General insurance underwriting and claims
Domain 3: General insurance underwriting and claims
This section tests how non-life risks are selected, priced and settled. Expect underwriting factors, sum-insured adequacy, deductibles, warranties, exclusions, claim documentation, surveyor involvement and the average clause.
Core rules
- Underwriters assess occupancy, construction, location, housekeeping, claims history and moral hazard; rating reflects frequency and severity.
- Sum insured should reflect reinstatement or market value as agreed. Average clause reduces claims where the sum insured is less than the value at risk.
- Deductibles and excesses shift small losses to the insured; warranties are conditions that must be complied with.
- Claims require immediate notice, proof of loss, and survey where required; insurers may appoint licensed surveyors for losses above the prescribed threshold.
- Subrogation, salvage and contribution apply after settlement. Consequential loss is excluded unless specifically insured.
Worked example
A factory worth ₹20 lakh is insured for ₹15 lakh under a fire policy with an average clause. Fire damage is ₹6 lakh. Because the sum insured is 75% of the value at risk, the claim is reduced proportionately: ₹6 lakh × 15/20 = ₹4.5 lakh. The insured bears ₹1.5 lakh as the underinsurance penalty. If the policy had a ₹10,000 excess, the payable amount would be ₹4.4 lakh.
Traps
- Ignoring the average clause and paying the full loss.
- Confusing salvage (insurer's recovery from damaged property) with subrogation.
- Treating a warranty breach as irrelevant after the loss.
- Assuming all losses need a surveyor; the threshold and type matter.