workbook developed by: growmore content development team© 33 e … · third-party administrator(...

Workbook Developed by: GROWMORE Content Development Team©

Workbook Developed by: GROWMORE Content Development Team©

1000 Families Rs.300 Rs. 3, 00,000/- +

Policy Holder/ Life Assured Premium Policy (Life) Fund

Claim

Human being is an income generating asset (as per its physical and mental capabilities) but it carries risk of untimely death or disability, which effects or ends the income generating capacity of this asset. By buying insurance, we transfer this risk looms on our income generating capacity in form of death or disability, to the insurance company in lieu of a sum, we pay as consideration (premium) to the insurance company.So, primary use of life insurance products is to provide economic protection to a Person’s family in case of any untoward incidents such as death or disability occurs, so the family can sustain its normal expenses for required time. Life Insurance is a contract, through which Insured and Insurer agrees on following:•Insurer will allow economic risk on the life of insured due to death or disability, transferred to it, up-to the extent of Sum Assured agreed upon, and will get a sum in lieu of such risk in the form of premium. •Policy holder/ Insured will pay a sum (premium) in lieu of a promise by insurer of paying the economic value of asset in accordance of sum assured in case of its economic value ceases due to insured event happens. •Another major responsibility of the insurer is SELECTION of risk, as insurer is trustee of the funds pooled by the policy holder and bad selection can lead to excessive claim thus losses, which will make group of policy holder at disadvantage. This training is to give you overall view of the business of insurance i.e. introduction of the business and its history, how it operates, laws governing this business, it’s importance to the individual/ society/ country, how its been marketed etc.

Insurer (Insurance Company )

Interest

Expenses

Bonus

Workbook Developed by: GROWMORE Content Development Team © Chapter-1

Chapter -1 (Understand, how Insurance Markets Operates)

Key Terms Insurance Life Insurance E- Sales Direct Marketing Risk Transfer Non-life Insurance Individual Agent Non-Direct Marketing Risk Retention Re-insurance Bancassurance Underwriters Liberalisation Insurance Intermediaries Insurance Broker Actuaries Third-Party Administrator( TPA) The Regulator Term Insurance Endowment Insurance Money-back Insurance Unit-Linked Insurance Plan(ULIP) Pension Plans What is Insurance? How does Insurance works? Risk Retention: Risk Transfer:

Need of Insurance Need of insurance can be categories in three categories i.e. individual, society and country. For Individual: Sr.# Benefit Explanation

1 Investment Option

2 Protection of Financial Security

3 Tax Benefit

4 Planning for Life-stage needs

5 Developing Saving Habit

6 Insurance is an asset

Other then this, business organizations has to set aside good amount of funds for various risks and if those risks are covered by insurance company, then those fund and management consultation on those risks releases, thus helps company grow faster, by utilizing those engaged recourses productively.


For Society: For Country:

Benefits of professional Insurance Market: Need Base Selling: Sr.# Benefits Explanations

1 Higher Confidence among policyholders

2 Increase-in insurance

penetration 3 Social Benefits 4 Employment

Generation 5 Increase profitability

for insurers

History of Insurance: Phase -I (Pre Liberalisation) Year Milestone Activity Explanation

1818-1829

First Insurance Company (Oriental Life Insurance Co)

1870 British Insurance Act 1870 1912 Indian Life Insurance

Companies Act 1912 1928 Indian Insurance Companies

Act 1928 1938 The Indian Insurance Act

1938 1950 Nationalization of insurance

sector 1957 General Insurance Council 1972 The General Insurance

Business(Notification) Act Phase II (Liberalisation) Year Milestone Activity Explanation

1993-1934

Malhotra Committee 1999 Formation of IRDA


Phase III (Post-Liberalisation) Year Milestone Activity Explanation

2000 Opening up the sector for private and foreign investment

2003 The General Insurance Business(Notification) Act 2003

Recent Developments in the Insurance Industry

5th largest in the world Sr.# Milestone Activity Explanation

1 Growing importance of Information Technology

2 Bancassurance 3 Online Sales 4 Micro Insurance 5 Grievance Redressal

( Insurance Ombudsman)

Insurance Organizations and roles Type of Insurance Organizations: Sr.# Type of Organization Explanation

Individual Insurance: 1 Life Insurance Group Insurance: Fire: Marine:

2 Non Life Insurance

Miscellaneous: 3 Re-insurance

Roles in the Insurance Organization: Sr.# Roles Explanation

1 Agents 2 Corporate

Agent 3 Intermediaries 4 Underwriters 5 Actuaries 6 TPAs


7 Surveyors/ Loss Adjusters

8 The Regulator (IRDA)

9 Training Institutes

10 NGO/ Consumer Right Organizations

Insurance Distribution

Direct Marketing Channels: Sr.# Channel Explanation

1 Direct Sales Teams

2 E-Sales

Indirect Marketing Channels: Sr.# Channel Explanation

1 Individual Agent

2 Corporate Agents

3 Insurance Brokers

4 Bancassurance 5 Composite

Brokers 6 Comparison

websites

Insurance Products Main Non Life Insurance Products: Sr.# Product Explanation

1 Fire 2 Marine Motor: Property: Liability: Health:

3 Miscellaneous

Travel :


Main Life Insurance Products: Sr.# Product Explanation

1 Term Assurance Plan

2 Endowment Assurance Plan

3 Whole Life Plans

4 Pension & Saving Plans

5 Unit Linked Insurance Plan (ULIP)

6 Group Insurance Plan

Role of an Agent

Sr.# Product Explanation Educational : Age : Miscellaneous

1 Qualification

Training : Need Analysis: Soliciting of Insurance: Knowledge of various Investment options: Help in Buying Process:

2 Miscellaneous

Servicing : 3 Code of

Conduct

Sample Question

The Concept of insurance involves transfer of Liability Need Ownership Risk Rakesh has just bought the health insurance and a personal accident policy. What important section(s) of the insurance market, do these products normally fall into Life Insurance in both cases

Life for health & Non life for personal Accident

Non Life Insurance in both cases

Non Life for health & life for personal accident

The main role of an underwriter in a insurance company , is normally to Assess the acceptability of a particular risk

Certify a loss, when a claim is submitted

Design the structure of a policy to be marketed

Negotiate with the industry regulator


Chapter -2 (Risk & Insurances)

Key Terms Risk Component of Risk Uncertainty Hazards Peril Homogenous Risk Accidental Risk Insurable Risk Financial Risk Pure Risk Risk Transfer Pooling of Risk

Concept of risk Definition of Risk:

• Risk is the chance of damage or loss • Risk is doubt concerning the outcome of a situation. • Risk is something or someone considered to be a potential hazard

Common risks, an individual is exposed to: Sr.# Risk Explanation

1 Dying too early

2 Living too long 3 Illness 4 Accidents 5 Unemployment

Attitude towards Risk:

• Risk Retention: • Risk Transfer:

Components of Risk Here given various component of risk: Sr.# Risk Explanation

1 Uncertainty Probability Extent

2 Level of risk

frequency Peril

Physical 3

Hazard Moral

High Risk Profiles: Sr.# Risk Explanation

1 Risky job profiles

2 Existing medical conditions


3 Lifestyle 4 Age group 5 Attitude

towards Risks

Insurable Risk

• Financial Risk • Pure Risk • Particular Risk

Financial Risk: Sr.# Risk Explanations

1 Loss of Life 2 Decease/

Disability 3 Saving

Accumulation 4 Retirement

Pure Risk: Particular Risk: Transfer of Risk Pooling of Risk Law of Large Numbers

Sample Question

How are PERILS and HAZARD normally distinguished under term insurance policies? Perils are medical factors which influence the risk of dying and hazards are lifestyle activities which influence the risk of dying.

Perils are risks that policy-holder will die before a specified date and hazards are factors which could influence that risk.

Perils are factors which affect the risk being insured and hazards are size of the risk being insured.

Perils are factors which could influence an insured event occurring ands hazard are the actual event which will trigger a payout.

In insurance terms, the risk of suffering a disability is best described as what type of Risk Financial Fundamental Homogenous Speculative


Chapter -3 (Part: 1 Insurance Principle)

Key Terms Offer & Acceptance Consideration Consensus ad idem Insurable Interest Key Person Insurance Utmost Good Faith Duty of Disclosure Material Facts Void Ab intio Indisputability Clause Indemnity Capacity to Contract Principle of Indemnity Value Contracts

Definition of Valid Contract: A contract is an agreement between two or more parties to do or to abstain from doing an act. It is intended to create a legally binding relationship.

Essentials of a valid Contract

Sr.# Feature Explanation 1 Offer &

acceptance 2 Consideration 3 Capacity to

contract 4 Consensus ad

idem 5 Legality of

purpose 6 Capability of

performance

The Policy Document

Role of Agent in Insurance Contract

Insurable Interest Definition: Insurable interest means that the proposer could suffer a financial loss if the subject insured is physically harmed in any way.

• Only financial interest can be insured.


• The proposer must be in a relationship with the subject of insurance whereby he/she benefits

from its safety and well being.

• Creation of Insurable interest happens through Through Common law Through Contract Through Statute

Relevance of Insurable Interest: Circumstances in which insurable interest exists: Sr.# Relation Explanation

1 Spouse 2 Children 3 Assets 4 Creditors 5 Business

Partners 6 Employer-

Employee 7 Surety or

Guarantor 8 Key Man

Utmost Good Faith

Importance of Utmost Good Faith: • In insurance, most of the important facts about personal history, health, family history are

known only to the proposer. • Any attempt by the proposer to hide these facts may lead to ‘unfair selection’. • Hence the contract of insurance is based on trust or the ‘Principle of utmost good faith’ or

Uberimma Fides. • The law imposes a positive duty on the proposer to make a full disclosure of material facts on

the proposal form. • In the event of failure to disclose material facts the contract can be held to be void ab initio

Definitions of Utmost Good Faith: “A positive duty, voluntary to disclose, accurately and fully, all facts material to the risk being proposed, whether requested or not.”


Possible breach of the duty of utmost good faith by Insured: Sr.# Reason Explanations

1 Non disclosure 2 Concealment of

Material Fact 3 Fraudulent

misrepresentation 4 Innocent

misrepresentation Possible breach of the duty of utmost good faith by Insurer: Sr.# Reason Explanations

1 Untrue statements by the agent

2 Loans 3 Bonus rate 4 Withholding

information Duty of Disclosure:

• By Insured: The proposer has the duty to disclose till risk commences. Circumstances which arise after the risk has commenced need not be disclosed unless the contract requires ‘Continuous Disclosure’. Full disclosure has to be done at the time of revival of a lapsed policy or at the time of reinstatement of a surrendered policy, as per the terms and conditions of revival or reinstatement

• By Insurer: As per the principle of utmost good faith, the duty of full disclosure rests on the insurer also.

Material Facts

A fact which would influence the decision of whether to accept a risk for insurance and on what terms. Following are the example of same:

• Age • Medical history • Occupation • Smoking/Drinking habits

Importance of material facts:


Consequences of non-disclosure: Indisputability Clause (Section 45):

Indemnity To indemnify is to bring to the same position as he was before a specified incident. The principle of indemnity implies that the mechanism of insurance cannot be used to make a profit. The claim amount paid cannot exceed the amount of loss incurred. Sr.# Application Explanation

1 Indemnity in Non Life Insurance

2 Indemnity in Life Insurance


Chapter -3 (Part: 2 Insurance Practices)

Key Terms Assignment Cancellation Lapse Premium Receipt Assigner Cooling of Period Nomination Policy Document Assignee Conditional Agreement Notices Prospectus Absolute Assignment Exclusions Paid-up Value Revival Appointee Endorsements Proposal Form Surrender Value

How insurance policies are bought & written

5th largest in the world Sr.# Activity Explanation

1 Source of preliminary information

2 Purpose of Buying insurance

3 How life insurance is written

4 Proposal Form

5 Quotations 6 Insurance

Contract

7 Renewals

Key Documents Sr.# Particular Explanation

Name & contact details : Occupation & nature of job: Plan & payment details: Body built life style: Medical history: Details previous Insurance: Family history:

1 Proposal Form

Nomination & appointee details:

2 Declaration on Proposal Form


Standard age proof: 3 Age Proof Non-standard age proof: Photo id proof: Address proof: Recent photo: Financial & Medical Details (if require):

4 Other Documents

First Premium receipt: 5 Premium

receipts Renewal premium receipt:

6 Free Look/ Cooling of Period

Heading: Preamble: Operative Clause: Proviso: Schedule:

Attestation: Terms & Condition:

7 Policy Document

Endorsement: 7.1 Policy information

Statement Endorsements: Notices:

8 Endorsements, notices and prospectus Prospectus:

9 Documents required at the time of claim

Key Insurance Terms

Sr.# Particular Explanation Lapse :

Paid up Value:

1 Non Forfeiture Options Section 113 of Insurance Act 1938 Surrender Value:

Meaning : Process:

2 Revival of Policy

Impact on Contract: 3 Renewal

4 Nomination


Meaning : Type of Assignment:

5 Assignment (Section 38 of Insurance Act) Impact on Contract:

6 Loans 7 Foreclosure

Relevance of premium payment and valid cover

Sample Question For a household insurance policy, insurable interest need only exists at outset and at what point The date when the cancellation period expires

The Date claim occurs The date policy document is received

The termination date

Prakash is employed by Pradip, in respect of this employment, Prakash automatically has insurable interest in Pradip’s life up to what limit, if any? Prakash’s monthly salary

Prakash’s pension fund value Pradip’s annual profit There is no limit

Arun started a twenty yr term policy, once establish, when, if at all is the insurer next entitled to ask him for proof of continuing good health. At no point End of first 12 month When Arun changes his occupation or retires When a lapsed policy is revived The concept of indemnity is based on the key principle that policyholders should be prevented from Insuring existing losses Making false insurance

claims Paying excessively for insurance cover

Profiting from insurance

Once an absolute assignment is effected under a life insurance policy, who will be the titleholder(s) of this policy? The assignor in all cases The assignee in all cases Either the assignor or

assignee, depending upon the type of policy involved

The assigner and assignee jointly.

How long is free look-in period under a term insurance policy from the date of receipt of the document. 5 days 10 days 15 days 20 days A life insurer issued a quotation on 10th February, guaranteed for 14 days, which was accepted by customer on 10th day. Consequently the insurer can only decline this risk if the Customer submit a second quotation request

Insurer increases its underlying premium rates

Market place experience a significant downturn

Material facts changes

A policy document for a money back policy includes the statement’ the proposal and declaration signed by the proposer from the basis form the basis of the contract’ in which main section of the policy document will this normally appear? Attestation Operative Clause Preamble Terms & conditions A life insurance policy can only be made paid up if what particular policy feature exists? Indexing contribution Nomination Facility Rider benefit Saving element


Chapter-4 (Insurance Underwriting)

Key Terms Underwriter Gross premium Moral hazard Non medical underwriting Human life value(HLV) Loading Physical hazards Risk premium Bonuses Financial underwriting Medical underwriting Liens Adverse selection Risk groups Level premium Time value of money

The process of Insurance underwriting

1 Collect information about applicant

2 Analyse the risk associated

3 Estimate the potential exposure

4 Determine the probability of loss

5 Accept ( or reject) the proposal

6 Classify and rate into a risk group to calculate the premium

7 Issue the insurance policy

Obtaining the required information

Personal Information: Medical Information: Agent’s Report:

1 Proposal form

Financial Information:

2 Medical examination report


4 Additional information

5 Report from tax authorities

Physical & Moral Hazard

Age : Occupation: Gender: Address: Habits: Hobbies : Physical characteristics: Medical Condition: Physical Handicap: Medical History of the family:

1 Physical Hazard

Personal History : Attitude towards health: Previous history of dishonesty: Previous dubious claim history: Request for large mount of Sum Assured: Proposer with no dependent: Policy asked for non earning member of family : No insurable interest between nominee & proposer: Medical check at different place from residence :

Moral Hazard

Large praportation of income committed for premium:

2

Fraud & Moral Hazard:

.

Financial, medical & non medical underwriting

1 Financial underwriting

2 Medical

underwriting

3 Non medical underwriting

Human Life Value (HLV)


1 Income replacement method

2 Simple Method

Liens

1 Diminishing 2 Constant

Pricing & Calculating the premium

Mortality Rates: Loading: Income from investment of premium: Benefits promised

1 Pricing Element

Premium Plan being taken : • Single premium plan: • Level premium plan: • Flexible premium plan :

Risk premium: Level premium: Deduct the interest(net premium) Loading:

2 Calculating premium

Gross/ office premium

Calculating bonus

1 Simple revisionary Bonus

2 Compounded revisionary bonus

3 Terminal bonus

4 Interim bonus


Agents role in underwriting

Sample Question

The main reason, why a insurance proposal form often asks for the proposer’s height is to enable a reasonable comparison with the proposer’s Age Gender Occupation weight Where annually increasing flexible premiums operate under a life insurance policy, what rate of increase will generally apply? 2.5% 3.0% 5.0% 7.5% The amount paid out by the insurer under a 30 yr life insurance policy exceeded the sum assured plus the revisionary bonus. The excess is likely to result from? Charges refund A frequency loading A tax rebate A terminal bonus What normally happens to sum insured under a life insurance policy once the period of lien expires? It reduces It increases It temporarily

suspended It is replaced by a newly underwritten sum assured


Chapter-5 (Basic Life Insurance Product)

Key Terms Protection need Factors effecting protection

needs Death cover Survival benefit

Term insurance plan Pure endowment plan Endowment assurance plan

Whole life insurance

Convertible insurance plan

Single life insurance plan Joint life insurance plan Group insurance plan

Micro insurance plan ULIPs With profit policy Taxation Inflation Prioritizing needs Child plan Money back plan

Protection needs

Income: Medical needs : Dependents : Asset & Liabilities :

1 General protection needs of an individual

Family maintenance: Age: Income: Dependents:

2 Personal factors affecting protection needs

Asset/ Liabilities :

Life insurance products

Death Cover: Maturity benefit:

1 Basic elements of a life insurance plan

Tern Insurance plan

2 Basic Life Insurance plan

3 Return of

Premium Plan 4 Pure endowment

plan Death Cover: Saving element: Goal based investment :

5 Endowment insurance plan


6 Whole life

insurance plan 7 Convertible

insurance plan 8 Joint life

insurance plan Immediate Annuity :

9 Annuities

Deferred Annuity: Minimum Size: Type of group: Cover :

10 Group Insurance plan Policy holder :

11 Micro insurance plan

Choice of investment : Flexibility : Liquidity : Death & maturity benefit :

12 Unit linked insurance plan

Settlement option: Policy holder/insured : Lien : Deferment period & vesting date: Protection for payer :

13 Child plan

Type of insurance offered: 14 Money back

policy 15 Salary savings

scheme (SSS)

Taxation & inflation

Investment stage: Section 80C Section 80D Maturity stage:

1 Tax implication on insurance products

2 Inflation implication on insurance products

.


Prioritizing protection needs Why Prioritizing needs is necessary?

How to priorities needs?

1 Protection of future income

2 Medical/health protection for self & family

3 Planning for child’s education

4 Planning for child’s marriage

5 Protection against home/car loan

6 Planning for retirement

Execution process

1 Prioritizing the needs

2 Start with smaller investment

3 Postpone low priority for some time

Sample Question

The main protection need of a 19 yr old is most likely to be Self protection Home loan protection Protection of dependent Protection of children’s

future. Rajat recently arranged a life insurance policy under which he is classed as the master policy holder. This addresses his role as A creditor A debtor An employee An employer


Chapter-6 (Savings Product)

Key Terms Asset Management Company(AMC)

Compounding Gratuity Traditional deposits

Bank deposits Disposable income Lock-in-period Saving needs Bonds Financial planning analysis

process Investors convenience Shares

Child plans Post office savings Mutual Fund Speed of transactions Cumulative deposit Fund managers Interest rates Taxation & tax planning

The need for savings/ investment advice

1 Ignorance about the financial planning process

2 Ignorance about the full range of financial products available

Factors that determining the saving needs of an individual

Individual without capital: Individual with capital:

1 General Saving needs

Duration of investment: Amount of disposable income: Existing assets and liabilities:

2 Factors that determine the saving needs of a particular person

Feature and benefits of saving products 1 Capital or

income growth 2 Guarantees 3 Lock in period 4 Penalties .5 Risk

6 Buying & selling mechanism


.7 Flexibility

Type of saving products

1 Life insurance Traditional: Cumulative:

2 Bank deposits

Recurring: Regular Income: Capital appreciation:

3 Mutual Funds

SIP: Dividend Income: Bonus shares:

4 Shares

Capital appreciation: Corporate Bonds: Government Bonds Commercial papers:

5 Bonds

Treasury bills: NSC/KVP : PPF : Term/ Recurring deposit: POMIS:

6 Post office savings

SCSS: Good returns: Portfolio diversion: Hedge against inflation:

7 Gold and silver

Insurance against uncertainties:

Tax inflation implication for savings products 1 Tax

implications Sec 80C Sec 80D Sec 80DD Sec 80E

2 Income Tax Act 1961

Sec 24(b)

3 Inflation implications


Implication of interest rates on savings products 1 Increase in

interest rates 2 Decrease in

interest rates

Prioritizing saving needs 1 Contingency

Fund 2 The need for

insurance 3 The need to

purchase assets

4 The need to save for retirement

5 The need for tax

planning Short term needs: Medium term needs:

6 Short, medium and long term needs Long term needs:

Sample Question

The need for investment advice from an insurance agent normally results form what overriding factor? Absence of any long term goals

Inability to priorities future financial needs

Lack of market knowledge Shortage of available funds

When undertaking financial planning for individual without capital, what savings needs is likely to be addressed in every single case? Emergency funds Funds for children’s savings Funds for educational cost House purchase fund Naveen is addressing his income needs by investing directly in corporate bonds. In what form, will he receives this income Annuity installment Dividend payment Interest payments Rental payments Nikhil is looking for tax efficient saving methods for his disposable income. He is considering an equity-linked saving scheme, national saving certificates and an endowment policy. Premiums for which of these investments are allowed to be deducted from his taxable income? The NSC only The equity linked saving

scheme and NSC only The NSC and the Endowment insurance only

The NSC, Equity Linked saving scheme and endowment insurance

An investor holds a wide range of shares. If the Reserve Bank of India announces a series of significant interest rate increase, the prices of these shares are most likely to Become volatile decrease increase stagnant


Chapter-7 (Other key financial Product)

Key Terms Health Insurance Insurance riders Pension Plan Cashless facility No-claim bonus Accumulation phase Commutation Individual health

insurance plan Family floater Daily hospitalizations cash

benefit plan Accidental death benefit rider

Critical illness rider

Term rider Waiver of premium rider Life annuity Guaranteed period annuity Increasing annuity Prioritising needs

Other Financial needs

1 Need for health insurance

2 Need for insurance riders

3 Need for pension plan

Type of products, their features and benefits

Individual health insurance: Family floater health insurance: Group Health insurance plan:

1 Types of health plan

Daily hospital cash benefit plan: Pricing: Cash-less facility: Medical examination: Pre-existing illness: No claim bonus: Permanent exclusions: Immediate care:

2 Features and benefits of health plan

No need for saving or loan for medical emergencies: ADB: Term Rider: Critical Illness(CI):

Waiver of premium:

3 Riders

Surgical Benefit rider:


Hospital cash benefit rider: Guaranteed insurability rider: Additional Cover: Nominal cost: Customization: Flexibility:

Features and benefit of riders

Tax benefit:

4

Sum assured: Premium:

5 IRDA regulations for riders

Immediate annuity: Deferred annuity: Life annuity : Joint life, last survivor annuity: Guaranteed period annuity: Life annuity with return of purchase price:

6 Annuities

Increasing annuity: Accumulation phase: Regular annuity phase: Commutation: Payment frequency: Insurance cover: Tax implication: Frequency of payment: Traditional/ Unit linked:

7 Pension plans

Type of payout:

Tax and inflation implication for financial products

Health insurance plans: Riders: Pension plans:

1 Tax implication for financial products

2 Inflation implication for financial products


Prioritising needs

Sample Questions

The main purpose of the guaranteed insurability rider benefit is to give the policy holder the right to Cancel a health based exclusion after a symptom-free period

Includes his parents under the policy

Increase cover when a key life event occurs

Maintain cover despite a fall in investment value

The change in a health care costs over recent years has had what general impact on healthcare insurance A fall in average premium

A reduction in underwriting requirements

A rise in the need for cover A strengthening of the insurable interest rules

The general need for a pension policy results from the existence of what key problem? Anticipated fall in income

Lack of employment opportunities

Likely deterioration in health

Uncertainty over investment performance

Yash pays health insurance premiums for himself, his wife and his two children aged 13 and 8. Premiums for which of these individuals will qualify as deductible from Yash’s taxable income? Yash only Yash and his wife only Yash, his wife and his

oldest child Yash, his wife and both of his child


Chapter-8 (Identifying client needs)

Key Terms Assets Life cycle Prioritization of needs Communication skills Listening skills Questioning skills Quantifying skills Long term needs Real needs Income Medium term needs Short term needs Perceived needs Liabilities Surplus funds

Who is your client

Building a contingency fund:: Income protection: : Saving for child education: Saving for retirement:

1 Prospective clients

Protection against loans: Identifying needs: Quantifying needs: Prioritising needs:

2 Client needs

3 Existing arrangements of client

The typical life stage of a client

1 Childhood With dependents: 2 Young unmarried No dependents: Double income family: 3 Young married Single income family: Double income family: Young married

with children Single income family: 4

5

Young married with older children

6 Pre retirement

7 Retirement


Factors that effect the life stages

1 Age 2 Marital status and

dependents Public sector employee: Private sector employee: Self employed: People with short career: Unemployed:

3 Employment

4 Health issue 5 Individual’s income

and expenditures 6 Divorce, separation

and bereavement

Client needs: real and perceived

1 Identification of real need

2 Identification of current and future needs

3 Quantification and prioritization of needs

4 Financial planning review

Communication, questioning and listening skills


1 Communication skills

Questioning skills

Open ended: Close ended:

Different types of questions

Seek information: Explore and collect additional information: Understanding the question: Confirm agreed points:

2

Classification by purpose

Commitment for action: 3 Phrasing of

question 4 Listening skills No need: Competition offers better: No money:

5 Handling objections from the client

Gathering client information including family information

1 Personal details 2 Family details 3 Medical details 4 Professional details

5 Cash flow and existing investments

Understanding priorities- a summery

1 Life cycle


2 Existing insurance

policies 3 Surplus funds

available

Confirming assumptions and agreeing objectives

Sample Questions

The sole focus during a client’s fact finding session was healthcare requirements and estate planning Young married Young married with

children Pre retirement Retirement

Apart from the salary level, what other key feature of Alok’s salary likely to have a major impact on the level of his pension, life insurance and health insurance needs? Whether the job is office or field base

The normal retirement age in relation to the job

Whether the job is in public or private sector

Whether the job is manual or non manual

In the context of financial planning, how is the difference between the real needs or perceived needs best described? Real needs are financial needs and perceived needs are non financial needs.

Real needs arte actual needs and perceived needs are based on a client’s thoughts and desire.

Real needs identified by the insurance agent and the perceived needs are identified by the client

Real needs are needs which satisfy an objective and perceived need s are needs which do not satisfy an objective.


Chapter-9 (The fact finding and financial planning)

Key Terms Fact finding Cash flows Structured interview Pension details Family details Employment details Financial details Assets Liabilities Assessment Analysis Making recommendations Needs Priorities Benefit illustration Guaranteed benefit Non guaranteed benefits Know your customer(KYC)

What is fact finding

Identify needs: Gathering client’s data: Analyzing client’s cash flow:

1 Objective of fact finding

Provide for anticipated changes:

Using a fact-find

Making client feel comfortable: Explanation of process: Gathering information: Discussion on priorities:

1 Structured interview

An agreement in principle: Personal details:

Family details

Employment details:

Financial details:

Existing insurance and investments:

Monthly income and expenditure:

Objective of financial planning

Future details:

2 Fact Finding Forms

Next review session:


Assessment and analysis

1 Assessment

3 Analysis

Client needs: real and perceived

1 Identification of real need

2 Identification of current and future needs

3 Quantification and prioritization of needs

4 Financial planning review

Applying product features and benefit to a client situation

Prioritization: Research information: Calculation of amount Draft a report and presentation: Prepare quotations:

1 Product short listing process

Product identification:

2 Product short Listing of needs:


Selection of products:

Analysis of chosen products:

listing for each needs

Choosing the most suitable product:

Making recommendations

1 Presentation of recommendations to the client

Need check: Outline concept behind recommendation: Satisfying each needs: Seek authority for proceeding:

2 Structure of presentation of recommendation

Documentation: 3 Presenting benefit

illustration Photograph: Proof of identity:

4 Know your customer (KYC)

Address proof:

Sample Questions

In order to fulfill the “know your customer” procedure, at what stage in the financial planning process is the insurance agent most likely to request a copy of the customer’s photograph? At the end of the fact finding meeting

At the end of the presentation meeting

As soon as the application is accepted by the insurer

As soon as the insurer is ready to issue the policy document.

An agent has recommended an investment product with non guaranteed benefits. The benefit illustration passed to his client will therefore use assumed annual growth rates of 5% & 8 % 5% & 10 % 6% & 8 % 6% & 10 %


Chapter-10 (Good client practice)

Key Terms Agent’s duties and responsibilities.

Client requirements Agent remuneration Disclosure

Recommendations Application and rejection of a policy

Churning Switching

Persistency Policy servicing Client rights Long term relationship Disclosure methods Priortisation of needs Suitable products Benefit illustration

documents

Duties and responsibilities of an insurance agent

Requirements of the clients

1 Prioritising the needs of the client

2 Conducting a research to prepare unified recommendation

3 Finding the gap in the planning

4 Identifying the suitable product

Agent remuneration and upfront disclosure method

First year commission: Limits of FYC: Renewal Commission:

1 Remuneration method

Limits of RYC: 2 Disclosure

Recommending a suitable product


1 Checking the client’s commitment

2 Outlining the reason of recommendation

Agree with recommendation but wants time: Does not agree with recommendation: Client accept few but not all recommendation:

3 Acceptance or rejection of the recommendation

4 Churning and product

switching

The long term benefits of retaining the policies and avoiding short-term cancellation (persistency)

Helps clients in achieving goals: Increase revenues: Reduction in costs:

1 Benefits of persistency

Insure client satisfaction: Product design: Role of an agent: Change in clients financial circumstances:

2 Different factors that can effect persistency

Policy servicing: Flexibility in premium payment: Constant reminder of due dates: Continuous contact with client:

3 Different methods for maintaining high persistency

Policy servicing:

Client’s rights and complaint procedures

Building long term relationship with client

1 Marriage 2 Moving house 3 Birth of a child 4 Change of job


Sample Questions

The main purpose of including commission details in the documentation to the client is to increase: Competitiveness Efficiency Flexibility Transparency A client has been recommended a low risk investment by his insurance agent, but client insists the agent arranges for the money to be invested in the high risk product. What action should the agent take? Carryout these instruction , but document that this contradicts the recommendation

Conduct a new fact-find Invest a reduced amount of money in this product

Refuse to act for the client.

An insurance agent has advised a client to surrender an existing policy and start a new investment policy. What key indicator should be used to determine whether this advice was ethical? The best interest of the client

The difference in potential income and capital growth between two products

The flexibility of the new product to the old one

The views expressed by the client.

What key impact will low persistency levels have on insurance policy holders? An enhancement in investment choice

An improvement in investment performance

An increase in insurance cover

A reduction in benefit.


Chapter-11 (Claims)

Key Terms Claims Maturity claims Survival benefit payments Death claims Valid claims Policy not in force Breach in policy condition Fraudulent claims Claim documents Early death claims Presumption of death Void claim Void-able contracts Indisputable contract Claimant’s statement Rider benefit Return of premium Terminal bonus

Requirement of a valid claim

What is claim?

Survival benefit payment: Paid-up value: Discounted claim: Commutation of installments: Annuity payment at the time of vesting:

1 Maturity claims

2 Death claims ADB: Critical illness:

3 Rider benefit claim

Hospital care: 4 Valid claim

Why a claim may be invalid

1 Policy not in force

2 Excluded

conditions apply 3 Fraudulent claim

Duties after death and documentary evidence

Documents at the first hand, required :


1 Early death claim

Settling claims

Claim guidelines should be given with the policy documents: Receiving claims: Decision on claim:: Claim investigation: Delay in payment

1

IRDA guidelines

Role in disputes within claimants: Submission of original documents: Identity of the claimant: Discharge form: Age proof: No Premium dues:

2 Maturity claims

No assignment: 3 Survival benefit

claim 4 Death claim

Fraudulent claims

Consequences of fraud from insurer: Consequences of fraud from insured: Consequences of fraud from claimants:

1 Consequences of fraud

2 Caution points at the time of handling death claim

3 Presumption of death

Void and void-able contracts


1 Mistake 2 Illegitimate / un-

lawful circumstances 3 Lack of insurable

interest Breach of good faith : Breach of warranty:

4 Indisputable contract ( Section 45)

Sample Questions

Raju died 5 yrs before the end of his 30 year old endowment insurance policy. What factor most likely caused the insurer to investigate the claim using early death claim procedure? He paid the most recent premium in period of grace.

His cover was originally accepted with a premium loading on medical grounds

This death resulted from a recently acquired illness

The policy had lapsed and was revived shortly before he died.

A claim under a term insurance policy is submitted by an individual who has substantially understated his age. As an alternative to paying out the full claim the insurer most likely to take which action? Deduct the underpaid premium from the sum insured

Make the policy paid up. Pay out the surrender value Reject the claim on the ground of misrepresentation.

On the maturity of an endowment policy, a reduced sum insured is paid out. What is the most likely reason for this? The installments were commuted by the policyholder

The policyholder’s health seriously deteriorated during the policy term.

The policy was made paid-up during the policy term.

The policy was subject to a lien.

What key event is most likely to prevent insurers from ensuring that each insured person bring a fair premium to the pool of risk presented? A fraudulent claim A policy assignment A steep rise in interest

rates A sudden illness


Chapter-12 (Legislation and client advice)

Key Terms Remuneration Prohibition of rebates Licensing of insurance

agent Beneficiary

Solvency Money laundering Financial intelligence unit (FIU)

High and low risk customers

Trust Trustor Trustee Know your customer (KYC)

Insurance act 1938

Section 41(1) Prohibition of rebate:

Section 42 Licensing of agents:

1 Provision with specific relevance to agents

Section 44- Prohibition of cessation of payment of commission:

Indian Life Assurance Companies Act 1912

Life Insurance Corporation Act 1956

Insurance Regulatory and Development Authority

(IRDA) Act 1999


Prevention of Money Laundering Act(PMLA) 2002

1 Placement 2 Layering 3 Integration 4 IRDA guidelines to

insurer’s 5 Know your

customer (KYC) 6 Risk profile of the

customers 7 Source of funds

8 Threshold for payment of premium in cash

Married Woman’s Property Act(MWPA) 1874

1 Issuance 2 Alterations 3 Claims

Other key legislations

1 Redressal of Public Grievances Rues 1998

Advertisement by Insurance Agents:

2 IRDA( Insurance Advertisement and Disclosure) Regulations 2000


3 IRDA( Manner of Receipt of Premium) Regulations 2002

4 RDA( Licensing of Corporate Agents) Regulations 2002

5 Foreign Exchange Management (Insurance) Regulations 2000

Issue of policy and collection of payment: Claim Settlement: Commission to overseas agents:

6 Foreign Exchange Management (Insurance) Regulations 2000- life insurance memorandum

7 Consumer Protection

Act (COPA)1986

Sample Questions

An insurance agent served an insurer continually and exclusively for 20 years, after which he retired from the work. In accordance with section 44 of the insurance Act 1938, renewal commission due to him after the termination of his agency can only be withhold if He ceased to remain a resident of India for tax purposes

He survives beyond the age 75

There has been a change in regulator

There is fraud involve


Chapter-13 (Regulation and client advice)

Key Terms and concepts Insurance Regulatory and Development Authority (IRDA)

Foreign direct investment Life insurance council (LI Council)

Institute of Actuaries of India ( IAI)

Insurance Brokers Association of India (IBAI)

Insurance Institute of India (III)

Tariff Advisory Committee (TAC)

De-tarrification

IRDA ( Licensing of Insurance Agents) Regulations 2000

Cancellation of license Practical training Issue of license

Code of conduct Duplicate license

The role of Government

1 Power of the central government to supersede the IRDA

2 Relationship of central government with the IRDA

Foreign direct investment (FDI): Income tax incentives:

3 Role of the government in the growth of the industry

Key Indian and international insurance bodies

1 Insurance Regulatory & Development Authority (IRDA)

2 Life insurance council (LI Council)

3 General Insurance council (GI Council)

4 Insurance Brokers Association of India (IBAI)


5 Institute of Actuaries of India ( IAI)

6 Tariff Advisory Committee (TAC)

7 Insurance Institute of India (III)

8 National Insurance Academy (NIA), Pune

9 Chartered Insurance Institute( CII)

10 Institute of Insurance and Risk Management( IIRM), Hyadarabad

Duties, powers and functions of the IRDA and other regulators

Licensing of insurers: Licensing of Intermediaries: Functioning of insurers: Functioning of intermediaries: Guardian of best business practices: Framing of regulations and guidelines for smooth functioning of the business: Code of conduct for other stake holders: Promotion of industry:

1 IRDA

Other: 2 Reserve Bank of

India( RBI)

3 Securities and Exchange Board of India ( SEBI)

IRDA ( Licensing of Insurance Agents) Regulations 2000

1 Becoming an agent Regulation 3 : 2 Application Regulation 7 : Regulation 4 : 3 Qualification

4 Practical training Regulation 5 : 5 Examination Regulation 6 :


6 Issue of licensed 7 Renewal of license 8 Cancellation of license 9 Issue of duplicate

licensed 10 Operating without

license 11 Agent code of conduct

Sample Questions

Legislation gives which body, the power to specify a code of conduct for surveyors and loss assessors ? Institute of Insurance and Risk Management

Insurance Regulatory and Development Authority

Life Insurance Council Securities and Exchange Board of India

What key legacy has been left with Tariff Advisory Committee A central compensation fund

Customer classification status

Illustrative projection rates Standard policy wording


Chapter-14 (Customer Protection)

Key Terms and ideas Customer protection Prospectus Proposal to insurance Grievance Redressal

procedure Claim procedure Policyholder servicing Insurance ombudsman Settlement Award Recommendation Typical complaints Grievance management

system Grievance Redressal cell of the IRDA

Key features documents Consumer affaires department

Renewal of license

The importance of consumer protection

IRDA (Protection of Policyholders Interest) Regulation 2002

Prospectus: Material Information: Recommendations by agent:

1 Point of sale

Declaration: Policy document: Language: Oral record : Encourage for nomination:

2 Proposal of insurance

Proposal processing time limit:

3 Grievance Redressal procedure

Plan terms and conditions: Details of bonus: Details of benefits including riders : Commencement and maturity dates: Premium payment and grace period details : Requirements : Provisions and exclusions: Special clause and conditions : Procedures such as claims etc:

Matters to be stated in a life insurance policy

Age: Regulation 6 (1)

4

Regulation 6 (2)


5 Claim procedure 6 Servicing the

policyholders

7 What does it mean for Life Insurance agents

Typical complaints

Claim related complaints :

Policy servicing related complaints :

1 Complaints against Insurance companies

Policy lapse related complaints :

Regarding policy charges : Premium paying tenure told less then actual: Product not matching requirement:

2 Complaints against agents

Pros and cons not explained properly:

Handling customer complaints effectively

1 Consumer affair department

2 Integrated grievance management system (IGMS

Grievance Redressal mechanism: Grievance Redressal officer:

3

Internal grievance Redressal cell of insurers

Key feature document: Need analysis or suitability:

4 Other initiative by the IRDA to protect policyholders Guidelines for direct marketing:

Insurance Ombudsman

Claim related complaints :

1 The Insurance Ombudsman’s objective

2 Territorial


jurisdiction of Ombudsman

3 Function of Ombudsman

4 Manner of lodging a complaint

Withdrawal:/ Settlement : Recommendation : Award: Non acceptable/ not maintainable complaints:

5 Complain resolution process

Grievance Redressal Cell of the IRDA

A typical complaint process

1 Claim submitted 2 Life insurance

company

3

Life insurance company’s internal grievance Redressal Cell

4 Insurance company’s nodal officer

5 The insurance Ombudsman

6 Out come


Renewal of License

Sample Questions

Apart from conducting a comprehensive fact-find, the other main action that an agent can take at outset to minimize the risk subsequently receiving a customer complaint is to Ask for referral Offer commission rebate Provide detailed disclosure Register with the

insurance Ombudsman. An award made by the insurance Ombudsman will only be binding on the insurer if the Complainant accept the decision

Consumer forum is involved in the case

Insurer signs a disclaimer Value of the award is less than 2 lakh.


Chapter-15 (Ethics and code of conduct)

Key Terms and concepts Ethics Churning Discipline Unethical behavior Delay in claim settlement

Ethical codes Underpinning professional responsibilities

Overselling of insurance concept

Positive image Evaluation and monitoring Underselling of insurance politics

Embedding ethics

What do we mean by ethics?

Definition: Objective:

Typical unethical behavior

The overselling of insurance policies: The underselling of insurance policies : Churning : Delay in refusal to make a claim payment:

1 Dangers of unethical behavior

The business benefits of ethics

Positive image : Goodwill : Protection by both sides : Model for others:

1 The importance of ethics for individual and the insurance company

Typical ethical behaviour

1 Suitable recommendation


2 Full disclosure of features

3

In-adequate riders recommendation

4 Payment recommendations

5 Disclosure of terms and condition

Ethical frameworks including ethical codes

1 Ethical codes 2 Embedding ethics

Underpinning professional responsibilities

1 Objectives of the IRDA

2 Objective of the Life Insurance Council

Evaluation, monitoring and discipline

Lapses/ cancellations / free look-in-period : Complaint volumes : Analysis of product being offered:

1 Evaluation and monitoring

Revamping internal system and procedures: Disciplinary action against the offender:

2 Discipline


Code of conduct prescribed by the IRDA

1 Every agent shall

2 No insurance agent shall

3 insurance agent shall

need

4 Non adherence of the code of conduct

Sample Questions

A policyholder asked his insurance agent for guidance on submitting a claim for the maturity benefit under his life insurance policy. Due to pressure of work, the agent declined to assist. Consequently, this action is deemed to be breach of the General Insurance Council’s guidelines

Insurance Regulatory & Development Authority’s code of conduct

Insurance Ombudsman’s protocol

Insurance Brokers Associations of India’s membership rules

During the process of applying for life insurance, the customer disclosed confidentially to the insurance agent that he had a mild stroke four months ago, however this was NOT mentioned in the application form. In accordance with the IRDA’s code of conduct, how should the insurance agent deal with this information? Ask the policyholder’s doctor to send details to the insurer.

Notify the insurer of this matter.

Refuse to act for the customer in this case.

Respect this confidentiality by not disclosing it with anyone else.

Workbook Developed by: GROWMORE Content Development Team ©

Answer Key: Question # Answer Question # Answer Question # Answer Chapter -1 1 D 2 C 3 A Chapter -2 1 C 2 B 3 Chapter -3 1 B 2 A 3 D 4 D 5 B 6 C 7 D 8 C 9 D Chapter -4 1 D 2 C 3 D 4 B Chapter -5 1 A 2 D Chapter -6 1 C 2 A 3 C 4 D 5 B Chapter -7 1 C 2 C 3 A 4 D Chapter -8 1 D 2 C 3 B Chapter -9 1 B 2 D Chapter -10 1 D 2 A 3 A 4 D Chapter -11 1 D 2 D 3 C 4 A Chapter -12 1 D Chapter -13 1 B 2 D Chapter -14 1 C 2 A Chapter -15 1 B 2 B 3

Workbook Developed by: GROWMORE Content Development Team ©Contact Details: +917930060519 (Land Line) +919067659421/+919137712288Webpage: www.growmoreahmadabad.webs.comMail us : [email protected] MRP: Rs.125/-

Why this workbook?

While going through the new IC 33 courseware, we have reached on following conclusion:• This course is pretty much contemporary and useful for the agents, even beyond the licensing exam.• Those aspirant agents, who comes from non commerce back ground, this course is pretty difficult, they need to self study the subject, beyond the stipulated 50 hrs of training.

This has inspired us create this work-book, which can help the individual, who are aspiring to become an life insurance agent, for self study and understand the whole syllabus easily.

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