Podcast
Questions and Answers
What is the purpose of insurance?
What is the purpose of insurance?
To provide financial protection against losses or damages due to uncertain events.
Which of the following are types of risks in insurance?
Which of the following are types of risks in insurance?
The principle of pooling in insurance means collecting small contributions to cover large losses.
The principle of pooling in insurance means collecting small contributions to cover large losses.
True
The first life insurance company in the world was founded in _____ in London.
The first life insurance company in the world was founded in _____ in London.
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What is a peril in the context of insurance?
What is a peril in the context of insurance?
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What is the significance of the IRDAI?
What is the significance of the IRDAI?
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Which of these is a fundamental risk?
Which of these is a fundamental risk?
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The risk of financial loss from being found liable is known as _____ risk.
The risk of financial loss from being found liable is known as _____ risk.
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What does life insurance encourage among policyholders?
What does life insurance encourage among policyholders?
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Speculative risks are generally insurable.
Speculative risks are generally insurable.
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Match the following types of insurance with their descriptions:
Match the following types of insurance with their descriptions:
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What makes an insurance contract valid and enforceable under the law?
What makes an insurance contract valid and enforceable under the law?
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The principle of proximate cause states that the immediate cause of a loss must be an insured peril for the insurer to be liable.
The principle of proximate cause states that the immediate cause of a loss must be an insured peril for the insurer to be liable.
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What is the principle of indemnity?
What is the principle of indemnity?
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Subrogation refers to the transfer of all rights and remedies from the insured to the _____
Subrogation refers to the transfer of all rights and remedies from the insured to the _____
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Which of the following are typically included in a proposal form for insurance? (Select all that apply)
Which of the following are typically included in a proposal form for insurance? (Select all that apply)
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What must a proposer disclose in a proposal form regarding their previous insurances?
What must a proposer disclose in a proposal form regarding their previous insurances?
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The declaration in a proposal form ensures that the insured has understood and filled out the form accurately.
The declaration in a proposal form ensures that the insured has understood and filled out the form accurately.
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According to the Insurance Act, when must a premium be paid for an insurance policy?
According to the Insurance Act, when must a premium be paid for an insurance policy?
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What type of document serves as evidence of an insurance contract?
What type of document serves as evidence of an insurance contract?
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What is the role of conditions in an insurance policy?
What is the role of conditions in an insurance policy?
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A warranty in an insurance policy can be ignored if it does not affect the risk.
A warranty in an insurance policy can be ignored if it does not affect the risk.
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Which of the following critical illnesses are covered under the Critical Illness Insurance Policy? (Select all that apply)
Which of the following critical illnesses are covered under the Critical Illness Insurance Policy? (Select all that apply)
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The insurance policy is cancelled at the request of the insured after nine months without any refund.
The insurance policy is cancelled at the request of the insured after nine months without any refund.
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What is the sum insured available under the Critical Illness Insurance Policy?
What is the sum insured available under the Critical Illness Insurance Policy?
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The insured can avail the Critical Illness Insurance Policy if they are between _____ years to _____ years.
The insured can avail the Critical Illness Insurance Policy if they are between _____ years to _____ years.
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What is the loading on premium in case of existence of Hypertension without other complications?
What is the loading on premium in case of existence of Hypertension without other complications?
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The insurance policy covers self-inflicted injuries.
The insurance policy covers self-inflicted injuries.
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What should be submitted along with the claim form to the company?
What should be submitted along with the claim form to the company?
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The period allowed to review the terms and conditions of a fresh policy is _____ days.
The period allowed to review the terms and conditions of a fresh policy is _____ days.
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Match the following critical illnesses with their coverage status:
Match the following critical illnesses with their coverage status:
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What is the primary purpose of the Insurance Regulatory and Development Authority of India (IRDAI)?
What is the primary purpose of the Insurance Regulatory and Development Authority of India (IRDAI)?
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Legal hazard refers to the motivation to sue for financial profit due to little cost faced by the plaintiff.
Legal hazard refers to the motivation to sue for financial profit due to little cost faced by the plaintiff.
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What significant change did the IRDAI make regarding the foreign direct investment limit in the insurance sector in June 2016?
What significant change did the IRDAI make regarding the foreign direct investment limit in the insurance sector in June 2016?
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The Law that governs all contracts in India, including insurance contracts, is the __________.
The Law that governs all contracts in India, including insurance contracts, is the __________.
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Which of the following is NOT a characteristic of a valid insurance contract?
Which of the following is NOT a characteristic of a valid insurance contract?
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What is the distinction between moral hazard and morale hazard?
What is the distinction between moral hazard and morale hazard?
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Which organization was established in 1956 to nationalize the life insurance sector in India?
Which organization was established in 1956 to nationalize the life insurance sector in India?
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What is 'insurable interest' in the context of insurance?
What is 'insurable interest' in the context of insurance?
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Insurance intermediaries have no role in the insurance transaction.
Insurance intermediaries have no role in the insurance transaction.
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What is one of the functions of the IRDAI?
What is one of the functions of the IRDAI?
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The principle of _______________ in insurance requires that all material facts relating to the subject matter of insurance must be disclosed.
The principle of _______________ in insurance requires that all material facts relating to the subject matter of insurance must be disclosed.
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Study Notes
Module Overview
- Objective: Providing comprehensive guidelines and knowledge for point-of-sale insurance through an organized manual structure.
- Modules: Five key modules covering introduction, market insights, principles, general insurance products, and miscellaneous topics.
Introduction to Insurance
- Concept: Insurance mitigates financial loss from unpredictable events by pooling contributions from similar asset owners.
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Historical Roots:
- Originated around 3000 BC with various civilizations practicing loss-sharing.
- Babylonian traders utilized agreements featuring ‘bottomry loans’ to ensure repayment upon safe shipping.
- Greeks and Chinese traders engaged in mutual financial support practices.
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Modern Development:
- Lloyd’s Coffee House in London marked the beginning of commercial insurance.
- The first life insurance company was the Amicable Society for a Perpetual Assurance (1706).
Evolution of Insurance in India
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Initial Developments:
- The first life and non-life insurance companies began operations in early 1800s.
- National Insurance Company Ltd was founded in 1906, the oldest still active today.
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Regulatory Milestones:
- 1912: Life Insurance Companies Act introduced compulsory actuarial valuations.
- 1956: Nationalization of life insurance with the establishment of LIC.
- 1972: Nationalization of non-life insurance led to the formation of GIC.
- 1999: Insurance Regulatory and Development Authority (IRDAI) established.
Concepts of Risk, Peril, and Hazard
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Definitions:
- Risk: The possibility of loss.
- Peril: The specific cause of loss (e.g., fire, flood).
- Hazard: Conditions that increase the likelihood of a peril occurring (e.g., faulty wiring for fire).
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Types of Risk:
- Pure Risk: Only risk of loss with no chance of gain (insurable).
- Speculative Risk: Involves the chance of both gain and loss (generally uninsurable).
- Fundamental Risk: Affects large groups (e.g., natural disasters), often covered by government.
- Particular Risk: Specific to individuals (e.g., theft).
Importance and Functions of Insurance
- Security Provision: Offers safety against financial losses from various perils.
- Risk Mitigation: Reduces business losses and guarantees continuity despite uncertainties.
- Peace of Mind: Alleviates anxiety related to potential future losses.
- Encourages Saving: Promotes regular savings through premium payments over time.
- Economic Growth Catalyst: Supports development by protecting capital and encouraging investments.
- Credit Facilitation: Allows insured individuals to obtain loans against insurance policies.
- Inflation Reduction: Helps stabilize money supply and promote economic production.
- Employee Welfare: Insurance benefits enhance employee security, encouraging productivity and loyalty.
Regulations and Compliance
- Regulatory Framework: Governed by the Insurance Act (1938) and subsequent amendments outlining company ownership and operational guidelines.
- Key Norms: Insurance companies must adhere to AMU KYC guidelines and protect policyholder interests, including grievance redressal.
Conclusion
- Insurance Role: Essential for providing financial security, mitigating risks, and fostering economic stability and growth.
- Continuous Evolution: The insurance landscape continues to adapt with regulatory changes and market needs, ensuring better protection and service for policyholders.### Insurable Interest
- Validates and enforces an insurance contract under law.
Proximate Cause
- Key principle determining the cause of loss or damage in an insurance claim.
- Insurer liable only if the loss arises from an insured peril.
- Focuses on the predominant cause initiating the chain of events, not just the last event.
- Remote causes do not affect the claim if they are not proximate causes.
Indemnity Principle
- Applicable to non-life insurance policies.
- Policyholders are compensated to restore their financial position before the loss, not to profit.
- Insurers assess the economic value of loss for compensation.
Subrogation
- Process where the insurer acquires the insured’s rights to pursue recovery post-indemnification.
- If the insured is compensated for loss due to a third party's negligence, the insurer can seek damages from that party.
Proposal Form
- Essential document initiating an insurance contract, detailing the insured's identity and insurance needs.
- Collects material facts for risk assessment by the insurer.
- Must be filled with utmost good faith; non-disclosure can nullify coverage.
Risk Assessment
- Proposal forms guide insurers in deciding on accepting risks and setting terms, rates, and conditions.
Declaration in Proposal Forms
- Insured confirms accuracy and truthfulness of all information provided.
- Standard declaration format ensures transparency.
- Duty of disclosure extends throughout the policy period.
Nature of Proposal Questions
- Tailored to insurance type, often asking about health, lifestyle, and insurance history.
- Past claims and losses give insight into risk management.
Intermediaries' Role
- Agents/brokers ensure both parties’ interests are met and all material risk information is shared.
- Provide clients with necessary advice regarding coverage.
Acceptance of Proposal
- Underwriting evaluates proposal contents and may require medical assessments for health insurance.
- Insurers communicate acceptance or rejection decisions in writing within specified timelines.
Prospectus
- Promotional document outlining the insurance product's benefits, coverage, and key terms.
- Must comply with regulatory guidelines detailing coverage, exclusions, renewal terms, and premium conditions.
Premium Receipt
- Issued upon receiving premium payment, validating the insurance contract.
- Premium must be paid in advance as per the Insurance Act, ensuring that risk is assumed only after payment.
Payment Methods
- Can include cash, bank instruments, internet transfers, and others approved by regulatory authorities.
Policy Document
- Formal contract providing evidence of insurance terms, including insured details, coverage descriptions, sums insured, and obligations.
- Governed by statutory requirements ensuring clarity and protection for policyholders.
Conditions vs. Warranties
- Conditions: Essential provisions; breach can void the contract. Example: claim fraud invalidates policy coverage.
- Warranties: Conditions to reduce insurer liability; must be strictly observed. Example: limits on the number of insured traveling together.
Endorsements
- Documents used to modify an insurance policy’s terms after issuance, covering changes in sum insured, risks, or extended coverage.
- Form integral part of the insurance contract when issued.
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Description
Explore the concept and history of insurance, from ancient civilizations to modern practices, and learn how it provides a system of sharing risks and financial losses.
