Franchise is used in health

insurance, motor insurance, travel insurance and fire insurance,

etc.

2.1 Deductible

The deductible is the portion which is not covered by the

insurance. If the claim is up to amount of deductible it is not

payable by insurance company and if it is higher, then only the

difference between the claim amount and deductible is payable.

2.2 Excess

The excess is the amount of expenses that must be paid by

insured, before an insurer will pay further expenses. An excess

is an amount a policyholder must bear before the liability passes

to the insurer (subject to sum insured).

The effect of an excess or deductible are the same if the claim

amount is fully covered, but differ when the claim amount

exceeds that minimum insured value

CSC – VLE TRAINING

CONCEPTS OF BENEFITS AND DEDUCTIBLES

II) Non Life Insurance – Contd

2 Excess

The excess is the amount of expenses that must be paid by insured, before an insurer will

pay further expenses. An excess is an amount a policyholder must bear before the liability

passes to the insurer (subject to sum insured).

The effect of an excess or deductible are the same if the claim amount is fully covered, but

differ when the claim amount exceeds that minimum insured value.

Example:

Policy amount

Rs. 5,00,000

Deductible

Excess

Deductible/Excess Rs. 5,000

Claim-‐1

Rs. 4,000

NIL

Nil

Claim-‐2

Rs. 25,000

Rs.20,000(Rs.25,000

less Rs 5,000

Rs.20,000

(Rs.

25,000 less Rs 5,000

Claim -‐3

Rs. 5,,00,000

Rs 4,95,000

5,00,000

2.3 Franchise

In case of franchise, if the amount of claim is up to franchise it is not paid. Once it reaches

amount of “franchise” it is paid in full, without any deduction.

Example:

Policy amount

Rs 5,00,000/-‐

Payment

Franchise

Rs 5,000/-‐

Claim 1

Rs. 4,000/-‐

NIL

Claim 2

Rs 25,000/-‐

Rs. 25,000/-‐

Claim 3

Rs. 1,00,000/-‐

Rs 1,00,000/-‐

The purpose of deductible/ excess and franchise is to avoid smaller claims and also make

the insured responsible.

Depreciation

3.1 In non life insurance principle of indemnity applies. If the damaged property has

depreciated [natural wear and tear], the insurance company will pay claim which is

equivalent to depreciated property value. An amount is deducted towards depreciation

depending upon the life of property/machinery.

3.2 In motor insurance policy the percentage of depreciation is fixed by Policy conditions.

Different percentages for metal, rubber and fiber glass etc parts are provided in policy.

Some insurers issue policies under motor insurance for without depreciation for which

extra premium is charged.

3.3 Under fire policy there is no fixed depreciation. It is deducted depending on total and

expected balance life of the property/machinery. Example: for machinery, if total life is 20

years and if 5 years are over, 25% depreciation is deducted from the new value at the time

of claim.

CSC – VLE TRAINING

CONCEPTS OF BENEFITS AND DEDUCTIBLES

Health Insurance

It is paid as percentage of a premium

amount for the policies handled by him. He

is paid fees on all the policies and not only

on the policies on which the claims are

lodged.

Co-‐pay

Co-‐Pay is the amount which the insured

person has to bear out of the medical

expenses

incurred

him

for

hospitalization of a particular sickness

insured under a health policy. It is like an

excess but generally higher amount and

always expressed in terms of percentage

say 10%, 20% etc. Moreover in excess if

claim is less than excess then it is not paid

whereas under Co Pay whether claim is big

or small it is payable after deduction of Co-‐

pay.

Example: Mr. Shenoy has taken a health

insurance policy for sum Rs 1,00,000/-‐ Co-‐

pay is 10%. Now he is hospitalized and

submits claim for Rs 30,000/-‐.

Claim payable will be Rs 30,000/-‐ less Rs

3,000/-‐ = Rs 27,000/-‐.

The Purpose of Co-‐Pay is to make insured

exercise economy in spending on medical

expenses.

III) Health Insurance

Cumulative Bonus

For each claim free year the policyholder

gets a benefit known as ‘cumulative’ bonus

and is similar to ‘no claim bonus’ in concept.

The only difference being that instead of

giving a discount, in the next year’s renewal

premium the health insurance company

adds more benefits for the same premium

paid. However, the overall amount of

benefits

will

not

exceed

certain

percentage as specified in the health-‐

insurance policy cover.

Example: Sum Insured is Rs 1, 00,000 and

Cumulative Bonus is 5% per year.

For 4 claim free years, the cumulative bonus

will be 20%. [5% x 4]

In fifth year sum insured will be Rs 1, 00,000

+ Rs 20,000-‐= Rs 1, 20,000

The premium charged will be for Rs 1, 00,000

sum insured.

If claim is made in any year cumulative

bonus is lost.

TPA Fees

TPA fees is the amount paid by insurer to

the

Third

Party

Administrator

who

processes

the

claims

under

health

insurance policies of the company

AGRICULTURE INSURANCE BASED ON NEW EMERGING TECHNOLOGIES

There are about 10 million such farmers, for whom the issue is with

coverage of non-loanee farmers, under the National Agricultural

Insurance Scheme and the Weather-based Insurance Scheme.

The “Weather Based Crop Insurance Scheme is intended to provide

insurance protection to the cultivator against adverse weather

incidence, such as deficit & excess rainfall, frost, heat (temperature),

relative humidity, etc., which are deemed to adversely impact the crop

during its cultivation period.

Under the insurance coverage Scheme, two distinct provisions,

season wise are provided as follows:

KHARIF

SEASON

Crop raised between June and

September/October/November in respect of short,

medium and long duration crops, respectively.

RABI

SEASON

Crop raised between November and April.

C S C V L E T R A I N I N G

Genesis

Agriculture plays a dominant

role in economies of both

developed and developing

countries.

Whether agriculture

represents a substantial

surplus and agriculture

sustainable country for an

economically strong country or

simply sustenance for a

hungry, overpopulated one, it

plays a significant role in

almost every nation.

The production of food crops

including all type of crop

production is important to

everyone and producing food

crops in a cost-effective

manner is the goal of every

farmer, large-scale farm land

owners and regional

agricultural situations.

A farmer needs to be efficient.

Having knowledge and

information on crop conditions

and farming operations will

help the farmers to

understand the health of their

crops, extent of infestation or

stress damage, or potential

yield and soil conditions.

This in turn will give

information on farm

production, as yield (both

quantity and quality) estimates

for all crop products, which will

help control price and promote

insurance companies to offer

insurance and credit support

in case of crop failures.

AGRICULTURE INSRURANCE

Area Approach:

The Scheme is operated on the principle of “Area

Approach”, which signifies that a “Reference Unit

Area” (specific Reference Weather Stations, that

provides “Weather Data” for the purpose of

assessment of compensation), is considered as a

Unit-Area of Insurance for the purpose of acceptance

of risk and assessment of compensation as well

Adverse Weather Incidence:

Following are the weather perils, which are deemed to

cause “Adverse Weather Incidence”, leading to crop

loss, would be covered under the Scheme:

KHARIF

PERILS

Deficit Rainfall, Excess Rainfall, etc.

RABI

PERILS

Un-seasonal Rains, Frost, Heat

(Temperature), Relative humidity, Wind,

Solar Radiation, etc.

Risk period is from “Sowing Period” to “Maturity” of the

crop.

Risk period, depending on the duration of the crop and

the weather parameters chosen, could vary with

individual crop and Reference Unit Area.

Triggers are fixed keeping in mind the moisture/water

requirement of a particular Crop to produce a Normal

Yield.

For Groundnut, the 4 key Crop-

stages identified are:

(i)

Sowing & Germination;

(ii)

Vegetative phase;

(iii)

Flowering & Pegging; &

(iv)

Pod formation &

Maturity.

Sum

Insured

for

Deficit

Rainfall (i.e. the Maximum

Pay-out) are distributed over

the

key

Crop-stages

keeping in mind the relative

importance of each stage.

Emerging Technologies

Identifying and mapping crops help various

agencies to prepare an inventory of what

was grown in certain areas.

It also helps in crop condition assessment,

crop yield forecasting, grain supplies,

collecting

crop

production

statistics,

facilitating crop rotation records, mapping

soil productivity, identification of factors

influencing crop stress, assessment of

crop damage due to storms and drought,

and monitoring farming activity at field

level.

The key activities include identifying the

crop types and delineating their extent

(often measured in acres).

Traditional methods of obtaining this

information

are

census

and

ground

surveying.

In order to standardize measurements,

particularly for international agencies and

consortiums, satellite remote sensing can

provide common data collection and

information extraction strategies.

Area Approach:

AGRICULTURE INSRURANCE

reflectance as a function of plant phenology (stage

of growth). This in turn requires seasonal high-

resolution satellite data for growing seasons.

For example, crops like canola (Sarsoon in Hindi)

may be easier to identify when they are flowering,

because of both the spectral reflectance change,

and the timing of the flowering.

Some times multisensor data may be valuable for

increasing classification accuracies by contributing

more information than a sole sensor could

provide, viz. information relating to plant structure

and moisture by microwave satellite sensor and

chlorophyll content and the canopy structure, by

multi spectral sensors.

The tropical agricultural crops have distinct

multispectral signatures. Monitoring stages of rice

growth is a key application in tropical areas,

particularly Asian countries.

These data are used to classify crop type over a

regional scale to conduct regional inventories,

assess vegetation condition, estimate potential

yield, and finally to predict similar statistics for

other areas and compare results, with the use of

high resolution optical, land use, and parcel

measurement.

With these methodologies it is possible to estimate

the crop yield and .assess insurance coverage, in

case of crop failure.

Satellite images are used as mapping tools to

classify crops, examine their health and viability,

and monitor farming practices.

Agricultural applications of satellite remote

sensing include the following:

a) crop type classification;

b) crop condition assessment;

c) crop yield estimation;

d) mapping of soil characteristics;

e) mapping of soil management practices;

f) compliance monitoring (farming practices)

Satellite remote sensing offers an efficient and

reliable means of collecting the information

required, in order to map crop type, acreage and

crop condition.

It provides both field level information and

synoptic view, which gives information about the

health of the vegetation.

The spectral reflection of a field will vary with

respect to changes in the phenology (growth),

stage type, and crop health, and thus can be

measured

and

monitored

multispectral

sensors.

The high-resolution satellite data increases the

information available for distinguishing each

target class and its respective signature.

Thus there is a better chance of performing a

more accurate classification. Interpretations from

remotely sensed data can be input to a

geographic information system (GIS) and crop

rotation systems.

This can be combined with ancillary data to

provide information of ownership, management

practices etc.

Crop identification and mapping benefit from the

use of multitemporal imagery to facilitate

classification by taking into account changes in

AGRICULTURE INSRURANCE

Crop Monitoring & Damage Assessment

Assessment of the health of a crop, as well as

early detection of crop infestations, is critical in

ensuring good agricultural productivity.

Stress associated with, for example, moisture

deficiencies,

insects,

fungal

and

weed

infestations, must be detected early enough to

provide an opportunity for the farmer to mitigate.

Also, crops do not generally grow evenly across

the field and consequently crop yield can vary

greatly from one spot in the field to another.

These growth differences may be a result of soil

nutrient deficiencies or other forms of stress.

Remote sensing allows the farmer to identify

areas within a field which are experiencing

difficulties, the knowledge of which can facilitate

appropriate support system for farm productivity.

Satellite images and maps as well as statistical

and

graphical

data,

indicate

vegetation

conditions on a pixel by pixel basis and illustrate

the predominant vegetation condition.

A detailed, quantitative analysis with mean

Normalized Difference Vegetation Index (NDVI)

value on a regular basis for crop and pasture/

grassland and differences between stressed and

unstressed vegetation, providing an indication of

plant health. Mean NDVI data can be plotted,

viewed, compared, and analyzed with any other

year in the statistical archive.

Season wise, two to three satellite imageries

may have to be taken for the agricultural area, in

each State, if advised for crop condition

assessment for insurance estimation, in the

country.

The project will have great economic benefit in

terms of yield estimation, food security analysis,

agriculture planning, livelihood analysis and a

host of other spin off benefits, for the rural

economy, in addition to crop security.

CONCLUSION

The mail advantages of GIS are its

flexibility,

speed,

accuracy,

cost

effectiveness and capability to handle large

volumes of spatial and non-spatial data. In

addition, GIS can integrate the satellite data

with attributes and has been developed as

an efficient modern tool in the domain of

map analysis and decision making.

GIS of late, has become a powerful tool to

provide ways to use maps to analyse and

understand how rainfall, crop conditions,

weather and geography affects insurance

applications

including

risk

assessment,

target areas, crop loss, crop yield, spatial

locations and people affected. GIS can be

used

provide

maps,

demographic

analysis, area and people affected, extent of

damage,

insurance

estimation

etc.

Insurance help alleviate the risk and fears

by providing affected farmers with monetary

support in the event of failure of crops.

Conventional crop or livestock insurance

relies on direct measurement of the loss or

damage suffered by the farmer. However,

field loss assessment is normally costly or

not feasible, particularly where there are a

large number of small-scale farmers or

where insurance assessment factors are

undeveloped. Geoinformatics poses as a

powerful tool for addressing this issue.

In view of the emerging technologies in

Agriculture, the Crop Condition Assessment

for estimation of insurance support to

affected farmers will give a fillip to the

development of agriculture in the country.

Fundamental Principles of Insurance

PRINCIPLES OF UTMOST GOOD FAITH

To consider a ‘Life Insurance’ proposal the insurer needs to

know

• Personal details of the proposer

• Personal Health details of the proposer

• Family Health particulars of the proposer

• Previous Insurance details of the proposer etc.

To consider ‘General Insurance’ proposal the insurer needs to

know

a) Details of the property to be insured.

b) Previous details of the property / accidents etc.

The insurer is entirely dependent upon the proposer for the

above details.

The proposer on the other hand knows or is supposed to know

everything about the above details.

Student Notes

FUNDAMENTALS and PRINCIPLES OF INSURANCE

Life Insurance covers insurance of human beings.

General Insurance comprises of

a. Insurance of property against fire, burglary etc,

b. Personal insurance such as Accident and Health Insurance, and

c. Liability insurance that covers legal liabilities etc.

In case any of these principles are missing the insurance contract will become

void.

Hence there is a need for Utmost Good Faith on the part of the proposer.

Both the insurer and the client should ensure that

a) Client discloses all correct and complete information in the

proposer to the insurer

i. Insurer does not withhold any information from the client

such as Standard features of the policy

ii. Premiums / Discounts as per standard policy conditions.

iii.

Inclusions and exclusions in the policy

iv. Terms and conditions of the policy etc.

Utmost Good Faith can be defined as “A positive duty to voluntarily

disclose, accurately and fully all facts material to the risk being proposed

whether requested for or not”.

In Insurance contracts Utmost Good Faith means “each party to the

proposed contract is legally obliged to disclose to the other all information

which can influence the others decision to enter the contract”.

Failure to reveal information, gives the aggrieved party the right to regard

the contract as null and void.

WHAT IS A MATERIAL FACT?

Material fact is every circumstance or information, which would influence the

judgment of a prudent insurer in assessing the risk.

Some examples of Material facts, which need to be disclosed, in the next page:

Fundamental Principles of Insurance

CSC – VLE Training

Continued

Facts generally required to be disclosed

In Life

Insurance

• Age, height, weight,

• Income and occupation,

• Family history / medical history

• Previous medical history if it is likely to increase the choice of

an accident,

• Personal habits such as smoking drinking etc.

In Fire

Insurance

Nature of construction, whether it is

• Concrete or Kucha

• Type of roofing: Thatched /concrete

• Residential building / Godown, Office.

• Whether fire fighting equipment is available or not.

Motor

Insurance

• Type of vehicle / Class of vehicle,

• Purpose of its use,

• Age (Model),

• Cubic capacity etc.

Personal

Accident

Insurance

• Age, height, weight, occupation,

• Previous medical history if it is likely to increase the choice of

an accident,

• Personal habits such as smoking drinking etc.

Burglary

Insurance

• Nature of stock,

• Value of stock,

• Type of security precautions taken.

• This is NOT an exhaustive list and is only indicative.

BREACHES OF UTMOST GOOD FAITH

Breaches of Utmost Good Faith occur in either of two ways.

a) Misrepresentation, which again may be either innocent or intentional. If

intentional then they are fraudulent

b) Non-‐Disclosure, which may be innocent or fraudulent. If fraudulent then it

is called concealment.

Failure to reveal material information can result in the contract being declared as

null and void.

Fundamental Principles of Insurance

CSC – VLE Training

PRINCIPLE OF INSURABLE INTEREST

Ø An Insurance contract is enforceable when the insured has an insurable

interest in the subject matter of the contract.

Ø Insurance without ‘insurable interest’ would be a mere wager and as such

unenforceable in law.

Insurable Interest is defined as

“The legal right to insure arising out of a financial relationship

recognized under the law between the insured and the subject matter of

Insurance”.

WHEN SHOULD INSURABLE INTEREST EXIST

a) In Life Insurance Insurable Interest must exist at the time of inception of

Insurance and it is not required at the time of claim

b) In Marine Insurance Insurable Interest must exist at the time of loss /

claim and it is not required at the time of inception.

c) In Property and other Insurance Insurable Interest must exist at the time of

inception as well as at the time of loss/ claims.

QUESTION.

Can you insure you house under residential building where you are storing fire

works item without disclosing it to insurance company?

Yes / NO. Risk has to be disclosed

Can you take insurance policy of Red Fort situated at Delhi?

No. Since there is no insurable interest.

SUMMARY

The principle of insurance has been formulated so that a person does not make profit

out of the insurance transaction.

The basic purpose of insurance is that the insured is put in same financial position as

he was before the loss.

Fundamental Principles of Insurance

CSC – VLE Training

OBJECTIVE TYPE QUESTIONS

1.When there is a fraudulent non-disclosure of material facts the insurance contracts

becomes:

a. voidable

b. illegal

c. unenforceable

d. Void

2. The legal right to insure means

a) Competence to enter into contract

b) Insurable interest

c) Utmost good faith

d) Consideration

3. The principle of indemnity is applied in practice through

a. Franchise deduction

b. Deduction & depreciation

c. Extra premium

d. Excess clause deduction

4. Methods of providing indemnity are

a. cash payment

b. repair

c. Replacement

d. All

5. Study the two statements below:

Ø Statement A: The proposer need not to disclose facts which considers as not

material

Ø Statement B: Facts which are common knowledge which the insurer is

expected to need not be disclosed.

a) Only A is true

b) Only B is true

c) Both are true

d) Neither of two

Fundamental Principles of Insurance

CSC – VLE Training

6. Which of the following principles of law prevents an insured from making a profit out

of his loss

a. Insurable interest

b. Caveat emptor

c. Utmost good faith

d. Indemnity

7. Read the two statements below

Ø Statement A: The existence of other insurance must be disclosed.

Ø Statement B: Facts of law need not be disclosed.

a. Only A is true

b. Only B is true

c. Both are true

d. Neither of two

8. Insurable interest can be created

a. by common law

b. by statute

c. by contract

d. all of the above

ANSWERS