Insurance Regulations, Agents Sales Process (3).pptx

Insurance regulations PPT

1. Insurance regulations

2. Grace Period Additional time given to policy holder to pay up the premium to avoid the lapse of the policy. The Grace period may be different for premium terms. Generally 30 days for an annual premium. The policy holder can’t claim if the premium is not paid in time. Even during the grace period. Lapse and Revival The policy is deemed as lapsed if not paid even during the grace period. The insurance company gives some time to the policy holder to pay up the premium in order to reactivate the lapsed policy. Loan availability Also called as pledging. The insurance company allows the customers to take loan against the policy. Recap - Commonly used Terms in Insurance

3. Non Forfeiture Provisions That an insured is eligible to get partial refund of the premiums paid after the lapse or due to non payment of the premiums. Nomination , Assignment & Appointee Nominee is a person appointed by the insured who can receive the amount in case of demise. Appointee is named when nominee is a minor – to take care of proceeds. Assignment is transfer of policy rights, ownership & interest to another person or entity. Basic concepts of underwriting Underwriter – Quantifies the risk and claim amount and in process set the insured’s insurance & premium accordingly. Medical Underwriting – Assess the risk involved in insuring an individual or company and decide on premium amount. Non-Medical Underwriting – Assess potential customer’s background information & financial status. Underwriters also review insurance forms for compliance and adherence. Solvency Ratio, Persistency & Claim paid settlement ratio

4. Types of Claim Death Benefit Claim Maturity benefit claim Rider benefit claim Property, Liability and Life Section 45 of Insurance Act 1938 Insurance Co. can’t question the policy or customer after it has completed 3 years from date of issuance. Claim Procedure – Life Insurance & Health Insurance Ombudsman Is empowered to address and resolve the grievances of the policy holders Actuary Ensure the profitability of the organization & calculate risk to decide on premium amount. Fund Managers Fund Manager has to multiply the funds by reinvesting the funds in market. Underwriter Evaluates whether you are eligible for the quoted premium ; represents the company

5. Specialized Insurance Products and Services These specialized insurance products and services cater to unique risks and situations that standard insurance policies might not adequately cover. They offer tailor made solutions to protect individuals, businesses, and organizations from specific liabilities and uncertainties related to their respective fields or activities

6. 1. Professional Liability Insurance A lso known as errors and omissions (E&O) insurance, is designed to protect professionals from claims arising due to negligence, errors, or omissions in their professional services. This type of insurance is essential for individuals or companies providing specialized services, such as doctors, lawyers, architects, and consultants. Ex : Imagine a financial consultant provides investment advice to a client. If the client suffers financial losses due to the consultant's recommendations and decides to sue for damages, the professional liability insurance would cover legal expenses and potential settlements. 2. Directors and Officers Liability Insurance This offers coverage for the personal liability of directors and officers of a company in case they are sued for alleged wrongful acts while managing the company. This coverage protects their personal assets from claims made by shareholders, employees, or other stakeholders. Ex: If a company goes bankrupt and its shareholders blame the directors and officers for mismanagement, D&O liability insurance would cover the legal costs associated with defending against such claims

7. 3. Cyber Insurance C ybersecurity insurance or data breach insurance, helps organizations manage and mitigate the financial impact of cyber risks and data breaches. It covers expenses related to data breaches, including legal fees, notification costs, and potential lawsuits. Ex : A company experiences a cyberattack that compromises sensitive customer data. Cyber insurance would cover the costs associated with notifying affected customers, hiring cybersecurity experts to assess the breach, and potential legal actions resulting from the breach. 4. Environmental Liability Insurance Environmental liability insurance provides coverage for costs related to environmental cleanup, restoration, and legal liabilities arising from pollution or environmental damage caused by a business operation. Ex : A manufacturing company accidentally spills hazardous chemicals into a nearby river, causing environmental damage. Environmental liability insurance would cover the costs of cleaning up the pollution, restoring the affected area, and addressing legal claims from regulatory authorities or affected communities.

8. 5. Special Event Insurance Special event insurance, also known as event liability insurance, is designed to protect organizers and participants of events from financial losses due to unexpected cancellations, property damage, or injuries that may occur during the event. Ex : An outdoor music festival is planned, but due to severe weather conditions, it has to be canceled. Special event insurance would cover the costs associated with ticket refunds, venue rental fees, and other pre-paid expenses.

9. Value-Added Services Provided by Insurance Advisors Risk Assessment and Analysis Insurance advisors assess clients' unique risk profiles. They analyze clients' personal or business situations to identify potential risks that need coverage. This personalized approach ensures clients get tailored insurance solutions. Coverage Customization Advisors understand that a one-size-fits-all approach doesn't work in insurance. They customize insurance packages to meet specific needs, ensuring clients aren't over-insured or under-insured.

10. Policy Comparison Advisors provide clients with a comparison of different policies from various insurance providers. This empowers clients to make informed decisions by weighing coverage features, benefits, and costs. Claims Assistance In the unfortunate event of a claim, advisors guide clients through the claims process. They act as intermediaries between clients and insurance companies, ensuring smooth and timely claims settlement. Annual Policy Review Advisors conduct regular policy reviews to ensure that coverage remains relevant as clients' needs evolve. This proactive approach helps clients avoid gaps in coverage. Education and Awareness Advisors educate clients about insurance concepts, terms, and options. They help clients understand the intricacies of insurance policies, empowering them to make confident choices. Value-Added Services Provided by Insurance Advisors

11. Risk Mitigation Strategies Beyond insurance, advisors offer risk management advice. They suggest strategies to minimize risks through safety measures and best practices. Loyalty Rewards and Discounts Advisors may have access to loyalty programs and discounts offered by insurers. They ensure clients benefit from such opportunities, saving on premiums and enhancing value. Emergency Support In crisis situations, advisors provide support, guiding clients on the immediate steps to take, such as contacting authorities and insurers. Value-Added Services Provided by Insurance Advisors

12. Relationship between Insurance Management and Risk Management Insurance management and risk management are closely intertwined concepts, both crucial for individuals and businesses to navigate uncertainties and mitigate potential losses. Insurance Management Insurance management involves the process of identifying risks and choosing appropriate insurance solutions to address them. It focuses on selecting the right type and amount of insurance coverage based on a person's or organization's needs. Risk Management Risk management, on the other hand, is a broader concept that encompasses identifying, assessing, and mitigating risks. It involves analyzing potential threats, evaluating their impact, and implementing strategies to minimize or eliminate them. While insurance is one aspect of risk management, it also includes other methods such as - risk avoidance, risk reduction, risk transfer, and risk acceptance.

13. The Life Insurance Contract The final aspect of life insurance is the contract. Its significance comes from the term sum assured. This amount is contractually guaranteed, making life insurance a vehicle of financial security . T he e l e m e n t o f g u arant e e a l s o i m p l i es t h at l i f e i n s uran c e i s s ub j e c t to stringent regulation and strict supervision. Life insurance contracts, we must remember, involve both risk cover and a savings element. This makes it a financial product like other products in the financial market.

14. Ad v an t ages Safe and secure investment Discipline Investment management Provides liquidity Income tax advantages Safe from creditors’ claims

15. D i s ad v an t ages Relatively stable returns it is subjected to the corroding effect of inflation Life insurance policies, reduces the amount of money accumulated.

16. Types of Goals

17. Life Stages and Priorities Learner [till say age 20 -25] Earner [from 25 onwards] Partner [on getting marriage at say 28 -30] Parent [say 28 to 35] Provider [say age 35 to 55] Empty Nester [age 55 to 65] Retirement – the twilight years [age 60 and beyond]

18. Three phases of economic life cycle Student Phase The first phase is the pre-job phase when one is typically a student. This is a preparatory stage for taking up responsibilities as a productive citizen. The priority is developing one’s skillsets and enhancing one’s human capital value. Working Phase The phase of work begins somewhere between the ages of 18 to 25 or even earlier, and may last for 35 to 40 years. During this period, the individual tends to earn more than he consumes and thus begins to save and invest funds. Retirement Phase In the process he accumulates wealth and builds assets which would provide funds for various needs in the future including an income in later years, when one has retired and stopped working.

19. FINANCIAL PLANNING Financial planning is a process of identifying one’s life’s goals, translating these identified goals into financial goals and managing one’s finances in ways that will help one to achieve those goals. Financial planning is a process through which one can chart a roadmap to meet expected and unforeseen needs in one’s life. It involves assessing one’s net worth, estimating future financial needs, and working towards meeting those needs through proper management of finances. Financial planning is taking action to turn one’s goals and desires I n to reality.

20. Role of financial planning Financial planning Investing - allocating assets based on one’s risk taking appetite, R i s k m a n a g e m e n t, Ret i r e m e n t pl a n n i n g , T ax a n d estate pl a n n i n g , a n d F i n a n c i n g o n e ’ s n e e d s Challenges Disintegration of the joint family Multiple investment choices Changing lifestyles Inflation Other contingencies and needs

21. Importance of insurance regulations An insurance agent should always bear in mind that he / she is selling a promise that the insurance company will pay a certain amount of money if a misfortune occurs. The insured person would undoubtedly have many worries about the insurance that is being purchased

22. Common concerns of an insured Is the insurance legal? Are insurance agents recognised by law? Are these insurance companies regulated or supervised? Is the document given to me by the insurer legally valid? Will the insurance company pay me the money if a loss happens? Will they pay me the full money that is due to me? If I do not get a claim, can I go to court based on the documents they have given me? Are t h ere a n y hi d d e n p ro v isio n s i n t h e ins u ran c e c o n t r a c t wh e reby t h e insurance company can avoid paying me a claim? Do I have to go through any complicated procedures to get my claim paid?

23. Why are insurance regulations required? The prime purpose of insurance regulation is to protect the policyholder. The policy holder has paid the money and bought the insurance policy. I nsurance is an absolutely legal contract Government is duty bound to protect all its citizens and all entities in the country Regulations made by IRDA are to ensure that insurance companies should exist as financially sound organisations to honour the contracts that they have entered into.

24. Entities regulated by IRDA

25. Insurance regulatory framework in India The Insurance Act, 1938 The Insurance Regulatory & Development Authority Act, 1999 Other legislations The Wor k m e n's C om p e n s a tion Act, 1923 ( a m e n ded and re n amed as Employees Compensation Act in 2010) – Emplo y ee s ’ S t ate Insu r ance Act, 1948 – Life Insu r ance Corporation Act, 1956 – Deposit Insurance and Credit Guarantee Corporation Act, 1961 – Marine Insuran c e A ct, 1963 – E x po r t C r edit Gua r ant e e Corporation Act, 1964 – General Insurance Business (Nationalisation) Act, 1972 – General Insurance Business (Nationalisation) Amendment Act, 2002 – Mo t or V ehicles A ct, 1988 – Public Liability Insu r an c e Act, 1991

26. Rules governing licensing of insurance agents Qualifications of the applicant – The applicant must possess the minimum qualification of a pass in 12 th standard or equivalent examination. Disqualifications of the applicant Is a minor , Is of unsound mind , Found guilty of criminal misappropriation Guilty of knowingly participating in or has connived at any fraud ,

27. Practical training The first time applicant for agency licence shall have completed from an IRDA approved institution, at least, fifty hours’ practical training in life or general insurance business, which may be spread over two to three weeks. The first time applicant seeking licence to act as a composite insurance agent shall have completed from an IRDA approved institution, at least, seventy five hours practical training in life and general insurance business, which may be spread over two to three weeks.

28. Examination The applicant shall have passed the pre-recruitment examination in life or general insurance business, or both, as the case may be, conducted by the Insurance Institute of India, Mumbai , or any other ‘examination body’. IC 38 Certification – Valid only for 3 years. Min score required is 35%

29. Recap Regulatory Framework Governing Insurance Management in India : The IRDAI was established in 1999 to regulate and promote the insurance sector, ensuring its stability, growth, and protection of policyholders' interests. The regulatory framework includes various guidelines, regulations, and norms that insurance companies, intermediaries, and professionals must adhere to. The key aspects of the regulatory framework include Licensing and Registration The IRDAI mandates that insurance companies, agents, brokers, surveyors, and other intermediaries must obtain licenses and registrations before conducting business in the insurance sector. Product Approval Insurance products need IRDAI's approval before they can be offered to customers. This ensures that the products are transparent, fair, and aligned with policyholder interests.

30. Solvency Margin and Capital Requirements Insurance companies must maintain a minimum solvency margin to ensure their financial stability. The framework also specifies capital requirements based on the type of insurance business. Investment Regulations The regulatory framework defines the investment limits and categories for insurance companies to manage their funds prudently. Claim Settlement Guidelines The IRDAI sets guidelines for fair and timely claim settlements, protecting the rights of policyholders. Recap

31. Compliance Requirements and Licensing Procedures To operate within the insurance industry in India, professionals and entities must comply with specific requirements : Insurance Agents and Brokers Individuals interested in becoming insurance agents or brokers must undergo training from IRDAI-approved institutions. They must pass a qualifying exam and then apply for a license. Insurance Surveyors Surveyors assess the extent of damage or loss during claim settlement. They need to be licensed by IRDAI after fulfilling certain educational and experience criteria. Insurance Companies Insurance companies must meet capital requirements and comply with solvency margins. They need IRDAI's approval for product offerings and must adhere to investment regulations.

32. Compliance Reporting All entities must regularly submit financial and operational reports to the IRDAI to ensure transparency and compliance with regulations. Ethical Considerations in Providing Insurance Advice Insurance advisors and intermediaries are entrusted with significant responsibilities in providing insurance advice ethically : Transparency Advisors must provide clear and accurate information about policy terms, coverage, benefits, and costs to customers. Conflict of Interest Advisors must avoid situations that could compromise their objectivity, such as recommending policies solely for personal gain. Recap

33. Client's Best Interest Advisors should prioritize the client's interests above their own or the company’s. Confidentiality Advisors must maintain the confidentiality of client information and use it only for insurance-related purposes. Informed Decision-Making Advisors must empower clients with adequate information to make well-informed decisions about their insurance coverage. Upgradation of Knowledge & Education Advisors should stay updated about evolving insurance products, regulations, and ethical standards to provide accurate advice. Indian insurance industry is governed by a robust regulatory framework that emphasizes professionalism, ethical conduct, and customer protection. Complying with these regulations and adhering to ethical considerations is crucial for maintaining the integrity and stability of the insurance sector in India. Recap

34. Thank you Mr Chander Mohan Gupta School of Business Management Shoolini University Village Bajhol, Solan (H.P) [phone] (Mob No.) chander m o h a n@s h o olini u ni v ersi t y .com