Insurance

Defining Insurance

Insurance in broad terms may be described as a method ofsharing financial losses of few from a common fund who areequally exposed to the same loss.

Insurance is defined as the equitable transfer of the risk of a loss,from one entity to another, in exchange for a premium, and canbe thought of a guaranteed small loss to prevent a large, possiblydevastating loss.

An insurer is a company selling the insurance. The insurance rateis a factor used to determine the amount, called the premium, tobe charged for a certain amount of insurance coverage.

Concept of risk

Massive risk with high magnitude

Day to day risk of lesser magnitude

Defining Risk

A variation in the possible outcome

The degree of uncertainty associated with a particular loss

Greater the accuracy with which the outcome can be predicted the lower is the risk.

Risk is the possibility of an unfortunate occurrence

Risk is the possibility of loss

The combination of hazards

Uncertainty of loss

The tendency that actual results may differ from predicted results

Basic Terminology

Peril : Cause of a risk and losses. E.g. Earthquake, flood , fire, criminal activities etc.

Basic Terminology

Hazard : Condition that increases the frequency or severity of loss. E.g. absence of proper security or fencing , poorly maintained fire alarm system etc.

Basic Terminology

Moral Hazard: It refers to the dishonesty of the insured personleading to increase probability of loss from given risk exposure.E.g. setting fire to your own house.

Morale Hazard: This refers to attitude of indifference to lossesthat results out of a known fact that the said losses were insured.

Catastrophic loss: It is a potential loss that is unpredictable suchas flood, but is capable of producing an extra ordinary largeamount of damage related to assets held in insurance pool. Theseare generally natural disasters like earthquake flood etc.

Requirements of Insurable Risk

Should be a Pure risk Involves a chance of loss or no loss

Large number of exposure units to predict average loss

Accidental and unintentional loss to control moral hazard to assure randomness

Determinable and measurable loss to facilitate loss adjustment

Requirements of Insurable Risk

No catastrophic loss to allow the pooling technique to work

Probability of loss must not be very high to determine the premium need

Economically feasible premium so people can afford to buy

Concept of Insurance

Basic Characteristics of Insurance

Pooling of losses

Spreading losses incurred by the few over the entire group

Risk reduction based on the Law of Large Numbers

Payment of fortuitous losses

Insurance pays for losses that are unforeseen, unexpected, and occur as a result of chance

Risk transfer

A pure risk is transferred from the insured to the insurer, who typically is in a stronger financial position

Indemnification

The insured is restored to his or her approximate financial position prior to the occurrence of the loss

Example

Say 1000 motor cars valued @ 300000/- are observed over aperiod of five years. On an average say per year two are total lossby accident. Then the total annual loss would be Rs.600000. If theloss is to shared by all the thousand owners then they have tocontribute Rs.600/-

The loss experience will be established by taking the pastexperience, geographical area in which the vehicles are used anddensity of traffic.

Basic terms

Insurer : The party to an insurance arrangement who undertakesto indemnify for losses.

Insured: A person whose interests are protected by an insurancepolicy.

Premium: Financial cost of obtaining an insurance cover, paid as alump sum or in installments during the duration of the policy.

Policy: Written contract or certificate of insurance

Exposure to Loss: In insurance, areas in which the risk of lossexists. Four loss risk areas are: (1) property; (2) income; (3) legalvulnerability; and (4) key personnel in an organization

Basic terms

Life annuity: A life annuity is a financial contract in the form of aninsurance product according to which a seller (issuer) — typically afinancial institution such as a life insurance company — makes aseries of future payments to a buyer (annuitant) in exchange forthe immediate payment of a lump sum (single-payment annuity) ora series of regular payments (regular-payment annuity), prior tothe onset of the annuity.

Nomination: It is the right of the policy holder on his/ her own lifeto designate a living person to receive the policy proceeds in theevent of him predeceasing the nominee before the maturity of thepolicy.

Nominee: Nominee should not be a stranger because its againstthe objective of insurance which in most cases is family protection.

Basic terms

Assignment: An agreement under which one party–the assignor–transfers some or all of his ownership rights in a particularproperty, such as a life insurance policy or an annuity contract, toanother party–the assignee.

Assignor: A property owner who transfers some or all of theownership rights in a particular property to another party bymeans of an assignment.

Assignee: A person or party to whom a property owner transferssome or all of the property owner's rights in a particular propertyby means of an assignment.

IRDA

The Insurance Regulatory and Development Authority (IRDA) is a

national agency of the Government of India, based in Hyderabad. It

was formed by an act of Indian Parliament known as IRDA Act 1999,

which was amended in 2002 to incorporate some emerging

requirements.

Mission

"to protect the interests of the policyholders, to regulate, promote

and ensure orderly growth of the insurance industry and for matters

connected therewith or incidental thereto."

Benefits of Insurance to an Individual

Peace of mind

Aversion of risk

Protects mortgaged properties

Provides self dependency

Tool of savings

Tool of investment

Satisfies various needs

Benefits of Insurance to Business

Reduced reserve requirements

Capital freed for investment

Indemnification

Reduction of uncertainty

Reduced cost of capital

Reduced credit risk

Loss control activities

Business and social stability

Benefits of Insurance to Society

Protects wealth of the country

Helps in economic growth

Control inflation

Cost of Insurance

Operating Expense

Distribution cost

Underwriting cost

Policy Administration Cost

Reserve cost

Moral Hazard resulting in extra cost

Exaggerated Losses

Benefit-cost Tradeoff

Insurance Classification

Insurance

Life Insurance General Insurance

Fire Marine Health Auto

Players in the Industry

Life Insurance General Insurance

Life Insurance Corporation of India. General Insurance Corporation of India.

1. Oriental Insurance Company Ltd.

2. New India Assurance Company Ltd.

3. National Insurance Company Ltd.

4. United India Insurance Company Ltd.

New Entrants

ICICI Prudential Life Insurance Ltd. Bajaj Alliaz General Insurance Company Ltd.

Tata AIG Life Insurance Corporation Ltd. Reliance General Insurance Company Ltd.

ING Vysya Life Insurance Corporation Ltd. Tata AIG General Insurance Company Ltd.

Kotak Mahindra Life Insurance Corporation Ltd.

Royal Sundaram Alliance Insurance Company Ltd.

Concept of General Insurance

Defining General Insurance

General insurance or non-life insurance policies, includingautomobile and homeowners policies, provide paymentsdepending on the loss from a particular financial event.

General insurance typically comprises any insurance that is notdetermined to be life insurance.

It is called property and casualty insurance in the U.S. and Non-Life

Insurance in Continental Europe.

Classification

Commercial lines: products are usually designed for relativelysmall legal entities. These would include workers' comp (employersliability), public liability, product liability, commercial fleet andother general insurance products sold in a relatively standardfashion to many organizations. There are many companies thatsupply comprehensive commercial insurance packages for a widerange of different industries, including shops, restaurants andhotels.

Personal lines: products are designed to be sold in large quantities.This would include autos (private car), homeowners (household),pet insurance, creditor insurance and others.

Principles of Insurance

Utmost Good Faith

Insurable Interest

Principle of Indemnity

Principle of Contribution

Principle of Subrogation

Principle of loss Minimization

Principle of ‘CAUSA PROXIMA’

Utmost Good Faith

Both the parties i.e. the insured and the insurer should a goodfaith towards each other.

The insurer must provide the insured complete ,correct and clearinformation of subject matter.

The insurer must provide the insured complete ,correct and clearinformation regarding terms and conditions of the contract.

This principle is applicable to all contracts of insurance i.e. life, fireand marine insurance.

Insurable Interest

The insured must have insurable interest in the subject matter ofinsurance.

In life insurance it refers to the life insured.

In marine insurance it is enough if the insurable interest exits onlyat the time of occurrence of the loss

In fire and general insurance it must be present at the time oftaking policy and also at the time of the occurrence of loss.

The owner of the party is said to have insurable interest as long ashe is the owner of the it.

It is applicable to all contracts of insurance.

Principle of Indemnity

Indemnity means a guarantee or assurance to put the insured inthe same position in which he was immediately prior to thehappening of the uncertain event. The insurer undertakes to makegood the loss.

It is applicable to fire ,marine and other general insurance.

Under this the insurer agrees to compensate the insured for theactual loss suffered.

Principle of Contribution

The principle is a corollary of the principle of indemnity.

It is applicable to all contracts of indemnity.

Under this principle the insured can claim the compensation onlyto the extent of actual loss either from any one insurer or all theinsurers.

Principle of Subrogation

As per this principle after the insured is compensated for the lossdue to damage to property insured , then the right of ownership ofsuch property passes on to the insurer.

This principle is corollary of the principle of indemnity and isapplicable to all contracts of indemnity

Principle of Loss of Minimization

Under this principle it is the duty of the insured to take all possiblesteps to minimize the loss to the insured property on the happeningof uncertain event.

Principle of ‘Causa Proxima’

The loss of insured property can be caused by more than onecause in succession to another.

The property may be insured against some causes and not againstall causes.

In such an instance, the proximate cause or nearest cause of loss isto be found out.

If the proximate cause is the one which is insured against ,theinsurance company is bound to pay the compensation and viceversa.

General Rules

Mis-description

Reasonable care

Fraud

Basic principles Insurable interest Utmost good faith Subrogation Contribution Indemnity

Risk of loss not covered

Types of General Insurance

Main types of general insurance are:

Fire

Health

Marine

Motor Vehicle

Fire Insurance

Fire Insurance

Fire insurance is a form of property insurance which protects peoplefrom the costs incurred by fires. When a structure is covered by fireinsurance, the insurance policy will pay out in the event that thestructure is damaged or destroyed by fire.

Types of Fire Insurance Policies

Specific policy: In this type of policy, the insurance company is liable to pay a sum, which may be less than the property’s real value. The insured is called to bear a part of the loss, as the actual value of the property is not considered in deciding the amount of indemnity.

Comprehensive policy: Known as “all-in-one” policy, the insurance company indemnifies the policyholder for loss arising out of fire, burglary, theft and third party risks. In this type of policy, the policyholder also gets paid for loss of profits incurred, due to fire, till the time the business remains shut.

Valued policy: In this type of policy, the value of the commodity is already set and actual loss is not taken into consideration. The policy follows a standard contract of indemnity, wherein the policyholder gets paid a specific amount of indemnity, without considering the actual loss.

Types of Fire Insurance Policies

Floating policy: This type of policy is subject to average clause and the extent of coverage expands to different properties, belonging to the policyholder, under the same contract and one premium. The floating policy also provides protection of goods kept at two different stores.

Replacement or Re-instatement policy: As per replacement or re-instatement policy, the insurance company instead of paying the policyholder the amount of indemnity in cash, replaces the damaged property/commodity with a new one.

Fire Insurance Claim Procedure

Individuals/corporate must inform insurer as early as possible , in no case later than 24 hours.

Provide relevant information to the surveyor/claim representative appointed by the insurer.

The surveyor then analyzes the extent/ value of loss or damage.

The claim process takes anywhere between one to three weeks.

Documents Required

True copy of the policy along with schedule

Report of fire brigade

Claim Form

Photographs

Past claims experience

Need of Fire Insurance

Fire insurance is important because a disaster can occur at any time.There could be many factors behind a fire, for example arson, naturalelements, faulty wiring, etc. Some facts that stress the importance offire insurance include:

Fire contributes to the maximum number of deaths occurring inAmerica due to natural disasters.

Eight out of ten fire deaths take place at home.

A residential fire takes place after every 77 seconds.

The major reason for a residential fire is unattended cooking.

Fire Insurance in India

Fire insurance business in India is governed by the All India Fire Tariffthat lays down the terms of coverage, the premium rates and theconditions of the Fire Policy. The fire insurance policy has beenrenamed as Standard Fire and Special Perils Policy. The risks coveredare as follows:Dwellings, Offices, Shops, Hospitals (Located outside the compoundsof industrial/manufacturing risks) Industrial / Manufacturing RisksUtilities located outside industrial/manufacturing risks Machineryand Accessories Storage Risks outside the compound of industrialrisks Tank farms / Gas holders located outside the compound ofindustrial risks

Fire Insurance in India

Perils Covered: Cause of Loss Fire Lightning Explosion/ImplosionAircraft damage Riot, Strike Terrorism Storm, Flood, inundationImpact damage Subsidence, landslide Bursting or overflowing oftanks Missile Testing Operations Bush fire etc.

Exclusions: Loss or damage caused by war, civil war and kindered perils Loss or damage caused by nuclear activity Loss or damage to the stocks in cold storage caused by change

in temperature Loss or damage due to over-running of electric and/ or

electronic machines Claims: In the event of a fire loss covered under the fire insurance

policy, the Insured shall immediately give notice there of to theinsurance company. Within 15 days of the occurrence of such lossthe Insured should submit a claim in writing giving the details ofdamages and their estimated values. Details of other insurances onthe same property should also be declared.

Indian Companies Offering FI

ICICI Lombard General Insurance (Pvt.)

United India Insurance (Govt.)

New India Insurance (Govt.)

Bajaj Allianz Insurance (Pvt.)

Oriental Insurance (Govt.)

Tata-AIG General Insurance (Pvt.)

Health Insurance

What is Health Insurance?

Health insurance, like other forms of insurance, is a form of

collectivism by means of which people collectively pool their risk, in

this case the risk of incurring medical expenses.

Importance of Health

Rising medical costs

Sharing of health related risk

uncertain hospital bills

Expensive/quality health care services

Money value – Sick Vs Healthy

Family health insurance

Tax benefit

Productivity of workforce

Removes some of the burden from the state

Keeping pace with the customer needs while achieving profitability

How to improve the access to health care and financial protection of

the poor?

Answer

The most obvious solution will be to improve the health

insurance penetration.

How to Improve Health Insurance Penetration?

Regulator/Government Enhance customer awareness Enhance client confidence - real value benefits in the event of a claim Effective supervision Compulsory percentage of total business towards health Compulsory savings towards health Tax incentives to employers for promoting group health coverage

Insurer Clients confidence - warrantable claim will be paid out in a reasonable

time frame New clients have to be reached Value for money Design products as per clients needs Product transparency Cost efficiency affordability Wellness programmes

Initiatives of IRDA

Committee to formulate regulations

Pure health insurance products

Allowing the formation of an stand alone health insurance company

Standalone health insurance companies

Renewability

Senior citizens

Impediments in Health Insurance

Lack of Data

Moral Hazard/Adverse Selection

Complex nature of the product

Medical Inflation

New treatments

Unnecessary treatments

Difficulty in pricing

Government provision of health care

Long term nature

Changing life style

Mis-selling/fraud

Mitigation of Impediments

Insurer Designing a less complex products Transparency in the product features Clarity in policy terms, conditions & exclusions Efficient back-office support for underwriting and claims

processing Higher Reinsurance Need for quicker services. E.g. Toll free numbers, cashless,

quick response Expense analysis on a regular basis Product innovation Efficient training of sales force

Mitigation of Impediments

Policyholder Pay attention to policy conditions Read the exclusions and limitations very carefully Compare premium costs, deductibles, co-payments Take an informed decision

TPA Proper infrastructure Speedy claim settlement process Less paper work

Mitigation of Impediments

Regulator/Government

Come out with health insurance regulations

Centralized data base for health insurance experience statistics

Provider rating

Cap on renewal premiums

Ensure that a decent portfolio of health coverage represent the rural sector

Guard against ill effects of privatization

Further tax incentives

Compulsory savings towards health care

Types of Health Insurance Plans

Individual health plan

Family floater plan

Senior Citizens’ plan

Critical illness plan

Daily hospital cash and

Unit-linked health plan (ULHP).

Individual Health Plans

Largely, an individual health insurance plan (IHIP), or ‘mediclaim’, would cover expenses if you are hospitalised for at least 24 hours.

These plans are indemnity policies, that is, they reimburse the actual expenses incurred up to the amount of the cover that you buy.

Some of the expenses that are covered are room rent, doctor’s fees, anaesthetist’s fees, cost of blood and oxygen, and operation theatre charges.

Family Floater Plans This is a fairly new entrant in the health insurance firmament.

It takes advantage of the fact that the possibility of all members ofa family falling ill at the same time or within the same year is low.

Under a family floater (FF) health plan, the entire sum insured canbe availed by any or all members and is not restricted to oneindividual only as is the case in an individual health plan.

Let’s look at an example. Say, a family of four has individual coversof Rs 1 lakh each. If the cost of treating one person crosses Rs 1lakh, then the rest has to be borne by the family out of its ownmoney. If, however, the entire family is insured for Rs 4 lakhthrough a floater policy, then any of the members will be coveredfor that amount in any year. To the extent of the annual cover, anynumber of members can avail the money.

Senior Citizens’ Plans

Insurance is considered a form of long-term savings for seniorcitizens. This money provides financial stability and also helpsthem in times of need. Medical insurance enables senior citizens topay for health checkups, emergency medical costs and long-termtreatment. The income tax benefit on insurance premiums is up toRs. 15,000 under Section 80 D of the Income Tax Act, as on March31, 2007. Medical insurance is provided through several privateinsurance companies and four public sector general insurancecompanies. These are:

National Insurance Company

Oriental Insurance Company

New India Assurance

United India Insurance Company

Senior Citizens’ Plans

The National Insurance Company offers the Varistha MediclaimPolicy for senior citizens. This policy covers hospitalization anddomiciliary hospitalization expenses under Section I as well asexpenses for treatment of critical illnesses, if opted for, underSection II. Diseases covered under critical illnesses are coronaryartery surgery, cancer, renal failure, stroke, multiple sclerosis andmajor organ transplants. Paralysis and blindness are covered atextra premium.

Oriental Insurance Company provides a Comprehensive HealthInsurance Scheme, a Group Insurance and an Individual MediclaimPolicy. These policies pay for hospitalization or domiciliaryhospitalization of the insured in case of a sudden illness, anaccident or surgery. These conditions should have arisen duringthe policy period.

Critical Illness Plans

A Critical Illness plan means to insure against the risk of seriousillness. It will give the same security of knowing that a guaranteedcash sum will be paid if the unexpected happens and one isdiagnosed with a critical illness.

The purpose of a critical illness plan is to let you put aside a smallregular amount now, as an insurance against all this happening.

Bajaj Allianz, in its efforts to provide a customer centric solution isoffering an insurance policy to cover to some of these criticalillnesses like Cancer Coronary Artery bypass surgery First Heartattack Kidney Failure Multiple sclerosis Major organ transplantStroke Arota graft surgery Paralysis Primary Pulmonary ArterialHypertension.

Daily Hospital Cash

Expense benefit is paid on per day basis after hospitalization (mostplans mandate at least 48 hours of hospitalization).

The pre-decided daily benefit amount is paid in full, irrespective ofthe actual expenses.

For example, a person buys a DHC plan with a limit of Rs 2,000 perday. He gets hospitalised for 7 days and the total bill is Rs 35,000.He would be reimbursed Rs 14,000 (2,000x7). If the bill is Rs 8,000,he would still be reimbursed Rs 14,000.

Unit-linked health plan (ULHP)

All ULHPs offer one or more combination of the other benefits (forwhich risk premium is deducted from fund value).Also, charges such as premium allocation charge and policyadministration charge are deducted from the fund value.

LIC has launched Health Plus plan, a unique long term health insurance plan that combines health insurance covers for the entire family (husband, wife and the children) – Hospital Cash Benefit (HCB) and Major Surgical Benefit (MSB) along with a ULIP component (investment in the form of Units) that is specifically designed to meet domiciliary treatment (DTB) related expenses for the insured members.

Health Insurance in India

The health insurance market in India is very limited covering about10% of the total population. The existing schemes can be categorizedas: Voluntary health insurance schemes or private-for-profit schemes;

Mandatory health insurance schemes or government run schemes(namely ESIS, CGHS).

Insurance offered by NGOs / community based health insurance,and

Employer-based schemes

Voluntary health insurance schemes

In private insurance, buyers are willing to pay premium to aninsurance company that pools similar risks and insures them forhealth related expenses.

The main distinction is that the premiums are set at a level, whichare based on assessment of risk status of the consumer (or of thegroup of employees) and the level of benefits provided, ratherthan as a proportion of consumer’s income.

In the public sector, the General Insurance Corporation (GIC) andits four subsidiary companies (National Insurance Corporation,New India Assurance Company, Oriental Insurance Company andUnited Insurance Company) provide voluntary insurance schemes.

Voluntary health insurance schemes

The most popular health insurance cover offered by GIC isMediclaim policy.

Mediclaim policy: It was introduced in 1986. It reimburses thehospitalization expenses owing to illness or injury suffered by theinsured, whether the hospitalization is domiciliary or otherwise.

Some of the various other voluntary health insurance schemesavailable in the market are :- Asha deep plan II , Jeevan Asha planII, Jan Arogya policy, Raja Rajeswari policy, Overseas Mediclaimpolicy, Cancer Insurance policy, Bhavishya Arogya policy, Dreadeddisease policy, Health Guard, Critical illness policy, Group Healthinsurance policy, Shakti Shield etc.

Mandatory health insurance schemes

Employer State Insurance Scheme (ESI) Enacted in 1948, the employers’ state insurance (ESI) Act was the

first major legislation on social security in India.

The scheme applies to power using factories employing 10 personsor more and non-power & other specified establishmentsemploying 20 persons or more.

It covers employees and the dependents against loss of wages dueto sickness, maternity, disability and death due to employmentinjury. It also covers funeral expenses and rehabilitation allowance.Medical care comprises outpatient care, hospitalization, medicinesand specialist care.

These services are provided through network of ESIS facilities,public care centers, non-governmental organizations (NGOs) andempanelled private practitioners.

Mandatory health insurance schemes

Central Government Health Insurance Scheme (CGHS) Established in 1954, the CGHS covers employees and retirees of

the central government and certain autonomous and semiautonomous and semi-government organizations.

It also covers Members of Parliament, Governors, accreditedjournalists and members of general public in some specified areas.

Benefits under the scheme include medical care, home visits/care,free medicines and diagnostic services.

These services are provided through public facilities with somespecialized treatment (with reimbursement ceilings) beingpermissible at private facilities.

Most of the expenditure is met by the central government as only12% is the share of contribution.

Mandatory health insurance schemes

Universal Health Insurance Scheme (UHIS) For providing financial risk protection to the poor, the government

announced UHIS in 2003. Under this scheme, for a premium of Rs. 165 per year per person,

Rs.248 for a family of five and Rs.330 for a family of seven , healthcare for sum assured of Rs. 30000/- was provided.

This scheme has been made eligible for below poverty line familiesonly. T

o make the scheme more saleable, the insurance companiesprovided for a floater clause that made any member of familyeligible as against mediclaim policy which is for an individualmember.

Insurance offered by NGOs Insurance offered by NGOs/Community based schemes are typically

targeted at poorer population living in communities. Such schemes aregenerally run by charitable trusts or non-governmental organizations(NGOs).

In these schemes the members prepay a set amount each year forspecified services. The premia are usually flat rate (not income related)and therefore not progressive.

The benefits offered are mainly in terms of preventive care, thoughambulatory and inpatient care is also covered.

Such schemes tend to be financed through patient collection,government grants and donations.

Some of the popular Community Based Health Insurance schemes are:- Self-Employed Women’s Association (SEWA), Tribuvandas Foundation(TF), The Mullur Milk Co-operative, Sewagram, Action for CommunityOrganization, Rehabilitation and Development (ACCORD), VoluntaryHealth Services (VHS) etc.

Employer based schemes

Employers in both public and private sector offers employer basedinsurance schemes through their own employer.

These facilities are by way of lump sum payments, reimbursementof employees’ health expenditure for out patient care andhospitalization, fixed medical allowance or covering them underthe group health insurance schemes.

The Railways, Defense and Security forces, Plantation sector andMining sector run their own health services for employees andtheir families.

Marine Insurance

Defining Marine Insurance

Marine Insurance covers the loss or damage of ships, cargo,

terminals, and any transport or cargo by which property is

transferred, acquired, or held between the points of origin and final

destination.

Two Broad Categories

Ocean marine insurance

Inland marine insurance

Ocean Marine Insurance

Hull

Cargo

Freight

Protection and indemnity insurance

Inland Marine Insurance

Extension of Ocean marine insurance

Domestic goods in transit

Property held by Bailees

Mobile equipment and property

Block Policies- “all-risks” basis

Means of transport and communication

Risks

Two types of risks are covered by ocean marine insurance.

The first type is the perils of the sea that include both naturalcalamities and fortuitous accidents.

The second type of risks covered is extraneous risks. These risksinclude ordinary risks such as theft, pilferage, rain damage,shortage, breakage, etc and special risks such as strike, war, failureto deliver, etc.

Covered Perils

Perils of the sea, such as loss due to bad weather, high waves,collision, and other navigable waters

Fire, enemies, pirates, thieves, jettison

Barratry, or fraud by crew members

All risks

Further Cover

Pollution Hazard

War and strikes clause

Bursting boilers or breaking shafts

Accident or negligence of a third party

Common Exclusions

Loss, damage or expenses attributable to willful misconduct of theassured

Ordinary or inevitable losses Loss, damage or expense caused by inherent vice or nature of the

subject matter insured Loss/damage due to insufficient, unsuitable or defective packing

(including storage) Loss/damage or expenses proximately caused by delay even if the

delay is caused by a peril insured against Loss damage or expenses arising from insolvency of the owners,

managers, operators of the vessel. Loss damage due to un seaworthiness of the vessel or craft,

container, lift van employed for carrying the insured matter. Wars, strikes and civil commotions unless covered under separate

endorsements.

Hull Insurance

Covers physical damage to ship or vessel

Always written with a deductible

Contains collision liability clause

Covers owner’s legal liability

Cargo Insurance

Covers the loss to the shipper if the goods are damaged or lost

Policy can be single or open cargo policy

Salvage loss Follows forced sale of badly damaged cargo

Cargo Partial Loss

Where goods delivered damage measure of indemnity is

Proportion of sum fixed by policy

equal to the gross sound value less damaged value at place of delivery

Freight Insurance

Insures the profit made by a ship owners out of ships used to carrycargo, both their own and others

Loss occurs when cargo is not deliverable

Liability Insurance

Covers the property damage or bodily injury to third party

Damage caused by the ship to docks, harbor installation, fines,penalties, injury to crew members, etc

Major Types of Policy

Time policy

Voyage policy

Mixed policy

Open policy

Time Policy

A time policy is one that runs for a period of time usually notexceeding 12 months.

In using a time policy, the most important question is whether theloss occurred at a time in which the policy was running becausesometimes it is difficult to prove in case where it is alleged that theconditions giving rise to the loss (e.g. a hole in the ship) occurredduring the policy, although the final consequence (the founderingof the vessel) occurred afterwards.

Voyage Policy

This is a policy that operates for the period of the voyage.

For cargo, the cover is from warehouse to warehouse.

The policy will not apply if the actual voyage and/or ports aredifferent from those in the policy.

Mixed Policy

This is a policy that covers the subject matter for the voyage withina time period.

It is used to cover the cargo from warehouse to warehouse with atime limit.

The cargo has to be warehoused within 60 days after discharge orthe policy will no longer cover the cargo.

Open Policy

This is an arrangement in which terms such as types of risks to becovered, validity of the insurance contract, rate, premium,maximum value of each shipment and geographical limits, etc areworked out when the contract is signed.

Each shipment is covered once the assured declares the details.The assured may be authorized to issue against payment a pre-printed insurance certificate which is valid after completion ofshipment details and his signature for documentation purposes.

The insurance certificate is pre signed by the insurer. If the contractis effective only for a specified period, a clause of terminationshould be included.

Auto Insurance

Defining Auto Insurance

Auto insurance (also known as vehicle insurance, car insurance, or

motor insurance) is insurance purchased for cars, trucks, and other

vehicles. Its primary use is to provide protection against losses

incurred as a result of traffic accidents and against liability that could

be incurred in an accident.

Auto Insurance Coverage

Auto insurance provides property, liability and medical

coverage:

Property coverage pays for damage to or theft of the car.

Liability coverage pays for the legal responsibility to others forbodily injury or property damage.

Medical coverage pays for the cost of treating injuries,rehabilitation and sometimes lost wages and funeral expenses

Coverage Levels

Vehicle insurance can cover some or all of the following items:

The insured party

The insured vehicle

Third parties (car and people)

Third party, fire and theft

In some jurisdictions coverage for injuries to persons riding in theinsured vehicle is available without regard to fault in the autoaccident (No Fault Auto Insurance)

Types of Auto Insurance in India

There are different types of Auto Insurance in India :

Private car insurance: It is the fastest growing sector as it iscompulsory for all the new cars. The amount of premium depends onthe make and value of the car, state where the car is registered andthe year of manufacture.

Two wheeler insurance: It covers accidental insurance for the driversof the vehicle. The amount of premium depends on the currentshowroom price multiplied by the depreciation rate fixed by the TariffAdvisory Committee at the time of the beginning of policy period.

Commercial vehicle insurance: It provides cover for all the vehicleswhich are not used for personal purposes, like the Trucks and HMVs.The amount of premium depends on the showroom price of thevehicle at the commencement of the insurance period, make of thevehicle and the place of registration of the vehicle.

What it covers?

The auto insurance generally includes:

Loss or damage by accident, fire, lightning, self ignition, externalexplosion, burglary, housebreaking or theft, malicious act.

Liability for third party injury/death, third party property andliability to paid driver.

On payment of appropriate additional premium, loss/damage toelectrical/electronic accessories.

Exclusions

Typically, the motor insurance plan does not provide for:

Normal wear and tear or general ageing of the vehicle

Mechanical/electrical breakdown.

Depreciation, wear and tear of consumables like tubes and tires.

Damages that occur while a person is driving with invalid drivinglicense.

Damage that occur while a person is under the influence of drugsor liquor.

Damage due to a war, civil war, mutiny, or nuclear risk.

Claims arising out of contractual liability.

Use of vehicle other than what it is meant for. For example, if aprivate car is being used as a taxi and gets involved in an accident,the owner will not be able to claim damages.

Indian Companies Offering AI

HSBC India - Auto Secure

Bajaj Allianz - Bajaj Allianz's Motor Insurance

ICICI Lombard - Motor Plans, Two Wheeler Package Policy

United India Insurance Co. - Motor Package and Liability Only Policies

The New India Assurance Co. - Motor Policy