III IC-22 cheat sheet

Insurable interest: the policyholder must stand to suffer pecuniary loss from the insured event; in life insurance it must exist at proposal, in property insurance at the time of loss.

Utmost good faith (uberrimae fidei): the proposer must disclose all material facts a prudent underwriter would consider; non-disclosure or misrepresentation renders the contract voidable.

Indemnity applies to property, liability and health costs, restoring the insured to pre-loss financial position; it does not apply to life or personal accident benefits, which are valued/mutual contracts.

Subrogation: after paying an indemnity claim, the insurer acquires the insured's rights of recovery against the third party, limited to the amount paid and only after full indemnity.

Contribution: where several indemnity policies cover the same risk, each insurer pays a rateable share so the insured cannot recover more than the loss; common law and usually reinforced by a condition.

Proximate cause: the dominant, effective cause of loss decides whether the peril is covered; concurrent causes are resolved by the dominant cause rule.

Insurable risk requirements: large number of homogeneous exposure units, accidental and measurable loss, calculable probability, and losses that are not catastrophic to the pool.

Risk pooling and the law of large numbers: as the number of independent similar exposures rises, actual loss experience converges on expected loss, reducing the insurer's relative uncertainty.

Moral hazard arises from dishonest intent of the insured; morale hazard arises from carelessness or indifference; both are managed through deductibles, exclusions and claims investigation.

Term assurance pays a sum assured only on death within the policy term; no survival benefit and no cash value, so premium per unit of cover is the lowest among life products.

Whole life assurance provides lifetime death cover with a guaranteed sum assured; premiums are payable for life or to a stated age, and the policy accumulates a surrender value.

Endowment assurance pays the sum assured on death or on survival to maturity; it combines protection with a savings element and builds a guaranteed maturity value.

Unit-linked insurance invests premiums in segregated funds; the policyholder bears investment risk, the sum assured is typically the fund value plus a minimum death cover, and charges are disclosed.

Money-back (return of premium) policies pay a percentage of the sum assured at fixed survival intervals while retaining reduced death cover for the balance.

Annuities are the reverse of life insurance: a lump sum is converted into periodic income; immediate annuities start payments at once, deferred annuities after a waiting period, and the payout depends on the annuity rate.

Underwriting in life insurance assesses mortality risk using age, health, family history, occupation, habits and sum assured; outcomes are standard rates, extra premium, exclusions, postponement or decline.

Suicide clause: most life policies restrict payment for death by suicide within a stated period (commonly 12 months) from commencement or revival; after that period the full sum assured is payable.

Grace period of typically 15-30 days allows premium payment after the due date without lapse; revival (reinstatement) within the permitted period usually requires arrears, interest and fresh evidence of health.

Fire insurance standard cover comprises fire, lightning and explosion; allied perils such as riot, storm, flood and impact are added by endorsement and each peril carries its own conditions.

Marine insurance follows the principle of indemnity with insured value, sue and labour charges, particular average (partial loss borne by the owner of the damaged cargo) and general average (loss deliberately sacrificed for the common safety, shared proportionately).

Motor third-party liability is compulsory; own-damage cover is optional and applies depreciation by part age, while no-claim bonus reduces renewal premium for claim-free years.

Underwriting factors in property insurance: construction, occupancy, protection (fire-fighting), exposure and housekeeping; these are assessed per location, not per policyholder.

Average (underinsurance) clause: if the sum insured is less than the value at risk, the claim is reduced in the proportion sum insured bears to the value at risk.

Reinstatement value policies settle the cost of replacing the asset new, subject to the sum insured; market value policies deduct depreciation from the loss.

Claims procedure: intimation, survey by a licensed surveyor where required, submission of documents, assessment of loss, and settlement; fraudulent claims are repudiated in full.

Excess (deductible) is the first amount of each loss borne by the insured; a franchise is a threshold below which no claim is paid but above which the full loss is paid.

Reinsurance: proportional treaties (quota share, surplus) share premiums and losses by agreed ratios; non-proportional covers (excess of loss, stop loss) respond only above a retention.

Insurance is regulated to protect policyholders, ensure insurer solvency, promote fair market conduct and support orderly market development; the regulator licenses, supervises and can suspend or cancel registration.

Solvency margin is the excess of admitted assets over liabilities, expressed against required solvency; IRDAI rules require a margin of 150% of the required solvency for Indian insurers.

Capital and ownership rules: Indian insurers need minimum paid-up capital set by the regulator, and foreign investment is permitted only within the prescribed cap and approval route.

Registration certificate is mandatory before transacting insurance; it must be renewed, and the regulator may cancel it after giving the insurer a reasonable opportunity of being heard.

Product regulation: life and general products must be filed with the regulator under the applicable file-and-use or use-and-file procedure before being marketed.

Intermediaries (agents, brokers, corporate agents, web aggregators) require licensing, prescribed qualifications and training, and must disclose commissions; mis-selling attracts penalties.

Policyholder protection: free-look period to return a policy, grievance redressal through the insurer's officer and the regulator's consumer forum, and ombudsman machinery for disputes.

Investment and valuation rules prescribe admissible asset categories, exposure limits and periodic actuarial valuation of liabilities to keep reserves adequate.

Anti-money-laundering duties: know-your-customer verification, monitoring of suspicious transactions and reporting to the financial intelligence unit within the prescribed timelines.