IC-38 - Short Notes (Life) & QP
IC-38 - Short Notes (Life) & QP
IC-38
NEW SYLLLABUS
(LIFE)
CONTENTS
Chapter
Title Page no
no.
SECTION 1 COMMON CHAPTERS
1 Introduction to Insurance 3
2 Customer Service 8
3 Grievance Redressal Mechanism 13
4 Regulatory aspects of Insurance Agents 17
5 Legal Principle of an Insurance Contract 19
SECTION 2 LIFE INSURANCE
6 What Life Insurance Involves 23
7 Financial Planning 26
8 Life Insurance Products – I 30
9 Life Insurance Products – II 34
10 Applications of Life Insurance 38
11 Pricing and Valuation in Life Insurance 42
12 Documentation – Proposal Stage 48
13 Documentation – Policy Condition - I 52
14 Documentation - Policy Condition - II 56
15 Underwriting 65
16 Payments Under a Life Insurance Policy 71
SECTION 3
HEALTH INSURANCE CHAPTERS
Chapter – 1
Introduction to Insurance
Insurance – in simple language it means to transfer risk to someone who is capable of handling
it generally to insurer (Insurance Company).
The origin of insurance business started from London‟s Lloyd coffee house.
1st Life insurance company in the world was Amicable society for Perpetual
Assurance.
st
1 life insurance company to be set up in India was The Oriental Life
Insurance company ltd.
st
1 Non-life insurance company established in India was Triton Insurance
company ltd.
st
1 Indian insurance company was Bombay Mutual Assurance society ltd found
in 1870 in Mumbai.
In 1912, the Life Insurance Companies Act and the Provident Fund Act were
passed to regulate the insurance business.
The Life Insurance Companies Act 1912 made it compulsory that premium-
rate tables and periodical valuation of companies be certified by an actuary.
The Insurance Act 1938 was the first legislation enacted to regulate the conduct
of insurance companies in India.
Life insurance Business was nationalized on 1st September 1956 by merging 170
insurance companies and 75 Provident Fund societies and Life Insurance
corporation of India ( LIC ) was formed..
Primary burden of risk – losses actually suffered. E.g. Factory getting fire.
. Secondary burden of risk – losses that might happen. Eg. physical/mental Stress strain.
Risk management techniques: - The various types of techniques that can be used to manage
risk are
Risk retention - One tries to manage the impact to risk and divides to bear the risk and
its effects by oneself.
Risk reduction and Control - This is a more practical and relevant approach than risk
avoidance. It means taking steps to lower the chance of occurrence of a loss and / or to reduce
severity of its impact if such loss should occur.
Don‟t risk more than what we can afford to lose. E.g. we cannot afford to not
insure our house as its cost is high.
Don‟t insure without considering the likely outcome. E.g. can anyone insure a
space satellite?
Note: - Insurance refers to protection against an event that might happen whereas Assurance
refers to protection against an event that will happen
c. The money raised from premium is invested in to the development of infrastructure needs.
d. Removes the fear, worry and anxiety associated with one‟s future.
Chapter -1 Questions
1. Which among the following is the regulator for the insurance industry in India?
I. Insurance Authority of India
II. Insurance Regulatory and Development Authority of India
III. Life Insurance Corporation of India
IV. General Insurance Corporation of India
2. Which among the following is a secondary burden of risk?
I. Business interruption cost
II. Goods damaged cost
III. Setting aside reserves as a provision for meeting potential losses in the future
IV. Hospitalization costs as a result of heart attack
3.Which among the following is a method of risk transfer?
I. Bank FD
II. Insurance
III. Equity shares
IV. Real estate
4. Which among the following scenarios warrants insurance?
I. The sole bread winner of a family might die untimely
II. A person may lose his wallet
III. Stock prices may fall drastically
IV. A house may lose value due to natural wear and tear
5.Which of the below insurance scheme is run by an insurer and not sponsored by the
Government?
I. Employees State Insurance Corporation
II. Crop Insurance Scheme
III. Jan Arogya
IV. All of the above
6. Risk transfer through risk pooling is called ________.
I. Savings
II. Investments
III. Insurance
III. Rs.80/-
IV. Rs.400/-
13.Which of the following statements is true?
I. Insurance is a method of sharing the losses of a „few‟ by „many‟
II. Insurance is a method of transferring the risk of an individual to another individual
III. Insurance is a method of sharing the losses of a „many‟ by a few
IV. Insurance is a method of transferring the gains of a few to the many
14.Why do insurers arrange for survey and inspection of the property before acceptance of a
risk?
I. To assess the risk for rating purposes
II. To find out how the insured purchased the property
III. To find out whether other insurers have also inspected the property
IV. To find out whether neighbouring property also can be insured
15.Which of the below option best describes the process of insurance?
I. Sharing the losses of many by a few
II. Sharing the losses of few by many
III. One sharing the losses of few
IV. Sharing of losses through subsidy
CHAPTER – 2
CUSTOMER SERVICE
Customer Service :
Customers provides the bread and butter of a business and no enterprise can
afford to treat them indifferently.
The role of customer service and relationships is far more critical in the case of
insurance than in other products.
Because Insurance is a Service. Insurance is a Intangible good.
It is necessary for insurance companies and their personnel, which includes their
agents, to render high quality service and delight the customer.
ii) Proposal stage – the agent has to help customers in filling the proposal form. It is
important that the agent explains and clarifies the proposers doubt while filling the
form.
iii) Acceptance stage – the promptness of agent in handing over FPR to customer
develops surety in customers mind. Delivery of policy bond is another major
opportunity.
iv) Premium payment – agents can be in continuous touch with their customers through
reminder calls for premium due‟s in order to avoid lapsation of policy.
v) Claim settlement – agents play crucial role during claim settlement by providing
policy holder details required during investigation stage.
1. Communication skills - One of the most important set of skills that an agent needs to
possess for effective performance is soft skills. Sift skills relate to one‟s ability to interact
effectively with other workers, customers. What goes in to making of a good relationship
is TRUST that you generate in your customers mind through – Attraction; Being Present;
Communication.
Communication can take place in several forms – Oral; Written; Non-Verbal; Body
Language.
Elements of effective listening – paying attention, providing feedback, responding
appropriately, empathetic listening and not being judgemental.
Non Verbal Communication :
a. Making a great first impression
Be on time always
Present yourself appropriately
A warm, confident and wining smile.
Being open, confident and positive
Interest in the other person.
b.Body Language - refers to movements, gestures, facial expressions. The Way we
talk, walk, sit and stand.
Listening skills :
Active Listening:
Is where we consciously try to hear not only the words but also, more importantly, try to
understand the complete message being sent by another.
i. Paying Attention
ii. Demonstrating that you are listening - Use of body language plays an important role
here.
iii. Provide feedback
iv. Not being Judgmental - Such judgmental approach can result in the listener
being unwilling allow the speaker to continue speaking, considering it a waste of time.
v. Responding appropriately
vi. Empathetic listening - Being empathetic literally means putting yourself
in the other and feeling his or her experience as he or she would feel it.
CHAPTER – 2 QUESTIONS
CHAPTER -3
GRIEVANCE REDRESSAL MECHANISM
Grievance redressal mechanism – IRDA has various regulations in order to render the
consumers grievances/complaints which come under protection of policy holder‟s
interests‟ regulation 2002.
ii) The consumer protection act 1986 – the act was passed “to provide for better
protection of the interest of consumers and to make provision for the
establishment of consumer‟s disputes”.
. Service – any provision made available to potential users such as banking, financing,
transport, insurance etc.
. Consumer – any person who buys any goods for a consideration or hires or avails of
any services for a consideration.
. Complaint – it means any allegation given in writing regarding any unfair trade,
defect in goods, deficiency in services hired or availed, excess pricing.
. Consumer dispute – it means a dispute where the person against whom the
complaint is made, denies and disputes the allegations made on him.
2. Ombusman :
Total office of ombudsman in India – 12.
The Ombudsman power is restricted to the value not exceeding Rs.20 Lacs
4. Important Days :
a. 10 days – Insurer has to communicate the policy holder on any inquery.
b. 15 days – Customer can cancel the contract within 15 days of receiving the policy
(Free look period/Cooling off period).
c. 15 days – Insurer has to convey the policy holder about acceptance or rejection of
proposal.
d. 15 days – In case of claim insurer can ask for additional documents within 15 days
of receiving the claim documents.
e. 15 days – Insurer has to honor the Award passed by the ombudsman within 15 days.
f. 15 days – Grace period in case of monthly mode of premium payment.
g. 31 days or one month – Grace period in case of Quarterly/half yearly/annual mode.
h. 30 days – ombudsman has to pass recommendation.
i. 30 days – Insurer has to settle the claim within 30 days after receiving the claim
document.
j. 90 days – Ombudsman has to pass an award within 90 days.
k. 180 days – maximum time in case of disputed claims.
CHAPTER -3 QUESTIONS:
3.Which among the following cannot form the basis for a valid consumer complaint?
I. Shopkeeper charging a price above the MRP for a product
II. Shopkeeper not advising the customer on the best product in a category
III. Allergy warning not provided on a drug bottle
IV. Faulty products
4.Which of the below will be the most appropriate option for a customer to lodge an insurance
policy related complaint?
I. Police
II. Supreme Court
III. Insurance Ombudsman
IV. District Court
5.Which of the below statement is correct with regards to the territorial jurisdiction of the
Insurance Ombudsman?
I. Insurance Ombudsman has National jurisdiction
II. Insurance Ombudsman has State jurisdiction
III. Insurance Ombudsman has District jurisdiction
IV. Insurance Ombudsman operates only within the specified territorial limits
6.How is the complaint to be launched with an insurance ombudsman?
I. The complaint is to be made in writing
II. The complaint is to be made orally over the phone
III. The complaint is to be made orally in a face to face manner
IV. The complaint is to be made through newspaper advertisement
7.What is the time limit for approaching an Insurance Ombudsman?
I. Within two years of rejection of the complaint by the insurer
II. Within three years of rejection of the complaint by the insurer
III. Within one year of rejection of the complaint by the insurer
IV. Within one month of rejection of the complaint by the insurer
8.Which among the following is not a pre-requisite for launching a complaint with the
Ombudsman?
I. The complaint must be by an individual on a „Personal Lines‟ insurance
II. The complaint must be lodged within 1 year of the insurer rejecting the complaint
III. Complainant has to approach a consumer forum prior to the Ombudsman
IV. The total relief sought must be within an amount of Rs.20 lakhs.
9.Are there any fee / charges that need to be paid for lodging the complaint with the
Ombudsman?
I. A fee of Rs 100 needs to be paid
II. No fee or charges need to be paid
III. 20% of the relief sought must be paid as fee
IV. 10% of the relief sought must be paid as fee
10.Can a complaint be launched against a private insurer?
I. Complaints can be launched against public insurers only
II. Yes, complaint can be launched against private insurers
III. Complaint can be launched against private insurers only in the Life Sector
IV. Complaint can be launched against private insurers only in the Non-Life Sector
CHAPTER – 4
REGULATORY ASPECTS OF INSURANCE AGENTS
not act as insurance agent for more than one life insurer, one general insurer, one
health insurer and one each of the mono-line insurers.
“Centralised list of Agents” means a list of agents maintained by the Authority,
which contains all details of agents appointed by all insurers
“Designated Official” means an officer authorised by the Insurer to make
Appointment of an individual as an Insurance Agent
An applicant seeking appointment as an insurance agent of an Insurer shall submit
an application in Form I-A to the Designated Official of the Insurer
The Designated Official shall communicate the reasons for refusal for
appointment as agent to the applicant in writing, within 21 days of receipt of the
application
CHAPTER 5
1) Offer and Acceptance – out of the 2 parties‟ one should offer and other party should
accept. Usually offer is made by proposer (policy holder) and acceptance is made by
insurer.
2) Consideration – premium paid by policy holder and the promise to indemnify by insurer
is known as consideration.
3) Agreement between parties – both parties should agree to the same thing.
4) Free consent – there should be no pressure on proposer while taking policy. Consent is
free when the policy is taken under no-coercion; undue influence; fraud;
misrepresentation; mistake.
5) Capacity of the parties – proposer should be legally competent. I.e. Sound mind, not
disqualified by law, should not be minor.
1) Uberima Fides (or) Utmost good faith – it means that every party to contract must
disclose all material facts relating to the subject matter of insurance whether asked or not.
3) Insurable Interest – it is the financial interest the proposer has in his belongings. I.e. Self;
spouse; parents; house; car etc. is termed as insurable interest.
In Non-life Insurance – Insurable interest should be present both at the start and during claim.
4) Proximate Clause – it is the main reason behind the various activities taking place and
there by resulting into any event.
5) Free Look-In Period (or) Cooling off period – if any proposer after entering into a
contract i.e. After taking a policy if he wants to cancel or reject the policy then he or she
take this decision within 15days from receiving of policy.
6) Indemnity - It means that the policyholder, who suffers a loss, is compensated so as to put
him or her in the same financial position as he or she was before the occurrence of the loss
event.
7) Subrogation: It is the process an insurance company uses to recover claim
amounts paid to a policy holder from a negligent third party.
2._____________ relates to inaccurate statements, which are made without any fraudulent
intention.
I. Misrepresentation
II. Contribution
III. Offer
IV. Representation
3.________________ involves pressure applied through criminal means.
I. Fraud
II. Undue influence
III. Coercion
IV. Mistake
4.Which among the following is true regarding life insurance contracts?
I. They are verbal contracts not legally enforceable
II. They are verbal which are legally enforceable
III. They are contracts between two parties (insurer and insured) as per requirements of Indian
Contract Act, 1872
IV. They are similar to wager contracts
5.Which of the below is not a valid consideration for a contract?
I. Money
II. Property
III. Bribe
IV. Jewellery
6.Which of the below party is not eligible to enter into a life insurance contract?
I. Business owner
II. Minor
III. House wife
IV. Government employee
7.Which of the below action showcases the principle of “Uberrima Fides”?
I. Lying about known medical conditions on an insurance proposal form
II. Not revealing known material facts on an insurance proposal form
CHAPTER – 6
i.e. Can measured in terms of money is known as Asset. Every human being has a
value which can be determined and is termed as Human Life Value (HLV). HLV helps to
determine how much insurance one should have for full protection.
E.g. Mr. Mahesh earns Rs.120000 per annum and spends Rs.24000 on himself. Therefore net
earnings for family in case of Mr. Mahesh‟s death is Rs.96000 per annum. Suppose rate of
interest is 8% then HLV = 96000/ 0.08 = 12,00,000.
2. Risk – there are various types of risk involved for a human being such as dying too early;
living too long; living with Disability.
3. Indemnity – in the occurrence of an event, the procedure to assess the loss and pay the
compensation for this loss is known as Indemnity.
4. Level Premium – it is a premium fixed in such a manner that it does not increase with age
but remains constant throughout the contact period
Mutuality is one of the important ways to reduce risk in financial markets, the other
being diversification. The two are fundamentally different.
Contract – taking insurance involves getting into a contract. Here the contract is between the
Insurer (Insurance company) and Insured (Policy holder).
CHAPTER – 6 QUESTIONS
1.Which of the below is not an element of the life insurance business?
I. Asset
II. Risk
III. Principle of mutuality
IV. Subsidy
2.Who devised the concept of HLV?
I. Dr. Martin Luther King
II. Warren Buffet
III. Prof. Hubener
IV. George Soros
3.Which of the below mentioned insurance plans has the least or no amount of savings element?
I. Term insurance plan
II. Endowment plan
III. Whole life plan
IV. Money back plan
4.Which among the following cannot be termed as an asset?
I. Car
II. Human Life
III. Air
IV. House
CHAPTER 7
FINANCIAL PLANNING
Financial planning is a process to identify his goals; assess net worth; estimating future
financial needs; and working towards meeting those needs.
Goals
Student Phase – this is pre-job phase. One is getting ready for earning phase.
Working Phase – this phase starts around 20-25yrs of age and lasts for 35-40yrs.
Earner [25 onwards] – this is the phase when one starts earning.
Partner [28- 30yrs] – this is the phase when one gets married.
Parent [30-35yrs] – this is the phase when one move towards parenting.
Provider [35-55yrs] – this is the phase when parents have to fulfil children‟s
needs.
Empty Nester [55-65yrs] – this is the phase when children get married.
Retirement [60 onwards] – this is the phase when one gets retired and there‟s no
regular source of income. Health also gets deteriorating.
C) Individual Needs –
D) Financial products – for above needs to be fulfilled following products can be used
. Wealth accumulation product – shares; bonds can be used to invest for wealth creation.
Role of Financial Planning: – It is a process in which clients current and future needs are
considered and evaluated along with his risk profile and income assessment. Financial planning
includes – Investing, Risk management, Estate planning, Retirement planning, Tax planning and
financing daily and regular requirements.
st
Note – the right time to start financial planning is when one starts receiving his 1 salary.
Need for Financial Planning: – Disintegration of joint family; multiple investment choices;
changing lifestyles; inflation; other contingency needs.
CHAPTER – 7 – QUESTIONS
1.An individual with an aggressive risk profile is likely to follow wealth _______ investment
style.
I. Consolidation
II. Gifting
III. Accumulation
IV. Spending
2.Which among the following is a wealth accumulation product?
I. Bank Loans
II. Shares
III. Term Insurance Policy
IV. Savings Bank Account
3.Savings can be considered as a composite of two decisions. Choose them from the list below.
I. Risk retention and reduced consumption
II. Gifting and accumulation
III. Spending and accumulation
IV. Postponement of consumption and parting with liquidity
4.During which stage of life will an individual appreciate past savings the most?
I. Post retirement
II. Earner
III. Learner
IV. Just married
5.What is the relation between investment horizon and returns?
I. Both are not related at all
II. Greater the investment horizon the larger the returns
III. Greater the investment horizon the smaller the returns
IV. Greater the investment horizon more tax on the returns
6.Which among the following can be categorised under transactional products?
I. Bank deposits
II. Life insurance
III. Shares
IV. Bonds
7.Which among the following can be categorised under contingency products?
I. Bank deposits
II. Life insurance
III. Shares
IV. Bonds
8.Which of the below can be categorised under wealth accumulation products?
I. Bank deposits
II. Life insurance
III. General insurance
IV. Shares
9.__________ is a rise in the general level of prices of goods and services in an economy over a
period of time.
I. Deflation
II. Inflation
III. Stagflation
IV. Hyperinflation
CHAPTER -8
LIFE INSURANCE PRODUCTS – I
What is a product?
• From a marketing standpoint, a product is a bundle of attributes.
• The difference between a product (as used in a marketing sense) and a commodity is
that a product can be differentiated. A commodity cannot.
Products may be
• Tangible • Intangible
Life insurance is a product that is intangible.
A rider is a provision typically added through an endorsement, which then becomes a part of
the contract.
Traditional Life Insurance Products
• Term Insurance Plans
• Whole Life Insurance Plans
• Endowment Insurance Plans
Variants of Term Assurance
• Decreasing term assurance
• Increasing term assurance
• Term assurance with return of premiums
CHAPTER – 8 – QUESTIONS
1.___________ life insurance pays off a policyholder's mortgage in the event of the person's
death.
I. Term
II. Mortgage
III. Whole
IV. Endowment
2.The ________ the premium paid by you towards your life insurance, the ________ will be the
compensation paid to the beneficiary in the event of your death.
I. Higher, Higher
II. Lower, Higher
III. Higher, Lower
IV. Faster, Slower
3.Which of the below option is correct with regards to a term insurance plan?
I. Term insurance plans come with life-long renewability option
II. All term insurance plans come with a built-in disability rider
III. Term insurance can be bought as a stand-alone policy as well as a rider with another policy
IV. There is no provision in a term insurance plans to convert it into a whole life insurance plan
4.In decreasing-term insurance, the premiums paid ____________ over time.
I. Increase
II. Decrease
III. Remain constant
IV. Are returned
5.Using the conversion option present in a term policy you can convert the same to __________.
I. Whole life policy
II. Mortgage policy
III. Bank FD
IV. Decreasing term policy
6.What is the primary purpose of a life insurance product?
I. Tax rebates
CHAPTER – 9
LIFE INSURANCE PRODUCTS – II
Cash value component
• The savings or cash value component in traditional life insurance policies is not well
defined
Rate of return
• It is not easy to ascertain what would be rate of return on traditional life insurance
policies
Surrender value
• The cash and surrender values (at any point of time), under these contracts depend on
certain values (amount of actuarial reserve and the pro-rata asset share of the policy)
Yield
• Finally there is the issue of the yield on these policies
Appeal :
Major sources of appeal of the new genre of products that emerged worldwide are :
• Direct linkage with the investment gains
• Inflation beating returns
• Flexibility
• Surrender value
Non-traditional life insurance products Universal Life Insurance
Universal Life Policy was first introduced in the USA.
Universal life insurance is a form of permanent life insurance characterised by its flexible
premiums, flexible face amount and death benefit amounts, and the unbundling of its
pricing factors.
Non-traditional life insurance products
• Variable insurance plans
• Unit linked insurance plans
Break-up of ULIP Premium
• Expenses
• Mortality
• Investment
Investment fund options offered by ULIP Equity Fund :
This fund invests major portion of the money in equity and equity related instruments.
Equity Fund : Invests major portion of the money in equity and equity related
instruments.
Money Marker Fund: Invests money mainly in instruments such as treasury bills,
certificates of deposit, commercial paper etc.
.
VARIABLE LIFE INSURANCE :
This policy was first introduced in the United States in 1977. Variable life insurance
is a kind of “Whole Life” policy where the death benefit and cash value of the policy
fluctuates according to the investment performance of a special investment account into
which premiums are credited. Theoretically the cash value can go down to zero, in which case
the policy would terminate.
• Unit linked insurance
Unit linked plans, also known as ULIP‟s emerged as one of the most popular and
significant products, displacing traditional plans in many markets. These plans were introduced
in UK, in a situation of substantial investments that life insurance companies made in
ordinary equity shares and the large capital gains and profits they made as a result.
Unit linked policies thus provide the means for directly and immediately “cashing on the
benefits of a life insurer’s investment performance.
CHAPTER – 9 QUESTIONS
1.What does inter-temporal allocation of resources refer to?
I. Postponing allocation of resources until the time is right
II. Allocation of resources over time
III. Temporary allocation of resources
IV. Diversification of resource allocation
2.Which among the following is a limitation of traditional life insurance products?
I. Yields on these policies is high
II. Clear and visible method of arriving at surrender value
III. Well defined cash and savings value component
IV. Rate of return is not easy to ascertain
3.Where was the Universal Life Policy introduced first?
I. USA
II. Great Britain
III. Germany
IV. France
4.Who among the following is most likely to buy variable life insurance?
I. People seeking fixed return
II. People who are risk averse and do not dabble in equity
III. Knowledgeable people comfortable with equity
IV. Young people in general
5.Which of the below statement is true regarding ULIP‟s?
I. Value of the units is determined by a formula fixed in advance
II. Investment risk is borne by the insurer
III. ULIP‟s are opaque with regards to their term, expenses and savings components
IV. ULIP‟s are bundled products
6.All of the following are characteristics of variable life insurance EXCEPT:
I. Flexible premium payments
II. Cash value is not guaranteed
III. Policy owner selects where savings reserve is invested
CHAPTER 10
Section 6 of the Married Women’s Property Act, 1874 provides for security of
benefits under a life insurance policy to the wife and children. Section 6 of the Married Women‟s
Property Act, 1874 also provides for creation of a Trust.
• Wife alone
• Wife and one or more children jointly
• One or more children
Features of a policy under the MWP Act :
i. Each policy will remain a separate Trust. Either the wife or child (over 18 years of age)
can be a trustee.
ii. The policy shall be beyond the control of court attachment and even the life assured.
iii. The claim money shall be paid to the trustees.
iv. The policy cannot be surrendered and neither nomination nor assignment is allowed. .
iv If the policyholder does not appoint a special trustee to receive and administer the
benefits under the policy, the sum secured under the policy becomes payable to the
official trustee of the State in which the office at which the insurance was effected is
situated.
Key Man Insurance :
It can be described as an insurance policy taken out by a business to compensate that
business for financial losses that would arise from the death or extended incapacity of an
important member of the business.
Keyrnan is a term insurance policy where the sum assured is linked to the profitability of
the company rather than the key person‟s own income. The premium is paid by the
company. This is tax efficient as the entire premium is treated as business expense. In
case the key person dies, the benefit is paid to the company. Unlike individual insurance
policies, the death benefit in keyman insurance is taxed as income.
a) Who can be a KEYMAN?
A key person can be anyone directly associated with the business whose loss can cause
financial strain to the business. For example, the person could be a director of the company, a
partner, a key sales person, key project manager, or someone with specific skills or knowledge
which is especially valuable to the company.
CHAPTER – 10 – QUESTIONS
1.The sum assured under keyman insurance policy is generally linked to which of the following?
I. Keyman income
II. Business profitability
III. Business history
IV. Inflation index
2.Mortgage redemption insurance (MRI) can be categorised under ________.
I. Increasing term life assurance
II. Decreasing term life assurance
III. Variable life assurance
IV. Universal life assurance
3.Which of the below losses are covered under keyman insurance?
I. Property theft
II. Losses related to the extended period when a key person is unable to work
III. General liability
IV. Losses caused due to errors and omission
4.A policy is effected under the MWP Act. If the policyholder does not appoint a special trustee
to receive and administer the benefits under the policy, the sum secured under the policy
becomes payable to the _____________.
I. Next of kin
II. Official Trustee of the State
III. Insurer
IV. Insured
5.Mahesh ran a business on borrowed capital. After his sudden demise, all the creditors are doing
their best to go after Mahesh‟s assets. Which of the below assets is beyond the reach of the
creditors?
I. Property under Mahesh‟s name
II. Mahesh‟s bank accounts
III. Term life insurance policy purchased under Section 6 of MWP Act
IV. Mutual funds owned by Mahesh
6.Which of the below option is true with regards to MWP Act cases?
Statement I: Maturity claims cheques are paid to policyholders
Statement II: Maturity claims cheques are paid to trustees
I. I is true
II. II is true
III. Both I and II are true
IV. Neither I nor II is true
7.Which of the below option is true with regards to MWP act cases?
Statement I: Death claims are settled in favour of nominees
Statement II: Death claims are settled in favour of trustees
I. I is true
II. II is true
III. Both I and II are true
IV. Neither I nor II is true
8.Ajay pays insurance premium for his employees. Which of the below insurance premium will
not be treated deductible as compensation paid to employee?
Choice I: Health insurance with benefits payable to employee
CHAPTER 11
Pricing refers to the process of calculating the rate of the premium that
will be charged on insurance policy.
It is normally expressed as a rate of premium per thousand of Sum
Assured
The policyholder can pay the premium in a number of ways:
a. Single Premium Plan
b. Level Premium Plan
c. Flexible Premium Plan
2. Types of Premiums :Arriving at the rate is performed by an Actuary
a. Office Premium : This rates printed in the tables of insurance companies.These
are typically level premiums which need to be paid every year.
b. Risk Premium : Premium is charged to meet the claim for the year.
Risk Premium = Mortality rate X Sum assured.
c. Level Premium : Equal premium charge for entire term of the policy.
d. Net Premium : The interest earned is also considered for the premium
calculation.
e.
Net Premium = premium – interest earnings.
3. Rebates :
a. Adequacy :The total loading from all policies must be sufficient to cover the
company‟s total operating expenses. It should also provide a margin of safety and
finally it should contribute to the profits or surplus of the company.
b. Equity :Expenses and safety margins etc. should be equitably apportioned among
various kinds of policies, depending on type of plan, age and term etc.
c. Competitiveness :The resulting gross premiums should enable the company to
improve its competitive position.
6.
8. Bonus :
CHAPTER – 11 QUESTIONS:
CHAPTER – 12
i) Prospectus - it is a formal legal document used by insurer that provides details about the
product. It states the terms and conditions scope of benefits- guaranteed- non-
guaranteed; entitlements; exception
ii) Proposal form - it is a form to be filled by the proposer for giving all material required
by insurer in order to decide catheter the risk of the proposer to be acetated or rejected.
iii) Agent report - agent is primary under writer. All material facts and particulars about the
proposer such as health, habits, occupation, income, family etc.
iv) Medical examiners report - the medical examiner‟s report is required typically when
the proposal cannot be considered under normal condition i.e. Sum proposed is high or
age is high or there are certain characteristics which call for examination and report by
medical examiner.
v) Moral hazard report - it is the likelihood that a client‟s behaviour might change as
report of purchasing a life insurance policy and such a change would increase the chance
of loss.
vii) Anti-money laundering (AML) - the prevention of money laundering is the process of
bringing illegal money into economy by hiding its origin. The act to curtail was paned in
2002 and person found guilty is perishable for 3-7 years imprisonment and fine unto 5
lakhs.
viii) Know Your Customer (KYC) - It is the process used to verify the identity of their
clients. The objective is to prevent financial institutions from being used by criminal
elements for money laundering activities.
KYC procedure:
i. Photographs
ii. Age proof
iii. Proof of address – driving license, passport, telephone bill, electricity bill,
bank passbook etc.
iv. Proof of identity – driving license, passport, voter ID card, PAN card, etc.
v)Income proof documents in case of high-value transactions
ix) Free-look period (or) Cooling off period - suppose a person has purchased a new life
insurance policy and received the policy document and if the policy holder is not
satisfied with the terms and conditions of the policy then he can take his decision to
continue stop such policy within 15days from receipt of policy document / bond.
CHAPTER - 13
a. Policy schedule: – It contains Policy owner‟s name & address, DoB, Age, Plan &
Term, Whether the policy is Par / Non Par, Mode of Premium, Policy no, DOC,
DOM, SA , Premium paid, nominee, details of riders etc.,
b. Standard provisions: – These are normally present in all LI contracts.These
provisions define the rights and privileges and other conditions viz; days of grace,
non-forfeiture in case of lapse
c. Specific policy provisions : - These may be printed on the face of the document
or inserted separately in the form of an attachment.
1.Which of the following documents is an evidence of the contract between insurer and insured?
I. Proposal form
II. Policy document
III. Prospectus
IV. Claim form
2.If complex language is used to word a certain policy document and it has given rise to an
ambiguity, how will it generally be construed?
I. In favour of insured
II. In favour of insurer
III. The policy will be declared as void and the insurer will be asked to return the premium with
interest to the insured
IV. The policy will be declared as void and the insurer will be asked to return the premium to the
insured without any interest
3.Select the option that best describes a policy document.
I. It is evidence of the insurance contract
II. It is evidence of the interest expressed by the insured in buying an insurance policy from the
company
III. It is evidence of the policy (procedures) followed by an insurance company when dealing
with channel partners like banks, brokers and other entities
IV. It is an acknowledgement slip issued by the insurance company on payment of the first
premium
4.Which of the below statement is correct?
I. The proposal form acceptance is the evidence that the policy contract has begun
II. The acceptance of premium is evidence that the policy has begun
III. The First Premium Receipt is the evidence that the policy contract has begun
IV. The premium quote is evidence that the policy contract has begun
5.For the subsequent premiums received by the insurance company after the first premium, the
company will issue __________.
I. Revival premium receipt
II. Restoration premium receipt
III. Reinstatement premium receipt
IV. Renewal premium receipt
6.What will happen if the insured person loses the original life insurance policy document?
I. The insurance company will issue a duplicate policy without making any changes to the
contract
II. The insurance contract will come to an end
III. The insurance company will issue a duplicate policy with renewed terms and conditions
based on the current health declarations of the life insured
IV. The insurance company will issue a duplicate policy without making any changes to the
contract, but only after a Court order.
7.Which of the below statement is correct?
I. The policy document has to be signed by a competent authority but need not be compulsorily
stamped according to the Indian Stamp Act.
II. The policy document has to be signed by a competent authority and should be stamped
according to the Indian Stamp Act.
III. The policy document need not be signed by a competent authority but should be stamped
according to the Indian Stamp Act.
IV. The policy document neither needs to be signed by a competent authority nor it needs to be
compulsorily stamped according to the Indian Stamp Act.
8.Which of the below forms the first part of a standard insurance policy document?
I. Policy schedule
II. Standard provisions
III. Specific policy provisions
IV. Claim procedure
9.In a standard insurance policy document, the standard provisions section will have information
on which of the below?
I. Date of commencement, date of maturity and due date of last premium
II. Name of nominee
III. The rights and privileges and other conditions, which are applicable under the contract
IV. The signature of the authorised signatory and policy stamp
10.“A clause precluding death due to pregnancy for a lady who is expecting at the time of
writing the contract” will be included in which section of a standard policy document?
I. Policy schedule
II. General provisions
III. Standard provisions
IV. Specific policy provisions
CHAPTER 14
1. Grace Period :
The “Grace Period” clause grants the policyholder an additional period of
time to pay the premium after it has become due.
The standard length of the grace period is one month or 31 days
computed from next day after due date.
The premium however remains due and if the policyholder dies during this
period, the insurer may deduct the premium from the death benefit. If
premiums remain unpaid even after the grace period is over, the policy
would then be considered lapsed and the company is not under obligation
to pay the death benefit but for the amount under Non Forfeiture
provisions.
2. Lapse :
If the policy premium has not been paid even during days of grace , the
policy is deemed to be lapsed.
3. Reinstatement / Revival :
Reinstatement is the process by which a life insurance company puts back
into force a policy that has either been terminated because of non-payment
of premiums or has been continued under one of the non-forfeiture
provisions
Conditions of Policy Revival :
Revival is more often advantageous because buying a new policy would call for a higher
premium based on age on the date of revival
If premiums have been paid for at least 3 consecutive years, the accrued Surrender Value will be
paid.
Policy Loan:
1. When a policy acquires a cash value, policyholder can borrow money (loan) while keeping the
insurance alive.
5. Nomination :
a. It is the process of life insured proposing the name of the person(s) to whom the
sum insured should be paid by the insurance company after his/her death.
b. A nominee does not have any right to whole ( or part ) of the claim.
c. For an insurance policy nomination is allowed under Section 39 of the insurance
Act 1938.
Provisions of Section 39 :
6. Assignment :
Transfer the rights of the property ( Policy).
Assignment
assignee
Where is it It is applicable only It is applicable all over
applicable? where the Insurance the world, according to
Act, 1938 is the law of the
applicable respective country
relating to transfer of
property.
Does the The policyholder The policyholder loses
policyholder retain retains title and the right, title and
control over the control over the interest under the policy
policy? policy and the until a re-assignment is
nominee has no right executed and the
to sue under the assignee has a right to
policy sue under the policy.
Is a witness Witness is not Witness is mandatory.
required? required.
Do they get any Nominee has no rights Assignee gets full rights
rights? over the policy over the policy, and can
even sue under the policy.
Can it be revoked? Nomination can be The assignment once
revoked or cancelled done cannot be
at any time during cancelled, but can be
the policy term. reassigned.
In case of minor: In case the nominee In case the assignee is a
is a minor, appointee minor, a guardian has to
has to be appointed be appointed.
What happens in case of the In case of nominee‟s death, In case of conditional
nominee’s or the rights of assignee‟s death, the
assignee’s death? the policy revert to rights on the policy
the policyholder or to revert back to the life
his legal heirs. assured, based on the
terms of assignment. In
case of the absolute
assignee‟s death, his
legal heirs are entitled
to the policy
What happens in In case the nominee In case the assignee dies
case of death of dies before the before the settlement,
the nominee or settlement of death the policy money is
assignee after the claim, the death payable to the legal
death of the lifeassured claim will be payable heirs of the assignee and
and before to the legal heirs of not the life-assured who
the payment of the the life assured. is the assignor
death claim
Can creditors Creditors can attach Creditors cannot attach
attach the policy the insurance policy the policy unless the
which has a assignment is shown to
nomination in it. have been made to
defraud the creditors.
10. Duplicate Policy :
If the insured person loses the original life insurance policy document, the
insurance company will issue a duplicate policy without making any
changes to the contract.
The claim may be settled on furnishing an indemnity bond with or without
surety
9 .Alterations :
Policy holder may seek to effect alteration in policy terms and conditions.
It is subject to the consent of both insurer and insured.
Normally alterations may not be permitted during 1st year of policy Except
for some simple ones like change of mode of payment of premium, change
in name, address, request for grant of DAB or PDB etc
4.Which of the below statement is correct with regards to grace period of an insurance policy?
I. The standard length of the grace period is one month.
II. The standard length of the grace period is 30 days.
III. The standard length of the grace period is one month or 30 days.
IV. The standard length of the grace period is one month or 31 days.
5.What will happen if the policyholder does not pay the premium by the due date and dies during
the grace period?
I. The insurer will consider the policy void due to non-payment of premium by the due date and
hence reject the claim
II. The insurer will pay the claim and waive off the last unpaid premium
III. The insurer will pay the claim after deducting the unpaid premium
IV. The insurer will pay the claim after deducting the unpaid premium along with interest which
will be taken as 2% above the bank savings interest rate
6.During the revival of a lapsed policy, which of the below aspect is considered most significant
by the insurance company? Choose the most appropriate option.
I. Evidence of insurability at revival
II. Revival of the policy leading to increase in risk for the insurance company
III. Payment of unpaid premiums with interest
IV. Insured submitting the revival application within a specified time frame
7.For an insurance policy nomination is allowed under _________ of the Insurance Act, 1938.
I. Section 10
II. Section 38
III. Section 39
IV. Section 45
8.Which of the below statement is incorrect with regards to a policy against which a loan has
been taken from the insurance company?
I. The policy will have to be assigned in favour of the insurance company
II. The nomination of such policy will get cancelled due to assignment of the policy in favour of
the insurance company
III. The nominee‟s right will affected to the extent of the insurer‟s interest in the policy
IV. The policy loan is usually limited to a percentage of the policy‟s surrender value
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9.Which of the below statement is incorrect with regards to assignment of an insurance policy?
I. In case of Absolute Assignment, in the event of death of the assignee, the title of the policy
would pass to the estate of the deceased assignee.
II. The assignment of a life insurance policy implies the act of transferring the rights right, title
and interest in the policy (as property) from one person to another.
III. It is necessary that the policyholder must give notice of assignment to the insurer.
IV. In case of Absolute Assignment, the policy vests absolutely with the assignee till maturity,
except in case of death of the insured during the policy tenure, wherein the policy reverts back to
the beneficiaries of the insured.
10.Which of the below alteration will be permitted by an insurance company?
I. Splitting up of the policy into two or more policies
II. Extension of the premium paying term
III. Change of the policy from with profit policy to without profit policy
IV. Increase in the sum assured
CHAPTER 15
UNDERWRITING
i) Underwriting purpose -
b) To classify risks and ensure equity among risks. Equity among risks here refers to
those applicants who are exposed to similar degree of risk and are to be grouped
together and charged same premium.
c) Sub –standard lives – those applicants / proposers whose mortality rate is higher
than standard lives but insurable. They are charged extra premium.
b) Department level – at office level a specialist person who is expert in judging the
collected data and considering this relevant data decides whether to accept or not
the proposal. Such experts are known as underwriters.
a) Acceptance at ordinary rate (OR) – it is the most common decision where in the
proposal is accepted at same premium as it would apply for standard lives.
b) Acceptance at extra rate (ER) – it involves charging extra premium for sub-
standard lives.
e) Decline or postpone – if the proposer does not fit in any of the above conditions
i.e. They are very adverse and there is little chance of improvement then such
cases are declined or decision on them is postponed for certain time period.
ii) Minors – insurability of minors look for capacity of parents; need for insurance;
has properly developed physique; proper family history; parents adequately
insured.
iii) Large sum assured – insurability for large sum assured policies raise a doubt of
concern. Generally S.A is to be 10-12 times of annual income.
iv) Age – insurability for advanced age group is to be considered with utter care. As
chances of moral hazard is very high. Some special reports may be called.
vi) Occupational hazard – insurability for people with occupational hazard may
arise due to accident – driver / circus artists / stuntmen‟s; health – chemical
factory workers / nuclear plant / deep sea divers; moral – criminal mind / night
club workers.
Upper limit of sum assured for e.g. Cases above 5lac may need to undergo
medical.
Entry level of age. Proposers above 40-45 age may compulsory need medical.
Term of the policy. Insurer might restrict term up to 20 yrs. or maturity age
till 60.
Class of lives. Depending upon work area insurer might call for medical.
vi) Medical underwriting: - the medical factors that would influence an underwriter‟s
decision. They may often call for a medical examiner‟s report. Factors involved
are-
i) Family history – 3 factors are taken into consideration in order to understand family
history of the proposer
Average longevity of family – if parents have died early due to cancer, heart
trouble.
ii) Personal history – it refers to past impairment of various systems of human body
which the proposer might have suffered.
Build – for a given age & height there is a standard weight, if the standard
weight is too high or too low then such proposals need to be checked.
. Urine-specific gravity – one‟s urine indicates the salts in the body. Its
mal-functioning can be indicated through its test.
CHAPTER 16
1) Survival claim - claims payable even when the life inured is alive.
i) For survival claim the event has to be occurred as per stipulated conditions.
ii) Maturity claim & money back claims are given based on determined dates.
iii) Surrender value are claims to be given based on decision taken by insured.
iv) Critical illness claims are processed based on medical and other records
provided.
ii) Surrender of policy – the voluntary decision taken by the policy holder to stop the policy
contract. The amount payable to insured is surrender value.
iii) Rider benefit – a payment done by insurer on occurrence of specified event according to
terms and conditions. The policy continues even after the rider benefit payment is
done.
iv) Maturity claim – a payment done by insurer at the end of the policy term, if the insured
survives the entire term of the policy. The insurance contract comes to an end after
maturity claim is paid.
v) Death claim – if the insured expires during the term of the policy, accidentally or
otherwise, then the insurer pays the sum assured, bonus, etc. to nominee; assignee or
legal heir. Such payments are known as death claim. Contract comes to an end. Death
claim can be
. Early death claim – claim that arises within 3yrs from start of policy.
. Non-early death claim – claim that arises after 3yrs from start of policy.
Forms to be submitted by nominee; assignee or legal heir on death are claim form;
certificate of burial or cremation; treating physicians certificate; hospitals certificate;
employers certificate; certified court copies of police reports in case of accidental
death; death certificate issued by municipal authority.
B) Repudiation of death claim – if it is detected by insurer that the proposer had made any
incorrect statements or had suppressed material facts relevant to policy, the contract
becomes void. All benefits under the policy are forfeited.
C) Indisputability clause – a policy which has been in force for 2yrs cannot be disputed on
the ground of incorrect or false information. The insurer will have to prove in order to
repudiate a policy after 2yr period.
D) Presumption of death – the Indian evidence act 1872 deals with presumption of death;
under this act if an individual has not been heard off or seen for 7yrs then they are
presumed to be dead. It is necessary that premiums should be paid till the court decrees
presumption of death.
Insurer will call upon the primary documents which are normally required.
In case of any dispute over the claim, it shall initiate and complete within
6months from the time lodging the claim.
Claim is ready for payment but cannot be done due to lack of proper
identification, the life insurer shall hold such amount and shall earn interest as
per schedule banks saving accounts rate (effective from 30days following the
submission of all papers and information).
F) Role of agent -
An agent shall render all possible service to the nominee, legal heir or the beneficiary in
filling up the claim form accurately and assist in submission of these at insurer‟s office. Apart
from discharging obligations, goodwill is generated from such a situation where by there exists
ample opportunity for the agent to procure business or referrals in future.
CHAPTER – 16 – QUESTIONS
1.Given below is a list of policies. Identify under which type of policy, the claim payment is
made in the form of periodic payments?
I. Money-back policy
II. Unit linked insurance policy
III. Return of premium policy
IV. Term insurance policy
2.Mahesh has bought a life insurance policy with a critical illness rider. He has made absolute
assignment of the policy in favour of Karan. Mahesh suffers a heart attack and there is a claim of
Rs. 50,000 under the critical illness rider. To whom will the payment be made in this case?
I. Mahesh
II. Karan
III. The payment will be shared equally by Mahesh and Karan
IV. Neither of the two because Mahesh has suffered the heart attack but the policy is assigned in
favour of Karan.
3.Praveen died in a car accident. The beneficiary submits documents for death claim. Which of
the below document is an additional document required to be submitted in case of accidental
death as compared to natural death.
I. Certificate of burial or cremation
II. Treating physician‟s certificate
III. Employer‟s certificate
IV. Inquest Report
4.Which of the below death claim will be treated as an early death claim?
I. If the insured dies within three years of policy duration
II. If the insured dies within five years of policy duration
III. If the insured dies within seven years of policy duration
IV. If the insured dies within ten years of policy duration
5.Given below are some events that will trigger survival claims. Identify which of the below
statement is incorrect?
I. Claim paid on maturity of a term insurance policy
II. An instalment payable upon reaching the milestone under a money-back policy
III. Claim paid for critical illnesses covered under the policy as a rider benefit
IV. Surrender value paid on surrender of an endowment policy by the policyholder
6.A payment made under a money-back policy upon reaching a milestone will be classified
under which type of claim?
I. Death claim
II. Maturity claim
III. Periodical survival claim
IV. Surrender claim
7.Shankar bought a 10 year Unit Linked Insurance Plan. If he dies before the maturity of the
policy which of the below will be paid?
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CHAPTER 17 - 21
Health is a state of complete physical, mental and social wellbeing and not
merely the absence of disease.
Health is the Word Derived from the “Hoelth”. Which means the soundness of
the body.
Determinants of health:
a. Life Style factors : Lifestyle factors are those which are mostly in the control of
theindividual concerned. Eg : Smoking, abusing drugs.
b. Environmental factors: Certain diseases caused due to environmental factors .Eg. Safe
Drinking water, sanitation and nutrition. Etc..
c. Genetic factors: Diseases may be passed on from parents to children through genes.
Types of healthcare:
a. Primary Health Care :
Primary health care refers to the services offered by the doctors, nurses and other
small clinics which are contacted first by the patient for any sickness, that is to
say that primary healthcare provider is the first point of contact for all patients
within a health system.
Primary Health care centres are set up both by Government and
private players.
Government primaryhealth care centres are established depending upon the
population size and are present right up to the village level in some form or the
other.
b. Secondary healthcare:
Secondary health care refers to the healthcare services provided by medical
specialists and other health professionals who generally do not have first contact
withpatient.
Most of the times, the patients are referred to the secondary care by primary
health care providers / primary physician.
C.Tertiary healthcare :
Tertiary Health care is specialized consultative healthcare, usually for inpatients
and on referralfrom primary/secondary care providers.
e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk
pregnancy specialists etc.
Factors affecting the health systems in India:
Insurance Companies especially in the general insurance sector provide the bulk of
the health insurance services.
C. INTERMEDIARIES:
1.Insurance Brokers :
who may be individuals or corporates and work independently of insurance
companies.
Brokers represents the customers.
Work for one or more insurance companies.
2. Insurance Agents
are usually individuals but some can be corporate agents too.
Agents represent the insurance company.( one Life, One General or One
Health Insurance company.)
3.ThirdParty Administrators :
TPAs are funded by the insurance companies for their respective claims and are
remunerated by them by way of fees which are a percentage of the premium.
4. Insurance Web Aggregators :
Through their web site and/or telemarketing, they can solicit insurance business
through distance marketing without coming face to face with the prospect and
generate leads of interested prospects to insurers with whom they have an
agreement. They also display products of such insurance companies for comparison.
5. Insurance Marketing Firms:
They can perform the following activities by employing individuals licensed to
market, distribute and service such products.
D. OTHERS IMPORTANT ORGANIZATIONS :
Insurance Regulatory and Development Authority of India (IRDAI)
General Insurance and Life Insurance Councils
Insurance Information Bureau of India.
a)DOMICILIARY HOSPITALIZATION
This benefit is not commonly used by policyholders, an individual health
policy also has a provision to take care of expenses incurred for medical
treatment taken at home without being admitted to a hospital.
This cover usually carries an excess clause of three to five daysmeaning that
treatment costs for the first three to five days have to be borne by the insured.
The cover also excludes domiciliary treatments for certain chronic or common
oilmentssuch as Asthma, Bronchitis, Chronic Nephritis and Nephritic Syndrome,
Diarrhoea and all type of Dysenteries including Gastroenteritis, Diabetes
Mellitus Epilepsy, Hypertension, Influenza, Cough and Cold, fevers.
c) COMMONEXCLUSIONS :
1. Pre-existing diseases:
“Any condition, ailment or injury or related condition(s) for which you had
signs or symptoms, and/or were diagnosed, and/or received medical
advice/treatment within 48 months prior to the first policy issued by the
insurer.”
Exclusions for Pre-existing disease – 48 months from the day of Inception of
the policy.
Waiting periods : Depending on the product, waiting periods of one
/ two / four years apply for diseases such as Cataract, Benign Prostatic
Hypertrophy, Hysterectomy for Menorrhagia or Fibromyoma, Hernia,
Hydrocele, Congenital internal disease, Fistula in anus, piles, Sinusitis and
related disorders, Gall Bladder Stone removal, Gout and Rheumatism,
Calculus Diseases, gout and rheumatism, age related osteoarthritis,
osteoporosis.
C.COVERAGE OPTIONS AVAILABLE :
Individual Coverage
Family Floater
D. Top-up covers or high deductible insurance plans :
The maximum amount of cover under a health policy remained at Rs 5,00,000 for
a very long time.
Anyone wanting a higher cover was forced to buy two policies paying double the
premium. This led to the development of the Top-Up policies by insurers, which
offers cover for high sums insured over and above a specified amount (called
threshold).
E. Senior citizen policy :
Coverage :People over 60 years of age.
Sum Assured :Rs.50,000 to Rs.5,00,000.
Entry age is mostly after 60 years and renewable lifelong.
F. Fixed benefit covers -Hospital cash, critical illness :
1. HOSPITAL DAILY CASH POLICY :
Per day amount limit – Rs.1500 – 5000 per day.
Number of payment days linked to the disease for which treatment is being taken.
The hospital daily cash policy is available as a standalone policy as offered by
some insurers.
2. CRITICAL ILLNESS POLICY
Critical illness policy is a benefit policy with a provision to pay a lump sum
amount on diagnosis of certain named critical illness.
It is sold:
Long termcare means all forms of continuing personal or nursing care for people who are
unable to look after themselves without a degree of support and whose health is not going to
get better in future.
There are two types of plans for long term care:
a)Pre-funded plans which are purchased by healthy insured to take care of their
future medical expenses and
b)Immediate need plans which are purchased by a lump sum premium when the
insured is requiring long term care.
BhavishyaArogyapolicy :
Introduced in the year 1990.
Age : 25 years to 55 years.
This scheme provides assignment.
This policy does not have the exclusions of pre- existing diseases.
Micro insurance and health insurance for poorer sections:
1. Jan ArogyaBima Policy :
Following are the features of Jan ArogyaBima Policy:
a.This policy is designed to provide cheap medical insurance to poorer sections of
the society.
b.The coverage is along the lines of the individual Mediclaim policy. Cumulative
bonus and medical check-up benefits are not included.
c. The policy is available to individuals and family members.
d.The age limit is five to 70 years.
e.Children between the age of three months and five years can be covered provided one
or both parents are covered concurrently.
f.The sum insured per insured person is restricted to Rs.5,000 and the premium
payable as per the following table.
2. Universal Health Insurance Scheme (UHIS) :
This policy is available to groups of 100 or more families. In recenttimes
evenindividual UHIS Policies were made available to the public.
Benefits under this policy are Medical Reimbursement, Personal accident cover,
Disability cover,
3. RashtriyaSwasthyaBimaYojana(RSBY):
a.Total sum insured of Rs. 30,000 per BPL family on a family floater basis.
b.Pre-existing diseases to be covered.
c.Coverage of health services related to hospitalization and services of surgical nature
which can be provided on a day-care basis.
d.Cashless coverage of all eligible health services.
e.Provision of smart card.
f.Provision of pre and post hospitalization expenses.
g.Transport allowance of Rs.100/-per visit.
h.The Central and State Government pays the premium to the insurer.
i.Insurers are selected by the State Government on the basis of a competitive
bidding.
j.Choice to the beneficiary between public and private hospitals.
k.Premium to be borne by the Central and State governments in the proportion of 3:1.
Central Government to contribute a maximum amount of Rs. 565/-per family.
l.Contribution by the State Governments: 25 percentof the annual premium and
any additional premium beyond Rs 750.
m.Beneficiary to pay Rs. 30/- per annum as registration fee/ renewal fee.
n.Administrative cost to be borne by the State Government.
o.Costof smart card additional amount of Rs. 60/-perbeneficiary would be available for this
purpose.
Claim settlement to be done through TPA‟s mentioned in the schedule or by the
insurance company.
4. PradhanMantriSurakshaBimaYojana (PMSBY).
overingpersonalaccident death and disability cover insurance.
Age : 18 yrs to 70 years
Sum assured : Rs.2,00,000
Premium : Rs.12 per annum.
The cover shall be for the one year period from 1st June to 31st May.
Temporary total disability (TTD): means becoming totally disabled for a temporary
period of time. This section of cover is intended to cover the loss of income during
the disability period.
Underwriting?
Customer The person who buys insurance is the first stakeholder and
„receiver of the claim‟.
Owners Owners of the insurance company have a big stake as the „payers of the
claims‟. Even if the claims are met from the policy holders‟ funds, in
most cases, it is they who are liable to keep the promise.
Underwriters Underwriters within an insurance company and across all insurers have
the responsibility to understand the claims and
design the products, decide policy terms, conditions and pricing etc.,
The regulator (Insurance Regulatory and Development Authority of
Regulator India) is a key stakeholder in its objective to:
Maintain order in the insurance environment
Protect Policy holders Interest
Ensure long term financial health of insurers.
Insurance agents / brokers not only sell policies but are also expected to
Insurance agents
service the customers in the event of a claim.
/ brokers
They ensure that the customer gets a smooth claim experience,
Providers / especially when the hospital is on the panel of the TPA the
Hospitals Insurer to provide cashless hospitalization.
Efficient claims management ensures that right claim is paid to right person at the
right time.
a) Intimation
Claim intimation is the first instance of contact between the customer and the
claims team.
The customer could inform the company that he is planning to avail a
hospitalization or the intimation would be made after the hospitalization has taken
place, especially in case of emergency admission to a hospital.
b) Registration
Registration of a claim is the process of entering the claim in the system and creating a
reference number using which the claim can be traced any time. This number is called Claim
number, Claim reference number or Claim control number. The claim number could be numeric
or alpha-numeric based on the system and processes used by the processing organization.
c) Verification of documents
Once a claim is registered, the next step is to check for the receipt of all the required documents
for processing. It must be appreciated that for a claim to be processed following are the most
important requirements:
1. The documentary evidence of the illness
2. Treatment provided
3. In-patient duration
4. Investigation Reports
Room, board and nursing expenses including registration and service charges.
Charges for ICU and any intensive care operations.
Operation theatre charges, anaesthesia, blood, oxygen, operation theatre charges, surgical
appliances, medicines and drugs, diagnostic materials and X-ray, dialysis, chemotherapy,
radiotherapy, cost of pacemaker, artificial limbs and any medical expenses incurred which is
integral part of the operation.
Surgeon, anaesthetist, medical practitioner, consultant's, specialists fees.
Ambulance charges.
Investigation charges covering blood test, X-ray, scans, etc.
Medicines and drugs.
Package rates
Many hospitals have agreed package rates for treatment of certain diseases. This is based on
the ability of the hospital to standardize the treatment procedure and use of resources. In recent
times, for treatment at Preferred Provider Network and also in case of RSBY, package cost of
many procedures has been pre-fixed.
Example
a) Cardiac packages: Angiogram, Angioplasty, CABG or Open heart surgery, etc.
b) Gynaecological packages: Normal delivery, Caesarean delivery, hysterectomy, etc.
c) Orthopaedic packages
d) Ophthalmological packages
e) Coding of claims
The most important code set used is the World Health Organization (WHO) developed
International Classification of Diseases (ICD) codes.
While ICD is used to capture the disease in a standardized format, procedure codes such
as Current Procedure Terminology (CPT) codes capture the procedures performed to
treat the illness
f) Processing of claim
The heart of claims processing in any insurance policy, is in answering two key questions:
Admissibility of a claim
i. The member hospitalized must be covered under the insurance policy
ii. Admission of the patient within the period of insurance
iii. Hospital definition
iv. Domiciliary hospitalization
v. Duration of hospitalization
vi. OPD
vii. Treatment procedure/line of treatment
viii. Pre-existing illnesses
Pre-existing illnesses refer to “Any condition, ailment or injury or related
condition(s) for which insured person had signs or symptoms and/or was
diagnosed and/or received medical advice/treatment within 48 months prior to
his/her health policy with the company whether explicitly known to him or not.”
The policy lists out a set of exclusions which in general can be classified as:
Illnesses which are not intended to be covered such as HIV, Hormone therapy, obesity
treatment, fertility treatment, cosmetic surgeries, etc.
List all the bills and receipts under the various heads of room rent,
Step I
consultant fee, etc.
Deduct the non-payable items from the amount claimed under each
Step II
head
Step III Apply any limits applicable for each head of expense
Arrive at the total payable amount and check if it is within sum insured
Step IV
overall
Step V Deduct any co-pay if applicable to arrive at the net claim payable
h) Payment of claim
Once the payable claim amount is arrived at, payment is done to the customer or the
hospital as the case may be. The approved claim amount is advised to the Finance /
Accounts function and the payment may be made either by cheque or by transferring the
claim money to the customer‟s bank account.
Management of deficiency of documents / additional information required
Processing of a claim requires the scrutiny of a list of key documents. These are:
Payment receipts,
Customer identification.
j) Denial claims
The experience in health claims show that 10% to 15% of the claims submitted do not fall within
the terms of the policy. This could be because of a variety of reasons some of which are:
i. Date of admission is not within the period of insurance.
ii. The Member for whom the claim is made is not covered.
iii. Due to Pre-existing illness (where the policy excludes such condition).
Apart from the representation to the insurer, the customer has the option, to approach the
following in case of denial of claim:
Insurance Ombudsman or
IRDAI or
Law courts.
iii. Inflation of expenses, either with the help of the hospital or by addition of external bills
fraudulently created.
Triggered claims
"Third Party Administrators or TPA means any person who is licensed under the IRDAI (Third
Party Administrators - Health Services) Regulations, 2001 by the Authority, and is engaged, for
a fee or remuneration by an insurance company, for the purposes of providing health services.
ii. Treatment,
iii. Patient / proposer identification card issued by the TPA and photo ID
proof.
v. Detailed bill
TPA will process the claim and recommend for payment to the hospital
after verifying details such as the following:
i. The Patient treated is the same person for whom approval was provided.
ii. Treated the patient for the same condition that it requested the approval
for.
iii. Expenses for treatment of excluded illness, if any, is not part of the
Step 8
bill.
iv. All limits that were communicated to the hospital have been adhered
to.
v. Tariff rates agreed with the hospital have been adhered to, calculate the
net payable amount.
Customer must make sure that he/she has his/her insurance details with him/her. This includes
his:
TPA card,
Policy copy,
The TPA is usually expected to maintain a call centre with toll-free numbers reachable at
all times including nights, weekends and holidays i.e. 24*7*365.
The call centre should be accessible through a national toll free number and the customer
service staff should be able to communicate in the major languages normally spoken by
the customers.
"Cashless facility" means a facility extended by the insurer to the insured where the
payments, of the costs of treatment undergone by the insured in accordance with the policy terms
and conditions, are directly made to the network provider by the insurer to the extent pre-
authorization approved.
H. TPA Remuneration
b) A fixed amount for each member serviced by the TPA for a defined time period, or
c) A fixed amount for each transaction of the service provided by the TPA – e.g. cost per
member card issued, per claim etc.
F. Claims management – personal accident
Personal accident is a benefit policy and covers accidental death, accidental disability
(permanent / partial), Temporary total disability and may also have add-on coverage of
accidental medical expenses, funeral expenses, educational expenses etc. depending on particular
product.
Claims manager should mark caution and check following areas on receipt of the notification of
the claim:
a) Person in respect of whom the claim is made is covered under the policy
g) Maintain the turnaround time (claim servicing time) and keep the customer informed of the
development of the claim.
The covers under the policy can be broadly divided into following sections.
d) Personal liability
CHAPTER – 17 – 21 QUESTIONS
I. 15 days
II. 30 days
III. 45 days
IV. 60 days
7. Identify the form of insurance that is depicted in the following scenario.
Scenario: Patient pays the health provider and is subsequently reimbursed by the health
Insurance company.
I. Service Benefit
II. Direct contracting
III. Indemnity
IV. Casualty
8. Moral hazard by health insurance companies can result in _________.
I. Community rating
II. Adverse selection
III. Abuse of health insurance
IV. Risk pooling
9. Primary care can be described as ____________.
I. Care provided to patient in an acute setting
II. Care provided in hospitals
III. First point of contact for people seeking healthcare
IV. Care provided by Doctors
10.________________ is an insured who undergoes treatment after getting admitted in a
Hospital.
I. Inpatient
II. Outpatient
III. Day patient
IV. House patient
11. _________ refers to a hospital/health care provider enlisted by an insurer to provide medical
Services to an insured on payment by a cashless facility.
I. Day care centre
II. Network provider
II. Service is provided free of cost to the insured and no cash is to be paid as the
payment is made by the Government to the insurance company under a special scheme
III. All payments made by insured have to be made only through internet banking or
cards as cash is not accepted by the insurance company
IV. The insured does not pay and the insurance company settles the bill directly with the
hospital
17. Identify the correct full form of PPN with regards to hospitals in health insurance.
I. Public Preferred Network
II. Preferred Provider Network
III. Public Private Network
IV. Provider Preferential Network
18. Identify which of the below statement is incorrect?
I. An employer can take a group policy for his employees
II. A bank can take a group policy for its customers
III. A shopkeeper can take a group policy for its customers
IV. A group policy taken by the employer for his employees can be extended to include
the family members of the employees
19. Underwriting is the process of ___________.
I. Marketing insurance products
II. Collecting premiums from customers
III. Risk selection and risk pricing
IV. Selling various insurance products
20. The principle of utmost good faith in underwriting is required to be followed by
___________.
I. The insurer
II. The insured
III. Both the insurer and the insured
IV. The medical examiners
21. Insurable interest refers to ____________.
I. Financial interest of the person in the asset to be insured
II. The asset which is already insured
III. Each insurer‟s share of loss when more than one company covers the same loss
IV. The amount of the loss that can be recovered from the insurer
22. Which of the following statements about medical underwriting is incorrect?
I. It involves high cost in collecting and assessing medical reports.
II. Current health status and age are the key factors in medical underwriting for health
insurance.
III. Proposers have to undergo medical and pathological investigations to assess their
health risk profile.
IV. Percentage assessment is made on each component of the risk.
23.1) In a group health insurance, any of the individual constituting the group could anti-select
against the insurer.
2) Group health insurance provides coverage only to employer-employee groups.
I. Statement 1 is true and statement 2 is false
II. Statement 2 is true and statement 1 is false
III. Statement 1 and statement 2 are true
IV. Statement 1 and statement 2 are false
24. Which of the following factor does not affect the morbidity of an individual?
I. Gender
II. Spouse job
III. Habits
IV. Residence location
25.According to the principle of indemnity, the insured is paid for __________.
I. The actual losses to the extent of the sum insured
II. The sum insured irrespective of the amount actually spent
III. A fixed amount agreed between both the parties
IV. The actual losses irrespective of the sum assured
26.The first and the primary source of information about an applicant, for the underwriter is his
________________.
I. Age proof documents
II. Financial documents
III. Previous medical records
III. Reserving
IV. Investing
32. Which of the following documents are not required to be submitted for Permanent Total
Disability claim?
I. Duly completed Personal Accident claim form signed by the claimant.
II. Attested copy of First Information Report if applicable.
III. Permanent disability certificate from a civil surgeon or any equivalent competent
doctors certifying the disability of the insured.
IV. Fitness certificate from the treating doctor certifying that the insured is fit to perform
his normal duties.
33. Who among the following is considered as primary stakeholder in insurance claim process?
I. Customers
II. Owners
III. Underwriters
IV. Insurance agents/brokers
34.Girish Saxena‟s insurance claim was denied by insurance company. In case of a denial, what
is the option available to Girish Saxena, apart from the representation to the insurer?
I. To approach Government
II. To approach legal authorities
III. To approach insurance agent
IV. Nothing could be done in case of case denial
35.During investigation, of a health insurance claim presented by Rajiv Mehto, insurance
company finds that instead of Rajiv Mehto, his brother Rajesh Mehto had been admitted to
hospital for treatment. The policy of Rajiv Mehto is not a family floater plan. This is an example
of ___________fraud.
I. Impersonation
II. Fabrication of documents
III. Exaggeration of expenses
IV. Outpatient treatment converted to in-patient / hospitalization
36.Under which of the following condition, is domiciliary hospitalization is covered in a health
Insurance policy?
I. The condition of the patient is such that he/she can be removed to the
Hospital/Nursing Home, but prefer not to
II. The patient cannot be removed to Hospital/Nursing Home for lack of accommodation
There in
III. The treatment can be carried out only in hospital/Nursing home
IV. Duration of hospitalization is exceeding 24 hours
37. Which of the following codes capture the procedures performed to treat the illness?
I. ICD
II. DCI
III. CPT
IV. PCT
ANSWERS – CHAPTER WISE QUESTIONS
CHAPTER -1
Q.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
ANS B C B A C C B D B D D B A A B
CHAPTER -2
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B A A B A D B D C D
CHAPTER – 3
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
C B B C D A C C B B
CHAPTER – 5
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B A C C C B C C A C
CHAPTER – 6
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
D C A C C B C C C D
CHAPTER – 7
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
C B D A B A B D B D
CHAPTER – 8
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B A C C A C C B C C
CHAPTER – 9
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B D A C C A C B C D
CHAPTER –10
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B B B B C B B B B C
CHAPTER –11
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B B B D D A C D D B
CHAPTER –12
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
C A B D B C A D C B
CHAPTER –13
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B A A C D A B A C D
CHAPTER –14
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
D B C D B A C B D A
CHAPTER –15
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
B D C B C A D B A B
CHAPTER –16
Q.No 1 2 3 4 5 6 7 8 9 10
ANS
A B D A A C B D A C
CHAPTER –17 - 21
Q.No 1 2 3 4 5 6 7 8 9 10 11 12 13
ANS B C C D B B C B C A B B A
Q.No 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
D C C A D D B A D C B B C B D A B A B C
2 27 2 27 2 27
3 28 3 28 3 28
4 29 4 29 4 29
5 30 5 30 5 30
6 31 6 31 6 31
7 32 7 32 7 32
8 33 8 33 8 33
9 34 9 34 9 34
10 35 10 35 10 35
11 36 11 36 11 36
12 37 12 37 12 37
13 38 13 38 13 38
14 39 14 39 14 39
15 40 15 40 15 40
16 41 16 41 16 41
17 42 17 42 17 42
18 43 18 43 18 43
19 44 19 44 19 44
20 45 20 45 20 45
21 46 21 46 21 46
22 47 22 47 22 47
23 48 23 48 23 48
24 49 24 49 24 49
25 50 25 50 25 50
CANDIDATE ANSWERING PAGE
MOCK TEST 4 MOCK TEST 5 MOCK TEST 6
Sno Ans Sno Ans Sno Ans Sno Ans Sno Ans Sno Ans
1 26 1 26 1 26
2 27 2 27 2 27
3 28 3 28 3 28
4 29 4 29 4 29
5 30 5 30 5 30
6 31 6 31 6 31
7 32 7 32 7 32
8 33 8 33 8 33
9 34 9 34 9 34
10 35 10 35 10 35
11 36 11 36 11 36
12 37 12 37 12 37
13 38 13 38 13 38
14 39 14 39 14 39
15 40 15 40 15 40
16 41 16 41 16 41
17 42 17 42 17 42
18 43 18 43 18 43
19 44 19 44 19 44
20 45 20 45 20 45
21 46 21 46 21 46
22 47 22 47 22 47
23 48 23 48 23 48
24 49 24 49 24 49
25 50 25 50 25 50
ENGLISH - MOCK TEST - ANSWER SHEET
MOCK TEST 1 MOCK TEST 2 MOCK TEST 3 MOCK TEST 4
Sno Ans Sno Ans Sno Ans Sno Ans Sno Ans Sno Ans Sno Ans Sno Ans
1 B 26 D 1 C 26 D 1 D 26 C 1 C 26 A
2 B 27 B 2 C 27 D 2 B 27 B 2 B 27 D
3 C 28 A 3 C 28 B 3 A 28 C 3 B 28 C
4 C 29 C 4 C 29 B 4 C 29 D 4 C 29 B
5 B 30 D 5 B 30 D 5 B 30 B 5 B 30 D
6 A 31 A 6 A 31 B 6 D 31 B 6 C 31 B
7 D 32 A 7 C 32 D 7 A 32 A 7 D 32 D
8 A 33 C 8 D 33 A 8 D 33 C 8 C 33 D
9 B 34 D 9 A 34 D 9 D 34 B 9 B 34 C
10 D 35 C 10 D 35 C 10 B 35 A 10 B 35 B
11 D 36 C 11 C 36 A 11 D 36 D 11 C 36 C
12 D 37 A 12 C 37 D 12 D 37 D 12 A 37 A
13 C 38 D 13 D 38 D 13 A 38 C 13 D 38 C
14 D 39 D 14 D 39 B 14 C 39 D 14 C 39 A
15 A 40 B 15 B 40 D 15 C 40 D 15 C 40 B
16 B 41 D 16 D 41 D 16 D 41 B 16 B 41 A
17 D 42 C 17 B 42 C 17 C 42 B 17 C 42 C
18 A 43 D 18 C 43 B 18 C 43 C 18 D 43 C
19 B 44 A 19 B 44 A 19 A 44 C 19 C 44 C
20 A 45 B 20 D 45 D 20 D 45 D 20 A 45 B
21 A 46 D 21 C 46 D 21 D 46 C 21 D 46 C
22 D 47 A 22 D 47 B 22 B 47 A 22 D 47 D
23 A 48 D 23 B 48 C 23 A 48 B 23 D 48 B
24 A 49 A 24 A 49 B 24 B 49 A 24 C 49 C
25 B 50 C 25 B 50 C 25 D 50 B 25 C 50 B
MOCK TEST 5
Sno Ans Sno Ans
1 D 26 A
2 C 27 B
3 D 28 A
4 C 29 B
5 D 30 D
6 A 31 C
7 C 32 B
8 C 33 B
9 A 34 D
10 B 35 B
11 D 36 C
12 C 37 D
13 D 38 D
14 D 39 D
15 D 40 A
16 D 41 D
17 D 42 B
18 A 43 C
19 B 44 B
20 D 45 C
21 C 46 D
22 B 47 C
23 A 48 B
24 D 49 D
25 C 50 C