General Insurance Agent Certification - Part 1

General insurance cannot be used to make windfall gains on the occurrence of a contingent event.

The cover shall extend to loss of Profits arising out of the spoilage, i.e. interruption of business solely as a result of (i) loss of stock in process;
and (ii) damage to machinery containers and equipment. 

Apart from claim form and survey report, the other documents
required for processing the claim are:

(1) Driving Licence
(2) Registration Certificate Book
(3) Fitness Certificate (Commercial Vehicles)
(4) Permit (Commercial Vehicles)
(5) Police Report (Taxis, commercial Vehicle need F.I.R./ spot
survey, if loss is heavy or T.P. loss occurs)
(6) Final Bill from repairers
(7) Satisfaction Note from the insured
(8) Receipted bill from the repairer, if paid by insured.
(9) Discharge voucher (full and final payment)

Hazards can be classified into physical and moral. Physical hazard refers to the risk arising from material features of the subject matter of insurance, whereas moral hazard may arise from human weakness (e.g. dishonesty, carelessness, etc.) or from general economic and social conditions. At the operating level, ratemaking process involves assessment of physical and moral hazards. An insurance agent should report to the insurer any detection of moral hazard.

A testimonial is a written recommendation from a celebrity or satisfied customer affirming the performance, quality, and/or value of a product or service. Testimonials are one of the most potent tools of marketing.

Underwriter decides whether to accept the risk or not. Underwriting, in a technical sense, comprises the following steps:

i. Assessment and evaluation of hazard and risk in terms of frequency and severity of loss
ii. Formulation of policy coverage and terms and conditions
iii. Fixing of rates of premium

The Essential Elements In Voluntary Arbitration Are :- The Voluntary Submission Of Dispute To An Arbitrator.

• The Subsequent Attendance Of Witnesses And Investigations.
• The Enforcement Of An Award May Not Be Necessary in Binding because there Is No Compulsion.
• Voluntary Arbitration May Be Specially Needed For Disputes Arising Under Agreements.

A risk is simply the possibility of a loss. Thus, Chance of loss is referred to as Risk.

In case of motor insurance, the sum insured is the insured's declared value [IDV]. It is the value of the vehicle, which is found by adjusting the current manufacturer's listed selling price of the vehicle with depreciation percentage as prescribed in the IRDA regulations. Manufacturer's listed selling price will include local duties / taxes, excluding registration and insurance.

An individual cannot become a corporate agent. 
The corporate agent could be:
(a) A firm
(b) A company formed under Companies‟ Act, 1956
(c) A Banking Company
(d) A Regional Rural Bank
(e) A Co-op. Society/Co-op. Bank
(f) A Panchayat/Local Authority 

No complaint to the Ombudsman shall lie unless:-
(a) the complainant, before making a complaint to the Ombudsman, had made a written representation to the insurer named in the complaint and either insurer had rejected the complaint or the complainant had not received any reply within a period of one month after the insurer concerned received his representation or the complainant is not satisfied with the reply given to him by the insurer.
(b) the complaint is made not later than one year after the insurer had rejected the representation or sent his final reply on the representation of the complainant; and
(c) the complaint is not on the same subject matter, for which any proceedings before any court, or Consumer Forum, or arbitrator is pending or were so, earlier.

Off Duty Covers - If cover is required only for the restricted hours, that is when the employee is not at work and / or not on official duty, the reduced premium of 50% of the appropriate premium can be charged.

The following features are considered to contribute to the improvement of risk in fire insurance.

(i)    Installation of sprinkler system within the premises
(ii)   Installation of hydrant system in the compound
(iii)  Installation of hand appliances such as buckets, portable extinguishers and manual fire pumps
(iv)  Installation of automatic fire alarm

In burglary, following can be the physical hazards:-

i.   The nature of the stocks
Articles of high value in small bulk (e.g. Jewellery) and easily disposable, are considered to be bad risks.
ii.  Situation
Ground floor risks are inferior to upper floor risks. Private dwellings situated in isolated areas are hazardous.
iii. Constructional hazard
Too many doors and windows constitute physical hazard.

Aviation insurance is an insurance coverage geared specifically to the operation of aircraft and the risks involved in aviation. Aviation insurance policies are distinctly different from those of other areas of transportation and tend to incorporate aviation terminology, as well as limits and clauses specific to aviation insurance.

Correct Answer: Premium, Claims 

Insurance is based on transfer of risk to the insurer. By purchasing an insurance policy, the insured is able to reduce the impact of financial losses arising from the peril, against which the property is insured. The whole mechanism of insurance involves pooling of a large number of statistically similar risks, so that the law of large numbers would operate and the probability of number of losses (frequency) as well as the extent of loss (severity) becomes predictable. Thus, probability and severity of risks are the two important factors.

Sources of information for underwriting
The first stage in any numerical (or statistical) analysis is the collection of data. When pricing a risk, an underwriter should gather as much information as possible to aid accurate assessment.
Sources of information for underwriter are:

i. Proposal form or underwriting presentation
ii. Risk surveys
iii. Historic claims experience data

The use of large deductible policies has increased dramatically during the last 5 to 10 years for the following reasons:

1. Insurance cost savings;
2. Loss control incentives;
3. Reduced residual market burdens; and
4. Cash flow advantages.

In Public Liability Policy, the sum insured is referred to as Limit of Indemnity. This limit is fixed per accident and policy period which is called Any One Accident (AOA) limit and Any One Year (AOY) limit, respectively. The AOA limit which is the maximum amount payable for each accident, should be fixed taking into account the nature of activity of the insured and the maximum number of people who could be affected and the maximum property damage that could occur, in the worst possible accident in the insured's premises. 

Vehicle insurance (also known as car insurance, motor insurance or auto insurance) is insurance purchased for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage and/or any bodily injury resulting from traffic collisions and against liability that could also arise from there. Thus, it is mandatory to be kept in the vehicle (motor car). 

CFT Cover is available for Executives of Coporate clients and Partners of registered firms annually subject to the duration of any one trip not exceeding 60 days.

The administrator of motor third party insurance is General Insurance Corporation of India.

Moral hazard could arise in the following ways:

(1) Dishonesty
(2) Carelessness
(3) Industrial relations
(4) Wrong claims

A health underwriter needs to understand the risk profile of the insured, age, medical aspects, fitness levels and family history and measure the effect of each factor affecting the risk. The objectives of underwriting are achieved, in short, by deciding the level of acceptability, adequacy of premium and other terms.

A claim will arise under an insurance policy when the insured events happen. 

After settlement of claims, the insurers under subrogation rights applicable to insurance contracts, are entitled to the rights and remedies of the insured and to recover the loss paid from a third party, who may be responsible for the loss under respective applicable laws. Thus, insurers can recover the loss from shipping companies, railways, road carriers, airlines, port trust authorities etc.

MRI is an insurance policy that provides financial protection for home loan borrowers and their families. Specifically, MRI helps settle outstanding home loan amounts in the event of death or total disablement of the borrowers.

A function of a direct broker as per IRDA Regulations is to assist clients in paying premium under section 64VB of Insurance Act, 1938.
Other functions are:- 
(a) obtaining detailed information of the client's business and risk management philosophy;
(b) familiarising himself with the client's business and underwriting information so that this can be explained to an insurer and others;
(c) rendering advice on appropriate insurance cover and terms;
(d) maintaining detailed knowledge of available insurance markets, as may be applicable;
(e) submitting quotation received from insurer/s for consideration of a client;
(f) providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover;
(g) acting promptly on instructions from a client and providing him written acknowledgements and progress reports;
(h) assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938);
(i) providing services related to insurance consultancy and risk management;
(j) assisting in the negotiation of the claims; and
(k) maintaining proper records of claims; 

The coverage and the sum assured depend on the different covers opted and the type of individual availing the plan. All the options are true in the context. 

The person getting an insurance policy must have an insurable interest in the property or life insured. A person is said to have an insurable interest in the property if he is benefited by its existence and be prejudiced by its destruction. Without insurable interest, the insurance contract is void. The ownership of a property is not necessary for establishing insurable interest. A banker has an insurable interest in the property mortgaged to it against a loan.

Benefits of Householders insurance:

• comprehensive coverage to both content and structure of home.
  -Securing assets in any mishap.
  -Home insurance policy is at comparatively lower premium rates than other insurance policies.
  etc. 

Fire insurance policy is suitable for commercial establishments as well as for the owner of property, and for individuals / financial institutions who have financial interest in the property.

Personal Accident cover for Owner-driver :
(a) the owner-driver is the registered owner of the vehicle insured.
(b) the owner-driver is the insured named in this policy.
(c) the owner-driver holds an effective driving license.
(d) capital sum insured Rs.1 lac (two wheelers) capital sum insured Rs.2 lacs.(private cars and commercial vehicles.)

The main features of underwriting are as follows

i.    To identify risk based upon the characteristics
ii.   To determine the level of risk presented by the proposer
iii.  To ensure that the insurance business is conducted on sound lines

This policy offers a solution by covering profit lost due to reduction in turnover arising from interruption of business following damage to the property insured.
This policy can be taken only in conjunction with Fire Policy or Machinery Breakdown policy.

Insured's declared value in motor insurance includes manufacturer's selling price. IDV is the value of the vehicle, which is found by adjusting the current manufacturer's listed selling price of the vehicle with depreciation percentage, as prescribed in the IRDA regulations. Manufacturer's listed selling price will include local duties / taxes, excluding registration and insurance.

The policy covers the cost of accidental breakage of insured glass by any reason, except those that are specifically excluded. Some of the exclusions are:- 

Fire or explosion
Earthquakes or such other convulsion of nature
Damage to frames
Cost of removal or replacement of any fittings or fixtures necessitated for replacing the broken glass
Cracked or imperfect glass
Any superficial damage or scratching 

Both the statements are true. 
Code of conduct regulations apply to micro-insurance agents. Every micro insurance agent and specified person employed by him shall abide by Code of conduct as laid down in Regulation 8 of the Insurance Regulatory and Development Authority.

Advertisement regulations also apply to micro-insurance agents. Any violation by a micro-insurance agent of the code of conduct and/or advertisement or disclosure norms shall lead to termination of his appointment.

Generally, India’s social security schemes cover the following types of social insurances:Pension
Health Insurance and Medical
Maternity
Gratuity
Disability

In fire insurance, following are the physical hazard:-

i.    Construction
ii.   The height
iii.  Nature of flooring
Wooden floors add fuel to fire. Besides, wooden floors collapse easily in the event of fire, causing damage to property on lower floors through machinery or goods falling from upper floors.
iv.  Occupancy
v.   Ignition hazard

A valued marine insurance policy is the opposite of an open marine insurance policy. In this type of policy, the value of the cargo and consignment is ascertained and is mentioned in the policy document beforehand, thus making the value of the reimbursements in case of any loss to the cargo and consignment clear. Both the statements are true. 

In section 14 of IRDA, DUTIES, POWERS AND FUNCTIONS OF AUTHORITY are mentioned.

Section 13 of IRDA, 1999 deals with TRANSFER OF ASSETS, LIABILITIES, ETC., OF INTERIM INSURANCE REGULATORY AUTHORITY.

Documents required for Fire Claims (additional documents):

• Report of the Internal Committee constituted for investigating the cause of fire.
• Fire Brigade Report.
• First Information Report / Letter of intimation to the Police Station duly endorsed / Police Panchnama.
• Forensic Laboratory Report on samples collected at affected site.
• Drug Inspector's Report on destruction of Drugs/ Pharmaceutical items (for claim on pharma products only).
• Final Investigation Report.
• Action taken on the suggestion of TAC/ LPA on loss minimisation of prevention.

The insurance is: (a) A cooperative device to spread the risk; (b) the system to spread the risk over a number of persons who are insured against the risk; (c) the principle to share the loss of the each member of the society on the basis of probability of loss to their risk; and (d) the method to provide security against losses to the insured

In addition to the claim form, certain documents are required to be submitted by the claimant or secured by the insurers to substantiate the claim. For cyclone damage, a report from the Meteorological office may be called for. 

One needs to show a share capital of Rs.100 crs to start up an insurance business in India.

On receipt of the claim form, from the insured, the insurers decide about investigation and assessment of the loss. If the claim amount is small, the investigation to determine the cause and extent of loss is done by an officer of the insurers.

Different types of marine policies include:
• Specific policy
• Open policy
• Open cover
• Duty and increased value insurance
• Delay in start-up