Insurance Terminology - Copy.ppt

8/9/2019 Insurance Terminology - Copy.ppt

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Insurance TerminologyInsurance Terminology


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What are theseWhat are these

Every discipline of study hasEvery discipline of study has

vocabulary of its own.vocabulary of its own.

Same is with Insurance.Same is with Insurance.Significance of these terms may varySignificance of these terms may vary

from their dictionary meanings.from their dictionary meanings.

Use of these terms help visualiseUse of these terms help visualisesituationssituations


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WHAT IS INSURANCEWHAT IS INSURANCE

It is a system to transfer RiskIt is a system to transfer Risk

Risk is transferred to an Insurance companyRisk is transferred to an Insurance company

Insurance company is known as InsurerInsurance company is known as Insurer Individual/Body corporate transferring Risk isIndividual/Body corporate transferring Risk is

known as Insuredknown as Insured

Insurer reimburses Insured covered lossInsurer reimburses Insured covered loss


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How We May DefineHow We May Define

InsuranceInsurance Insurance is a CONR!CInsurance is a CONR!C wherebywhereby

1.1. A certain sum is charged in consideration ----PremiumA certain sum is charged in consideration ----Premium

2.2. A large amount is guaranteed to be paid by the InsurerA large amount is guaranteed to be paid by the Insurer

3.3. The payment is made only upon a COTI!"C#The payment is made only upon a COTI!"C#

$.$. The compensation will be made in a certain preThe compensation will be made in a certain predetermined sumdetermined sum

One party "Insurer# agrees to pay to t$e ot$er partyOne party "Insurer# agrees to pay to t$e ot$er party

"Insured# or $is beneficiary% a certain sum upon a"Insured# or $is beneficiary% a certain sum upon agiven contingency "Risk# against w$ic$ insurance isgiven contingency "Risk# against w$ic$ insurance isproposed&proposed&


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Types of InsuranceTypes of Insurance

LIFE INSURANCELIFE INSURANCE' Insurance of' Insurance of HumanHumanLifeLifeonlyon

ly

NN LIFE INSURANCE!NN LIFE INSURANCE!(((Insurance of pin(((Insurance of pinto elep$ants% )otor cars to satellites%to elep$ants% )otor cars to satellites%*lantation to non $uman life% Buildings%*lantation to non $uman life% Buildings%

Bridges% +oss of profits due to accidents% lossBridges% +oss of profits due to accidents% lossof income due to in,ury% !cidental deat$ ofof income due to in,ury% !cidental deat$ of$uman lives&$uman lives&


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Proposal

It is an application form seeking insurance.---the form is designed by the insurer.

It contains questionnaire asking pertinent

details of the applicant & subject matter ofinsurance.

The form is filled in and signed by theapplicant.

Applicant is knon as !Proposer"#illed in forms are submitted to the insurancecompany $Insurer%.


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UnderwriterUnderwriter

Is a person who examines the proposal form.Is a person who examines the proposal form.

He/she asses the proposal following co. norms.He/she asses the proposal following co. norms.

Decides:Decides:

If Insurance can be accepted or notIf Insurance can be accepted or not

If acceptable, then at what price. (PremiumIf acceptable, then at what price. (Premium

!erms and condition of acceptance.!erms and condition of acceptance.

"#ce of the underwriter is $nown as"#ce of the underwriter is $nown asUnderwriting o#ce.Underwriting o#ce.


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UnderwritingUnderwriting

Underwriting is selection and acceptanceUnderwriting is selection and acceptance

of %is$of %is$

& It is a s$ill Insurers de'elopIt is a s$ill Insurers de'elop

& It is a s$ill to decide on depth and spread ofIt is a s$ill to decide on depth and spread of

co'erageco'erage

& It is a s$ill to decide on pricingIt is a s$ill to decide on pricing


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PremiumPremium

It is the price insured pas for theIt is the price insured pas for the

insurance co'er.insurance co'er.

!he amount of premium is decided!he amount of premium is decided

b the insurer.b the insurer.

In India the premium is paable inIn India the premium is paable in

ad'ance i.e. before the inception ofad'ance i.e. before the inception of

co'er. ()ec. *+- of the Insuranceco'er. ()ec. *+- of the Insurance

ctct


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lassi0cation of Premiumlassi0cation of Premium

1ross direct Premium: mount of1ross direct Premium: mount of

business written direct from thebusiness written direct from the

mar$et.mar$et.

Depending on the nature and si2e ofDepending on the nature and si2e of

the ris$333premium as well as ris$ isthe ris$333premium as well as ris$ is

shared with other insurers.333coshared with other insurers.333co

insurance.insurance. )imilarl co insurance premium is)imilarl co insurance premium is

recei'ed from other insurers.recei'ed from other insurers.


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%e insurance%e insurance

Insurers transfers ris$ to specialisedInsurers transfers ris$ to specialised

Insurers.Insurers.

!hese insurers are $nown as %einsurers.!hese insurers are $nown as %einsurers.

4hile transferring ris$ insurers pa4hile transferring ris$ insurers pa

premium to reinsurers.premium to reinsurers.

!his is $nown as ession.!his is $nown as ession.

4hen premium is recei'ed as reinsurer4hen premium is recei'ed as reinsurer

it is $nown as acceptance.it is $nown as acceptance.


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5et Premium5et Premium

It is the sum total of gross directIt is the sum total of gross direct

premium6 co insurance premiumpremium6 co insurance premium

recei'ed 6 accepted re insurancerecei'ed 6 accepted re insurance

premium & amount of premiumpremium & amount of premium

ceded.ceded.


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PolicyPolicy

It is the documentar e'idence of theIt is the documentar e'idence of theinsurance contract.insurance contract.

It is issued b the insurer in fa'our ofIt is issued b the insurer in fa'our of

the insured.the insured. It is signed b an authorised o#cial ofIt is signed b an authorised o#cial of

the insurer.the insurer.

!he insurer is obliged to honour the!he insurer is obliged to honour thecommitments as laid down in the polic.commitments as laid down in the polic.

..


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ain contents of the Policyain contents of the Policy

All the terms & condition of the contract andAll the terms & condition of the contract andwarrantieswarranties

The details of the subject matter of insuranceThe details of the subject matter of insuranceand the amount of the sum assured.and the amount of the sum assured.

The tenure of the policy i.e. the period of validity.The tenure of the policy i.e. the period of validity.

Eclusions!!!!!certain losses due to operation ofEclusions!!!!!certain losses due to operation ofcertain perils remain out of cover.certain perils remain out of cover.


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'onditions'onditions

"onditions #recedent!!!!Insured re$uires"onditions #recedent!!!!Insured re$uires

to disclose all material fact to ensureto disclose all material fact to ensure

validity of the cover.validity of the cover.

"onditions Subse$uent!!!!Insured are to"onditions Subse$uent!!!!Insured are tonotify any change in material fact after thenotify any change in material fact after the

issuance of policy.issuance of policy.

"onditions precedent to liability!!!Insured"onditions precedent to liability!!!Insured

is to give notice of an event happeningis to give notice of an event happening

within a specified period of timewithin a specified period of time


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(epresentations(epresentations

"ustomer is obliged to ma%e truthful"ustomer is obliged to ma%e truthful

statements affecting the ris% .statements affecting the ris% .

Age of a vehicle sailing date of aAge of a vehicle sailing date of a

vessel etc.vessel etc.

If based on belief it must beIf based on belief it must be

substantially true.substantially true.

'aim of ( Utmost )ood *aith+'aim of ( Utmost )ood *aith+

applies.applies.


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WarrantiesWarranties

n assurance/promise / underta$ingn assurance/promise / underta$ing

gi'en b the insured to be $ept duringgi'en b the insured to be $ept during

the polic period.the polic period.

In general insurance, breach ofIn general insurance, breach of

warrant ma$es the polic 'oidable.warrant ma$es the polic 'oidable.

In certain cases breach of warrantIn certain cases breach of warrant

in'ites penalt.in'ites penalt. 4arranties are attached to the policies.4arranties are attached to the policies.


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AssignmentAssignment

%ight of the polic holder to transfer the%ight of the polic holder to transfer therights 7 liabilities of the polic to some onerights 7 liabilities of the polic to some oneelse.else.

!he polic holder who transfers is $nown as!he polic holder who transfers is $nown asassignor.assignor.

!he person in whose fa'our the transfer is!he person in whose fa'our the transfer ismade is $nown as assignee.made is $nown as assignee.

In general Insurance assignment is notIn general Insurance assignment is notallowed except in marine cargo policies.allowed except in marine cargo policies. 8ife Insurance policies are generall freel8ife Insurance policies are generall freel

assignable.assignable.


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)ndorsements)ndorsements

n change re9uired to be made ton change re9uired to be made to

the polic conditions /warrantiesthe polic conditions /warranties

including premium is documented.including premium is documented.

It is issued and signed b the Insurer.It is issued and signed b the Insurer.

Polic is to be interpreted along withPolic is to be interpreted along with

the endorsement.the endorsement.

It is written separatel and attachedIt is written separatel and attached

to the polic.to the polic.


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"remium reser#e"remium reser#e

*ortion of premium set aside to meet*ortion of premium set aside to meet

liabilities&liabilities&

It is known as - +ife .und in +ife Insurance&It is known as - +ife .und in +ife Insurance&

0nown as - *olicy$olders .und in 1eneral0nown as - *olicy$olders .und in 1eneralInsurance&Insurance&


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laimlaim

Polic holders re9uest for compensation .Polic holders re9uest for compensation . It must be in terms of the polic.It must be in terms of the polic. Person ma$ing the claim is $nown asPerson ma$ing the claim is $nown as

claimant.claimant. In non life policies claimant is the policIn non life policies claimant is the polic

holder.( except death cases in P. andholder.( except death cases in P. and;ediclaim policies;ediclaim policies

In 8ife Policies nominee in case of deathIn 8ife Policies nominee in case of deathduring tenure of the polic.during tenure of the polic. Incase of endowment policies the sur'i'ingIncase of endowment policies the sur'i'ing

polic holder.polic holder.


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Premiumincomeincome

?xpenses %atio = ?xpenses> premium?xpenses %atio = ?xpenses> premium

incomeincome

ombined ratio = 8oss ratio 6 ?xpenses ratioombined ratio = 8oss ratio 6 ?xpenses ratio!he ratios indicate the e#cienc of an!he ratios indicate the e#cienc of an

insurance co.insurance co.


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Incurred but not %eportedIncurred but not %eported

(I-5%(I-5%

laims occurred in a particular ear.laims occurred in a particular ear.

5ot reported during the ear.5ot reported during the ear.

mount is determined b appointedmount is determined b appointedctuar.ctuar.


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*ther (atios*ther (atios

'ortality!!!Average age of death ,atio of'ortality!!!Average age of death ,atio ofdeath at various age group separately fordeath at various age group separately formen and women.men and women.

'orbidity - other than death'orbidity - other than death

#repared by /ational *amily 0ealth#repared by /ational *amily 0ealthSurvey 'ortality & 'orbidity InvestigatingSurvey 'ortality & 'orbidity Investigating"entre -affiliate of institute of actuaries"entre -affiliate of institute of actuariesthe 1ife Insurance "ouncil and I,2A.the 1ife Insurance "ouncil and I,2A.

#repared on the basis of eperience in#repared on the basis of eperience inIndiaIndia


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Important InstitutionsImportant Institutions

1loyd3s!!!oldest and most coveted1loyd3s!!!oldest and most covetedinstitution provide valuable servicesinstitution provide valuable servicesto the insuring world. Its membersto the insuring world. Its members

write business. It itself does notwrite business. It itself does notwrite business.write business.

#rotection &Indemnity "lubs-#&I#rotection &Indemnity "lubs-#&I

"lubs!!!Ship owners club to meet"lubs!!!Ship owners club to meettheir certain liabilities4mostly thetheir certain liabilities4mostly theclaims not entertained by insurers.claims not entertained by insurers.


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+pecific to ,ife Insurance+pecific to ,ife Insurance


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Single #remium!!!The entire premium isSingle #remium!!!The entire premium ispaid at one go.paid at one go.

2ays of grace!!!no. of days allowed to pay2ays of grace!!!no. of days allowed to paypremium beyond the stipulated date.premium beyond the stipulated date.

1apse !!!policy benefits lost partially or1apse !!!policy benefits lost partially orwholly for non payment of premium.wholly for non payment of premium.

#aid up policy!!!!lapsed policy restored#aid up policy!!!!lapsed policy restoredwith reduced sum insured and benefit.with reduced sum insured and benefit.

,evival!!!lapsed5paid up policies are,evival!!!lapsed5paid up policies arerestored to original status after payingrestored to original status after payingdues as per co. rulesdues as per co. rules


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2eferred date!!!a date after the2eferred date!!!a date after thecommencement when ris% cover starts. 6rcommencement when ris% cover starts. 6rthe date when annuity begins.the date when annuity begins.

2eferment period!!! period between2eferment period!!! period betweencommencement and deferred date.commencement and deferred date.

/omination!!!identifying a person in/omination!!!identifying a person inabsence of the policy holder to receive theabsence of the policy holder to receive the

benefits of the policy.benefits of the policy.Surrender value!!!the value at terminationSurrender value!!!the value at terminationbefore the date of maturity.before the date of maturity.


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Life Insurance "oliciesLife Insurance "olicies

erm ((((*ayable on deat$ only2to t$e nominee2erm ((((*ayable on deat$ only2to t$e nominee2

t$e sum insured2no survival benefit&t$e sum insured2no survival benefit&

3ndowment (((payable on deat$ or surviving t$e3ndowment (((payable on deat$ or surviving t$e

policy period&policy period& 4it$ profit((((policy allowing bonus at a rate4it$ profit((((policy allowing bonus at a rate

determined every year and payable at maturity/deat$determined every year and payable at maturity/deat$

over and above t$e sum insured&over and above t$e sum insured&

4it$out profit(((only sum insured at maturity /deat$&4it$out profit(((only sum insured at maturity /deat$&


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ommon !erminologiesommon !erminologies

%is$3333 Probabilit of monetar loss%is$3333 Probabilit of monetar loss

Peril3333 Damage causing phenomenaPeril3333 Damage causing phenomena

Ha2ard3333onditions inAuencingHa2ard3333onditions inAuencing

degree of chance of lossdegree of chance of loss


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Terms specific to on-,ifeTerms specific to on-,ife

5o renewal333new contract at the end of5o renewal333new contract at the end ofthe polic period.the polic period.

erti0cate of Insurance333n e'idence oferti0cate of Insurance333n e'idence ofthe polic ha'e been issued. !o be carriedthe polic ha'e been issued. !o be carried

in the 'ehicle under ;..ct.in the 'ehicle under ;..ct. -onus333either a discount in premium or-onus333either a discount in premium or

increase in sum insured without additionalincrease in sum insured without additionalpremium. !his is oBered to customerpremium. !his is oBered to customer

ha'ing no claim experience duringha'ing no claim experience duringpre'ious earpre'ious ear ;alus333loading the premium on policies for;alus333loading the premium on policies for

claims made in the pre'ious ear/sclaims made in the pre'ious ear/s


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Terms specific to on-,ifeTerms specific to on-,ife

2eductible5Ecess!!!the amount which is2eductible5Ecess!!!the amount which is

to be borne by the customer in the eventto be borne by the customer in the event

of loss.of loss.

*ranchise!!!! a specified amount of loss*ranchise!!!! a specified amount of lossbeyond which the insurer will entertain thebeyond which the insurer will entertain the

claim and pay the loss to the etentclaim and pay the loss to the etent

allowed by the terms. If the loss remainsallowed by the terms. If the loss remains

within the amount of franchise insurerwithin the amount of franchise insurerdoes not come into picture.does not come into picture.


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on-,ife policieson-,ife policies

7alued #olicy5Agreed value7alued #olicy5Agreed value

#olicy8The insurer agrees to pay in#olicy8The insurer agrees to pay in

the event of loss a certain amountthe event of loss a certain amount

*ull value #olicy 9 the insured states*ull value #olicy 9 the insured states

that the sum insured is the truethat the sum insured is the true

value of the subject matter ofvalue of the subject matter of

insurance.insurance.


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*irst loss #olicies!!!! Irrespective of the*irst loss #olicies!!!! Irrespective of the

total value at ris% a certain value muchtotal value at ris% a certain value much

lower to the total is fied as sum insured.lower to the total is fied as sum insured.

The liability of insurer is limited to thatThe liability of insurer is limited to thatvalue. #opular in :;urglary3 #oliciesvalue. #opular in :;urglary3 #olicies

*loater #olicies!!!"overs ris% on stoc%*loater #olicies!!!"overs ris% on stoc%

located at various locations under one sumlocated at various locations under one sum

insured. Total value of stoc% at allinsured. Total value of stoc% at alllocations have to be declared.locations have to be declared.


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2eclaration policies4


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Marine insuranceMarine insurance

TermsTerms )peci0c Polic333 Issued for a single)peci0c Polic333 Issued for a single

consignment.consignment.

"pen PolicContract for a speci0c"pen PolicContract for a speci0cperiod for a total sum insured spreadperiod for a total sum insured spread

o'er a no. of consignments.o'er a no. of consignments.

Increased alue PolicCPro'ide toIncreased alue PolicCPro'ide to

insure consignments o'er and abo'einsure consignments o'er and abo'eits true 'alue. !his ta$es care ofits true 'alue. !his ta$es care of

'arious expenses'arious expenses


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Marine insuranceMarine insurance

TermsTerms Dut Insurance Polic333o'ers customDut Insurance Polic333o'ers custom

dut paid in case of imported cargo.dut paid in case of imported cargo.

!ime PolicCIssued for hull co'er for a!ime PolicCIssued for hull co'er for aperiod.period.

oage Polic333Issued to co'er hull for aoage Polic333Issued to co'er hull for aspeci0c 'oage .speci0c 'oage .

Institute argo clause333Drafted b theInstitute argo clause333Drafted b theInstitute of 8ondon Underwriters. ;arineInstitute of 8ondon Underwriters. ;arinepolicies are issued appling thesepolicies are issued appling theseclauses.clauses.


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!pes of claims3335on38ife!pes of claims3335on38ife

!otal 8oss333!otal 8oss333

(i ctual !otal 8oss, (!8(i ctual !otal 8oss, (!8

(iionstructi'e !otal 8oss (!8(iionstructi'e !otal 8oss (!8

Partial !otal 8oss333 an loss otherPartial !otal 8oss333 an loss other

than total loss is partial loss.than total loss is partial loss.


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ctual !otal 8oss&ctual !otal 8oss&

Subject matter insured isSubject matter insured is

destroyed.destroyed.

Damaged as to cease to be aDamaged as to cease to be a

thing of kind insured.thing of kind insured.

Assured is irretrievably deprivedAssured is irretrievably deprived


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onstructi'e !otal 8oss:onstructi'e !otal 8oss:

ctual 8oss appears to be una'oidablectual 8oss appears to be una'oidable

Pre'ention of actual loss causesPre'ention of actual loss causes

expenditure exceeding agreed 'alue.expenditure exceeding agreed 'alue.

ost of repairing7 forwarding toost of repairing7 forwarding to

destination exceed agreed 'alue .destination exceed agreed 'alue .


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1eneral 'erage 8oss1eneral 'erage 8oss 8oss caused b a 1. .act directl or8oss caused b a 1. .act directl or

in conse9uence of.in conse9uence of. It includes 1.. expenditure.It includes 1.. expenditure.

It includes 1..sacri0ceIt includes 1..sacri0ce


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1eneral 'erage3338oss , caused1eneral 'erage3338oss , caused

'oluntaril b extra ordinar sacri0ce'oluntaril b extra ordinar sacri0ce

to sa'e a common ad'enture, isto sa'e a common ad'enture, is

shared b all sta$e holders in theshared b all sta$e holders in the'oage.'oage.

)al'ageC%eco'ered portion of a)al'ageC%eco'ered portion of a

damaged propert. fter the claim isdamaged propert. fter the claim issettled the insurer can dispose of thesettled the insurer can dispose of the

sal'age for 'alue.sal'age for 'alue.


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Proimate cause

#or reco/ery0 the loss must becaused proimately by an

insured peril.1oes not mean the last cause.

The most effecti/e or

dominant or real cause.


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Few otherFew other

TerminologiesTerminologies )olatium


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Few otherFew other

TerminologiesTerminologies rbitration :rbitration :

4hen a claim is admissible, but4hen a claim is admissible, but

claim amount is disputed.claim amount is disputed.!his process is followed to a'oid!his process is followed to a'oid

long court caseslong court cases

It is a less expensi'e wa.It is a less expensi'e wa. -oth the parties appoint arbitrator/s-oth the parties appoint arbitrator/s


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