SUBJECT: BANKING & INSURANCE

MODULE: 3 & 4

Prepared by: Dr. Milan Kumar Sahoo

INSURANCE
Insurances is defined “as a social device providing financial compensation for the effects of
misfortune, the payment being made from the accumulated contributions of all parties
participating in the scheme”.

In simple terms “Insurance is a co-operative device to spread the loss caused by a particular risk
over a number of persons, who are exposed to it and who agree to insure themselves against
the risk”

Thus, the insurance is,

(a) A cooperative device to spread the risk;

(b) The system to spread the risk over a number of persons who are insured against the risk;

(c) The principle to share the loss of the each member of the society on the basis of probability
of loss to their risk; and

(d) The method to provide security against losses to the insured.

Insurance may be defined as form of contract between two parties (namely insurer and insured
or assured) whereby one party (insurer) undertakes in exchange for a fixed amount of money
(premium) to pay the other party (Insured), a fixed amount of money on the happening of
certain event (death or attaining a certain age in case of life) or to pay the amount of actual loss
when it takes place through the risk insured (in case of property).

Principles of Insurance
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The basic principles which govern the insurance are -

(1) Utmost good faith

(2) Insurable interest

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(3) Indemnity

(4) Contribution

(5) Subrogation

(6) Causa proxima

(7) Mitigation of loss

1. Principle of utmost good faith : A contract of insurance is a contract of ‘Uberrimae Fidei’

i.e., of utmost good faith. Both insurer and insured should display the utmost good faith
towards each other in relation to the contract. In other words, each party must reveal all
material information to the other party whether such information is asked or not. There should
not be any fraud, non-disclosure or misrepresentation of material facts.

2. Principle of Insurable Interest: This principle requires that the insured must have a
insurable interest in the subject matter of insurance. Insurance interest means some pecuniary
interest in the subject matter of contract of insurance. Insurance interest is that interest, when
the policy holders get benefited by the existence of the subject matter and loss if there is death
or damage to the subject matter.

3. Principle of Indemnity : This principle is applicable in case of fire and marine insurance
only. It is not applicable in case of life, personal accident and sickness insurance. A contract of
indemnity means that the insured in case of loss against which the policy has been insured,
shall be paid the actual cost of loss not exceeding the amount of the insurance policy. The
purpose of contract of insurance is to place the insured in the same financial position, as he was
before the loss.

4. Principle of Contribution: The principle of contribution is a corollary to the doctrine of

indemnity. It applies to any insurance which is a contract of indemnity. So it does not apply to
life insurance. A particular property may be insured with two or more insurers against the same
risks. In such cases, the insurers must share the burden of payment in proportion to the
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amount insured by each. If one of the insurer pays the whole loss, he is entitled to contribution
from other insurers.

5. Principle of Subrogation : The doctrine of subrogation is a collorary to the principle of

indemnity and applies only to fire and marine insurance. According to doctrine of subrogation,
after the insured is compensated for the loss caused by the damage to the property insured by

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him, the right of ownership to such property passes to the insurer after settling the claims of
the insured in respect of the covered loss.

6. Principle of Causa Proxima : Causa proxima, means proximate cause or cause which, in a
natural and unbroken series of events, is responsible for a loss or damage. The insurer is liable
for loss only when such a loss is proximately caused by the peril insured against. The cause
should be the proximate cause and can not the remote cause. If the risk insured is the remote
cause of the loss, then the insurer is not bound to pay compensation. The nearest cause should
be considered while determining the liability of the insured. The insurer is liable to pay if the
proximate cause is insured.

7. Principle of Mitigation of Loss: An insured must take all reasonable care to reduce the loss.
We must act as if the property was not insured.

Type of Insurance

Insurance cover various types of risks and include various insurance policies which provide
protection against various losses.

There are two different views regarding classification if insurance:-

I. From the business point of view; and

II From the risk points of view

I. Business point of view

The insurance can be classified into three categories from business point of view

1. Life insurance;

2. General Insurance; and

3. Social Insurance.
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1. Life Insurance:

Life insurance is a contract under which one person, in consideration of a premium paid either
in lump sum or by monthly, quarterly, half yearly or yearly installments, undertakes to pay to
the person (for whose benefits the insurance is made), a certain sum of money either on the
death of the insured person or on the expiry of a specified period of time.

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Life insurance offers various polices according to the requirement of the persons -

- Term Assurance

- Whole Life

- Endowment Assurance

- Family Income Policy

- Life Annuity Joint Life Assurance

- Pension Plans

- Unit Linked Plans

- Policy for maintenance of handicapped dependent

- Endowment Policies with Health Insurance benefits

2. General Insurance: The general insurance includes property insurance, liability insurance
and other form of insurance. Property insurance includes fire and marine insurance. Property of
the individual and business involves various risks like fire, theft etc. This need insurance Liability
insurance includes motor, theft, fidelity and machine insurance

Type of General Insurance policies available are -

- Health Insurance

- Medi- Claim Policy

- Personal Accident Policy

- Group Insurance Policy

- Automobile Insurance

- Worker’s Compensation Insurance

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- Liability Insurance

- Aviation Insurance

- Fire Insurance Policy

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- Travel Insurance Policy

3. Social Insurance: Social insurance provide protection to the weaker sections of the society
who are unable to pay the premium. It includes pension plans, disability benefits,
unemployment benefits, sickness insurance and industrial insurance.

II Risk Points of View

The insurance can be classified into three categories from Risk point of view

1. Property Insurance

2. Liability Insurance

3. Other forms of Insurance

1. Property Insurance: Property of the individual and business is exposed to risk of fire, theft
marine peril etc. This needs insurance. This is insured with the help of:-

(i) Fire Insurance

(ii) Marine Insurance

(iii) Miscellaneous Insurance

(i) Fire Insurance: Fire insurance is a contract under which the insurer agrees to indemnify the
insured, in return for payment of the premium in lump sum or by instalments, losses suffered
by the him due to destruction of or damage to the insured property, caused by fire during an
agreed period of time.

(ii) Marine Insurance: Marine insurance is an arrangement by which the insurer undertakes to
compensate the owner of the ship or cargo for complete or partial loss at sea. So it provides
protection against loss because of marine perils. The marine perils are collisions with rock, ship
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attack by enemies, fire etc. Marine insurance insures ship, cargo and freight.

(iii) Miscellaneous Insurance: It includes various forms of insurance including property

insurance, liability insurance, personal injuries are also insured. The property, goods, machine,

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furniture, automobile, valuable goods etc. can be insured against the damage or destruction
due to accident or disappearance due to theft.

2. Liability Insurance: The insurer is liable top pay the damage of the property or to
compensate the loss of personal injury or death. It includes fidelity insurance, automobile
insurance and machine insurance.

IRDA

The Insurance Regulatory and Development Authority of India (IRDAI) is an

autonomous, statutory body tasked with regulating and promoting the insurance and re-
insurance industries in India. It was constituted by the Insurance Regulatory and Development
Authority Act, 1999, an Act of Parliament passed by the Government of India.

The IRDA has a mandate to fulfill the following:

*To protect the interests of policyholders and ensure fair treatment to them.

*To facilitate speedy and orderly growth of the insurance industry sector in Indian economy, for

the benefit of common man, and to give long- term funds which will accelerate growth of our

economy.

*To ensure that the customers of insurance receive clear and correct information about the

products as well as the services

Role and Functions of IRDA

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Functions of Insurance Regulatory and Development Authority

 It issues the certificate of registration or renewal to Insurance companies, insurance

agents or surveyors, Insurance brokers. To function in the insurance sector, a company
has to register with the IRDA.

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  IRDA Protects the interests of the policyholders in matters like, nomination by
policyholders, assigning of the policy, insurable interest, surrender values of the policy,
settlement of insurance claim, and various other terms involved in the conditions of
contracts of insurance.
 It specifies the requisite qualification, practical training, and code of conduct for agents,
insurance brokers, and surveyors.
 IRDA is involved in promoting efficiency in insurance business conduction.
 It promotes and regulates professional organizations that connect with the insurance
and reinsurance business.
 IRDA also specifies the code of conduct for surveyors and loss assessors.
 It regulates the fees and other similar charges levied by the insurance companies,
brokers, agents, surveyors, etc.
 IRDA controls the rates, advantages, and terms and conditions which are offered by the
insurers.
 It specifies the form and manner in which books of accounts are to be maintained by the
insurers and other insurance intermediateries.
 It regulates the investment of funds made by the insurance companies and firms.
 IRDA settles disputes between insurers and intermediateries, whenever they arise.
 It also regulates the maintenance of margin of solvency.
 It specifies the percentage of premium income of the insurer that can go to finance
schemes for promotion and regulation of professional organisations.
 It also specifies the percentage of life insurance business and general insurance business
that can be undertaken by the insurer in the social and rural sector.
 It supervises the working of the Tariff Advisory Committee also.
 IRDA has the power to frame regulations regarding the Insurance market.
 IRDA is also involved in the field of Consumer education and assistance.

EXTENSION OF INSURANCE TO NICHE AREAS

Niche insurance is a form of specialized insurance that covers an uncommon form of business
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or enterprise, when that business still faces a substantial risk of financial loss. These types of
insurance are usually often very focused on types of business or industry they cover, and may
be more expensive than traditional liability or business insurance policies. The extension of
insurance to niche areas;

1. Pension plans:-

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A pension plan is the retirement amount, which an individual gets from their insurance
companies on a regular basis or in the form of a lump sum. There are various types of such
plans available in the country offered by various companies. However, increased choices may
confuse and person and make it difficult for individuals to choose one which works the best.
Through regular investments, it is possible to develop a sizable corpus, which on maturity gives
a regular monthly income for taking care of your post-employment years. The sum you gain is
can be termed as either the annuity or pension.

2. ULIP:- According to some people, regular life insurance plans are mostly associated
with low returns. One way to deal with this and get an increased income source in post
retirement years is through ULIP investments. Here besides investments in government
securities and bonds there is a portion of investment done in the stock market. This may
help in getting higher returns than regular plans.investors need to pay a fund
management charge and this impact your final returns significantly. Another point to
consider is equity allocations overall. Whenever any emergencies occur, these plans give
investor a chance to liquidate ULIP and get funds. Capital guarantee variations
introduced recently promise to give back the total amounts paid in premiums along with
the maturity benefits.

Features of ULIP:

1. Premium paid can be single, regular or variable.

2. As in all insurance policies, the risk charge(mortality rate) varies with age.

3. The maturity benefit is not typically a fixed amount and the maturity period can be advanced
or extended.

4. Investments can be made in gilt fund,balance funds, money market funds and growth funds.

5. The maturity benefit is the net asstet value of the units.

6. ULIP products are exempted from tax and they provide life insurance.

3. Bancassurance: Bancassurance is an arrangement between a bank and an insurance company

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allowing the insurance company to sell its products to the bank's client base. This partnership
arrangement can be profitable for both companies. Banks earn additional revenue by selling
insurance products and insurance companies expand their customer bases without increasing
their sales force or paying agent and broker commissions.

4. Third party administrator

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 TPA or Third Party Administrator (TPA) is a company/agency/organisation holding license from
Insurance Regulatory Development Authority (IRDA) to process claims - corporate and retail
policies in addition to providing cashless facilities as an outsourcing entity of an insurance
company. TPAs function as an intermediary between the insurance provider and the insured.
The stakeholders involved are as follows:
 Insurance companies
 Healthcare providers
 Policyholders

Need for Third Party Administrators:

According to industry observers, TPAs can bring in the following changes:

 Greater efficiency/quality (delivery of services)

 Improved standardization (procedures and due diligence)
 Increase knowledge base of healthcare services
 New management system
 Greater penetration of health insurance
 Minimize costs/expenditure
 Develop protocols to streamline investigation and avoid unnecessary delays
 Pave way for lower insurance premiums

5. Micro insurance:

Micro insurance is the protection of low-income people against specific perils in exchange for
regular premium payment proportionate to the likelihood and cost of the risks involved. This
definition is exactly the same as one might use for regular insurance except for the clearly
prescribed target market: low-income people. The target population typically consists of
persons ignored by mainstream commercial and social insurance schemes, as well as persons
who have not previously had access to appropriate insurance products.

Micro insurance delivery models

One of the greatest challenge for micro insurance is the actual delivery to clients. Methods and
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models for doing so vary depending on the organization, institution, and provider involved. In
general, there are four main methods for offering micro insurance the partner-agent model, the
provider-driven model, the full-service model, and the community-based model.
Partner agent model: A partnership is formed between the micro insurance(partner as MFI)
scheme and an agent (insurance companies), and in some cases a third-party healthcare
provider. The micro insurance scheme is responsible for the delivery and marketing of products

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to the clients, while the agent retains all responsibility for design and development. In this
model, micro insurance schemes benefit from limited risk, but are also disadvantaged in their
limited control. Micro Insurance Centre is an example of an organization using this model.

 Full service model: The micro insurance scheme is in charge of everything; both the design
and delivery of products to the clients, working with external healthcare providers to
provide the services. This model has the advantage of offering micro insurance schemes full
control, yet the disadvantage of higher risks.
 Provider-driven model: The healthcare provider is the micro insurance scheme, and similar
to the full-service model, is responsible for all operations, delivery, design, and service.
There is an advantage once more in the amount of control retained, yet disadvantage in the
limitations on products and services.
 Community-based model: The policyholders or clients are in charge, managing and owning
the operations, and working with external healthcare providers to offer services. This model
is advantageous for its ability to design and market products more easily and effectively, yet
is disadvantaged by its small size and scope of operations.

Insurance Inclusion

Insurance inclusion in India is greatly inadequate and highly urban centric. The rural population
is largely uninsured or underinsured. Besides financial insecurity after a person’s death,
insecurity because of droughts, floods and loss of crops is also common. The government’s
social security measures are less compared to developed countries, the significance of
insurance, hence, increase from the financial inclusion angle.

Insurance inclusion is determined by two important ratios- insurance density and insurance
penetration. Insurance density is a ratio of the premium to total population, while insurance
penetration is premium to GDP.

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RISK MANAGEMENT

Risk management is the identification, assessment, and prioritization of risks followed by

coordinated and economical application of resources to minimize, monitor, and control the
probability and/or impact of unfortunate events or to maximize the realization of opportunities.
Risk management’s objective is to assure uncertainty does not deflect the endeavor from the
business goals.

Objectives of risk management

1. Ensure the management of risk is consistent with, and supports the achievement of the
strategic and corporate objectives.

2. Provide a high quality service to customers.

3. Initiate action to prevent or reduce the adverse effects of risk.

4. Minimize the human costs of risks, where reasonably practicable.

5. Meet statutory and legal obligations.

6. Minimize the financial and negative consequences of losses and claims.

7. Minimize the risks associated with new developments and activities.

TYPES OF RISK

PURE RISK
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There are only two possibilities; something bad happening or nothing happening. It is unlikely
that any measurable benefit will arise from a pure risk. The house will enjoy a year with nothing
bad occurring or there will be damage caused by a covered cause of loss (fire, wind, etc.).
Predicting the outcomes of a pure risk is accomplished (sometimes) using the law of large
numbers, a priori data or empirical data. Pure risk, also known as absolute risk, is insurable.
Thus, pure risk can be classified into:
i) Personal risks(ii) Property risks (iii) Liability risks

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Personal Risks: this is the risk that affects the income earning capacity of an individual for
example: death, disability,illness,accident,unemployment..etc.the major type of personal risk is
represented as,

a- Earning risk
b- Medical expenses
c- Financial assets
d- Longevity risk

Earning risk

It refers to fluctuation in the family earning, which can occur as a result of decline in the value of
an income earners productivity. Earning risk can occur due to the following reasons

(i) Premature death (ii) Old age (iii) Poor health (iv) Unemployment

SPECULATIVE RISK Three possible outcomes exist in speculative risk: something good
(gain), something bad (loss) or nothing (staying even). Gambling and investing in the stock
market are two examples of speculative risks. Each offers a chance to make money, lose money
or walk away even. Again, do not equate gambling and investing on any other level than as both
being a speculative risk.
Property Risks

This risk results in a loss and /or damage to property. For example,fire,theft,war,flood etc…
property insurance policies typically promise to indemnify the insured for damage to covered
property on one of two bases: a- actual cash value and replacement cost.
Liability Risks
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This risk exposes an individual to the third party. For example, an accident while driving a car,
negligence by a professional etc…

Liability for causing harm to others is the second major object of risk.
Types of liability risk
a- Aries from ownership
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b- Aries from manufacturer
c- Aries from fiduciary relationship
d- Employers liability

FUNDAMENTAL RISK

A fundamental risk is a risk which is non-discriminatory in its attack and effect. It is impersonal
both in origin and consequence. It is essentially, a group risk caused by such phenomena like bad
economy, inflation unemployment, war, political instability, changing customs, flood, draught,
earthquake, weather typhoon, tidal waves etc. They affect large proportion of the population and
in some cases they can affect the whole population e.g. weather. The losses that flow from
fundamental risks are usually not caused by a particular individual and the impact of their effects
falls generally on a wide range of people or on everybody. Fundamental risk arise from the
nature of the society we live in or from some natural occurrences which are beyond the control
of man.

PARTICULARS RISKS
A particular risk involves losses that arise out of individuals events and are felt only by
particular individuals and not by the entire community or group. Individuals rather than society
bear the responsibility for dealing with these losses.
For example. Burning of a house or an automobile accident.

STATIC RISK Static risks are risks that involve losses brought about by irregular action of
nature or by dishonest misdeeds and mistakes of man. Static losses are present in an economy
that is not changing (static economy) and as such, static risks are associated with losses that
would occur in an unchanging economy. For example, if all economic variables remain constant,
some people with fraudulent tendencies would still go out steal, embezzle funds and abuse their
positions. So some people would still suffer financial losses. These losses are brought about by
causes other than changes in the economy. Such as perils of nature, and the dishonesty of other
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people.

DYNAMIC RISK

Dynamic risks, on the other hand, are typically present in the social environment and are
produced by the changes in economy and society. Although they affect a large predictable than
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static risks. Since they donot occur with any precise degree of regularity. For example- social
and market related events like unemployment or war.

Techniques of risk management

Comprehensive business risk management is a multi-stage process that will vary depending on
the needs and requirements of each individual enterprise.

The first stage is to determine exactly what the risks facing your business are, in order to assess
the likely and potential impact of each incident occurring.

Once this process has been completed, you can get down to evaluating the technique which will
best suit your business and maximize your risk management moving forward.

Here are the four key potential risk treatments to consider.

Avoidance Obviously one of the easiest ways to mitigate risk is to put a stop to any activities
that might put your business in jeopardy.

However it's important to remember that with nothing ventured comes nothing gained, and
therefore this is often not a realistic option for many businesses.

Reduction The second risk management technique is reduction - essentially, taking the steps
required to minimize the potential that an incident will occur.
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Risk reduction strategies need to be weighed up in terms of their potential return on investment.
If the cost of risk reduction outweighs the potential cost of an incident occurring, you will need
to decide whether it is really worthwhile.

Transfer One of the best methods of risk management is transferring that risk to another party.
An example of this would be purchasing comprehensive business insurance.

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Risk transfer is a realistic approach to risk management as it accepts that sometimes incidents do
occur, yet ensures that your business will be prepared to cope with the impact of that eventuality.

Acceptance Finally, risk acceptance involves 'taking it on the chin', so to speak, and weathering
the impact of an event. This option is often chosen by those who consider the cost of risk transfer
or reduction to be excessive or unnecessary.

Risk acceptance is a dangerous strategy as your business runs the risk of underestimating
potential losses, and therefore will be particularly vulnerable in the event that an incident occurs.

The Risk Management Process

“Risk management is an integrated process of delineating specific areas or risk, developing a

comprehensive plan, integrating the plan, and conducting the ongoing evaluation.”-Dr. P.K.
Gupta

1. Establish the context

Establishing the context includes planning the remainder of the process and mapping out the
scope of the exercise, the identity and objectives of stakeholders, the basis upon which risks will
be evaluated and defining a framework for the process, and agenda for identification and
analysis.

2. Identification

After establishing the context, the next step in the process of managing risk is to identify
potential risks. Risks are about events that, when triggered, will cause problems.

Hence, risk identification can start with the source of problems, or with the problem itself.

Risk identification requires knowledge of the organization, the market in which it operates, the
legal, social, economic, political, and climatic environment in which it does its business, its
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financial strengths and weaknesses, its vulnerability to unplanned losses, the manufacturing
processes, and the management systems and business mechanism by which it operates.

Any failure at this stage to identify risk may cause a major loss for the organization.

Risk identification provides the foundation of risk management. The identification methods are
formed by templates or the development of templates for identifying source, problem or event.
The various methods of risk identification methods are.
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3. Assessment

Once risks have been identified, they must then be assessed as to their potential severity of loss
and to the probability of occurrence. These quantities can be either simple to measure, in the case
of the value of a lost building, or impossible to know for sure in the case of the probability of an
unlikely event occurring.

Therefore;

In the assessment process it is critical to make the best educated guesses possible in order to
properly prioritize the implementation of the risk management plan.

The fundamental difficulty in risk assessment is determining the rate of occurrence since
statistical information is not available on all kinds of past incidents.

4. Potential risk treatments

Once risks have been identified and assessed, all techniques to manage the risk fall into one or
more of these four major categories: (Dorfman, 1997).

Risk Transfer: Risk Transfer means that the expected party transfers whole or part of the losses
consequential o risk exposure to another party for a cost.The insurance contracts fundamentally
involve risk transfers. Apart from the insurance device, there are certain other techniques by
which the risk may be transferred.

Risk Avoidance: Avoid the risk or the circumstances which may lead to losses in another way,
Includes not performing an activity that could carry risk.Avoidance may seem the answer to all
risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the
risk may have allowed. Not entering a business to avoid the risk of loss also avoids the
possibility of earning the profits.

Risk Retention: Risk retention implies that the losses arising due to a risk exposure shall be
retained or assumed by the party or the organization.Risk retention is generally a deliberate
decision for business organizations inherited with the following characteristics. Self-insurance
and Captive insurance are the two methods of retention.

Risk Control: Risk can be controlled either by avoidance or by controlling losses. Avoidance
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implies that either a certain loss exposure is not acquired or an existing one is abandoned. Loss
control can be exercised in two ways.

5. Create the plan

Decide on the combination of methods to be used for each risk. Each risk management decision
should be recorded and approved by the appropriate level of management.

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For example,

A risk (concerning the image of the organization should have top management decision behind it
whereas IT management would have the authority to decide on computer virus risks.

The risk management plan should propose applicable and effective security controls for
managing the risks. A good risk management plan should contain a schedule for control
implementation and responsible persons for those actions.

The risk management concept is old but is still net very effectively measured. Example: An
observed high risk of computer viruses could be mitigated by acquiring and implementing
antivirus software.

6. Implementation

Follow all of the planned methods for mitigating the effect of the risks.

Purchase insurance policies for the risks that have been decided to be transferred to an insurer,
avoid all risks that can be avoided without sacrificing the entity’s goals, reduce others, and retain
the rest.

7. Review and evaluation of the plan

Initial risk management plans will never be perfect. Practice, experience, and actual loss results,
will necessitate changes in the plan and contribute information to allow possible different
decisions to be made in dealing with the risks being faced.

Risk analysis results and management plans should be updated periodically. There are two
primary reasons for this; To evaluate whether the previously selected security controls are still
applicable and effective, and, To evaluate the possible risk level changes in the business
environment.

For example, information risks are a good example of rapidly changing business environment.

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Insurance Underwriter

Insurance underwriting is the process of choosing who and what the insurance company decides
to insure. This is based on a risk assessment. It s pretty much they determine who is insured and
how much in insurance premiums they will charge the insured person. Insurance underwriting
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also involves choosing who the insurance company will not insure. Insurance underwriters
evaluate the risk and exposures of potential clients. They decide how much coverage the client
should receive, how much they should pay for it, or whether even to accept the risk and insure
them. Underwriting involves measuring risk exposure and determining the premium that needs
to be charged to insure that risk.

Procedure for Life insurance claim settlement:

The following steps are followed in claim settlement of life insurance:

1. File a claim and supply necessary documents: the first sep in an insurance claim settlement is
to communicate with insurer, filing –out insurance form and send it with required documents. It
is quite important to contact insurance agent, and get a claim form. Most of the forms are self-
explanatory and it is quite easy to fill out the necessary fields.

2. Adjuster assesses the situation and gives an estimate: in the next step. A adjuster reviews
situation and gives an estimate of the settlement amount. The job of an insurance adjuster is to
make a fair settlement for which claim hasbeen made. However, decision is to made whether or
not to hire and insurance adjuster; if yes, then work with the adjuster who represents insurance
company. Usually a claims examiners assesses situation if claim is too expensive, person has to
carefully examines the documents sent by the insure, and also verifies the situation with the
witness, if required. Claims examiners can also forward the case to insurance investigators.

3. Insurance claim is settled: if insurer is agree with the estimate offered by the insurance
company, then it gives insurer the coverage amount. However, if insurer is not satisfied with the
proposal, then he/she can dispute it and file a law suit. However, claim settlement processed get
delayed if insure file a law suit. Premium rate may rise after the claim gets settled. If insurer is
found guilty, then the insurance company may raise his/her premium in order to provide the
required coverage.
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Procedure for Claim in Motor insurance

Motor insurance is the insurance for motor vehicles, there are various risks, which are related
with the loss of/or damage to motor vehicles like theft, fire or any accidental damage so as to
provide coverage for this motor insurance is taken. Motor insurance is an important part of
general insurance. Under it a personal or commercial vehicle is subjected to combined insurance
against the risk of:

a- Loss or damage to the motor vehicles and its accessories on account of accident or theft.
b- Death of or injury to the owner or passenger of the vehicles due to accident.
c- Damages payable to third parties by the owner of the vehicles for accident.

A comprehensive insurance policy may be taken to cover all these risks. Insurance against the
first two types of risks is optional. But every owner of motor vehicles is required to take out an
insurance policy to cover the third party risks under the motor vehicles act, 1956. Such a policy
is known as “third party insurance or liability insurance”. Under such policy, the third party who
has suffered any loss can sue the insurer directly even though that was not a party to the contract
of insurance. Apart from claim form and survey report the other documents required for
processing the claim are:

1- Driving license
2- Registration certificate book
3- Fitness certificate (commercial vehicle)
4- Final bill from repairs
5- Satisfaction note from the insured.
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6- Receipted bill from the repairer,if paid by insured

7- Discharge voucher(full and final payment)

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Procedure for Claim in Health insurance

A health insurance policy is a legal contract between an individual or a group of individuals and
a company or government program that describes how the medical bills of the individual or
group will be paid.

As a legal document, a health insurance policy contains terms that are unique to this type of
documents. The health insurance policy affects the individual or group who purchases the policy,
the company or governmental agency that sells or provides health insurance policies, and
physicians and other providers who receive insurance payments. Insurance against loss by illness
or bodily injury. Health insurance policies provide coverage for medicine, visits to the doctor or
emergency rooms, hospital stays and other medical expenses.

In each case, the covered groups or individuals pay premiums to taxes to help in protecting
themselves from unexpected health care expenses. Similar benefits paying for medical expenses
may also be provided through social welfare programs funded by the government. There are two
types by which health insurance claims are settled, which are as follows:

1-Cash less:- for availing cashless treatment the TPA has to be notified in advance or within the
stipulated time limits. The insurance desk at hospitals usually helps with all paper works. The
claim amount need to be approved by the TPA, and the hospital settles the amount with the
TPA/insurer.

2- Reimbursement:- reimbursement facility can be availed at both the network and non-network
hospitals. Here, the insured avails the treatment and settles the hospitals ills directly at the
hospitals. The insured can claim reimbursement for hospitalization by submitting relevant bills/
documents for the claimed amount to the TPA.

Dr.Milan Kumar Sahoo

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