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
