nism insurance session

8/6/2019 NISM Insurance Session

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Concept of Risk & Insurance

Life Insurance Products

General Insurance Products

Insurance History & Regulations

Contents

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An uncertain event leading to a loss

Kinds of Risk

Personal Risk

Property Risk

Liability Risk

Loss can be categorized as Financial Loss

Non Financial Loss

What is a risk?

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Death (Loss of Income)

Disability (Loss of Income temporarily)

Critical Illness (High treatment charges) Illness & injuries (Hospitalization expenses)

House: Fire, theft, calamity

Motor: Accidents, theft, calamity

Common risks faced by us

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Risk avoidance

Risk reduction

Risk transfer (Insurance) Risk retention

How can one manage risks?

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Insurance is the a risk management tool

Insurance is transfer of risk to a third party

(insurance company).

Its contract between Insured (Individual) and Insurer

(Insurance Company). Called Policy

Insured pays premium & Insurer pays sum

assured to the insured/family who has faced theevent. Risk Sharing concept

Life Insurance & General Insurance

What is insurance?

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1. Insurable interest

Exists if insured suffers from financial loss in case of event

Should own the object/property

Blood relations, employee-employer

2. Utmost good faith

Greater duties of faith on proposer & insurer

Disclosure of information and facts. E.g health history

3. Indemnity (Applicable to General Insurance Only)

Actual compensation of loss. No additional gain

4. Subrogation: Transfer of rights of insured to insurer.

5. Contribution: Sharing of loss by all insurers.

Principles of Insurance

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Contents

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Add Needs (A)

Outstanding Loan Amount

Family Commitments specially childrens future Future Expenses of family

Deduct Resources (B)

Current Investment Assets

Current Life Insurance Coverage

Present Value of Spouse Income

Life Insurance Need Analysis

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1. Term Policy

2. Endowment Policy

3. Whole Life Policy4. Moneyback Policy

5. Annuity & Pension Policy

6. ULIP (Unit Linked Insurance Policy)

Types of Life Insurance Policies

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Provides cover for a specific period only

Premium is low.

No returns/refund of premium No investment element

100% Risk Cover

Sum assured paid on death Best policy for adequate life cover

Buy based on life insurance need analysis

Term Policy

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Most popular insurance policy

Combines Investment + Risk Cover

Sum assured paid on death or survival atmaturity

Bonus paid along with Sum Assured on

maturity Premiums are higher than term due to a

savings component

Endowment Policy

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Pays either at death or maturity

Maturity usually 100 years age.

Premium paid for life time

Works for estate planning as benefits are

generally enjoyed by family

Whole Life Policy

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Covers death & survival benefits

Lump sum paid periodically.

20% + 20% + 20% + 40% of SA at predefined intervals Full sum assured paid on death

Popular for planning Childrens Education &

Marriage Specially designed Childrens Policies available in

market

Moneyback Policy

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Combination of MFs + Term

Units are priced as per current market value

On death higher of 2 or both is paid Sum assured

current value of units

High flexibility in policy structure

High costs too.

ULIP (Unit Linked Insurance Policy)

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Mortality charges

Cost of insurance coverage

Premium allocation charges Usually goes towards agents commission

Fund management charges

To manage investment component like MFs Policy administration charges

Surrender charges

Various costs of investment oriented

insurance policies specially ULIPs

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Accidental Death

Additional Sum Assured if death

Critical Illness If critical illness diagnosed

Waiver of Premium

Waives off premium if something happens toperson who is paying premium

Used mainly in Childrens Policies

What are Riders?

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Nomination

Entitles to receive the sum assured

Has to distribute it to the legal heirs

Policy Lapse

Loan against policy

Free Look Up Period Premium Paying Term & Options

Grace period

Important Concepts

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Contents

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Health Insurance Policy

Motor Insurance Policy

Home Insurance Policy

Overseas Travel Insurance Policy

Critical Illness Policy

Personal Accident/Disability Policy

Types of General Insurance Policies

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Hospitalization Expenses over 24 hours

Room charges, Medicine & Test Charges,

Operation, doctor fees etc covered Family floaters available

Group mediclaim policy

Eligible for tax benefits under 80D 1-5 lakhs cover recommended based on

affordability

Health Insurance

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Own Damage

Accidents

Thefts

Natural Calamities

Third Party Liability

Death /Disability

Property Damage

Accidental Death

Limited to a small amount

Motor Insurance Policy

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Fire

Theft

Calamities earthquakes, floods

Furniture, fittings, gadgets & appliances

Jewellery & precious items

Sum Insured separately for Home Structure

Home Contents

Home Insurance Policy

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Medical Treatment

Personal Accident

Loss of Luggage

Flight Cancellation

Loss of Passport

Personal Liability to Third Party

Overseas Travel Insurance

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Cancer, Heart Attack, Kidney Failure, Organ

Transplant, Paralysis, Bypass Surgery

Full Sum assured given on diagnosis Existing ailments not covered

Medical checkup a pre-requirement for many

5-20 lakhs based on family health history &affordability recommended

Critical Illness Policy

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Death 100%

Permanent Total Disability -100%

Permanent Partial Disability Varying

Temporary Total Disablement

1% of Sum Insured per week

Low Premium

Acts as Income replacement

Personal Accident Policy

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Contents

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First policy issued in England in 1583

In India first policy issued in 1870

The Insurance Act 1938 (amended)

LIC of India formed in 1956 after nationalization of lifeinsurance Business of 245 private insurance companies

General insurance business of107 insurancecompanies was nationalized in 1972 & four public

sector General Insurance Companies were formed Insurance sector opened up in India for private players

in 2000

History of Insurance in India

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Insurance Regulatory & Development Authority(IRDA)

Insurance Regulatory & Development Authority

Act 1999 Controlling and regulatory apex body in the

country for insurance sector

Chairman and members appointed byGovernment of India

Head Quartered at Hyderabad

IRDA

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Individual Agents

Corporate Agents

Bancassurance Insurance Brokers

Directly from companies

Branches

Online from websites

Where to buy insurance?

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IRDA (licensing of agents) regulation 2000

IRDA (surveyors & loss assessors ) regulation, 2000

IRDA (insurance advertisement & disclosures) regulation, 2000

IRDA (obligations of insurers to rural sectors) regulation, 2000 IRDA (investments) regulation, 2000

IRDA (third party administrators) regulation 2001

IRDA (protection of policyholders interest ) regulations, 2002

IRDA (licensing of corporate agents) regulations 2002

IRDA (manner of receipt of premium) regulation, 2002

IRDA (micro-insurance) regulations, 2005

IRDA (licensing of brokers) regulation, 2002

Regulations Issued by IRDA

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