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Questions and Answers
Who is the copyright holder of this course material?
Who is the copyright holder of this course material?
For what purpose is this course material designed?
For what purpose is this course material designed?
Who are the authors/reviewers of this course material?
Who are the authors/reviewers of this course material?
In what year was this course material published?
In what year was this course material published?
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What is the limitation of this course material?
What is the limitation of this course material?
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What is the relationship between the questions in the examination and this course material?
What is the relationship between the questions in the examination and this course material?
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What is the principle behind the concept of indemnity in insurance?
What is the principle behind the concept of indemnity in insurance?
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What happens to the insured's right to claim compensation from a third party after the insurer has paid the claim?
What happens to the insured's right to claim compensation from a third party after the insurer has paid the claim?
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What is the primary consideration when deciding whether to insure or not?
What is the primary consideration when deciding whether to insure or not?
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What is the purpose of subrogation in insurance?
What is the purpose of subrogation in insurance?
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If a house worth Rs. 10 lakhs is insured for Rs. 5 lakhs and a loss of Rs. 60,000 occurs, what is the maximum amount the insured can claim?
If a house worth Rs. 10 lakhs is insured for Rs. 5 lakhs and a loss of Rs. 60,000 occurs, what is the maximum amount the insured can claim?
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Which of the following scenarios is an example of a situation where insurance would be most required?
Which of the following scenarios is an example of a situation where insurance would be most required?
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What is the term used to describe the situation where the insured does not have sufficient insurance coverage to cover the full value of the property?
What is the term used to describe the situation where the insured does not have sufficient insurance coverage to cover the full value of the property?
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What is the main reason why retention of a risk would not be appropriate in certain situations?
What is the main reason why retention of a risk would not be appropriate in certain situations?
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Which of the following is NOT a consideration when deciding whether to insure or not?
Which of the following is NOT a consideration when deciding whether to insure or not?
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In the example of Mr. Kishore's household goods, how much can the insurance company recover from Sylvain Transport service?
In the example of Mr. Kishore's household goods, how much can the insurance company recover from Sylvain Transport service?
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What is the primary role of intermediaries in the insurance industry?
What is the primary role of intermediaries in the insurance industry?
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Why is subrogation often referred to as a 'corollary' of indemnity?
Why is subrogation often referred to as a 'corollary' of indemnity?
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What is the amount of loss that the insured can claim in proportion to the insurance coverage?
What is the amount of loss that the insured can claim in proportion to the insurance coverage?
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Which of the following is an example of an asset that should be insured due to its high severity and low frequency of loss?
Which of the following is an example of an asset that should be insured due to its high severity and low frequency of loss?
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What is the role of the Insurance Regulator in the insurance industry?
What is the role of the Insurance Regulator in the insurance industry?
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Which of the following scenarios needs insurance according to the considerations outlined in the content?
Which of the following scenarios needs insurance according to the considerations outlined in the content?
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What is the primary purpose of insurance?
What is the primary purpose of insurance?
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What is the term for the chance of a loss?
What is the term for the chance of a loss?
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What is an example of a peril?
What is an example of a peril?
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Why are losses arising from normal wear and tear not covered in insurance?
Why are losses arising from normal wear and tear not covered in insurance?
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What is the term for the asset that is exposed to a peril?
What is the term for the asset that is exposed to a peril?
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What is required for a loss to happen?
What is required for a loss to happen?
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What is the primary difference between risk and peril?
What is the primary difference between risk and peril?
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What is the primary obligation of a proposer when answering questions in an insurance policy?。
What is the primary obligation of a proposer when answering questions in an insurance policy?。
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Why do insurance policies not provide compensation for losses arising from normal wear and tear?
Why do insurance policies not provide compensation for losses arising from normal wear and tear?
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In which scenario does a proposer not need to disclose a material fact?
In which scenario does a proposer not need to disclose a material fact?
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What happens if a proposer is not aware of a material fact at the time of taking the policy?
What happens if a proposer is not aware of a material fact at the time of taking the policy?
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What is expected of the underwriters in terms of asking for information?
What is expected of the underwriters in terms of asking for information?
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What is the duration of the duty to disclose material facts in an insurance contract?
What is the duration of the duty to disclose material facts in an insurance contract?
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What happens if a proposer becomes aware of a material fact during the term of the policy?
What happens if a proposer becomes aware of a material fact during the term of the policy?
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What is the consequence of non-disclosure of material facts?
What is the consequence of non-disclosure of material facts?
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In which scenario can the insurer be considered indifferent to further information?
In which scenario can the insurer be considered indifferent to further information?
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Study Notes
Insurance Agents: Common Section
- The course material is based on the revised syllabus prescribed by the Insurance Regulatory and Development Authority of India (IRDAI) and prepared by the Insurance Institute of India, Mumbai.
- The course is designed to provide academic inputs for students appearing for the Insurance Institute of India's examinations.
Considerations before Opting for Insurance
- Evaluate the cost of transferring the risk (insurance premium) against the cost of bearing it oneself.
- Insurance is most required where the loss impact could be very high, but the probability (and hence the premium) is very low.
- Consider the following:
- Do not risk a lot for a little: ensure a reasonable relationship between the cost of transferring the risk and the value derived.
- Do not risk more than one can afford to lose: if the loss that can arise as a result of an event is large enough to cause bankruptcy, retention of the risk would not be appropriate.
- Consider the likely outcomes of the risk carefully: insure assets for which the probability of occurrence (frequency) of a loss is low but the possible impact (severity) is high.
Insurance Market Players
- Insurance companies (insurers) are the major players in the insurance industry.
- Other players in the insurance value chain include:
- Insurance Regulator
- Intermediaries like agents, brokers, banks (through bancassurance), insurance marketing firms, and point of sales persons
- These intermediaries interact with prospects/insured, finding out their needs, and giving them information about the policies available to cover their needs.
Risk and Insurance
- Risk refers to the chance of a loss.
- Risk can be defined as the likely loss or damage that can arise on account of happening of an event.
- Examples of risks include:
- Economic loss arising from the burning of a house or a burglary
- Accident resulting in the loss of a limb
- Perils are the causes of loss, such as:
- Fire
- Earthquakes
- Floods
- Lightning
- Burglary
- Heart attack
- Natural wear and tear is not covered in insurance.
Material Facts and Disclosure
- Material facts are information that can affect the insurance policy.
- The proposer has a duty to disclose material facts truthfully and fully.
- However, the following facts need not be disclosed:
- Measures implemented to reduce the risk
- Facts which the insured does not know or is unaware of
- Facts which could be discovered by reasonable diligence
- Matters of law
- Facts about which the insurer appears to be indifferent
Indemnity and Subrogation
- Indemnity means that the insured is compensated for the loss to the extent of the actual amount of loss.
- Subrogation is the transfer of all rights and remedies with respect to the subject matter of insurance, from the insured to the insurer.
- Subrogation follows from the principle of indemnity.
- The insurer can recover the claim amount paid to the policyholder from a negligent third party.
- The amount of damage that can be collected by the insurance company is only to the extent of the amount paid by the insurance company.
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Description
Prepare for the Insurance Institute of India's examinations with this quiz, covering the revised syllabus prescribed by the Insurance Regulatory and Development Authority of India (IRDAI).
