71669250 Life Insurance Practices in India (1)

8/20/2019 71669250 Life Insurance Practices in India (1)

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LIFE INSURANCE

PRACTICES IN INDIA


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Distribution system

• Distribution System is the relationshipbetween distribution channels, marketsegments and also products is very

important.• Insurance companies should continuously

innovate and integrate the distributionchannel, make them be the part of theoccupying market and highly promotingthe development of their own.


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DISTRIBUTION SYSTEM IN

INDIAN INSURANCE MARKET

• In present Indian insurance market, thechallenge to insurers and intermediaries is two-pronged:

• Building faith about the company in the mind ofthe client

• Intermediaries being able to build personalcredibility with the clients

Traditionally tied agents have been the primarychannels for insurance distribution in the Indianmarket


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Distribution system in Life

insurance

• Need

• Law requirements

• Beliefs and cultural or religiousbackgrounds


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Agents are necessary for the selling life insurance due to the followingreasons:

• Insurance is an idea that has to be explained and its usefulnessclarified personally

• Each prospective buyer has special needs and requires specialized

solutions• Personalized guidance can be given only when there is a liveinteraction with the agent

• Significant amount of money is to be set aside immediately andregularly for a long term in future for a benefit, which is vague andfar away.

• The insurer has to access the risk involved in every proposal forinsurance for which the necessary information would include detailson personal life styles, habits, family etc. The agent, who gets tomeet the proposer closely, is in a position to provide some of thisvaluable information.


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• The distinction of channels in the developed markets arepersonal distribution systems and direct responsesystems.

• Personal distribution systems include all channels like

agencies of different models and brokerages, bancassurance, and work site marketing.

• Direct response distribution systems are the methodwhereby the client purchases the insurance directly. Thissegment, which utilizes various media such as theInternet, telemarketing, direct mail, call centers, etc., is

just beginning to grow.


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Multiple distribution channels

• Agents – Age, known people, gender

• Banks – creditor insurance, banc

assurance

• Brokers

• Work site marketing

• Internet• Invisible insurer


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Work site marketing

• This area needs to be tapped, as in any country one of the biggestmarkets is through the worksite. With changes in human resourcesmanagement polices and compensation packages, group productsor work site products do have a definite market that cannot beignored.

• Here the advantages would be: – Captive customer base

– Potential to sell individual insurance and group insurance

– High trust factor

– High hit ratio for the intermediaries

The challenges would be the cost effectiveness, productcustomization and efficient post sales servicing, which would

determine continued business. Technology has a key role to playin worksite marketing to ensure cost benefits. Banks and financialinstitutions have been successfully marketing credit cards andother financial products using this channel. If not an identicalmodel a similar approach can be used for selling insurance.


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TRENDS IN DISTRIBUTION

CHANNELS • Agency and brokerage systems are common and

contribute maximum share of life insurance business inthe developing countries. The Japanese life insuranceindustry depends entirely upon agents. Part-Time agents

and lady agents form a good proportion of the agencyforce.

• In European countries, notably France, Holland, Belgiumand Spain distribution takes place also through banks.

• Direct mailing is becoming increasing popular in

developed countries. In a small way, this has started inIndia. The scope and the experience are being watched.


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Differences between public and

private sector insurance companies• Public Sector Companies

• Identity is well established, but the perception of " poor service providers" is a stigma.

• Products are not attractive and flexible enough but expensive.

• To retain their creamy layer

• clientele who are the most likely to be wooed by the new companies

• Retain and attract good intermediaries

• Match the aura created by the new companies in the urban market

• Private Sector Companies

• Have to build their identity in a market where the public does not distinguish them.

• Remove the perception that anything that looks good is expensive

• Work against the people's mindset that they are not here for the long term

• Attract intermediaries especially agents with the requisite qualifications and attributes

who can market the company and the product.• Run the risk of tapping an already insured market for repeat insurance instead of

tapping new virgin pockets in the market


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Insurance Models

• Direct Marketing by theinsurance company

• Partner-agent model • De-linked model

• Service Provider Model


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Direct Marketing by the insurancecompany

• Identification of clients, selling ofpolicies, collection of premium,receipts of claims and settlement of

claims etc., all are done by theinsurance companies

• Outreach to provide insurance to

poor through this model has beenvery limited


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Partner-agent model

• Approved intermediary organisations act asinsurance agents.

•

Identify the customers, negotiate withinsurance companies about the adequacy ofproducts and premium rates to be paid,collect the premium

• Assist in clients in claim processing andsettlement


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De-linked model

• Community based insurance facility whereNGO/MFI or federation of the groups act asinsurer

• Coverage of risk remains with the insurer

• Sum insured, design and pricing of products,adverse selection, collection, claimverification and settlement data collectionand maintenance, assessing clientsatisfaction etc are undertaken internally by

the insurer


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Service Provider Model

NGOs generally provide basic health care

facilities to the rural population sincenecessary amenities were simply not

present in their area of operation. Insteadof premium, the service providers chargea membership fees to partly cover theircosts


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Challenges in Insurance Penetration

Designing of products suiting therural market

Using the right distribution channelmix to reach the potential customer

Intermediaries being able to buildpersonal credibility with the clients


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Distribution Channels

• Agents

• Formal Banks

• Regional Rural Banks

• Cooperative Banks• NGOs & MFIs

• Post Offices

• Internet & Rural Kiosks & Rural Knowledge Centers


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Agents

• Prime channel for insurance distribution inurban areas

• Trust of the company & customer must

•

Knowledge of different products• Postman,School teacher, shopkeeper, gram

sevikas, gram sahayaks

• Training & educating poses a challenge

•

Not an optimum channel as 42 % of 600,000villages have population of less than 500


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Formal Banks

• 27 PSBs have19, 104 rural branches and 30Pvt.SBs 1,111

• Private banks are constrained by their lackof reach and meager branch strength

• Banking sector has shown propensity towards the

larger size accounts

• Within the foreseeable future they willnormally not be able to fully serve thatmarket


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Regional Rural Banks

• 177 RRBs together with14,150 branchescover 516 districts and serve a client base ofclose to 62.70 million

• RBI has permitted RRBs to undertake

insurance business as corporate agentwithout risk participation

• Chitradurga Gramin Bank has -in closecooperation with the NABARD GTZ-Project-introduced a new deposit scheme called

“Rakshith” Savings Bank Scheme in tie upwith LIC and UIICo. Ltd


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NGOs and MFIs

• Large number of NGOs and MFIs are involved in

social as well as financial services intermediation

• Out of 61 sample MFIs studied by Sa-Dhan 34 were

providing insurance services

• While all 34 MFIs provided life insurance products,

only 9 facilitated non life insurance products

• The most significant range in amount of cover was in

the category of Rs.10,000 and above


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Challenges faced by NGO & MFIs

• Many of them are working as pure service providerparticularly in health insurance, private insurer,

intermediary

• Poor live for the present and do not plan for the future.Given their fatalistic attitude, it is difficult to explainthe concept of insurance to poor

• Given this mindset, premium is seen as additionalexpenditure rather than risk cover

• Without the availability of basic health infrastructure inrural areas, health insurance is difficult to sell


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Challenges faced by NGO & MFIs

• Cooperation with the insurance company has not

proved successful. Limited motivation on both

sides to improve the cooperation

•

Delays in settling claims and complicatedformalities

• Challenge to pick up the necessaryinsurance techniques and adjust them to the

needs of their members• No legal status as a private insurer. This

complicates the matter further when itcomes to reinsurance


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Post Offices

• There are about 129,000 rural post offices.

• Post Office itself is offering insurance

products to the poor

• Its efficacy as an intermediary channel

needs to be explored


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Internet, Rural kiosks & Knowledge Centers

• Using net for transactions has been catching up in

urban areas. Many banks provide online banking

• Most of the insurance companies have product

information and/or illustrative tools on the web

• In rural areas too rural knowledge centers are being

set up to bring information close to the people. The

insurance companies can use these centers to create

awareness about insurance

• Can only be enablers for the human channels


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Appointment of agent

• Eligibility

• Life Insurance Corporation of India has eligibility requirements. You should be at least18 years of age or above and the 12th standard pass.

• If you are an eligible candidate, try to locate a local branch office of LIC andschedule an appointment with the Development Officer. An interview will beconducted by the branch manager of LIC to determine if you can qualify to undergotraining. The training will be conducted by the Divisional/Agency Training Center.

• The said training is conducted until the 100 hours is complete and it will cover thedifferent aspects of life insurance and the business.

• Once you‟ve completed the training, you will be allowed to take the pre-licensingexam by IRDA (Insurance Regulatory and Development Authority).

• IRDA will give you a license if you pass the exam and you can now become aninsurance agent. The branch office of LIC where you applied will already absorb youinto their team of insurance agents.

• An LIC agent should be ambitious, outgoing, can handle different personalities, andtreat clients as bosses. You are free to decide on your working hours so you can pickthe most convenient time to work. The good thing about becoming an LIC agent isthat you have a chance to earn unlimited income. LIC will provide the needed supportwhich includes advertising, first-rate training, and in-house consultant.


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REMUNERATION TO AGENTS

• Persons appointed by an insurer may be

remuneration in any of the following ways:

– Payment of fixed monthly salary

– Payment of commission related to the

business done

– Part payment of fixed salary and part payment

of commission based on business done.


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• Commission to agents is specified as a percentage of premiumspaid. This percentage may vary between different plans ofinsurance. It may also vary from year to year, high in first year andlower in subsequent years.

• Commission may be paid right through the term of the policy or maybe paid only for a fixed number of years.

• In India, provisions exist whereby agents who have performedcertain qualifying levels of business during 10 years of the agencyare entitled to receive commission for the rest of their lives undercertain conditions.

• Commission is also payable to the heirs after the agent‟s death.

• Bonus commission is also payable on the first year premium as anincentive for higher performance. This is a percentage of the eligiblefirst year commission increases.


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• Agents of the LIC are entitled to term insurance andgratuity benefits. The amount of term insurance is linkedto the average annual commission (renewal) earned inthe three agency years preceding his death. The

following other conditions also have to be fulfilled: – The agent should not have completed 50 years on the date ofappointment as an agent.

– The death must take place before he has completed 60 years ofservice

– He must have an insurance policy on his own life for at leastRs.5000 SA and the policy must have been in force at the time ofhis death.

– He must have completed at least 3 years as an agent at the timeof his death.


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• An agent will be eligible for gratuity if he has worked continuously for15 years or more and his agency is not terminated due to fraud,conviction on a charge of criminal misappropriation, criminal breachof trust, cheating or forgery, acting against the interests of theinsurer, offering rebate or giving false information in the agencyapplication form with a view to defraud the insurer.

• The amount of gratuity is related to the renewal commission earnedin the last 15 qualifying years preceding the date of claiming gratuity.180th part of the aggregate of the qualifying year renewalcommission is the eligible rate.

• Gratuity is admissible at the eligible rate for each qualifying year forthe first fifteen qualifying years and at half the eligible rate for the

subsequent ten qualifying years subject to a maximum. Gratuity ispaid only once in the agency career.


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• Functions Of The Insurance Agent:

• Life insurances agent has the unique roleof such a person, who enjoys the trust of

two parties - the prospect and the insurer -simultaneously in the same transaction.

• To simplify, functions of a life insurance

agent could be divided into two parts, viz.'Pre-sale functions';

• 'Post-sale functions'


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• Function Before Sales:• Contact prospects

• Study their insurance needs

• Completion of formalities for proposal of newinsurance viz,

• Filling of form

• Arranging for Medical Examination

• Collection proofs of age and income• Any other information required by theunderwriters


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• Function After Sales:

• Ensure payment of renewal premiums.

• Assist policyholder for nomination / or

change thereof.• Assist the policyholder in case he wants to

get loan against the policy assignment.

• Assist the policyholder or the claimant tocomply with the requirement for gettingtimely settlement of claims.


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Plans of life insurance

• Life insurance products are usually referred to

as „plans‟ of insurance.

• These plans have two basic elements. One is

„death cover‟ or „risk over‟, which provides for thebenefit being paid on the death of the insured

person within a specified period.

• The other is the „survival benefit‟, which provides

for the benefit being paid on survival of a

specified period.


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Understanding the Needs Levels

• Every possible adverse consequence that requires to be taken care ofconstitutes a need for insurance.

• The needs of people for life insurance can be classified as under:

• Stage 1 Family: Protection of the interests of the family against loss ofincome resulted because of the death of the bread-winner.

• Stage 2 Children: Provision for higher education, marriages, Start-in life.

• Stage 3 Old age: Post- retirement income for self and family/dependants.• Stage 4 Special Needs: Disability, accidents, expenses for treatment of

diseases. Loss of income as a result of sickness.

• Stage 5Avoiding the loss of wealth (assets) due to depreciation or inflation.

• Generally, all these needs exist simultaneously, but not in the same

measures, for all persons. The variations between people will depend onthe ages, size of families and dependants and the nature of other propertiesand incomes. Insurance plans of various kinds are designed to meet theseone plan alone may not meet all the needs. All the needs can be metthrough a judicious mix of plans.


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Basic elements of plans

• A plan of assurance will have the following features. By makingchanges in these features or adding and combining some of them,any number of plans can be developed.

• Who can be insured? The various possibilities are (i) individualadults (ii) children (minors) (iii) two or more persons jointly underone policy.

• What can be the SA? Some plans stipulate a minimum SA. Thereare maximum limits also for certain benefits, like accident benefits.

• In what contingency would the SA be payable? Could be on deathor on survival.

• When would the SA be payable? On the contingency happening orsome other dates.

• How would the SA be payable? Could be in one lump sum of ininstallments.

• What would be the term (duration) of the policy? This determines theperiod during which the specified event should occur for the SA tobe payable. Some plans provide for benefits even beyond the term.


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• When would the premium be payable? Variations are inthe frequency of payment (monthly), quarterly, half-yearly or yearly), as well as the period during which it ispayable. Some plans provide for premiums to be paid fora period less than the term.

• Does the SA increase? This can happen because of

participation in surpluses and bonus additions orbecause of guaranteed increases in S.A.

• Does the SA reduce? This can also happen, if the plan isto meet reducing liabilities under a mortgage.

• Are there additional benefits? These, also called

supplementary benefits, may be provided by way ofriders, in addition to the basic covers.


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Whole Life Assurance

• Ordinary whole life policy

• Limited Payment Whole Life Policy

• Single Premium Whole Life Policy • Convertible whole Life Assurance

Policy


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Endowment Assurance

• Advantages : – Compulsory savings

– Old Age Provision

– Accumulation of Fund

Types of Endowment Policies – Ordinary Endowment Policy

– Double Endowment

– Pure Endowment Policy

– Anticipated Endowment of Money back Policy – Triple Benefit Endowment Policy

– Marriage Endowment Policy

– Educational Endowment Policy


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Other Life Insurance Plans

• Money Back Policy • Family Income Assurance

• Limited payment plans

• Participating Plans

• Convertible Plans

• Joint Life Policies

• Children’s Plan – deferment period, defermentdate, risk cover, vesting

• Variable Insurance Plans

• Plans covering handicapped


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Policy Rider

• A rider is a clause or condition that is added on to abasic policy providing an additional benefit, at the choiceof the proposer.

• For example, a provision that in the event of death of the

life assured by accident, the SA would be double can bea rider on an Endowment policy. This rider can be addedon to a policy under any plan. The option to participate invaluation surplus can also be offered as a rider.

• Insurers find it convenient to have a small number of

basic, plans, with riders being offered as options, so thateffectively the prospect has a number of options, tochoose from each plan can be taken with any one ormore of the riders.


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• Some of the riders being offered by insurers in India are mentionedbelow: – Increased death benefit, being twice or even more the survival benefit.

– Accident benefits allowing double the SA if death happens due toaccident.

– Permanent disability benefits, covering loss of limbs, eyesight, hearing,speech, etc.

– Premium waives which would be useful in the case of children‟sassurance, if the parent dies before vesting date or in the case ofpermanent disability and sickness.

– Dreaded disease cover, providing additional payments (in or ininstallments), if the life insured requires medical attention because ofspecified conditions like cancer, cardiac or cardiovascular surgeries,stroke, kidney failure, major organ transplants, major burns, totalblindness caused by illness or accident, etc.

– Guaranteed increase in cover at specified periods or annually.

– Cover to continue beyond maturity age for same SA or higher SA.

– Option to increase cover within specified limits or dates.


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• As per the regulations made by the IRDA in April2002 and amended in October 2002.

• The premium on all the riders relating to healthor critical illnesses shall not exceed 100% of the

basic premium of the main policy.• And the premium on all the other riders put

together should not exceed 30% of the basicpremium.

• This virtually puts a limit n the number of ridersthat can be offered with any policy. It is possiblethat this limit of 30% may be changed from timeto time.


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ANNUITIES

• Annuity may be defined as the payment of amountsperiodically during the life time of the annuitant inconsideration of the payment of an agreed sum toinsurance company”.

• The Annuity is called the “up-side-down application of

the life insurance principle”. When a person purchases alife insurance contract he agrees to make a series ofpayment (premiums) to the insurer in return for which theinsurer agrees to pay a specified sum to thebeneficiaries, in case of death of the life assured.

• When a person buys an annuity contract, he pays theinsurer a specified capital sum, may be in installments, inreturn for a promise from the insurer to make a series ofpayments to him as long as he lives.


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Difference between Annuity and Insurance

• Insurance is a pooling arrangement whereby a group ofindividuals make contributions that the dependents of theunfortunate few, who die each year, may be indemnified for theloss of the bread winner‟s income. On the other hand, Annuity ispooling arrangements whereby those who die prematurely and donot need further cover make a contribution so that those who live

beyond their expectancy may receive more income from theircontribution alone would provide.

• Life insurance policy protects against the absence of income inthe event of premature death or disability, whereas the annuity(policy) protects against the absence of income on the part ofthose affected with undue longevity. These two are extremeforms that assume protection to two unfortunate groups. “Onedying too soon and the other living too long.”


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CLASSIFICATION OF ANNUITIES

• A. By Commencement of Income: – Immediate Annuity.

– Annuity Due.

– Deferred Annuity.

• B. By Number of Lives Covered: – Single Life Annuity. – Multiple Life Annuity.-Joint Life Annuity ; Last Survivor Annuity

• C. By Mode of Payment of Premium: – Level Premium Annuities.

– Single Premium Annuities.

• D. By Disposition of Proceeds: – Life Annuity.

– Guaranteed Premium Annuity.


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• Group Insurance is a plan of insurance that providescover to a large number of individuals under a singlepolicy called the “master policy”. Group insuranceschemes are used by the Government, as instruments ofsocial welfare.

• Group Gratuity Schemes are related to gratuitypayments. Gratuity is paid to employees who retire ordie and also to those who resign, after having put inspecified periods of minimum service, usually 15 years.

• The Group Superannuation Scheme is offered to

employers in order to facilitate the funding anddisbursement of pensions. Pensions are payable toemployees who retire from service on attaining the ageof superannuation or retirement.


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REINSURANCE

• “Reinsurance is a contract of insurance

whereby one insurer (called the

reinsurer or assuming company)

agrees, for a portion of the premium, toindemnify another insurer (called the

reinsured or ceding company) for

losses paid by the latter underinsurance policies issued to its

policyholders.”


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TRANSFERRING RISK

INSURANCE

RISK Policyholder Insurance Co.

- Insured - Insurer

- Underlying Insured


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TRANSFERRING RISK

REINSURANCE

Risk • Insurance Co. Reinsurer

- Ceding Co. -Assuming Co.

- Cedent- Primary Insurer

– Direct Company


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ELEMENTS OF

REINSURANCE• Reinsurance is a form of

Insurance.

• There are only two parties to the

reinsurance contract - the

Reinsurer and the Reinsured - both

of whom are empowered to insure.


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ELEMENTS OF REINSURANCE

(continued)

• The subject matter of a reinsurance

contract is the insurance l iab i l i ty the

Reinsured has assumed underinsurance policies issued to its own

policyholders.

• A reinsurance contract is an indemnitycontract.


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What Reinsurance Does

• It redistributes the risk of loss

which a reinsured incurs under

the policies it issues according

to its own needs.

• It redistributes the premiums

received by the reinsuredaccording to its own needs.


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What Reinsurance Does Not Do!

• Convert an uninsurable risk into an

insurable one.

• Make loss either more or less likely to

happen

• Make loss either greater or lesser in

magnitude

• Convert “bad” business into “good

business”

Forms of Reinsurance


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PROPORTIONAL EXCESS OR NON-PROPORTIONAL

Quota Share

Reinsurercovers the

same

percent oneach risk

Surplus

Share

Reinsurer’s

share based

on type orsize of risk

Excess Each Risk/

Per Risk

Per Risk Excess of Loss

Reinsurer covers excess of apredetermined amount; limitsapply separately to each loss

Per Risk Aggregate Excess of Loss

Reinsurer covers over aggregate

claims for a risk in a specified periodof time

Excess Each

Occurrence

(Catastrophe)

Reinsurercovers over a

predetermined

amount or limit

for all losses

arising out of

one event or

occurrence

Aggregate

Excess

(Stop Loss)

Reinsurer coversover a

predeterminedaggregate limitof loss or loss

ratio for aspecific

period oftime


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FORMS OF REINSURANCE

• PROPORTIONAL (OR PRO-RATA)

– PAY PREMIUM ON A SHARE BASIS

– COLLECT LOSSES ON SAME SHARE

• EXCESS OF LOSS

– PAY PREMIUM ON NEGOTIATED PRICE

– COLLECT LOSSES ONLY WHEN

RETENTION IS EXCEDED.


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The Forms of Reinsurance

• Pro-Rata or Proportional: – Reinsurer receives a percentage share of

premium and pays that same percent of

each loss.

– Reinsurer pays cedent a Commission to

Reimburse for Expenses

• Can be Flat Percentage

• Can Include Profit Commission

• Can be “Swing-Rated”


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• Pro-Rata or Proportional (cont.)

– Can be Quota Share or Surplus:

– Quota Share

• Reinsurer takes same % on each risk.


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• Pro-Rata or Proportional (cont.)

– Surplus Share

• Reinsurer‟s share varies for each risk

based on type and/or size of risk.

• Whatever that percentage share is,

reinsurer receives same percent of

premium and losses.


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• EXCESS OR NON-PROPORTIONAL:

– Per Risk (property), Per Occurrence

(casualty) or Claims Made

– Per Occurrence: Catastrophe


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• Per Risk or Occurrence Excess – Responds to Losses Excess of a

Predetermined Retention

– No Proportional Sharing of Premiumor Loss

– Premium is Negotiated

– Normally has Occurrence Limit

– Reinstatements are Negotiated


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• Catastrophe Excess of Loss

– Covers all losses in an event

– Occurrence is defined as a geographic

area (flood and Riot) or a time period(wind, quake, fire and winter storm)

– Usually Limited to two Occurrences

• Additional Cover Needed – Sold in Layers

– Usually has two risk warranty


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Functions of Reinsurance • Financing

• Stabilization

• Capacity

• Catastrophe Protection

• Services

Fi i


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Financing

• is growing and needs additional surplus tomaintain acceptable premium to surplus ratios.

• Unearned premium demands reduce surplus.

• Marketing considerations dictate that an

insurer enter new lines of business or new

territories.


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Stabilization

Marketing ConsiderationPolicyholders and stockholders like to beidentified with a stable and well managedcompany.

Management Consideration

Planning for long term growth and developmentrequires a more stable environment than aninsurance company‟s book of business is apt toprovide.


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Capacity

• Refers to an insurer‟s ability to provide ahigh limit of insurance for a single risk,

often a requirement in today‟s market.

• Reinsurance can help limit an insurer‟s loss

from one risk to a level with which

management and shareholders are

comfortable.

C t t h P t ti


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Catastrophe Protection

• Objective is to limit adverse effects on P&Land surplus from a catastrophic event to a

predetermined amount.

• Covers multiple smaller losses fromnumerous policies issued by one primary

insurer arising from one event.

Services


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Services1. Claims Audit

2. Underwriting

3. Product Development

4. Actuarial Review

5. Financial Advice

6. Accounting, EDP and other systems

7. Engineering - Loss Prevention


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Reinsurance is Provided Through

A. Treatya. Covers classes or entire “books” of business

b. Reinsurer accepts as written by insurer as to form,

price and risk

B. Facultative

a. Single Policy/Risk

b. Reinsurer evaluates each risk and establishes or

agrees to acceptance, form and price

c. Automatic or semi-automatic facilities


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Types of Reinsurers

1. Professional ReinsurersSpecialize in Reinsurance Are Licensed in at Least One State

Derive Majority of Their Premium Income

From Reinsurance2.

Reinsurance Department of PrimaryCompany

3. PoolsSpecial PurposeGeneral Purpose


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Marketing of Reinsurance

1. Broker (Intermediary) Market

• Reinsurance Intermediary

Provides Business for Reinsurers

Brings Parties Together - Helps Negotiate ReinsuranceTerms

Acts as Agent of Ceding Company

Compensated by Reinsurer

• Reinsurers Share Reinsurance Programs


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Marketing of Reinsurance2. Direct Writers

• Contact Primary Insurers Directly

Through Salaried Employees

• Frequently Assume 100% of

Reinsurance Program


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General Insurance Products

• Fire• Health

• Motor

• Marine

• Industrial

• Liability

• Micro insurance• Credit insurance

• Miscellaneous – Social

– Rural

– Accident and hospitalization

– Travel – Package

– Business

– Others


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Reinstatement Value Policies

• It is agreed that in the event of the propertyinsured being destroyed or damaged, the basisupon which the amount payable under interestinsured (building, content) of the policy is to becalculated shall be the cost of replacing orreinstating on the same site property of thesame kind or type but not superior to or moreextensive than the insured property when new,subject to the following Special Provision and

subject also to the terms and conditions of thepolicy except insofar as the same may be variedhereby.


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Special Provisions

i. The work of replacement or reinstatement must be commencedand carried out with reasonable dispatch and in any case must becompleted within 12 months after the destruction or damage orwithin such further time as the insurer may (during the said 12months) in writing allow, otherwise no payment beyond the amountwhich would have been payable under the Policy.

ii. Until expenditure has been incurred by the insured in replacing orreinstating the property destroyed or damaged the insurer shall notbe liable for any payment in excess of the amount which wouldhave been payable under the policy if this memorandum had notbeen incorporated therein.


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iii. If at the time of replacement or reinstatement the sum representing thecost which would have been incurred in replacement or reinstatement ifthe whole of the property covered had been destroyed exceeds the suminsured thereon at the breaking out of any fire or at the commencement ofany destruction of or damage to such property by any other peril insuredagainst by this policy then the Insured shall be considered as being hisown insurer for the excess and shall bear a rateable proportion of the loss

accordingly.

iv. This memorandum shall be without force or effect if(a) The Insured fails to intimate to the Insurer within 6 months from thedate of destruction or damage or such further time as the Insurer may inwriting allow his intention to replace or reinstate the property destroyed ordamaged.

(b) The Insured is unable or unwilling to replace or reinstate the propertydestroyed or damaged on the same or another site.


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Floating Policy

• Insurance cover for situations where the total insurableamount can be reasonably estimated but cannot bedetermined accurately-enough for computing correctpremium, until the insurance policy comes to an end. Forexample, a trader will take a floating policy on a sum

estimated to be large enough to cover shipments duringa period (say, one year) and pays premium accordingly. As the shipments are sent out, the insurer is informedand the value of those shipments is deducted from theinsured sum. This procedure is repeated until the insuredsum is almost exhausted. The insurer then recomputes

the premium according to the total value of the already-sent shipments, and adjusts it against the premium paidby the trader. At this stage the trader takes anotherfloating policy and whole process starts over again.

71669250 Life Insurance Practices in India (1)

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