Odisha CHSE +2 Vocational Insurance cheat sheet

Risk is uncertainty of loss; insurance transfers only pure (static) risk, not speculative risk such as gambling or market trading.

Insurable risk tests: large number of similar exposure units, accidental and measurable loss, determinable probability, no catastrophic concentration, and premium economically affordable.

Risk management steps: identify exposures, measure frequency and severity, select technique (avoid, reduce, retain, transfer), implement, then monitor and review.

Risk-control techniques reduce frequency (loss prevention) or severity (loss reduction); risk-financing techniques fund losses (retention, insurance, captive).

Law of large numbers: as the number of independent similar exposure units increases, actual loss experience converges toward expected loss, enabling stable pricing.

Pooling works because premiums of the many fund losses of the few; adverse selection (high-risk buyers over-represented) and moral hazard (careless or dishonest behaviour) break the pool.

Peril is the cause of loss (fire, flood, theft); hazard is a condition increasing the chance or size of loss - physical, moral, or morale.

Reinsurance transfers part of an insurer's risk to another insurer; retrocession is reinsurance of a reinsurer.

A contract requires offer, acceptance, consideration, capacity, free consent, and lawful object; insurance adds insurable interest, utmost good faith, indemnity, subrogation, and proximate cause.

Insurable interest must exist at inception for life insurance and at the time of loss for indemnity (general) insurance.

Utmost good faith (uberrimae fidei) obliges the proposer to disclose all material facts; non-disclosure or misrepresentation makes the contract voidable at the insurer's option.

Indemnity restores the insured to the pre-loss financial position, never profit; it applies to property and liability insurance, not to life or personal accident benefits.

Subrogation lets the insurer step into the insured's legal rights against a negligent third party after paying an indemnity claim.

Contribution applies when two or more indemnity policies cover the same risk: insurers share the loss, commonly pro rata by sums insured.

Proximate cause is the dominant, effective cause of loss; remote causes are disregarded, and excluded perils do not become payable merely because they follow a covered peril.

Warranties are conditions the insured promises to fulfil; breach may discharge the insurer's liability. A representation is a statement inducing the contract, not part of it.

Life insurance is a contract of guarantee, not indemnity: the sum assured is paid on death or maturity as agreed, regardless of actual financial loss.

Pure term assurance pays only on death within the term; it has no maturity value and offers the lowest premium for a given sum assured.

Whole life pays on death whenever it occurs; endowment pays the sum assured on death or on survival to maturity, whichever is earlier.

Money-back (cash-back) policies pay a percentage of the sum assured at intervals during the term, with the balance on maturity or death.

ULIPs combine investment with protection; the premium is split between a risk cover and units, and the fund value is subject to market risk.

Annuities convert a lump sum into periodic income; immediate annuities begin payment at once, deferred annuities later, and life annuities pay for the annuitant's lifetime.

Premium components are mortality (risk) charge, expenses, savings or investment element, and insurer's margin; policy loans and surrenders give access to cash value.

A policyholder may nominate a beneficiary; nomination is not the same as assignment, which transfers the policy's rights.

Fire insurance covers fire, lightning, explosion, and allied perils; standard fire policies exclude war, nuclear risks, and loss from the insured's own deliberate act.

Marine insurance covers hull (vessel) and cargo; perils include sea perils, jettison, and general average sacrifice.

Motor insurance: third-party liability is compulsory; own-damage cover is optional, with a no-claim bonus for claim-free years.

Health insurance pays hospitalisation costs subject to waiting periods, pre-existing disease clauses, sub-limits, and deductibles.

Personal accident covers accidental death, permanent disablement, and temporary total disablement; it is a benefit policy, not indemnity, and pays per a schedule.

Property policies may include reinstatement value, average (underinsurance) clause, and excess (deductible) reducing small claims.

Burglary and theft policies require forcible and violent entry; cash-in-transit, fidelity guarantee, and public liability are separate covers.

Crop and livestock insurance cover agricultural risks; engineering policies cover erection all risks and machinery breakdown.

Underwriting assesses and classifies risk, decides acceptance, terms, and premium, and prevents adverse selection.

Proposal form, medical or inspection reports, and past claims history are underwriting inputs; the insurer may accept standard, impose extra premium, exclude a peril, or decline.

Rating is the process of setting premium; rate = loss cost plus expenses plus margin, adjusted for risk class.

Life premium is based on mortality (age, sex, health, occupation) and interest assumptions; general premium is based on loss experience and exposure.

A policy document contains the schedule (insured, sum insured, period, premium), recitals, operative clause, exclusions, conditions, and endorsements.

Endorsements are written amendments to a policy; a cover note is temporary evidence of insurance until the policy is issued.

A deductible (excess) is the amount the insured bears before the insurer pays; it reduces premium.

Sum insured is the maximum liability; underinsurance triggers average clause, reducing the claim proportionally.

Claim process: intimation, registration, survey or investigation, documentation, assessment, approval, and settlement.

Intimation must be prompt; delay beyond the policy or regulatory requirement may prejudice the claim.

Surveyors assess loss for general insurance; they are appointed by the insurer and report on cause and quantum.

Documents commonly required: claim form, policy copy, proof of loss, FIR or police report, and repair or medical bills as applicable.

Settlement is subject to policy terms: deductible, sub-limits, average clause, and exclusions are applied before payment.

Repudiation must be in writing with reasons; the insured may then approach the insurer's grievance cell, the Insurance Ombudsman, or a court.

Third-party motor claims are handled through the Motor Accident Claims Tribunal, not by direct insurer settlement alone.

Fraudulent claims may be denied; the insurer can recover payments made on misrepresentation.

IRDAI-licensed intermediaries include agents, corporate agents, brokers, surveyors, third-party administrators, and web aggregators.

An agent represents the insurer; a broker represents the client and must act in the client's interest.

Corporate agents are entities (banks, firms) licensed to sell for one or more insurers as permitted.

Surveyors must be licensed and cannot be employees of the insurer for loss assessment.

Third-party administrators handle health claims and hospital networks; their role is administrative, not risk-bearing.

Bancassurance is the distribution of insurance through banks, subject to corporate agency or referral arrangements.

Intermediaries must disclose commissions, avoid mis-selling, and maintain confidentiality of client data.

Web aggregators compare products; they must display insurer disclosures and cannot offer advice beyond permitted limits.

An insurance agent is appointed by an insurer under a licence from IRDAI and is remunerated by commission.

Agent licensing requires minimum qualification, training, and passing the prescribed examination.

An agent's authority is defined by the appointment; acts beyond authority do not bind the insurer.

Commission rates are regulated; inducements beyond approved commission are prohibited.

The agent must disclose material facts to the insurer and explain policy terms to the prospect.

Distribution channels include individual agents, corporate agents, brokers, direct marketing, bancassurance, and online platforms.

An agent cannot simultaneously represent competing insurers unless permitted by regulation.

Agency termination requires notice; renewal and code of conduct are governed by IRDAI regulations.

IRDAI is the statutory regulator established under the Insurance Regulatory and Development Authority Act, 1999.

The Insurance Act, 1938 governs licensing, solvency, and conduct; the IRDA Act, 1999 defines the regulator's powers.

Key regulations cover registration of insurers, agents and intermediaries, policyholder protection, and grievance redressal.

Solvency margin requires insurers to maintain assets over liabilities at the prescribed ratio.

Policyholders have a free-look period to return a policy within the permitted days after receipt.

The Insurance Ombudsman scheme provides free, speedy redressal for eligible complaints up to the prescribed limit.

Life and general insurance business must be transacted separately; an insurer cannot carry on both without separate registration.

Unfair trade practices and misrepresentation are prohibited; penalties apply under the Insurance Act and IRDA regulations.

Ethical duties: honesty, transparency, confidentiality, fair dealing, and placing the client's interest above commission.

Mis-selling includes selling unsuitable products, concealing exclusions, and promising guaranteed returns not supported by the product.

Grievance redressal path: insurer's grievance officer, then the Insurance Ombudsman, then consumer forum or court.

The insurer must acknowledge complaints promptly and resolve within the prescribed turnaround time.

Service standards cover proposal processing, policy issuance, claim settlement, and renewal notices.

Confidentiality of client data is a legal and ethical obligation; sharing without consent is a breach.

Conflicts of interest must be disclosed; an agent cannot accept undisclosed inducements.

Complaint records and root-cause analysis drive service improvement.

Accounting equation: Assets = Liabilities + Capital; every transaction affects at least two accounts (double entry).

Debit increases assets and expenses; credit increases liabilities, capital, and income.

Premium income is recognised over the policy period; unearned premium is a liability carried forward.

Claims paid and outstanding claims are expenses; reserves are set aside for future obligations.

Office practice includes record-keeping, filing, correspondence, and statutory registers of policies and claims.

Entrepreneurship in insurance includes agency as a small business, with income from commission and renewal persistency.

A business plan for an agency covers target market, product mix, service standards, and cash-flow management.

Financial statements: trial balance, profit and loss account, and balance sheet; reconciliation ensures accuracy.