UPMSP Vocational Insurance cheat sheet

Risk is uncertainty about loss; insurance transfers a defined, measurable pure risk (loss or no loss) from the insured to the insurer for a premium, but speculative risk (gain or loss, e.g. share trading) is not insurable.

Insurable risk tests: large number of similar exposure units, accidental and unintentional loss, measurable and definite loss, no catastrophic concentration for the insurer, and premium must be economically affordable.

Risk management steps in sequence: identify exposures, measure frequency and severity, select technique (avoidance, reduction, retention, transfer, sharing), implement, then monitor and review.

Risk-control techniques reduce frequency (loss prevention, e.g. fire-safe wiring) or severity (loss reduction, e.g. sprinklers); risk-financing techniques fund retained or transferred losses (insurance, reserves, captives).

Law of large numbers: as the number of independent similar exposure units increases, actual loss experience converges toward expected loss, which is why insurers need a wide spread of homogeneous risks.

Premium components: pure/risk premium (expected claims) + expense loading (commission, administration) + contingency/reserve margin + profit margin; gross premium = risk premium divided by (1 - expense ratio).

Indemnity principle: insurance restores the insured to the pre-loss financial position, no better and no worse; it underlies property and liability cover but is modified for life and personal accident policies.

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

Insurable interest must exist at inception for life insurance and at the time of loss for property/marine insurance; without it the contract is void.

Term insurance pays the sum assured only if death occurs within the policy term; it has no maturity or surrender value and is the cheapest form of life cover per rupee of sum assured.

Whole life insurance covers the insured for the entire lifetime with a guaranteed death benefit; premiums are payable for life or a limited period, and the policy builds cash/surrender value.

Endowment policies pay the sum assured on survival to maturity or on earlier death; they combine protection with savings and carry higher premiums than term cover.

Money-back policies pay a percentage of the sum assured at fixed survival intervals and the balance at maturity or on death, while the full sum assured remains payable on death (subject to policy terms).

ULIPs (unit-linked insurance plans) split the premium into risk cover and investment units whose value depends on the fund's NAV; the investment risk is borne by the policyholder, subject to IRDAI-mandated minimum lock-in and charges disclosure.

Key life policy clauses: days of grace (usually 15 days monthly / 30 days other modes), revival of lapsed policy within 5 years with arrears and interest, suicide exclusion (typically 12 months), and nomination under Section 39 of the Insurance Act, 1938.

Personal accident cover pays fixed benefits (capital sum on death or permanent total disablement, a percentage for permanent partial disablement, weekly benefit for temporary total disablement) and is not indemnity-based; it excludes suicide, self-injury, war and disease.

Health and personal lines underwriting uses age, occupation, income, medical history and habits; the insurer may load premium, impose exclusions, or decline, and the proposal form answers become the basis of the contract.

Section 45 of the Insurance Act, 1938 bars the insurer from repudiating a life policy after 3 years from issuance or revival on any ground including fraud or misstatement; within 3 years repudiation requires proof of fraudulent suppression or misstatement.

Standard fire policy covers fire, lightning and explosion; allied perils (STFI - storm, tempest, flood, inundation; riot, strike, malicious damage; impact damage; subsidence and landslide) are added by endorsement for extra premium.

Fire policies are issued on reinstatement value (cost of rebuilding, no depreciation) or market value (replacement cost less depreciation); average applies if the sum insured is less than the property's value at loss.

Average clause: claim paid = (sum insured / value of property at risk) x loss, subject to the sum insured; under-insurance therefore reduces every claim proportionately.

Marine insurance covers ocean and inland transit; Institute Cargo Clauses A (all risks), B and C (named perils, narrowest) define cover, and the insured must hold insurable interest and act with utmost good faith.

Marine losses: total loss (actual total loss or constructive total loss where abandonment is justified) versus partial loss (particular average - accidental damage to one interest; general average - voluntary sacrifice for the common safety, shared proportionally by all cargo interests).

Marine policy elements: warranty of seaworthiness and legality, sue and labour clause (insured may act to avert loss and recover reasonable expenses), abandonment, and the principle of subrogation.

Motor insurance is compulsory for third-party liability under the Motor Vehicles Act, 1988; an 'Act only' policy covers third-party bodily injury, death and property damage up to statutory limits.

A comprehensive/package motor policy adds own-damage cover (accident, fire, theft, natural calamities, riot) and is subject to a compulsory deductible plus an optional voluntary deductible in return for premium discount.

Motor no-claim bonus (NCB) accrues in the own-damage section for claim-free years - typically 20%, 25%, 35%, 45%, 50% for successive years - and is forfeited or reduced when a claim is made.

Health indemnity policies reimburse actual hospitalisation expenses up to the sum insured; pre-hospitalisation (typically 30-60 days) and post-hospitalisation (typically 60-90 days) expenses are covered as per policy terms.

Waiting periods: initial waiting period (commonly 30 days, except accidental injury), specific-disease waiting period (1-2 years), and pre-existing disease waiting period (commonly 2-4 years, regulated by IRDAI).

Health policy exclusions typically include cosmetic treatment, self-inflicted injury, war and nuclear risk, and treatment taken during the waiting period; room-rent, ICU and co-payment caps must be checked before purchase.

Cashless facility is available at network hospitals through a third-party administrator (TPA); reimbursement requires discharge summary, bills, and claim intimation within the policy's stipulated period.

Critical illness policies pay a lump sum on first diagnosis of a covered condition after a survival/waiting period; they are benefit policies, not indemnity, and pay even if hospitalisation did not occur.

Personal accident and hospital daily-cash policies pay fixed amounts per day or event; they supplement indemnity health cover rather than replacing it.

Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) provides secondary and tertiary hospitalisation cover of Rs 5 lakh per family per year for eligible poor households, with no cap on family size or age.

PMJJBY (Pradhan Mantri Jeevan Jyoti Bima Yojana) offers life cover of Rs 2 lakh for death from any cause for eligible bank-account holders aged 18-50, renewable annually at a low premium; PMSBY provides accidental death and disability cover of Rs 2 lakh.

Employees' State Insurance (ESI) covers employees earning up to the wage ceiling for sickness, maternity, disability, dependants' and employment-injury benefits; the Employees' Provident Fund and Atal Pension Yojana address retirement security.

The Insurance Act, 1938 governs insurance business in India; the IRDA Act, 1999 created the Insurance Regulatory and Development Authority of India (IRDAI) as the sector regulator with powers over licensing, solvency, tariffs and market conduct.

IRDAI mandates a minimum paid-up capital of Rs 100 crore for a life or general insurer and a solvency margin of 150% of required solvency; insurers must maintain the required solvency ratio at all times.

The IRDAI (Insurance Products) Regulations and the IRDAI (Protection of Policyholders' Interests) Regulations set product-filing, disclosure, grievance-redressal and turnaround requirements, including a 15-day free-look period for policies.

Section 64VB of the Insurance Act, 1938: no insurer may assume risk unless the premium is received in advance, or is guaranteed to be paid within the prescribed period; agents must remit collected premium promptly.

An insurance agent must hold a valid IRDAI licence after passing the prescribed examination, work under a licensed insurer, and comply with commission caps and the code of conduct; the Insurance Act's Section 42A and 42D govern agent appointment and commission.

Utmost good faith, insurable interest, indemnity, subrogation, contribution and proximate cause are the six principles of insurance; subrogation transfers the insured's right of recovery against the wrongdoer to the insurer after payment.

Consumer protection: a policyholder may approach the insurer's grievance redressal officer, then the Insurance Ombudsman (for personal-lines and small-value claims under the Ombudsman Rules), and finally a consumer forum under the Consumer Protection Act, 2019.

The Insurance Ombudsman handles complaints relating to life and non-life policies up to the prescribed monetary limit, and its award is binding on the insurer if accepted by the complainant within the stipulated period.

Misrepresentation or fraud in a proposal renders the contract voidable; the policyholder must disclose material facts, and the insurer must issue the policy within the timelines prescribed by IRDAI.

A licensed agent acts as an intermediary of the insurer, not the insured; the agent's authority is defined by the insurer's appointment and the Insurance Act, and the agent must not misrepresent policy terms or benefits.

Agent licensing path: complete the prescribed training, pass the IRDAI agent examination, obtain a licence valid for the specified period, and renew before expiry; working without a licence is an offence.

The sales process: prospecting, pre-approach, approach, need analysis, presentation of the solution, handling objections, closing, and after-sales service including premium reminders and claim assistance.

Need-based selling uses the client's income, dependants, liabilities and goals to size the cover; for life insurance, a common rule of thumb is cover of 10-15 times annual income, adjusted for existing assets and loans.

Prospecting sources: referrals, natural market (family, friends, colleagues), cold calls, direct mail, seminars and digital channels; each lead should be recorded in a prospect card with contact details and needs.

Objection handling uses the listen-acknowledge-clarify-answer sequence; common objections are 'I already have insurance', 'it is too expensive' and 'I will think about it', each answered with facts, not pressure.

Closing techniques include the assumptive close, alternative-choice close, summary close and urgency close; the agent must never promise returns or benefits not stated in the policy document.

Commission and remuneration are regulated by IRDAI; first-year and renewal commission rates differ by product, and an agent must disclose the commission structure when asked by the prospect.

Documentation: the proposal form must be filled truthfully by the proposer, signed, and submitted with the premium; the agent must explain exclusions, waiting periods and the free-look period before the sale.

Claim sequence: intimation to the insurer or TPA, registration and claim number, document collection, verification and investigation, assessment by surveyor or loss assessor, decision, and settlement or repudiation with reasons.

A licensed surveyor/loss assessor is mandatory for general insurance claims above the prescribed value; the surveyor assesses the loss but the insurer decides the claim.

Claim documents for motor own damage: policy copy, claim form, driving licence, registration certificate, FIR (for theft or third-party injury), repair estimate and bills; for health: discharge summary, bills, prescriptions and investigation reports.

Claim settlement must follow IRDAI turnaround times: insurers are required to settle or reject a claim within the prescribed period after receipt of the last necessary document, and to pay interest for delay.

Repudiation grounds: non-disclosure or misrepresentation of material facts, policy lapse for non-payment, loss outside the policy period or territorial scope, excluded perils, and breach of a condition precedent (e.g. no valid driving licence).

Subrogation: after paying a claim, the insurer steps into the insured's shoes and may sue the third party responsible; the insured must not release that third party without the insurer's consent.

Contribution applies when the same loss is covered by two or more policies on the same interest; each insurer pays its rateable share so total recovery does not exceed the loss (not applicable to life or personal accident).

Salvage: damaged property remains with the insured unless the insurer takes it over; the insurer may deduct salvage value from the claim, and the insured must not abandon property to the insurer without consent.

Fraud control: exaggerated or fabricated claims are investigated, may be repudiated, and can lead to cancellation of the policy and criminal action; the insured must cooperate and give true information.

An insurance agency is a small business: the agent earns commission income, bears office and travel costs, and must maintain records, a prospect register, premium receipts and renewal reminders.

Basic business financials: revenue (commission) minus expenses (rent, travel, communication, staff) equals profit; break-even is reached when commission income covers fixed and variable costs.

Customer relationship management: maintain a client database with policy dates, premium mode and renewal dates; timely renewal follow-up and claim support drive persistency and referrals.

Persistency measures the proportion of policies retained over time; high persistency raises renewal commission and is a key performance indicator for agents and insurers.

Digital tools for agents: insurer portals and mobile apps for quotes and proposals, e-insurance accounts, digital payment of premiums, and e-KYC for faster onboarding.

Employability skills for insurance roles: communication, active listening, numerical ability for premium and claim calculations, ethical conduct, time management and basic computer literacy.

Recruitment and team building: an agent may develop a team of advisors, but must not employ unlicensed persons to solicit insurance or share commission with them.

Government entrepreneurship support includes MSME/Udyam registration, MUDRA loans for small businesses, and skill-development schemes; insurance agents can register as micro-enterprises.

Professional ethics: confidentiality of client data, no rebating of commission to win business, no mis-selling, and disclosure of all material policy terms to the customer.