Insurance

Defining Insurance
 Insurance in broad terms may be described as a method of
sharing financial losses of few from a common fund who are
equally exposed to the same loss.
 Insurance is defined as the equitable transfer of the risk of a loss,
from one entity to another, in exchange for a premium, and can
be thought of a guaranteed small loss to prevent a large, possibly
devastating loss.
 An insurer is a company selling the insurance. The insurance rate
is a factor used to determine the amount, called the premium, to
be charged for a certain amount of insurance coverage.
Concept of risk
 Massive risk with high magnitude

Day to day risk of lesser magnitude

Defining Risk
 A variation in the possible outcome
 The degree of uncertainty associated with a particular loss
 Greater the accuracy with which the outcome can be predicted the
lower is the risk.
 Risk is the possibility of an unfortunate occurrence
 Risk is the possibility of loss
 The combination of hazards
 Uncertainty of loss
 The tendency that actual results may differ from predicted results
Basic Terminology
 Peril : Cause of a risk and losses. E.g. Earthquake, flood , fire,
criminal activities etc.
Basic Terminology
 Hazard : Condition that increases the frequency or severity of loss.
E.g. absence of proper security or fencing , poorly maintained fire
alarm system etc.
Basic Terminology
 Moral Hazard: It refers to the dishonesty of the insured person
leading to increase probability of loss from given risk exposure.
E.g. setting fire to your own house.
 Morale Hazard: This refers to attitude of indifference to losses
that results out of a known fact that the said losses were insured.
 Catastrophic loss: It is a potential loss that is unpredictable such
as flood, but is capable of producing an extra ordinary large
amount of damage related to assets held in insurance pool. These
are generally natural disasters like earthquake flood etc.
Requirements of Insurable Risk
 Should be a Pure risk
 Involves a chance of loss or no loss

 Large number of exposure units

 to predict average loss

 Accidental and unintentional loss

 to control moral hazard
 to assure randomness

 Determinable and measurable loss

 to facilitate loss adjustment
Requirements of Insurable Risk
 No catastrophic loss
 to allow the pooling technique to work

 Probability of loss must not be very high

 to determine the premium need

 Economically feasible premium

 so people can afford to buy
Concept of Insurance
Basic Characteristics of Insurance
 Pooling of losses
 Spreading losses incurred by the few over the entire group
 Risk reduction based on the Law of Large Numbers
 Payment of fortuitous losses
 Insurance pays for losses that are unforeseen, unexpected,
and occur as a result of chance
 Risk transfer
 A pure risk is transferred from the insured to the insurer, who
typically is in a stronger financial position
 Indemnification
 The insured is restored to his or her approximate financial
position prior to the occurrence of the loss
Example
 Say 1000 motor cars valued @ 300000/- are observed over a
period of five years. On an average say per year two are total loss
by accident. Then the total annual loss would be Rs.600000. If the
loss is to shared by all the thousand owners then they have to
contribute Rs.600/-
 The loss experience will be established by taking the past
experience, geographical area in which the vehicles are used and
density of traffic.
Basic terms
 Insurer : The party to an insurance arrangement who undertakes
to indemnify for losses.
 Insured: A person whose interests are protected by an insurance
policy.
 Premium: Financial cost of obtaining an insurance cover, paid as a
lump sum or in installments during the duration of the policy.
 Policy: Written contract or certificate of insurance
 Exposure to Loss: In insurance, areas in which the risk of loss
exists. Four loss risk areas are: (1) property; (2) income; (3) legal
vulnerability; and (4) key personnel in an organization
Basic terms
 Life annuity: A life annuity is a financial contract in the form of an
insurance product according to which a seller (issuer) — typically a
financial institution such as a life insurance company — makes a
series of future payments to a buyer (annuitant) in exchange for
the immediate payment of a lump sum (single-payment annuity) or
a series of regular payments (regular-payment annuity), prior to
the onset of the annuity.
 Nomination: It is the right of the policy holder on his/ her own life
to designate a living person to receive the policy proceeds in the
event of him predeceasing the nominee before the maturity of the
policy.
 Nominee: Nominee should not be a stranger because its against
the objective of insurance which in most cases is family protection.
Basic terms
 Assignment: An agreement under which one party–the assignor–
transfers some or all of his ownership rights in a particular
property, such as a life insurance policy or an annuity contract, to
another party–the assignee.

 Assignor: A property owner who transfers some or all of the

ownership rights in a particular property to another party by
means of an assignment.

 Assignee: A person or party to whom a property owner transfers

some or all of the property owner's rights in a particular property
by means of an assignment.
IRDA
The Insurance Regulatory and Development Authority (IRDA) is a
national agency of the Government of India, based in Hyderabad. It
was formed by an act of Indian Parliament known as IRDA Act 1999,
which was amended in 2002 to incorporate some emerging
requirements.

Mission
"to protect the interests of the policyholders, to regulate, promote
and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto."
Benefits of Insurance to an Individual
 Peace of mind
 Aversion of risk
 Protects mortgaged properties
 Provides self dependency
 Tool of savings
 Tool of investment
 Satisfies various needs
Benefits of Insurance to Business
 Reduced reserve requirements
 Capital freed for investment
 Indemnification
 Reduction of uncertainty
 Reduced cost of capital
 Reduced credit risk
 Loss control activities
 Business and social stability
Benefits of Insurance to Society
 Protects wealth of the country

 Helps in economic growth

 Control inflation
Cost of Insurance
 Operating Expense
 Distribution cost
 Underwriting cost
 Policy Administration Cost
 Reserve cost
 Moral Hazard resulting in extra cost
 Exaggerated Losses
 Benefit-cost Tradeoff
Insurance Classification
Insurance

Life Insurance General Insurance

Players in the Industry
Life Insurance General Insurance
Life Insurance Corporation of India. General Insurance Corporation of India.
1. Oriental Insurance Company Ltd.
2. New India Assurance Company Ltd.
3. National Insurance Company Ltd.
4. United India Insurance Company Ltd.
New Entrants
ICICI Prudential Life Insurance Ltd. Bajaj Alliaz General Insurance Company Ltd.
Tata AIG Life Insurance Corporation Ltd. Reliance General Insurance Company Ltd.
ING Vysya Life Insurance Corporation Ltd. Tata AIG General Insurance Company Ltd.
Kotak Mahindra Life Insurance Royal Sundaram Alliance Insurance Company
Corporation Ltd. Ltd.
Concept of General Insurance
Defining General Insurance
 General insurance or non-life insurance policies, including
automobile and homeowners policies, provide payments
depending on the loss from a particular financial event.

 General insurance typically comprises any insurance that is not

determined to be life insurance.

 It is called property and casualty insurance in the U.S. and Non-Life

Insurance in Continental Europe.
Classification
 Commercial lines: products are usually designed for relatively
small legal entities. These would include workers' comp (employers
liability), public liability, product liability, commercial fleet and
other general insurance products sold in a relatively standard
fashion to many organizations. There are many companies that
supply comprehensive commercial insurance packages for a wide
range of different industries, including shops, restaurants and
hotels.

 Personal lines: products are designed to be sold in large quantities.

This would include autos (private car), homeowners (household),
pet insurance, creditor insurance and others.
Principles of Insurance
 Utmost Good Faith

 Insurable Interest

 Principle of Indemnity

 Principle of Contribution

 Principle of Subrogation

 Principle of loss Minimization

 Principle of ‘CAUSA PROXIMA’

Utmost Good Faith
 Both the parties i.e. the insured and the insurer should a good
faith towards each other.

 The insurer must provide the insured complete ,correct and clear
information of subject matter.

 The insurer must provide the insured complete ,correct and clear
information regarding terms and conditions of the contract.

 This principle is applicable to all contracts of insurance i.e. life, fire

and marine insurance.
Insurable Interest
 The insured must have insurable interest in the subject matter of
insurance.

 In life insurance it refers to the life insured.

 In marine insurance it is enough if the insurable interest exits only

at the time of occurrence of the loss

 In fire and general insurance it must be present at the time of

taking policy and also at the time of the occurrence of loss.

 The owner of the party is said to have insurable interest as long as

he is the owner of the it.

 It is applicable to all contracts of insurance.

Principle of Indemnity
 Indemnity means a guarantee or assurance to put the insured in
the same position in which he was immediately prior to the
happening of the uncertain event. The insurer undertakes to make
good the loss.

 It is applicable to fire ,marine and other general insurance.

 Under this the insurer agrees to compensate the insured for the
actual loss suffered.
Principle of Contribution
 The principle is a corollary of the principle of indemnity.

 It is applicable to all contracts of indemnity.

 Under this principle the insured can claim the compensation only
to the extent of actual loss either from any one insurer or all the
insurers.
Principle of Subrogation
 As per this principle after the insured is compensated for the loss
due to damage to property insured , then the right of ownership of
such property passes on to the insurer.

 This principle is corollary of the principle of indemnity and is

applicable to all contracts of indemnity
Principle of Loss of Minimization
Under this principle it is the duty of the insured to take all possible
steps to minimize the loss to the insured property on the happening
of uncertain event.
Principle of ‘Causa Proxima’
 The loss of insured property can be caused by more than one
cause in succession to another.

 The property may be insured against some causes and not against
all causes.

 In such an instance, the proximate cause or nearest cause of loss is

to be found out.

 If the proximate cause is the one which is insured against ,the

insurance company is bound to pay the compensation and vice
versa.
General Rules
 Mis-description

 Reasonable care

 Fraud

 Basic principles
 Insurable interest
 Utmost good faith
 Subrogation
 Contribution
 Indemnity

 Risk of loss not covered

Types of General Insurance
Main types of general insurance are:

 Fire

 Health

 Marine

 Motor Vehicle
Fire Insurance
Fire Insurance
Fire insurance is a form of property insurance which protects people
from the costs incurred by fires. When a structure is covered by fire
insurance, the insurance policy will pay out in the event that the
structure is damaged or destroyed by fire.
Types of Fire Insurance Policies
 Specific policy: In this type of policy, the insurance company is
liable to pay a sum, which may be less than the property’s real
value. The insured is called to bear a part of the loss, as the actual
value of the property is not considered in deciding the amount of
indemnity.

 Comprehensive policy: Known as “all-in-one” policy, the insurance

company indemnifies the policyholder for loss arising out of fire,
burglary, theft and third party risks. In this type of policy, the
policyholder also gets paid for loss of profits incurred, due to fire,
till the time the business remains shut.

 Valued policy: In this type of policy, the value of the commodity is

already set and actual loss is not taken into consideration. The
policy follows a standard contract of indemnity, wherein the
policyholder gets paid a specific amount of indemnity, without
considering the actual loss.
Types of Fire Insurance Policies
 Floating policy: This type of policy is subject to average clause and
the extent of coverage expands to different properties, belonging
to the policyholder, under the same contract and one premium.
The floating policy also provides protection of goods kept at two
different stores.

 Replacement or Re-instatement policy: As per replacement or re-

instatement policy, the insurance company instead of paying the
policyholder the amount of indemnity in cash, replaces the
damaged property/commodity with a new one.
Fire Insurance Claim Procedure
 Individuals/corporate must inform insurer as early as possible , in
no case later than 24 hours.

 Provide relevant information to the surveyor/claim representative

appointed by the insurer.

 The surveyor then analyzes the extent/ value of loss or damage.

 The claim process takes anywhere between one to three weeks.

Documents Required
 True copy of the policy along with schedule

 Report of fire brigade

 Claim Form

 Photographs

 Past claims experience

Need of Fire Insurance
Fire insurance is important because a disaster can occur at any time.
There could be many factors behind a fire, for example arson, natural
elements, faulty wiring, etc. Some facts that stress the importance of
fire insurance include:

 Fire contributes to the maximum number of deaths occurring in

America due to natural disasters.

 Eight out of ten fire deaths take place at home.

 A residential fire takes place after every 77 seconds.

 The major reason for a residential fire is unattended cooking.

Fire Insurance in India
Fire insurance business in India is governed by the All India Fire Tariff
that lays down the terms of coverage, the premium rates and the
conditions of the Fire Policy. The fire insurance policy has been
renamed as Standard Fire and Special Perils Policy. The risks covered
are as follows:
Dwellings, Offices, Shops, Hospitals (Located outside the compounds
of industrial/manufacturing risks) Industrial / Manufacturing Risks
Utilities located outside industrial/manufacturing risks Machinery
and Accessories Storage Risks outside the compound of industrial
risks Tank farms / Gas holders located outside the compound of
industrial risks
Fire Insurance in India
Perils Covered: Cause of Loss Fire Lightning Explosion/Implosion Aircraft
damage Riot, Strike Terrorism Storm, Flood, inundation Impact damage
Subsidence, landslide Bursting or overflowing of tanks Missile Testing
Operations Bush fire etc.
Exclusions:
 Loss or damage caused by war, civil war and kindered perils
 Loss or damage caused by nuclear activity
 Loss or damage to the stocks in cold storage caused by change in
temperature
 Loss or damage due to over-running of electric and/ or electronic
machines
Claims: In the event of a fire loss covered under the fire insurance policy,
the Insured shall immediately give notice there of to the insurance
company. Within 15 days of the occurrence of such loss the Insured should
submit a claim in writing giving the details of damages and their estimated
values. Details of other insurances on the same property should also be
declared.
Indian Companies Offering FI
 ICICI Lombard General Insurance (Pvt.)

 United India Insurance (Govt.)

 New India Insurance (Govt.)

 Bajaj Allianz Insurance (Pvt.)

 Oriental Insurance (Govt.)

 Tata-AIG General Insurance (Pvt.)

Health Insurance
What is Health Insurance?
Health insurance, like other forms of insurance, is a form of
collectivism by means of which people collectively pool their risk, in
this case the risk of incurring medical expenses.
Importance of Health
 Rising medical costs

 Sharing of health related risk

 uncertain hospital bills

 Expensive/quality health care services

 Money value – Sick Vs Healthy

 Family health insurance

 Tax benefit

 Productivity of workforce

 Removes some of the burden from the state

 Keeping pace with the customer needs while achieving profitability

How to improve the access to health care and financial protection of
the poor?

Answer

The most obvious solution will be to improve the health

insurance penetration.
How to Improve Health Insurance Penetration?
 Regulator/Government
 Enhance customer awareness
 Enhance client confidence - real value benefits in the event of a claim
 Effective supervision
 Compulsory percentage of total business towards health
 Compulsory savings towards health
 Tax incentives to employers for promoting group health coverage

 Insurer
 Clients confidence - warrantable claim will be paid out in a reasonable
time frame
 New clients have to be reached
 Value for money
 Design products as per clients needs
 Product transparency
 Cost efficiency
 affordability
 Wellness programmes
Initiatives of IRDA
 Committee to formulate regulations

 Pure health insurance products

 Allowing the formation of an stand alone health insurance

company

 Standalone health insurance companies

 Renewability

 Senior citizens
Impediments in Health Insurance
 Lack of Data

 Moral Hazard/Adverse Selection

 Complex nature of the product

 Medical Inflation

 New treatments

 Unnecessary treatments

 Difficulty in pricing

 Government provision of health care

 Long term nature

 Changing life style

 Mis-selling/fraud
Mitigation of Impediments
 Insurer
 Designing a less complex products
 Transparency in the product features
 Clarity in policy terms, conditions & exclusions
 Efficient back-office support for underwriting and claims
processing
 Higher Reinsurance
 Need for quicker services. E.g. Toll free numbers, cashless,
quick response
 Expense analysis on a regular basis
 Product innovation
 Efficient training of sales force
Mitigation of Impediments

 Policyholder
 Pay attention to policy conditions
 Read the exclusions and limitations very carefully
 Compare premium costs, deductibles, co-payments
 Take an informed decision

 TPA
 Proper infrastructure
 Speedy claim settlement process
 Less paper work
Mitigation of Impediments

 Regulator/Government
 Come out with health insurance regulations
 Centralized data base for health insurance experience statistics
 Provider rating
 Cap on renewal premiums
 Ensure that a decent portfolio of health coverage represent
the rural sector
 Guard against ill effects of privatization
 Further tax incentives
 Compulsory savings towards health care
Types of Health Insurance Plans
 Individual health plan

 Family floater plan

 Senior Citizens’ plan

 Critical illness plan

 Daily hospital cash and

 Unit-linked health plan (ULHP).

Individual Health Plans
 Largely, an individual health insurance plan (IHIP), or ‘mediclaim’,
would cover expenses if you are hospitalised for at least 24 hours.

 These plans are indemnity policies, that is, they reimburse the
actual expenses incurred up to the amount of the cover that you
buy.

 Some of the expenses that are covered are room rent, doctor’s
fees, anaesthetist’s fees, cost of blood and oxygen, and operation
theatre charges.
Family Floater Plans
 This is a fairly new entrant in the health insurance firmament.

 It takes advantage of the fact that the possibility of all members of a

family falling ill at the same time or within the same year is low.

 Under a family floater (FF) health plan, the entire sum insured can be
availed by any or all members and is not restricted to one individual only
as is the case in an individual health plan.

  Let’s look at an example. Say, a family of four has individual covers of Rs

1 lakh each. If the cost of treating one person crosses Rs 1 lakh, then the
rest has to be borne by the family out of its own money. If, however, the
entire family is insured for Rs 4 lakh through a floater policy, then any of
the members will be covered for that amount in any year. To the extent
of the annual cover, any number of members can avail the money.
Senior Citizens’ Plans
 Insurance is considered a form of long-term savings for senior
citizens. This money provides financial stability and also helps
them in times of need. Medical insurance enables senior citizens to
pay for health checkups, emergency medical costs and long-term
treatment. The income tax benefit on insurance premiums is up to
Rs. 15,000 under Section 80 D of the Income Tax Act, as on March
31, 2007. Medical insurance is provided through several private
insurance companies and four public sector general insurance
companies. These are:
 National Insurance Company
 Oriental Insurance Company
 New India Assurance
 United India Insurance Company
Senior Citizens’ Plans
 The National Insurance Company offers the Varistha Mediclaim Policy
for senior citizens. This policy covers hospitalization and domiciliary
hospitalization expenses under Section I as well as expenses for
treatment of critical illnesses, if opted for, under Section II. Diseases
covered under critical illnesses are coronary artery surgery, cancer,
renal failure, stroke, multiple sclerosis and major organ transplants.
Paralysis and blindness are covered at extra premium.

 Oriental Insurance Company provides a Comprehensive Health

Insurance Scheme, a Group Insurance and an Individual Mediclaim
Policy. These policies pay for hospitalization or domiciliary
hospitalization of the insured in case of a sudden illness, an accident
or surgery. These conditions should have arisen during the policy
period.
Critical Illness Plans
 A Critical Illness plan means to insure against the risk of serious
illness. It will give the same security of knowing that a guaranteed
cash sum will be paid if the unexpected happens and one is
diagnosed with a critical illness.

 The purpose of a critical illness plan is to let you put aside a small
regular amount now, as an insurance against all this happening.

 Bajaj Allianz, in its efforts to provide a customer centric solution is

offering an insurance policy to cover to some of these critical
illnesses like Cancer Coronary Artery bypass surgery First Heart
attack Kidney Failure Multiple sclerosis Major organ transplant
Stroke Arota graft surgery Paralysis Primary Pulmonary Arterial
Hypertension.
Daily Hospital Cash
 Expense benefit is paid on per day basis after hospitalization (most
plans mandate at least 48 hours of hospitalization).

 The pre-decided daily benefit amount is paid in full, irrespective of

the actual expenses.

 For example, a person buys a DHC plan with a limit of Rs 2,000 per
day. He gets hospitalised for 7 days and the total bill is Rs 35,000.
He would be reimbursed Rs 14,000 (2,000x7). If the bill is Rs 8,000,
he would still be reimbursed Rs 14,000.
Unit-linked health plan (ULHP)
 All ULHPs offer one or more combination of the other benefits (for
which risk premium is deducted from fund value).
Also, charges such as premium allocation charge and policy
administration charge are deducted from the fund value.

 LIC has launched Health Plus plan, a unique long term health
insurance plan that combines health insurance covers for the
entire family (husband, wife and the children) – Hospital Cash
Benefit (HCB) and Major Surgical Benefit (MSB) along with a ULIP
component (investment in the form of Units) that is specifically
designed to meet domiciliary treatment (DTB) related expenses for
the insured members.
Health Insurance in India
The health insurance market in India is very limited covering about
10% of the total population. The existing schemes can be categorized
as:
 Voluntary health insurance schemes or private-for-profit schemes;

 Mandatory health insurance schemes or government run schemes

(namely ESIS, CGHS).

 Insurance offered by NGOs / community based health insurance,

and

 Employer-based schemes
Voluntary health insurance schemes
 In private insurance, buyers are willing to pay premium to an
insurance company that pools similar risks and insures them for
health related expenses.

 The main distinction is that the premiums are set at a level, which
are based on assessment of risk status of the consumer (or of the
group of employees) and the level of benefits provided, rather
than as a proportion of consumer’s income.

 In the public sector, the General Insurance Corporation (GIC) and

its four subsidiary companies (National Insurance Corporation,
New India Assurance Company, Oriental Insurance Company and
United Insurance Company) provide voluntary insurance schemes.
Voluntary health insurance schemes
 The most popular health insurance cover offered by GIC is
Mediclaim policy.

 Mediclaim policy: It was introduced in 1986. It reimburses the

hospitalization expenses owing to illness or injury suffered by the
insured, whether the hospitalization is domiciliary or otherwise.

 Some of the various other voluntary health insurance schemes

available in the market are :- Asha deep plan II , Jeevan Asha plan
II, Jan Arogya policy, Raja Rajeswari policy, Overseas Mediclaim
policy, Cancer Insurance policy, Bhavishya Arogya policy, Dreaded
disease policy, Health Guard, Critical illness policy, Group Health
insurance policy, Shakti Shield etc.
Mandatory health insurance schemes
Employer State Insurance Scheme (ESI)
 Enacted in 1948, the employers’ state insurance (ESI) Act was the
first major legislation on social security in India.

 The scheme applies to power using factories employing 10 persons

or more and non-power & other specified establishments
employing 20 persons or more.

 It covers employees and the dependents against loss of wages due

to sickness, maternity, disability and death due to employment
injury. It also covers funeral expenses and rehabilitation allowance.
Medical care comprises outpatient care, hospitalization, medicines
and specialist care.

 These services are provided through network of ESIS facilities,

public care centers, non-governmental organizations (NGOs) and
empanelled private practitioners.
Mandatory health insurance schemes
Central Government Health Insurance Scheme (CGHS)
 Established in 1954, the CGHS covers employees and retirees of
the central government and certain autonomous and semi
autonomous and semi-government organizations.
 It also covers Members of Parliament, Governors, accredited
journalists and members of general public in some specified areas.
 Benefits under the scheme include medical care, home visits/care,
free medicines and diagnostic services.
 These services are provided through public facilities with some
specialized treatment (with reimbursement ceilings) being
permissible at private facilities.
 Most of the expenditure is met by the central government as only
12% is the share of contribution.
Mandatory health insurance schemes
Universal Health Insurance Scheme (UHIS)
 For providing financial risk protection to the poor, the government
announced UHIS in 2003.
 Under this scheme, for a premium of Rs. 165 per year per person,
Rs.248 for a family of five and Rs.330 for a family of seven , health
care for sum assured of Rs. 30000/- was provided.
 This scheme has been made eligible for below poverty line families
only. T
 o make the scheme more saleable, the insurance companies
provided for a floater clause that made any member of family
eligible as against mediclaim policy which is for an individual
member.
Insurance offered by NGOs
 Insurance offered by NGOs/Community based schemes are typically
targeted at poorer population living in communities. Such schemes are
generally run by charitable trusts or non-governmental organizations
(NGOs).
 In these schemes the members prepay a set amount each year for
specified services. The premia are usually flat rate (not income related)
and therefore not progressive.
 The benefits offered are mainly in terms of preventive care, though
ambulatory and inpatient care is also covered.
 Such schemes tend to be financed through patient collection,
government grants and donations.
 Some of the popular Community Based Health Insurance schemes are: -
Self-Employed Women’s Association (SEWA), Tribuvandas Foundation
(TF), The Mullur Milk Co-operative, Sewagram, Action for Community
Organization, Rehabilitation and Development (ACCORD), Voluntary
Health Services (VHS) etc.
Employer based schemes
 Employers in both public and private sector offers employer based
insurance schemes through their own employer.

 These facilities are by way of lump sum payments, reimbursement

of employees’ health expenditure for out patient care and
hospitalization, fixed medical allowance or covering them under
the group health insurance schemes.

 The Railways, Defense and Security forces, Plantation sector and

Mining sector run their own health services for employees and
their families.
Marine Insurance
Defining Marine Insurance
Marine Insurance covers the loss or damage of ships, cargo,
terminals, and any transport or cargo by which property is
transferred, acquired, or held between the points of origin and final
destination.
Two Broad Categories
 Ocean marine insurance

 Inland marine insurance

Ocean Marine Insurance
 Hull

 Cargo

 Freight

 Protection and indemnity insurance

Inland Marine Insurance
 Extension of Ocean marine insurance

 Domestic goods in transit

 Property held by Bailees

 Mobile equipment and property

 Block Policies- “all-risks” basis

 Means of transport and communication

Risks
Two types of risks are covered by ocean marine insurance.

 The first type is the perils of the sea that include both natural
calamities and fortuitous accidents.

 The second type of risks covered is extraneous risks. These risks

include ordinary risks such as theft, pilferage, rain damage,
shortage, breakage, etc and special risks such as strike, war, failure
to deliver, etc.
Covered Perils
 Perils of the sea, such as loss due to bad weather, high waves,
collision, and other navigable waters

 Fire, enemies, pirates, thieves, jettison

 Barratry, or fraud by crew members

 All risks
Further Cover
 Pollution Hazard

 War and strikes clause

 Bursting boilers or breaking shafts

 Accident or negligence of a third party

Common Exclusions
 Loss, damage or expenses attributable to willful misconduct of the
assured
 Ordinary or inevitable losses
 Loss, damage or expense caused by inherent vice or nature of the
subject matter insured
 Loss/damage due to insufficient, unsuitable or defective packing
(including storage)
 Loss/damage or expenses proximately caused by delay even if the
delay is caused by a peril insured against
 Loss damage or expenses arising from insolvency of the owners,
managers, operators of the vessel.
 Loss damage due to un seaworthiness of the vessel or craft,
container, lift van employed for carrying the insured matter.
 Wars, strikes and civil commotions unless covered under separate
endorsements.
Hull Insurance
 Covers physical damage to ship or vessel

 Always written with a deductible

 Contains collision liability clause

 Covers owner’s legal liability

Cargo Insurance
 Covers the loss to the shipper if the goods are damaged or lost

 Policy can be single or open cargo policy

 Salvage loss
 Follows forced sale of badly damaged cargo
Cargo Partial Loss
 Where goods delivered damage measure of indemnity is

 Proportion of sum fixed by policy

 equal to the gross sound value less damaged value at place of delivery
Freight Insurance
 Insures the profit made by a ship owners out of ships used to carry
cargo, both their own and others

 Loss occurs when cargo is not deliverable

Liability Insurance
 Covers the property damage or bodily injury to third party

 Damage caused by the ship to docks, harbor installation, fines,

penalties, injury to crew members, etc
Major Types of Policy
 Time policy

 Voyage policy

 Mixed policy

 Open policy
Time Policy
 A time policy is one that runs for a period of time usually not
exceeding 12 months.

 In using a time policy, the most important question is whether the

loss occurred at a time in which the policy was running because
sometimes it is difficult to prove in case where it is alleged that the
conditions giving rise to the loss (e.g. a hole in the ship) occurred
during the policy, although the final consequence (the foundering
of the vessel) occurred afterwards.
Voyage Policy
 This is a policy that operates for the period of the voyage.

 For cargo, the cover is from warehouse to warehouse.

 The policy will not apply if the actual voyage and/or ports are
different from those in the policy.
Mixed Policy
 This is a policy that covers the subject matter for the voyage within
a time period.

 It is used to cover the cargo from warehouse to warehouse with a

time limit.

 The cargo has to be warehoused within 60 days after discharge or

the policy will no longer cover the cargo.
Open Policy
 This is an arrangement in which terms such as types of risks to be
covered, validity of the insurance contract, rate, premium,
maximum value of each shipment and geographical limits, etc are
worked out when the contract is signed.

 Each shipment is covered once the assured declares the details.

The assured may be authorized to issue against payment a pre-
printed insurance certificate which is valid after completion of
shipment details and his signature for documentation purposes.

 The insurance certificate is pre signed by the insurer. If the contract

is effective only for a specified period, a clause of termination
should be included.
Auto Insurance
Defining Auto Insurance
Auto insurance (also known as vehicle insurance, car insurance, or
motor insurance) is insurance purchased for cars, trucks, and other
vehicles. Its primary use is to provide protection against losses
incurred as a result of traffic accidents and against liability that could
be incurred in an accident.
Auto Insurance Coverage
Auto insurance provides property, liability and medical
coverage:

 Property coverage pays for damage to or theft of the car.

 Liability coverage pays for the legal responsibility to others for

bodily injury or property damage.

 Medical coverage pays for the cost of treating injuries,

rehabilitation and sometimes lost wages and funeral expenses
Coverage Levels
Vehicle insurance can cover some or all of the following items:
 The insured party
 The insured vehicle
 Third parties (car and people)
 Third party, fire and theft
 In some jurisdictions coverage for injuries to persons riding in the
insured vehicle is available without regard to fault in the auto
accident (No Fault Auto Insurance)
Types of Auto Insurance in India
There are different types of Auto Insurance in India :
 Private car insurance: It is the fastest growing sector as it is
compulsory for all the new cars. The amount of premium depends on
the make and value of the car, state where the car is registered and
the year of manufacture.

 Two wheeler insurance: It covers accidental insurance for the drivers

of the vehicle. The amount of premium depends on the current
showroom price multiplied by the depreciation rate fixed by the Tariff
Advisory Committee at the time of the beginning of policy period.

 Commercial vehicle insurance: It provides cover for all the vehicles

which are not used for personal purposes, like the Trucks and
HMVs. The amount of premium depends on the showroom price
of the vehicle at the commencement of the insurance period,
make of the vehicle and the place of registration of the vehicle.
What it covers?
The auto insurance generally includes:

 Loss or damage by accident, fire, lightning, self ignition, external

explosion, burglary, housebreaking or theft, malicious act.

 Liability for third party injury/death, third party property and

liability to paid driver.

 On payment of appropriate additional premium, loss/damage to

electrical/electronic accessories.
Exclusions
Typically, the motor insurance plan does not provide for:
 Normal wear and tear or general ageing of the vehicle
 Mechanical/electrical breakdown.
 Depreciation, wear and tear of consumables like tubes and tires.
 Damages that occur while a person is driving with invalid driving
license.
 Damage that occur while a person is under the influence of drugs
or liquor.
 Damage due to a war, civil war, mutiny, or nuclear risk.
 Claims arising out of contractual liability.
 Use of vehicle other than what it is meant for. For example, if a
private car is being used as a taxi and gets involved in an accident,
the owner will not be able to claim damages.
Indian Companies Offering AI
 HSBC India - Auto Secure

 Bajaj Allianz - Bajaj Allianz's Motor Insurance

 ICICI Lombard - Motor Plans, Two Wheeler Package Policy

 United India Insurance Co. - Motor Package and Liability Only

Policies

 The New India Assurance Co. - Motor Policy