Loss control is an organized and usually continuous effort to help decrease the possibility of unforeseen losses and the impact of those that do occur. Loss financing is a "method used to obtain funds to pay for or offset losses that occur" insurance is the second form of loss financing and takes place when funds are paid towards a specific loss and in return the buyers risk is reduced.
Loss control is an organized and usually continuous effort to help decrease the possibility of unforeseen losses and the impact of those that do occur. Loss financing is a "method used to obtain funds to pay for or offset losses that occur" insurance is the second form of loss financing and takes place when funds are paid towards a specific loss and in return the buyers risk is reduced.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online from Scribd
Loss control is an organized and usually continuous effort to help decrease the possibility of unforeseen losses and the impact of those that do occur. Loss financing is a "method used to obtain funds to pay for or offset losses that occur" insurance is the second form of loss financing and takes place when funds are paid towards a specific loss and in return the buyers risk is reduced.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online from Scribd
Ans- Loss Control Loss Control is an organized and usually continuous effort to help decrease the possibility of unforeseen losses and the impact of those that do occur. Loss control can be applied to all kinds of losses such as those caused by fires, electrical surges, burglary, car crashes, hurricanes, or just about anything that causes unexpected harm, injuries or damage. most effective method to control insurance costs is to prevent losses from occurring Pre loss -- and to also contain the extent of losses after they occurpost loss Any accident, fire or explosion in a home or place of business may mean family disruption or the loss of community prestige, employee morale, and customer goodwill. The object is to assist in minimizing possible accident situations and fire and explosion hazards. Improving operating efficiency and safety can also add to increased production and reduced insurance costs. Loss Financing Loss financing is one of these techniques and is a method used to obtain funds to pay for or offset losses that occur (Risk Management Methods). Loss financing covers four different areas that help to achieve its end goal; retention and self-insurance, insurance, hedging, and other contractual risk transfers. Retention is when the business or an individual takes responsibility to pay back losses that have occurred. Chase bank holds many accounts and if a risk they took fails, this bank could pay back part or all of the finances individuals lost by investing with this company. Insurance is the second form of loss financing and takes place when funds are paid towards a specific loss and in return the buyers risk is reduced. Risk reduction This strategy aims to decrease the number of losses by reducing the occurrence of loss, which can be done in two ways namely loss prevention and loss control. Loss prevention is a desirable way of dealing with risks. It eliminates the possibility of loss and hence risk is also removed. The examples of this are safety programs like medical care, security guards, and burglar alarms. Q.No.2 Explain the elements of life insurance organization? Ans :- Elements of a Life Insurance Organization An organization is a legal entity which is created to do some activity or to achieve some purpose. It is created under some law, which gives it a status and identity. Because of the identity, the organization is considered to be a person in law. Therefore, it can enter into contracts, be sued in courts, accumulate property and wealth, and do business, in the same manner as any individual can do. Important activities The important activities in a life insurance company are: 1 Procuring or proposals from prospective buyers of life insurance.
2 Scrutinizing and making decisions on the proposals for insurance. This is called underwriting.
3 Issuing the policy document, incorporating the terms and conditions of the insurance cover.
4 Keeping track of the performance of the insurance contract by either party, like payment of premium or payment of benefits.
5 Attending to the various requirements that may arise during the term of the contract like nominations, assignment, alteration of terms, surrenders and payment of claims.
6 Other supporting activities like advertising, investment of funds, maintenance of accounts, management of personnel, processing of data, compliance with regulations and laws.
Internal organization
Within an insurance office, the following departments are likely to exist. These may be located in the branch office (as in the LIC now) or in the Divisional / Head offices (as in the LIC earlier and new companies now). These departments are to be identified by the activities being carried out, although they may be called by different names.
1 Business development or agency or marketing concerned with the development of agency force, market development and business growth.
2 New business, which would receive, scrutinize and take underwriting decisions on the new proposals for insurance and also issue the policy.
3 Policy-holders servicing which would be concerned with administration of the policy, monitoring premium payments, lapses and revivals, attending to alterations, nominations, assignments, surrenders, loans and claims.
4 Accounts to handle the financial flows. The following departments are likely to be centralized in the Head Offices, as they require specialized skills and also because they impact the whole organization.
5 Actuarial, studying the experience, doing valuations, declaring bonuses, monitoring the adequacy of premiums, setting underwriting standards, studying mortality rates, etc.
6 Investments of funds, studying the opportunities for maximizing returns.
7 Advertisement, publicity and public relations.
The distribution system
Life insurance is not compulsory under law. General insurance is frequently purchased due to compulsions under the law (Motor Vehicles Act) or from the financiers demanding insurance as collateral security. In the case of life insurance, the compulsion is negligible. There is often a tendency of deferring the decision. Death as a practical possibility is either ignored or not considered imminent. The requirements of today take priority over the requirements of tomorrow. Even if not absolutely essential, the requirements of today seem to be more compelling. Life insurance has to be secured when in the best of health. Otherwise, the insurer will refuse to grant the insurance cover.
Functions of the agent
The major function of the agent is to solicit and acquire life insurance business for the insurer, which has appointed him as an agent. While proposing a person for insurance, the agent has to assess his needs and his paying capacity, make all reasonable enquiries about the health and habits of the life to be insured and get proof of his age to be admitted at the commencement of the policy. If medical examination is required, the agent has to arrange for the same. After the proposal becomes a policy, the agent has to ensure continuance of the policy by the means of timely payment of renewal premiums, get nomination or assignment effected and help in prompt settlement of claims. Agents of the LIC are not authorized to collect premiums other than the first premium along with the proposal. If a policyholder pays premium to an agent, the LIC does not accept any liability for the same. The premium is treated as paid only when it is paid into the office. However, in practice agents do collect premiums from policyholders to ensure promptness in payment.
Q.NO3 :- insurance is the important industry .elaborate the different types of mediclaims and liability policies.
Ans:- Types of Mediclaim /Health Policy Broadly speaking, health insurance policies in India are of the following types: 1 Individual Mediclaim Policy 2 Group Mediclaim Policy 3 Deferred Mediclaim Policy 4 Overseas Mediclaim Policy 5 Innovative Mediclaim Policy
Individual mediclaim policy Individual and group mediclaim policies are similar in scope and nature. These policies provide for reimbursement of hospitalization/domiciliary hospitalization expenses for illness/disease suffered or accidental injury sustained during the policy period. The policy covers for expenses incurred under the following heads: (a) Room, boarding expenses in the hospital/nursing home (b) Nursing expenses (c) Surgeon, anaesthetist, medical practitioner, consultant, specialist fees (d) Anaesthesia, blood, oxygen, operation theatre charges, medicines, diagnostic materials, etc.
Group mediclaim policy The group mediclaim policy is available to any group/association/institution/ corporate body, provided it has a central administration point and subject to minimum number of 100 persons to be covered. The group policy is issued in the name of group/association/institution/ corporate body (called insured) with a schedule of names of the members including his/her eligible family members (called insured person) forming part of the policy.
Deferred mediclaim policy Also widely known as Bhavishya Arogya Policy, this policy can be taken at any age from 25 years onwards up to 55 years. The insured at the time of taking the policy has to select a retirement age between fifty-five and sixty years after which the coverage for hospitalization expenses will commence. The coverage under the policy is similar to what is available under a standard mediclaim policy with the following differences: 1 Pre- and post-hospitalization expenses are not covered under the policy. 2 The following exclusions of the mediclaim policy are not applicable. 3 Thirty days waiting period 4 First year exclusions 5 Pre-existing diseases exclusion 6 Circumcision, pregnancy, etc.
Overseas mediclaim policy This policy provides for medical expenses in respect of illness suffered or accident sustained by Indian residents during their overseas visits for official or personal purpose. First started in 1984, this insurance policy has been since modified to provide for additional benefits such as in-flight personal accident coverage, compensation for the loss of passport, personal liability, etc.
Videsh Yatra Mitra policy The widest coverage available under a variation of the overseas mediclaim policy is known as Videsh Yatra Mitra policy. There are five sections under the policy and the insured has the option to choose minimum three and maximum all six sections by paying appropriate premium. The six sections are as under:
Section A (personal accident): This section covers death or bodily injury resulting in total or partial permanent disablement to the insured.
Section B (medical expenses and repatriation): This section covers medical related expenses during and in course of the overseas stay.
Section C (loss of checked baggage): Total loss of a baggage during the course of travel is covered in this section.
Section D (delay of checked baggage): This section covers emergency purchase of replacement items if there is a delay in delivery of checked baggage of more than 12 hours from the scheduled arrival time at the destination.
Section E (loss of passport): This section covers actual expenses necessarily and reasonably incurred by the insured person in connection with obtaining a duplicate or fresh passport.
Section F (personal liability): This section covers legal liability that may attach to the insured person for any bodily injury or property damage to a third party accidentally caused by any act of the insured.
Liability Insurance Liability insurance is broadly classified into two categories: (i) Public liability insurance and (ii) Product liability insurance. Public liability insurance is broadly classified into two categories: Compulsory public liability insurance and Voluntary public liability insurance policies.
Types of Liability Policies
Compulsory public liability policy The Public Liability Insurance Act, 1991 imposes no fault liability, i.e., irrespective of any wrongful act, neglect or default on the part of the owner of any hazardous substance, he has to pay relief in the event of death or injury to any person other than a workman or damage to property of any person arising out of an accident involving the hazardous substance.
Voluntary public liability policy The owner of any industrial risk or non-industrial risk may take a voluntary public liability policy to cover his legal liability in respect of accidental physical death/ injury/property damage of a third party arising out of his property. Industrial risks are manufacturing premises including godowns and warehouses. Non- industrial risks are hotels, restaurants, cinema halls, auditoriums, residential premises, office premises, schools, amusement parks and film studios.
Products liability policy Products sold to their users/consumers, if defective, may cause death, bodily injury, illness or property damage. The manufacturers/marketers of such products are liable to pay relief to the accidental victims of their products under law. The product liability insurance policy provides insurance cover to manufacturers/ marketers. The structure of the policy is similar to voluntary public liability policy with differences relating to only the coverage and some exclusion. The indemnity is available to claims arising out of accidents during the period of accident and first made in writing against the insured during the policy period arising out of any defects in the products specified in the policy schedule.
Professional indemnity policy Professional indemnities are designed to provide insurance protection to professional people such as doctors, solicitors, chartered accountants, architects, etc., against their legal liability to pay damages arising out of negligence in the performance of their professional duties.
Directors and officers liability policy Directors and officers of an organization hold positions of trust and responsibility. They may become liable to pay damages to shareholders, employees, creditors, etc., of the company for wrongful acts committed by them in the management and supervision of the affairs of the company. The policy is designed to provide protection to directors and officers against their personal civil liability.
Employers liability policy Also known as workmens compensation insurance, the policy provides protection to the employers against their legal liability for payment of compensation in case of death or disablement of the employees arising out of and in the course of employment.
Q.No 4:- Give short notes on:- Ans- Pricing objectives
I. Rate adequacy To avoid financial problems and insolvency, insurance company rates must be adequate in the light of benefits promised under the companys insurance products. Rate adequacy means that for a given block of policies, total payments collected now and in the future by the insurer plus the investment earnings attributable to any net retained funds are sufficient to fund the current and future benefits promised plus cover-related expenses.
II. Rate equity Equity means charging premiums commensurate with the expected losses and other costs that insured bring to the insurance pool. The pursuit of equity is one of the goals of underwriting (classification and selection of insured).
III. Rates not excessive Rates should not be excessive in relation to the benefits provided. This objective is achieved by establishing a ceiling on the rates. Competition discourages excessive pricing.
Pricing elements The pricing elements underlying the pricing of life and health insurance contracts are:
expected mortality or morbidity experience expected investment return expenses
1. The probability of the insured event occurring It is shown by mortality tables in life insurance and morbidity tables in health insurance. The part of risk premium can be calculated by multiplying the sum assured with relevant information in these tables.
2. The time value of money The time value of money through rate of interest is the second factor taken into account for the calculation of premium. Net premium can be calculated by deducting interest component from risk premium.
3. Loading to cover expenses, taxes, profits and contingencies Tabular premium can be calculated by adding all these office expenses to net premium.
4. The benefits promised The fourth factor is the benefits promised under the contract. A loading in this respect is also included to arrive at the actual premium payable. Office premium is the sum of tabular premium and the promised benefits.
Q.No:5- Explain the creation and application of insurable interest. give the differences between wagering and insurance. Ans:- Creation of insurable interest There are a number of ways in which insurable interest will arise or be limited:
(a) By common law: Where the essential elements of insurable interest are automatically present, the same can be described as having arisen at common law. The common law duty of care which one owes to the other may give rise to a liability, which again is insurable.
(b) By contract: In some contracts a person will agree to be liable for something which he or she would not ordinarily be liable for.
(c) By statute: Sometimes an Act of the Parliament will create an insurable interest either by granting some benefit or imposing a duty. While the statute may create insurable interest where none would otherwise exist, there can be statutes which restrict liability and thereby also restrict insurable interest.
Application of insurable interest There are three main categories of application of insurable interest as follows: 1 life 2 property 3 liability Every person has an unlimited insurable interest in his or her own life. However, the obvious restriction in the application of this is the means with which to pay the premium. If a person is married then there is an automatic unlimited insurable interest in the life of the persons husband or wife. However, no other family relationship will give rise to insurable interest by itself. If family members are involved in business together or in the case of some other financial relationship, then in these circumstances, it is not the family ties, which create insurable interest, but it is the extent of the financial involvement. There is a basic rule that insurable interest will exist to the extent of the financial interest in another person or other persons. Thus, partners are capable of insuring each others lives as they incur loss in the event of the demise of any of them. A creditor may incur financial loss in case a debtor meets with death prior to the repayment of a loan.
Difference between Wagering and Insurance
Contract of Insurance Wagering Agreement 1. A contract of insurance is a contract to make good the loss of property (or life) of another person against some consideration called premium.
1. A wagering agreement is an agreement to pay money or money's worth on the happening of an uncertain event. 2. In a contract of insurance the insured must have insurable interest. Without insurable interest it will be a wagering agreement. 2. No insurable interest is necessary in case of a wagering agreement 3. In a contract of insurance both the parties are interested in the protection of the subject matter, i.e., there is mutuality of interest. 3. In a wagering agreement, there is conflict of interest and in reality there is no interest at all to protect. 4. Except life insurance, a contract of insurance is a contract of indemnity, i.e., a contract to make good the loss. 4. In case of a wagering agreement there is no question of indemnity. On the happening of the event fixed amount becomes payable. 5. Contracts of insurance are based on scientific and actuarial calculation of risks. 5. Wagering agreements are not based on such calculations and are in the nature of gambling. Q.No 6 identify the role of insurance in managing risk financing. Explain the important of insurance transaction .discuss in different perspectives of insured and insurer.
Ans:- Role of insurance in managing risk financing Business organizations and individuals take insurance policies. These insurance policies help them to cover the losses in case of any emergency. Here, the idea is to transfer the risk involved with the business to the insurance provider by taking an insurance policy. This insurance policy will honour claims in case certain emergencies disrupt the working of the organization. This type of financing strategy offers the benefit of knowing that even if the project faces financial trouble due to unseen events, the losses will be settled without having to use other company assets. However, these events will have to be mentioned in the insurance papers that the organization signs with the insurer. If an insurance policy does not cover theft, the organization cannot claim the amount from his insurer. The organization should maintain an adequate insurance to cover all insurance risks relating to the calamities that can happen. Insurance should be maintained in at least the following major areas of coverage such as:
Real and personal property Machinery Crime coverage Extra expense and valuable papers Workers compensation Comprehensive general liability Automobile liability and physical damage
Insurance Transaction Insurance is a contract. One party, namely, the insurer, contracts with another, the policyholder, to perform a particular service. The nature of insurance transaction can be represented by the following triangle: The risk
The insured The insurer
At the apex of this triangle there is the risk insured against. The insured policyholderis the person or company entering into the insurance contract and the insurer is the insurance company which has contracted with the insured to provide cover for the risk insured against.
From the perspective of the insurer
(a) It will be told about the risk by the proposer;
(b) In many cases the insurer will not rely on this source of information alone but will make its own inquiries. This may imply using skilled risk surveyors to look at pro-posals and make physical inspection or doctors to carry out medical examination for a life or permanent health insurance proposal;
(c) The insurer will decide on the level of cover which it is prepared to offer to the proposer;
(d) Finally, the insurer will have to determine the price to be charged for the cover it is willing to offer. This price will have to reflect a number of relevant factors.
A Beginner's Guide to Disability Insurance Claims in Canada: How to Apply for and Win Payment of Disability Insurance Benefits, Even After a Denial or Unsuccessful Appeal