III IC-47 / A-1 common mistakes
III IC-47 / A-1 · Understand the traps and how to avoid them.
In a fire or property scenario, states that the insured had no insurable interest because the property was bought or the mortgage taken out after the policy incepted, then concludes the contract is void.
The rule most often memorised first is the life-assurance rule (interest must exist at inception). Candidates apply it to every class instead of switching to the property rule (interest must exist at the time of loss).
What to do instead
Keep a two-line rule card and check it before writing: life and personal accident on one's own life require interest at inception and (for third-party lives) at loss; fire, marine cargo, liability and most general classes require interest at the time of loss. Name the class in the answer, then state the timing rule that applies to that class.
Awards the full sum insured for a partial building loss under a reinstatement-value policy, ignoring depreciation and the condition that reinstatement is payable only if the property is actually rebuilt.
The sum insured is the most visible number on the schedule, so candidates treat it as the amount payable instead of as the limit of liability.
What to do instead
Write the settlement ladder in every claim computation: identify the basis of valuation (indemnity, valued, reinstatement, agreed value) → measure the loss on that basis → apply the average/underinsurance condition if it is printed → deduct the excess → deduct salvage. Show each step; method marks are awarded on the ladder, not only on the final figure.
Quotes a solvency ratio, foreign-investment limit, surveyor threshold or return-filing deadline from memory with a round figure, and cites a section of the Insurance Act 1938 or an IRDAI regulation without the year of the instrument.
Revision notes and coaching summaries are copied forward year after year, and a confident-sounding number feels safer than a hedged answer, so outdated provisions survive into scripts.
What to do instead
Maintain a dated one-page sheet of current figures and cite the instrument with its year every time (for example, 'IRDAI (… ) Regulations, 20XX, as amended'). If the exact number is not certain, state the principle and name the regulator and instrument rather than inventing a figure; an incomplete but correct statement outscores a precise wrong one.
Describes an insurance broker as the insurer's agent, or says a corporate agent can bind the insurer and settle claims, or merges the role of a third-party administrator with that of an agent.
The vocabulary overlaps heavily (agent, corporate agent, broker, web aggregator, TPA, surveyor) and intermediaries are usually revised as a list of licences rather than as a set of legal relationships.
What to do instead
For every intermediary you are asked about, answer three things in order: whose agent it is, what it may actually do (solicit, quote, bind, collect premium, service or settle claims), and which regulation and licence govern it. Draw the same table from memory once a week until the three columns are automatic.
Labels a poor-loss-history driver or an over-insured property as moral hazard, and recommends declinature where the standard underwriting response would be a deductible, coinsurance or a pricing loading.
Moral hazard, morale hazard and adverse selection are taught in the same lesson and sound alike, and the matching underwriting responses are rarely drilled as a set.
What to do instead
Write one-line definitions and pair each with its usual response: moral hazard (dishonest intent to create or exaggerate a loss) → decline, void or strict conditions; morale hazard (indifference or carelessness after cover) → deductible, excess, risk-improvement conditions; adverse selection (high risks seeking cover disproportionately) → screening, exclusions, loading, experience rating. Apply the pair, not the label alone.
Applies the average (underinsurance) clause to a marine cargo valued policy or to an agreed-value policy, or divides by the sum insured when the calculation requires the value at risk at the time of loss.
The average clause is over-drilled on fire examples and then transplanted into any question mentioning underinsurance, without checking whether the clause is actually in the policy or what the denominator should be.
What to do instead
Before writing the fraction, confirm three things: the clause is printed in the policy wording, the basis of claim is indemnity rather than valued or agreed value, and the denominator is the value at risk at the time of loss. Only then write 'sum insured ÷ value at risk × loss' and show the numbers in the fraction.
Explains a reinsurance treaty as giving the original insured a direct right of claim against the reinsurer, or cannot say how retention and cession affect the direct underwriter's acceptance of a large or accumulating risk.
Reinsurance is revised as a standalone chapter and never linked back to day-to-day underwriting limits, capacity and line size.
What to do instead
Connect every large risk to capacity: line size available, the insurer's retention, and the facultative or treaty cession that absorbs the excess. State the privity position expressly - reinsurance is a contract between insurers and does not give the original insured a direct claim against the reinsurer; the insured claims on the insurer.
Selects the peril nearest in time to the loss, or the excluded peril, instead of the dominant and effective cause, and so rejects a claim where an excluded event set in motion a chain ending in a covered peril.
Scenario questions deliberately plant several perils and an exclusion keyword; candidates scan for the keyword rather than tracing causation, and 'last event' is the easiest heuristic under time pressure.
What to do instead
Draw the chain from the initiating event to the loss before writing anything. Ask which event was dominant and effective in bringing the loss about, then test that event against the exclusion wording and any ensuing-loss or exception clause. State the chosen cause and the test used, so the examiner can follow the reasoning.
Pays the gross loss without deducting salvage value, or allows the insured to recover the same loss from both the insurer and the negligent third party, treating subrogation as automatic from the date of the incident.
Claim computation is treated as pure arithmetic and the legal principles learned in the principles domain are never carried across into the claims answer.
What to do instead
Build the settlement in a fixed order: gross loss → less salvage → less excess → net payable. Then add one line on rights: subrogation arises only after and to the extent of payment, the insured must not prejudice recovery and must not retain a double recovery, and salvage proceeds belong to the insurer where it has paid a total loss.
Recommends settlement or payment in the claims-process answer before the loss is investigated and the required documents are received, and fails to discuss the effect of late intimation on the insurer's position.
Candidates write the commercially desirable outcome the question seems to point to, rather than the procedural sequence the examiner is marking, and notice conditions are the least revised part of the policy.
What to do instead
Answer in sequence: intimation and registration → appointment of a licensed surveyor where the applicable IRDAI regulations require one for the class and amount → document checklist → coverage determination against the policy and exclusions → reserve → settlement or reasoned repudiation → recovery action. Then state how the notice and cooperation conditions apply to a delayed intimation, including whether the insurer was prejudiced.