IC 33 Synopsis of Key concepts

IC 33 New Course Prepared By : Sachin Kamath

This is a summary of Important Concept / terminologies collected from every chapter of the new course , based on Frequent questions which have been appearing in exam . To be used/ handed over as Retention / emphasised pointers after completion of chapters during IC 33 Refresher trainings . It can be used during Safaalya , for understanding the reasoning of the correct answers given in the TEST Mode .

Chapter #1 : Introduction to Insurance 1.The concept of Insurance involves a transfer of RISK .2.Insurance is a process of Transferring RISK from the owner ( Insured ) to the Insurance company in return for a consideration ( Premium ).3.Insurance helps in Giving Protection , investment options , Tax planning / catering to different needs of life stages .4.tabled as below Banca-asuarnce Selling Insurance Through Banks

Micro Insurance For Lower Income Families . Premiums mostly collected weekly . Approx Rs 15 . Minimum SA : 5000, Max SA : 50000

IRDA Grievances Email : complaints@irda.gov.in ; Toll free Number : 155255

Principle of Indemnity Distinguishes between Life & Non Life Insurance . Does not allow any one to make profit out of Insurance .compensates only to the extent of losses that too not fully.

Actuary Calculates standard prices ( premium) of Insurance products ,Uses statistical data for claims ratio , works on future liabilities , announces Bonus , does VALUATION every year as per IRDA guidelines

TPA ( third party Administration)

Works in building Hospital NETWORK. Also helps in settling claims during cashless hospitalization

NGO /Self Help group Helps in spreading awareness of Insurance . Brings Buyers & Sellers together.

IRDA Grants licenses to Insurance Company. Regulates the industry. Helps to protect Policyholders against grievance from Insurer

Reinsurance They are Insurer of Insurance Company . Re insurer takes up a percentage of Risk from the Insurance company for a consideration ( premium) . Insurer approach reinsurance when risk is beyond their Capacity.

Direct Sales & Indirect sales

E sales( On line sales ) advertisement by Insurer, employees selling directly are examples of Direct method itreduces intermediary costs like Commission etc . Agents , Brokers , comparison websites, bancassurance etc are Indirect method sales .

Brokers They represent the Client . They compare between insurance companies products which suit the best for their client .

# Chapter 2 : RISK & Insurance 1. Lung cancer is a PERIL & Smoking is a Hazard .2.Level of Risk is normally assessed by Frequency ( probability ) of event happening and the severity ( extent ) of event if it does happen /3.Probability that certain person will die in one year is calculated by actuary and is put in mortality table. Page :1

4.Tabled below :Peril & Hazard Peril is an event that may cause Loss or damage .peril are the risk

being insured against . Hazard ( danger ) is a condition that either increases the chance that peril will happen or cause its effect to be worse if it happens

Physical hazard Family history of heart , blood pressure etc

Moral hazard Refers to habits and attitude of person that might increase risk . Eg : smoking or drinking

Financial Risk Loss of life , disability , retirement , saving accumulations re the financial risk we need to plan insurance for .

Particular Risk They are personal or local in nature .might effect one person or just one community /locality .,

Pure Risk No possibility of making profit .Insurance is given for Pure Risk.

Pooling of Risk Fundamental principles of Insurance .Collection of premium from several people who are exposed to similar risk . Insurance company is the trustee.

#Chapter 3 A :Principles and practises of Life Insurance

1. Contract Tabled Below:Offer & Acceptance Has to be Unconditional .If condition is kept then , counter offer

required .

Consideration In insurance Contract ,this is the PREMIUM

Capacity Has to be over 18 Years of age , sound mind ,not disqualified by law. Any contract entered by people who are not meeting these criteria would make it NULL & Void

Consensus Ad Idem Proposer and Insurer should understand and agree upon same things

Capability of performance A person asking for High SA should be able to pay high Premium.

2.Insurance Interest is one of the essential elements to make the Contract VALID .3.Has unlimited Insurable interest on own life .4.life Insurance :, Insurable Interest to exist at the time of taking a policy .Need not be proved again at time of claim . 5. General Insurance:Insurable Interest required while taking policy as well as Claim .6. Marine Insurance , Insurable Interest has to be proved at the TIME of Claim.7.All material Information that would effect in assessing the RISK has to be disclosed Voluntarily in the Principle of UTMOST GOOD Faith .8.Breach of Utmost Good Faith Tabled below :Non Disclosure Omission to disclose material facts either Inadvertently or proposer

thought it was Immaterial. Eg : Ajay does not disclose his surgery undergone during childhood . He has completely recovered now and thought it was immaterial to disclose now

Concealments Ajay consumes alcohol / or smokes daily . Does not disclose this during taking Insurance policy .

Fraudulent Mis- representation

Ajay states his age 5 years less than actual to gain premium benefit while taking a policy

Innocent Mis- representation

Inaccurate statement which are believed to be True .Eg Some hobbies like paragliding not mentioned while taking policy

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9. Duty of disclosure is for both Insurer as well as Insured .10.Breach of Utmost good faith leads to contract becoming null and void from beginning of term .11.If it is Fraudulent mis- representation or concealment of material facts then the Insurer may alo keep the premium .

12 Sec 45 : Indisputability Clause :applied in first two Years .Policy can become null and void . Premiums can be kept back by the insurer . After two years fraud has to be established by the Insurer if it wants to make the contract NULL and VOID .

# Chapter 3 B : Principles and Practises of Life Insurance 1. Key Documents & Terminologies Tabled Below Proposal Form To be filled by proposer in own handwriting .

Contains details like: Name , age , occupation , previous policy & rider details , Health related information , nomination . This is a basis of contact .

Declaration in proposal form

Puts Utmost Good faith on signing the declaration . If proposer Illiterate then left Thumb impression of the proposer along with declaration by third party is must with his address taken .

Age Proof Standard : Baptism Certificate , school certificate , passport , PAN card , service register . Roman catholic Marriage certificate Etc Non Standard : Voter card , Village panchayath , ration card , horoscope

FPR Evidence of contract that It has begun .Contains :Name , address , DOC , Premium details, SA , maturity date etc

RPR Proof of payments . Issued on paying the second premium .

2. FREE look or Cooling period is of 15 days from receiving the Policy document by the policyholder, to withdraw from the contract .Insurance company has to return the premium after deduction costs like Risk cover for those days , Stamp duty ,medical expenses if any .

3. Policy Document tabled Below :Heading Name and address of the company with logo

Preamble States the proposal & declaration signed by the proposer

Operative clause Lays down mutual obligation . Contains premiums to paid by proposer & SA to be paid by Insurer in case of event

Proviso Provisions related to guaranteed Surrender value , Nomination , assignment and provision of loan etc

Schedule Contains Date of commencement , Premiums to be paid & due dates , SA , maturity date , Lien , nominee details , special exclusion , rider details

Copy of proposal Will be added in the policy document

Attestation Signature to authenticate the document signed by authorised official of insurance company .

Terms & Condition Contains :Days of grace , consequences of failing to pay premium , availability of loan .How to assign , surrender ,make claims

Endorsement To make changes in any terms and condition . Can be made on blank paper and attached to the policy document . Endorsement is a part of Policy document . Modification on SA , NOMINEE , assignment, policy term , premium payment method & frequency etc can be canged and mentioned through endorsement

Policy Information Statement

Contains : method & frequency of premium payment , person / office required to be contacted for service issue , Ombudsman address

Prospectus States : scope of benefits , conditions , warranties ,entitlement etc

4. Key terminologies Tabled Below :Days of Grace One month for Yearly / half / quterly mode of premium payment & 15

days for monthly mode of payment . Death Claims arising in days of grace period would be settled in full afyter deduction of unpaid premiums .

Paid Up value Applicable for Policy having saving elements like endowment plans . Minimum 3 years premium have to be paid to get Paid Up value . On maturity , SA may be less than actual SA , because of paid up . Bonus accrued till lapse is given full.

Renewal Insurer may renew the existing policy or change the term / increase the Premium . Material facts need to be disclosed if it has changed from inception time .

Surrender value Also known as CASH value .insurer stipulates 3 to 7 years lock in before any surrender . Only policy with Saving element can be surrendered eg : Endowment plan etc .If X & Y take policy with SAME SA , Premium and surrender on the Same date , then The Policyholder whose term is Longer will get Lower SV .

Revival Requirement for revival : payment of outstanding premiums with Interest , proof of good health & Re instatement Fees .

5. Important concepts tabled Below Nomination Multiple nomination can be made with no specific share.

A person having policy on other life cannot make nomination . Can be changed by doing Endorsement during the policy term . In joint life Policy , Nomination can be made Jointly . Appointee is to be made if Nominee is Minor . If no appointee ,

then claim is given to legal heir if nominee is still Minor . Nominee has no right over claim Proceeds .

Assignment Assignor : one who transfers his policy .Assignee : Individual or Institution to which policy is being assigned .Cannot be changed / altered by assignor once it is assigned .Nomination ceases for assignor when assigned . Same time , assignee cannot make any nomination.Can be endorsed without stamped , or on separate deed which has to be stamped .Conditional Assignment Can revert in case : assignee predeceases

the assignor .Or when assignor survives until maturity

Absolute assignment Assignees becomes the titleholder & can deal with the policy the way he chooses

6. Important Terms tabled Below Loan Would be certain percentage of SV . ( endowment / whole life plan)

can be repaid in part or fully . SV keeps increasing when premiums are kept paying .

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Chapter #4 : Underwriting 1.Terms of Underwriter Tabled Below :Underwriter Asses the risk of people in the Pool .

calculates suitable Premiums . Decides on terms & conditions & scope of cover to be given .

Decision of underwriter Can reject , accept , charge extra premium , accept with modified conditions , apply lien,postpone for certain period

Decision To Proposer IRDA guidelines states the decision of the Underwriter has to be conveyed to the PROPOSER within 15 Days of receiving the proposal

Mortality Table Contains table of details of actuarial calculation on death .MPL is maximum possible loss .

2. Gathering Underwriting Information Tabled Below :Proposal Form Underwriter gets information from this . Carries details of Age , history ,

medical conditions , occupation , previous policy details etc

Agent Confidentiality report ( ACR )

Is prepared by agents .( primary underwriter). If amount of SA is High , then ACR has to be more detailed . Information can be gathered from Friends , relatives etc

Moral Hazard Report Sometimes for Higher SA , Report to be made by senior employees of company ( Unit manager / SALES manager ). Insurance Investigation agency are also used for gather Information on HIGH SA Proposal

Additional report Additional information on proposer's medical report can be sought . Special reports has to be done by the Senior Officials of insurance company & agents . This may contain Income , occupation , life style habits etc

3.Hazards Physical Hazards Refers to physical characteristics of Risk . Eg : AGE , sex , occupation ,

habits , personal medical history , Hobbies etc

Moral hazard Intention / ATITUDE . eg : reckless / careless attitude Towards health like smoking / drinking . Asking for HIGH SA beyond earning powers . Taking HIGH Insurance on spouse life who is not earning .

4.Details on Human Life Value tabled Below :HLV Amount of Insurance needed can be arrived from Human life Value .

It captures Economic value of the Person in monitory Value .As age increases , Human life value will decreases.

Income replacement method in HLV

Takes into consideration , the future income earning potential of a person during working years .

This method equates HLV to present value of future earning . Discount rate ( PPF ) is used while calculating this .

Simple Method in HLV Does not take salary increase over the years into consideration . Bank FD ( @ 8%) is taken into consideration for calculating this .

5. clause tabled below : Lien Used to substitute to charging High premium to High SA .

Risk would be decreasing over a period of time . If death happens during lien period , FULL SA is not Paid . Lien should decrease in an equal amount over a specific period

of time. If the term of the policy is multiple of Three , then lien operable

should be 1/3rd of the term. age #5

6.Premium & Bonus tabled below :Premium Actuaries using statistical data calculate premium table .

In level premium ,same premium paid across the term of plan .In flexible premium plan , the proposer can choose to have level or change the amount of premium on affordability . Usually increases by 5% annually .Premium will depend on AGE , Health , SA , benefits promised Risk PREMIUM Mortality table differ between insurance companies .

Mortality table is the probability that certain person will die before the next birthday.Risk premium is charged just to meet the claim for the year . RISK Premium = Mortality rate * SA

Net Premium Premium INTEREST EARNING

Loading Addition to premium is loading . Contains provision for : Bonus , medical expenses ,processing fees , claim settlement expenses , profit margin.Maximum expenses are incurred during Initial stages of the policy .

Bonus Actuary does valuation every year .Bonus is declared for with profit policy .Simple Revisionary

Gets added to the SA . Is paid bck to policyholder either during claim or any other date specified .

Compound revisionary

Computes annual bonus on compounded interest . Eg :bonus is added on SA and next bonus will be calculated on enhanced SA

Terminal bonus Also called PERCISTENCY BONUS . Applicable for policy with long term i.e 20/25/30 Years . Paid at maturity along with other bonus + SA

Interim Bonus Paid to policies which come for claim between two valuation . Paid at previous valuation bonus rate .

Chapter #5 : Basic of Life insurance products 1.Protection needs tabled below :INCOME Term Plan can help in protecting future income loss

Medical Needs Medical insurance plans to cover emergencies

Dependants For child education & marriage : children education plans .

Asset & Liabilities For protection against loans ( home loans , credit card etc ) : term plan for untimely death .

Family maintenance Term plan can supplement income loss or pension plan can give regular income .

2. two basic elements of Life insurance are : Death cover and maturity benefit .3. at lower age , Income protection is high priority and should look for term plans .4.Term plan is best against Home loans liabilities covering .5.two people opting for same term and product may have difference in premium amount due to AGE / SA/HEALTH reasons

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6 Insurance product Tabled below :Term Plan Cheapest form of Insurance . Covers death only .

Used for income protection as well as protection against liabilities like Home loan , car loan , credit card etc

Pure endowment plan Has only survival benefit which is paid at maturity .

Endowment Plan Death cover plus survival benefit .Has saving element in them and i given as bonus at the end in with profit policies . Because of saving elements , LOANS cn be taken in this . Plan is taken for specific goals like : Saving for future , children education etc

Whole Life Term plan with unspecified term .Loans can be taken . Partial withdrawal facility available during term

Convertible plan Useful for people who cannot pay high premium in initial years and later can increase the premium . Option has to be exercised during the specific trem stated in the policy Eg: initially taken a term plan and later converted into endowment /whole life .No medical or underwriting required at time of conversion

Joint Life Policies Ideal for married couple or partners .Each life is unwritten separately . Nomination is not needed. However if they want nomination , then it has to be done JOINTLY .

Group Insurance Plans Employees ,bank customers , trade union members etc .One policy issued : MASTER POLICY . And the employer would be called the Master policy holder .Group cannot be formed just to take insurance . It should have been formed earlier for other reasons .

ULIP Returns are subjected to movements in capital market .Insured has the flexibility to choose his own portfolio like investment in equity or debt or both . On death SA or Market value ( Fund value ) is paid .Settlement Option : allows the insured to take the FUND VALUE at maturity in a structured manner ( in 5 years ) instead of taking it in lump sum .

Child plan Dual benefit of saving and protection Child is the beneficiary to receive the benefit .Can be taken in form of ENDOWMENT , Money back or Ulip plans

Money Back Partial survival benefit and paid during the term of plan .which is TAX FREE .At maturity the bonus along with percentage of SA is paid . In case of death between Term , SA + bonus without deduction of survival benefits , would be paid to nominee .

7. Tax & Inflation features tabled below :Investment stage Under sec 80 C : Up to Rs 1 Lk can be claimed under premium /year.

Premium should be equal to or less than 20% of SA or SA should be 5 times the premium .

Maturity Stage Maturity amount is tax free under sec 10 (10 D) .provided the criteria od premium equal to or less than 20% of SA is met

Inflation Money loses its value . Plans should be taken keeping Inflation IMPACT in mind during the Maturity time .

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Chapter #6 : Saving Products 1. Saving Needs / Factors for saving Tabled below :Individual Without Capital

Building contingencies fund like medical emergencies , childs education . Retirement planning . Home loans etc

Individual with Capital To increase their existing WEALTH . Need sufficient wealth to be left behind for Legacy

Duration of Investment Compounding effect helps those who invest regularly for a long period .

Lock In period Investment made for TAX planning in BANKS IS 5 YEARS ,Loans cannot be taken in this FD In Equity Linked saving schemes it would be 3 years .

Risk Appetite Young people just out of college and have just started earning will have HIGH risk appetite as responsibility is lower . Moderate RISK APPETITE for people in Mid thirties .Very Low risk appetite for MID FIFTIES& above

2. Types of Saving Products tabled below :Bank Deposits Amount , tenure , interest rate , method of payment of interest is fixed at

inception of the Deposit .Principle will be returned at the time of Maturity .Interest rates varies with period of tenure . Traditional Interest is paid on Monthly / Qtrly/Half/ Yearly as

chosen .

Cumulative Interest is calculated in qtrly on compounding basis and is returned with principle at maturity .

Recurring Specified amount is invested every month on a chosen time horizon . Ideal for individual looking for accumulating money for goals like child education , buying car ,marriage etc

Mutual Funds Managed by asset managed company. Portfolio managers in these company will manage funds based on the type of fund that is chosen by the investor .Major advantage is RISK DIVERSIFICATION .MF provides :Regular Income Dividends declared

Capital appreciation Mutual fund unit are sold at price higher than the price at which they are brought.

Shares Represents the ownership of company.Stock exchange works as intermediary & offer a trading platform .Individual cannot buy or sell direct through exchange , they can go through stock brokers .Share provides : Dividend Income , capital appreciation , bonus shares

Bonds Investors are lending the money to get interest .corporate bond , T bill ,commercial papers , GSEC . Liquidity is another reason for people to invest in this .

Post Office All products individual has to Invest in lump sum amount for a fixed period .Interest rate is fixed at the inception . Individual to buy following instruments will go to Post office : Kisan Vikas Patra ,NSC , PPF ,Post office saving ,Monthly Income scheme, senior citizen saving schemes , recurring deposit account .

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Gold & Silver Gold is traded like Mutual fund through ETF .One GOLD ETF unit measures around 0.5/1 Gm of gold .GOLD ETF provides :Diversification ,good returns ,insurance against uncertainty & hedge against Inflation

3. TAX implications tabled below :80 C Life insurance Premium , NSC , PPF , PO TIME DEPOSIT 5 YEARS

,ELSS, pension plan , tuition fees paid for children .Principle of Home Loan

80 CCF Allowed investment in INFRASTRUCTURE Bond . Over and above Sec 80 C

80 D Deduction allowed from Health Insurance . Premium paid for parents will be getting extra deductions .Senior citizen ( above 65 years )would get higher than benefit than other individual .

24 B Subject to specified provision , Interest on Home loan is deductable

4.Implication of Interest Increase In Interest Interest rates on loans & deposits goes up .

Lending products from banks and financial institution falls due to borrowing becomes expensive .Bond purchase will increase .Share prices will drop .

Decrease in Interest Loans become attractive leading to consumption .Share price Increases . Investment in Real estate equities would increase

5.prioritizing needs Tabled below :Contingency fund Should have 3-6 Months saving for this .

Should invest in saving product which offers LIQUIDITY. BANK DEPOSITS & Bonds are preferred

Insurance Term Plan for INCOME PROTECTION .Endowment , ULIP , Whole life etc for saving . Child's plan :Risk averse investors should go for endowment plans & other higher risk appetite individuals can look at ULIP Investment

Assets EMI should not exceed more than 40% of monthly take home salary . For home loan 75% or 80% of total loan is provided by bank

Retirement Working professionals partially meets retirement through :EPF , Gratuity,pension

Tax Buying decision should be on NEEDS and not on TAX purpose only .6.Needs tabled Below :Perceived need A need which the person thinks is important but it actually is not . Eg :

looking to buy an expensive car , whereas real need could be planning for child's education

Short term Saving for emergencies . Duration : 1- 5 years

Medium Term Saving for children's education / marriage. Duration : 5-15 years

Long term For retirement planning . Duration : 15 or more years

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Chapter # 7 : Other key financial Products 1. Health Insurance Terminologies Tabled belowFamily Floater Can over Individual , spouse , children & Parents .

All get covered under one single insurance cover

Group insurance Plan Usually employees of the company covered for medical contingencies

Daily Hospitalization cash Benefit

Daily amount is fixed and may be more or less than actual .Paid daily on hospitalization .Has a limit of total number of days in a year . ICU : may pay additional amount .

Pricing Premium depends on Age , habits , family health , fitness . Premium Will be High for older age .

Cashless facility Photo ID card is provided . On admission on network hospital , invoices are settled by company directly to hospital . Not all expenses may be settled as per exclusion list in the Terms & condition of the policy

Pre existing Illnesses Insurance cover starts post waiting period information is specified in the terms & conditions of the policy documents

No claim Bonus Insurance company will give Discount on PREMIUM due next year , if no claims have come in the running year .

Individual Plan Caters to single individuals health

2.Type and terminologies of Riders tabled below :Accidental benefit rider ( ABR )

Paid on death due to accident ( external , violent , visible .unforeseeable means )

Critical Illness Rider Paid on diagnosis of Critical illness . Usually covers : aorta surgery , heart attack , cancer , major organ

transplant ,stroke , blindness ,paraplegia ,multiple sclerosis. Rider benefit ceases once it is paid . Payout can be used for any purpose including treatment

Waiver of premium Future premiums are waived off due to disability to policyholder by illness or accident .

Helps in preventing policy getting lapsed due to disability . some child plan comes with built in WOP .

Surgical Rider Treatment cost for surgery of heart , lungs brain , liver etc

Guaranteed Insurability Rider

Gives right to increase THE COVER in response to life stage events like , child birth , marriages etc

3.Rider Regulations Tabled Below :Health & Critical rider Premium of all these riders , in case of TERM & GROUP POLICY product

cannot exceed 100% of the premium of base policy

Other Rider Premium of all riders put together cannot exeed 30% of premium of base policy

SA clause Benefits of under each rider cannot exceed more than than the SA of base policy

4. Annuity types Tabled below :Immediate Become payable immediately after purchasing it in lump sum . Annuity

commences at end of month , half , qtrly , yearly

Deferred Paid in series of payment before vesting date . Can be paid in lum sum before the vesting period

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5. Type of annuity tabled below :Life annuity Annuity paid through out Life and ceases on death of the annuitant

Guaranteed period Paid for minimum fixed period such as 5/10/15/20/25 years, regardless of annuitant death . If he survives the period then annuity will continue till death .

Joint life , last survivor Husband & wife get annuity . Level annuity paid through out till last survival . May also have reduced annuity if the first annuitant dies then the

second one will get reduced percentage like 25/50/75% of the throughout depending on term and condition

Life Annuity with return of price

Annuity is paid till death of the annuitant and then the purchase price is returned to the nominee / legal hier

Increasing annuity Annuity will increase every year in fixed percentage or in line of agred inflation index .

6. Benefits of pension Tabled below :Commutation Before receiving the annuity , 1/3rd of the accumulated fund can be

withdrawn tax free .

Open market Option After the accumulation phase the annuitant can take annuity from same insurer or other . This helps in getting better Annuity rate

Minimum Guarantee returns

IRDA has specified 4.5% RETURNS if all premium paid and no partial withdrawal done

Tax 1/3rd Commutation is tax free under Sec 10 10 a. Annuity is taxable . Premium paid during accumulation phase is tax exempted under 80 C

Chapter #8 :Identifying client needs

1. Professional insurance market will cater to real NEEDS . Process involves : Identify >> quantify >> prioritize2.Life stages and product suitability Tabled below :Childhood Parents need to keep income protection in mind and then lok at saving

instrument for education . Term plan & then Child plan ( low risk then Endowment ) higher risk appetite then ULIP

Young Unmarried With no dependent : can look at ULIP . With dependent :Protect Income first ( term plan ) then look at long term wealth creation .

Young married Double Income No KIDS : Individual TERM plan for both partners . Then look at ULIP for high returns and accumulation of wealth .Single Income Family :Term plan is first preference.

Young married With Children

Double Income family :TERM Plan for both , then child plan , next health plan with family floater and then retirement plan .Single Income family :Term plan followed by child plan and Health plan with family floater

Married with Older children

Income protection , children's education / marriage saving , retirement planning , Health plans

Pre Retirement Retirement plan , & health plan

Retirement Invest funds to ensure regular income through pension plan review of health plans & Estate planning.

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3. Factors effecting Life stages tabled below :Public sector employed

Life , pension , health insurance needs are not high

Private sector employee

Life , health insurance may be provided buy Planning for retirement is important . No defined age for retirement

Self employed Term plan , child education plan & retirement planing high priority

Unemployed Should have disability insurance and also have emergency funds

Divorce , widow, separation

If housewife then on divorce / separation :protection & retirement plan Widow :manage asset or preserve assets for dependent children .

4. Open end questions :encourages client to speak freely .5. Close ended questions : makes client give specific answers . Like YES or No .

Chapter # 9 :Fact finding & Financial Planing 1.Identify , quantify and prioritize the real needs in fact finding .2. Information gathering for fact finding tabled below :Personal details Name , age ,occupation , marital status etc , habits , DOB

Employment details Employee benefits like EPF , gratuity, salary , bonus etc details for employed .For self employed : clients profit & amount drawn from business to family expenditure

Financial Details Assets & liabilities .Clients with Higher assets : investment advice clients with limited assets :suggest to match clients need and ability to pay

Existing Insurance & investments

Gather information of existing plans related to protection , wealth , health , ;lapsed policies etc

Monthly income & expenditure

Will help to identify funds available for investment post the monthly expenditure .

3.Important concepts on Fact finding Tabled below :Benefit illustration documents

Distinguishes between Guaranteed & Non guaranteed benefits . For non guarantee benefits illustration is shown at 6% & 10% as per

Life insurance council . Shows charges levied which in turn shows reduced investment

returns . Commission of agents can also been seen in the ULIP EBI . Signature in the EBI by the customer indicates that he is aware of

the features and understands the benefits of the plan .

KYC ( KNOW Your customer )

Photograph , Proof of identity (DL /Passport/Pan Card /voter ID /Defence ID)Proof of address (DL /passport/ telephone Bill/ electricity bill , ration card etc )

Recommendation Recommend the product that best suits the clients need .

Chapter # 10 :Good client Practise 1. Agent acts as an intermediary between Insurance company and the client .2. Agent should disclose commission to client when asked for . And should never give rebate .3. agent can receive maximum upto 35% of commission in first year , 7.5% in 2nd and 3rd year and then 5% there on ( this all does not apply for Immediate / deferred annuity ).4.during the first 10 years of insurer business , maximum of 40% first year commission can be paid to agents .

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5.commission of renewal premium cannot exceed 4% in any case .6.on renewal commission post termination clauses tabled below :Renewal commission #1 Should have worked for 5 years and not less than Policies with Rs 50k

SA are in force , one year before the termination of agency

Renewal commission #2 Should have worked for 10 years , and after ceasing , is not directly or indirectly involved in soliciting insurance

7. in case of agents death , commission is payable to legal heirs.8.Important terminologies tabled below :Churning Repeatedly encouraging customer to switch or invest policies

from one to another is churning . Some times agents use this to gain HIGHER commission by

surrendering old policy and giving new one . Client suffers because of surrender charges and no long term

benefit . Advice to surrender has to be done only when it is in the best

interest of the client . If sales target gets reduced , chances of churning might

decrease .

Persistency Refers to the amount of business insurance company is able to retain without surrender / lapse of the policy

a low persistence effects insurance industry . Low persistency for insurer leads to less profit & reduction in

accumulation of reserve . For agent it means reduction in renewal commission .

Low persistency ratio means large number of polices are getting Lapsed or Surrendered . Increase in Persistency ratio means , lapse / surrender is being controlled well .

High persistency helps in reducing costs to the insurer . Agents can get higher persistency by selling need based

polices and giving service to the client regularly .

Review of policy Might arise during child birth , marriage , change of job , moving house

Recommendation stage CHECK clients commitment ,outline the reasoning for recommendation ,accept the decision of the client . If rejects then agent should ask the reason for not going for the recommendation .

Chapter # 11 : Claims

1.Insurer will not pay claim till the event that has been insured happens 2. A lack of insurable interest will have the contract void .3. breach of good faith , and breach of warranty will make the contract void .4.Under disputibility clause , Insurance companies can hold back the premium after making the policy Null and void in case of fraudulent /concealment of material facts .5. claim is a demand to fulfil insurer obligation .6.Insurance company makes enquiries only in death cases .

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7 Types of Claim Tabled below :Maturity Claim Action is initiated by the Insurer .

Post dated cheques are sent before the maturity date on signing of discharge voucher .

If Policy is lost , Indemnity bond is signed and claim settled . Some times advertisement in news paper is also given stating the policy being lost .

In case of absolute assignment , claim is settled to assignee . In case settlement option , claims will be paid in structured manner

over a period of maximum 5 years from date of maturity instead of lump sum .

Survival Benefit Action initiated by insurer . Post dated cheques are sent . If policy document is lost , then duplicate policy is issued on which

endorsement would be made . Money back policy is an example which gives periodic payouts as

survival benefit across the term .

Death Claim Action is initiated by the Claimant . In case of ULIP , SA or fund value whichever is Higher is paid . Insurer has to exercise caution while settling death claim . In certain policies , death benefit may not be paid at time of death ,

but would be paid on specific date as per term and conditions of the policy ( Child's education / marriage age ).

Final death pay out may have deduction based upon any loan due / premium due .

8.Important claim concepts tabled below :Reduced SA There would be reduction in SA at maturity if the Policy has become PAID

UP .

Rider Benefit Under Accidental benefit Rider - additional SA is paid along with Base Policy benefits.

Under Hospital care Riders treatment costs in case of hospitalization is paid .

Presumption of Death

Proof of death is essential for death claim settlement . Under Indian evidence act 1872 , missing person not being heard for

7 years would be termed under presumption of death . Decree of court is required to settle the death claim . Premiums have to be paid till obtaining decree of court

Unnatural Death FIR ,Panchanama , forensic report , coroners report , post-mortem report needed

Document required for death claim settlement

Policy document deeds of assignment / reassignment proof of age if not submitted earlier death certificate claimant statement legal evidence of title if no nominee / assigned discharge voucher signed and witnessed

Early death Investigation will happen . Additional document may be asked for in order to make certain that

material facts were not suppressed during inception of policy

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9 . IRDA regulations on claim Time Lines Additional documents or queries to be asked has to be done in NO

piece meal basis within 15 days of receiving the claim intimation . A claim to be paid or disputed with reasons , has to be done in 30

days of receiving the claim intimation . Any investigation to be done , has to be completed in 6 months .

Penalty If insure is ready with claim pay out buy claimant has not claimed , then the interest rate applicable would be same as bank saving rate .

If delay in settlement from Insurance company side , then 2% over bank saving rates needs to be paid to the claimant

Chapter # 12 : Legislation & client Advise 1. Important provisions Tabled Below :Agent Sec 40(1) of insurance act 1938 deals with remuneration.

Sec 41 (1) prohibits agents from giving rebate .

LIC Formed in 1956

IRDA Controller of Insurance sector . Protects the interests of policyholders . Regulates , promotes and ensures orderly growth of industry.

2. Important concepts tabled below :Prevention of money laundering (PMLA)

Stages of money laundering : Placement >>layering >> Integration compliance of PMLA is for all financial sectors regulated by SEBI ,

RBI & IRDA & ALL FINANCIAL INTERMEDARIES

Anti Money Laundering ( AML )

Guidelines Include : Internal policies& procedures ; Compliance officer ; internal audit control ; Training to agents and employees.

KYC ( Know your customer ) :IRDA states requirement of customers Address proof, identity proof , income proof .

Others Risk profile : Low risk ( salaried , Govt. Employee) High Risk Profile : Politically exposed Person , NRI , NGO , Antique

dealers , film stars , person dealing with Real estate . Premium in cash cannot exceed Rs 50,000

3. Important Legislations Tabled Below : MWPA Life assured will be married / widower/or divorcee MAN only .

Beneficiary could be wife & Children / adopted child TRUST to be formed . Could be an individual or entity . Trustee, if

person has to be more than 18. can have more than one as a trustee. Policy is insured as a TRUST . Claim will be paid to the trust who will hold for the beneficiaries . Policy cannot be surrendered , nomination /assignment cannot be

done . In Mohammedan, the name of the beneficiaries have to be named

as its persona designate

IRDA Regulation on Advertisements

Unfair or misleading advertisement : fail to be identified as insurance product ; making claim beyond ability of policy ;benefits not matching with the product .

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COPA Can be approached for redress al of grievances district level :up to Rs 20lakh State level : Up to Rs 1 cr National Level : above the jurisdiction of the state forums and also

appeals against the decision of state forums .

Chapter # 13 : Regulations & Client advice 1. Regulations & Roles tabled below :Central Government Can supersede IRDA by issuing notification

Issues Grant to IRDA after due appropriation by parliament law . annual statement of IRDA has to be audited & certified by comptroller

& audit general of India and then forwarded to central Govt. . Can ask directions on questions of polices . Has allowed 26% stake for foreign investors in Insurance sector .

Life Insurance Council

Its the face of Insurance Industry helps in promoting role & benefits of life Insurance . Conducting research , training and seminar for Life insurance

industry. Formed under Insurance act 1938

Tariff advisory Committee

Controls and regulates advantages , rates , term & conditions with respect to General insurance .

TAC has been designated by IRDA as DATA Repository for general insurance .

Now pricing of insurance product has been de tariffed .

Insurance Institute of India

Earlier known as Federation of Insurance Institute in 1955 . Promotes insurnce education and training in India

National Insurance Academy ( NIA Pune )

Set up in 1980 by Govt with support from Life insurance council , GIC & 4 general insurer council .

Design , implement , & operate on Insurance Training architecture. 2. AGENT Licensing details Tabled Below :Application Rs 250 has to be paid . To become an agent Form & fees , has to undergo

50 hours of training , examination by III , at least 12th Pass , sound mind

Renewal After 3 years o licensing has to undergo 25 hours of practical training .

Duplicate license Fees of Rs 50 . Operating without license has to pay a Fine of Rs 500

3. Important Bodies tabled below :RBI Regulates , monitors and controls the monitory policy

SEBI Regulates & protects the investors in security market

IRDA Established in 1999 licensing of Insurance companies specifies qualification , training , code of conduct for intermediaries regulates investment funds of insurance companies . Adjudicates in disputes between Insurance company and

intermediaries. Regulates the maintenance of solvency margins .

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Chapter # 14 : Customer Protection 1. In process of SALES , the agent , insurer & intermediary will shall act as per code of conduct prescribed by : LI council , the authority & recognised professional body or association .2.HANDLING COMPLAINTS Tabled below :Consumer Affair department

Gives special focus to oversee the compliance BY INSURER of IRDA REGULATION .

Empowers the consumers by educating them on grievance process redressing .

Integrated grievances management system ( IGMS)

Gate way for policyholder to register complaint with Insurer and then escalate to IRDA .

Internal grievances cell Complaints can be registered through Call centre , help desk , by email etc

websites , prospectus , policy documents carry complaint handling numbers / email address of the company.

Nodal Officer Grievance redress al officer named by the branch / state zone level to handle complaints of consumers .

If not satisfied by Nodal officers interventions , can move the complaint to higher officers named Appellate authority

2. Ombudsman details tabled below :Role Resolves complaint related to claims , disputes with regard to term of

policy , premium paid , non issues of Policy documents . 12 locations have ombudsman . Power is restricted to insurance contract till Rs 20 Lk

Time lines Insurers have to honour the award passed by ombudsman in 15 day . Complaint to Ombudsman has to be made within 1 year of insurer

response . recommendation by ombudsman has to be made within 1 month of

the complaint registered with Ombudsman . If compliant agrees with the recommendation , then has to give in

writing within 15 days of the date of receipt of acknowledgement . Award has to be granted within 3 months of the complaint registered

with the ombudsman .

Actions First the complaint should have made complaint with the Insurer and if not satisfied with the response , can approach the ombudsman.

The complaint should not be pending before any consumer forum , court or arbitrator . Else , ombudsman would dismiss the complaint .

If not complaint is not satisfied with the award of the ombudsman , can approach other consumer forums , courts etc .

If the complainant is not in the same jurisdiction of the ombudsman , the case can be dismissed.

Chapter # 15 : Ethics & code of conduct 1.IRDA has laid down code of conduct for agents .and insurer .2.Insurance company can prescribe its own code of conduct .3. Churning is a bad example for agent . Insufficient emphasis on long term relation leads to lower persistency ratio.4. If free look / lapsation /surrender has decreased for a company it indicates that the ethicl practises has improved for the company .

All the Best Page #17