19 Page Summary of 15 Chapters

7/28/2019 19 Page Summary of 15 Chapters

1/19

Understand how the insurance market operates

SR Statement1 Health insurance policies and personal accident policies get broadly classified under non life insurance.

2 The concept of insurance involves a transfer of risk.

3 The main role of an underwriter in a non-life insurance company is normally to assess the acceptability of particular risks.

4 A human being is an economic asset, and has a capacity to generate the income within a finite life span.

5A professional life insurance agent not only assists the client in paperwork relating to buying a policy, but also provides after sales service and

assists in quicker settlement of claims.

6 An intermediary who can sell insurance of more than one company is broker.

7 As per present norms, the foreign partner can have maximum share holding of 26%.

8 Online sales is beneficial in reduction of costs as there is no intermediary and the savings can be passed on to the customer

9 E- sales is a constituent of insurance in direct marketing.

10 E- Sales marketing is through internet.

11 Foreign partners cannot hold more than 26% of capital in joint venture.

12Professional insurance market contributes to the wider economy by increase in employment generation and gaining higher confidence among

policy holders through increase in insurance penetration

13Information technology helps insurance companies to benefit their business by enabling their policy holders with services such as online

payment of premium, knowing status of policy, and receiving regular SMS.

14 Indian Insurance Industry is regulated by Insurance Act 1938 and IRDA Act 1999.

15 Insurance benefit society economically and socially.

16 Insurance brokers include direct brokers, re -insurance brokers and composite brokers.

17 Insurance business is divided into Life Insurance, Non-life Insurance and Re-insurance.

18 Insurance helps the individual as a tool for savings & investments, financial protection, and also tax benefits.

19Insurance is a process of transferring the risk from the owner(insured person), to another party (insurer) who can bear that risk, in return of

consideration (premium).

20 Insurance is a mechanism of risk transfer.

21 Call center is the latest initiative launched by IRDA addressing customer grievances

22 Min/ max cover in micro insurance is 5000/50000

23Professional selling in Insurance market not only helps to develop higher confidence in Insurance products by policy holders through higher

penetration of Insurance but also assists in career orientation

24 Professionalism in insurance market promotes need base selling and openness in dealing and disclosure.

25 TPA is Third Party Agreements.

26 Banca-assurance and Individual agents are indirect channel of insurance selling.

27Insurance cannot prevent the insured event from happening. Taking insurance can transfer the risk and only provide compensation for the loss

that comes as a result of the insured event happening.

28 Term insurance plans, endowment plans, and whole life plans are the main types of insurance products.

29 Insurance only provides compensation for the loss that comes as a result of insured event happening

30 According to the Insurance Act the insurance agent must have a license. Regulations must be complied with at all stages in the process.

Pre-recruitment qualification for life agents

Chapter 01

Chapter 01 Page 1 of 19


2/19

Understand risk and insurance in the context of the insurance market

SR Statement1 In insurance terms, a relatively cautious person has a increased likelihood to take an insurance cover.

2Under the term insurance policies, perils are risks that policyholders will die before a specified date where as hazards are factors which could

influence that risk.

3 In insurance terms, the risk of suffering a disability is best described as financial risk.

4 Hazard can be classified as physical hazard and moral hazard.

5 In a life time an individual is exposed to risks such as critical disease, retirement and death

6 Insurance works on the fundamental principles of pooling of risk, law of large numbers, and probabilities.

7 Life insurance mainly deals with two risk, they are premature death and living too long.

8 Life insurance mainly deals with two risk, they are premature death and living too long.

9 The components of risk are uncertainty, level of risk, peril and hazard.

10Risk can be explained as the chance of damage or loss, the doubt concerning the outcome of situation, or even something or some one

considered to be in potential hazard.

11 Dying early and living too long is a risk for an individual.

12 Peril refers to a specific event which might cause a loss.

13 Financial risk is one of the insurable risk.

14 Pure risk, particular risk, financial risk are the insurable risk.


Chapter 02



3/19

SR Statement1 A life insurance policy can only be made paid up if saving element exists.

2After customer has accepted the quotation issued by life insurer within the specified days of guarantee, the insurer can only decline this risk

if the material facts change.

3 TA policy document for a money-back policy includes the statement in its preamble the proposal and declaration signed by the proposer formthe basis of the contract.

4The insurer is entitled to ask for proof of continuing good health only in case a policy has lapsed and the policy holder wants to revive the

policy.

5 For a household insurance policy, insurable interest need only exists at outset and at the date a claim occurs.

6 Under a term insurance policy free look period is of 15 days from the date of receipt of the policy document.

7 Once an absolute assignment is effected under a life insurance policy, the assignee in all cases will be the titleholder(s) of this policy.

8 The concept of indemnity is based on the key principle that policyholders should be prevented from profiting from insurance.

9 A contract is valid if an offer is accepted unconditionally.

10 Age proof helps the company to decide the correct premium and profile of the customer.

11 Changes in policy can be made by endorsement.

12 Changes in policy can be made by endorsement.13 The proposer gives declaration that he has understood each term and condition on the proposal form.

14 Exclusion clause excludes certain benefits.

15 Indemnity is not applied to Life Insurance as it is a value contract.

16 Performance of contract is essential in Insurance contract

17 FPR contains name & address of the Life assured, Policy no ,Sum assured, date of maturity premium paid, and date of commencement of risk.

18 If the life assured dies before the policy document is received but after the FPR is issued then claim will be paid.

19 Premium is refunded after deducting certain charges when contract is withdrawn in the free look period.

20 Indemnity means compensation of loss to the extent of loss.

21 Insurable interest exists in husband and wife relation.

22Insurance companies collect the following information through proposal form: details relating to name age,height,weight,marital status ,health

other insurance plans, riders, and nomination23 Insurance is a contract between insurance company and the policy holder.

24 The company decides on the appropriate amount of insurance and premium to be charged based on material facts

25 An insurance policy is stamped under Indian stamp act.

26 Sec-45 is applicable in first 2 years of the policy and on revival.

27 Specified risk for which customer is covered is mentioned in the proposal form.

28 The client has the duty to complete the proposal form

29The First Premium Receipt contains the following information : Name and address of Life Assured, Method and frequency of Premium

Payment.

30 The terms and conditions mention the days of grace for payment of Premium and also the consequences of failing to pay the premium.

31 Proposal form is the basis of contract.

32 Utmost good faith is the duty of both the proposer and insurer


Chapter 03

Understand the principles and practices of life insurance



4/19

SR Statement

1Adjustments are made to the tabular premiums because of the health and occupation of the person insured and also the frequency of premium

payment.

2 An underwriter can accept the case at ordinary rate or with extra premium, or with lien.

3 An underwriter can accept the case with modified terms, or specified clauses, or even postpone the proposal.4 Financial underwriting is done to evaluate the possibility of moral hazard.

5 An interim bonus is valid till the next declaration of bonus.

6 Insurance is related to probable loss.

7 Premium is based on expectation of losses. Living too long is also a risk.

8 Person's quality cannot be insured. E.g. Strength of a wrestler cannot be insured.

9 Insurance does not prevent the risk. It only compensates to the extent the risk is covered

10 The minimum percentage of the surplus to be set aside for policyholders is 90%.

11The practice of charging level premiums is beneficial as it becomes convenient for the policyholder thus reducing the likelihood of lapses and

adds to the reserves of the insurer.

12 The practice of charging level premiums has the benefit of making it easy for the policyholder to maintain the insurance cover.

13 The premium actually paid by the policyholder depends upon the risk level as assessed by the insurer.

14 The premium is loaded because of likely expenses.15 The premium printed on the schedule of the policy is worked out from office premiums.

16The process of calculating the premium are calculate risk premium, based on risk premium calculate level premium, deduct the expected

interest on investment and add loading.

17 The proposal form and personal statement contain information relevant to determine level of risk, moral hazard and insurable interest.

18 The regulations issued by the IRDA, require that the decision on the proposal must be conveyed to the proposer within 15 days.

19The system of non medical underwriting is introduced because medical examiners are not available in all areas and most of the cases are

found to be standard lives acceptable at OR.

20 The underwriter can take decision to accept the proposal with a specific/modified clause.

21 Underwriter includes financial underwriter, medical underwriter, and non-medical underwriter.

22Underwriters collect information about proposer/ Life assured from medical examination report, proposal form additional report and insurance

agents report.23 The premium depends upon age medical history and family history of the person to be insured.

24 The premium depends upon neither the religion nor the income of the person to be insured.

25 A premium depends upon the decision of the underwriter.

26The medical report, the agents confidential report to the insurer and the medical referees advice, all are confidential and will not be given to

the proposer

27 The underwriter assesses the risk and no policy can be issued without the underwriters decision

28 The underwriter is an employee of the insurer and he/she determines the premium to be charged

29 An underwriter charges extra premium for physical hazards

30 A lien operates for a specific period and a clause excludes specific risks

31 Medical examination may be required before a policy can be issued

32 Underwriting is done, even if there are no medicals

33 The agent is expected to make his report commenting on the risk factors and it is important for the underwriter .34 By writing a truthful report, the agent is helping the insurer and the life to be insured

35 The proposal can be signed in any language.

36 A copy of the proposal has to be given to the proposer.

37 The rate of premium can be more than the tabular rates.

38 Premium rates are determined by the actuaries of insurers

39 Bonus is declared out of the surplus calculated by the actuary.

40 Bonus may vary between plans.

41The amount paid out by the insurer under a 30-year life insurance policy exceeded the sum insured plus revisionary bonuses. The excess is

likely to result from a terminal bonus.

42The main reason why a life insurance proposal form often asks for the proposers height is to enable a reasonable comparison with the

proposers weight.

43 Once the period of the lien expires normally the sum insured under a life insurance policy increases.

44 Life insurance policies operating under annually increasing flexible premiums generally apply a rate of 0,05.


Chapter 04

Understand underwriting for life insurance business



5/19

SR Statement1 A plan of insurance is said to be different from another if the conditions for payment of sum assured are different.

2 A plan of insurance is said to be different from another if the conditions when the sum assured becomes payable are different.

3 A plan of insurance is said to be different from another if the conditions when the sum assured becomes payable are different.

4 For the same age and benefits, the premium under a limited payment policy will be more than in a non-limited plan.5 For the same age and SA, the premium under an ordinary Whole Life policy will be less than in a limited payment Whole Life policy.

6 For the same age, SA and term, the premium under an Endowment policy will be less than in a limited payment Endowment policy.

7 Limited payment plan policies may be preferred by persons whose careers are likely to be short.

8 Limited payment plan policies may be preferred by persons who do not expect to be in active employment for long.

9 A pure endowment plan is the opposite of a term insurance plan.

10 In group insurance, there is only one proposal to insure many and one policy to cover many.

11 In group insurance, the proposal is made by the employer.

12 Group insurance covers a large numbers of persons in one policy and is relatively cheaper than individual insurance.

13 The members of a housing society can negotiate for a group insurance policy and a sports club can get a group policy for its members

14 Survival benefit means money back plan.15 Term Insurance is also known as only death benefit plan.

16 Various needs for which an individual requires financial protection are income protection, medical expenses , and children's education.

17 Life insurance products include both death cover and maturity benefit.

18 ULIPs provide flexibility, ULIPs give the option to participate in growth of capital markets. Loans are not given under ULIPs

19Child insurance plan offer the dual benefit of savings along with insurance and child is the beneficiary who is entitled to receive the benefit on

the maturity of the policy .

20 A joint life policy may cover a married couple under one policy

21 The premium under a joint life policy will be less than the cost for insuring the two persons separately

22 A whole life plan is basically a term insurance plan

23 The sum assured under some policies increase or reduce every year

24 The SA payable on death may be paid long after the death of the insured25 the SA maybe payed in lump sum or in installments, depending on the plan

26 A Whole Life plan is a term assurance plan with an indefinite term

27 In a limited payment policy, there is a maximum limit to the SA and term .

28 In a limited payment policy, the premium payment stops before the end of the term.

29 The educational annuity policy is an annuity policy meant for persons having young children

30 Only participating policies are entitled to the benefit of bonus

31 In a convertible plan, the conversion is done on the request of the policyholder

32 Convertible plans allow whole life plans to be altered to endowment plans

33 If the option of conversion is not exercised, the policy will continue as before

34 A conversion becomes effective when the policyholder exercises the option.

35 Money back policies are not convertible plan policies i

36 A variable insurance plan combines an insurance plan with an investment plan37 A variable insurance plan is good when investment conditions are favorable and when the stock market is booming.

38 Industrial assurance is meant for people with low incomes.

39 A salary savings scheme policy can be taken for a SA of Rs.10 lakh.

40 In a SSS policy, the policyholder has to ensure that premium is paid.

41 There is no death risk cover in an annuity and though called an annuity, the payments may be paid every month.

42 An annuity policy guarantees a pension

43 Annuities purchased during different years may all commence on the same date.

44 The premium under a SSS policy is paid monthly and is one twelfth the annual premium.

45The SA payable on death can be more than the SA payable on maturity and the SA payable on maturity can be more than the SA payable on

death

46 According to children's policies, the insured child becomes the owner of the policy on vesting date.

47 According to children's policies, both deferred date and vesting date are on policy anniversary.

48 Pure Endowment Plan is the opposite of term plan.

49 The employer is the master policy holder

50 The main protection need of a 19-year-old is most likely to be self protection.


Chapter 05

Understand basic life insurance products



6/19

SR Statement

1Financial goals of an individual may include the following; Building a contingency/emergency fund to meet unexpected financial difficulties

owing to a medical contingency, temporary job loss etc., and planning and investing for childrens higher education, and childrens marriage.

2 Saving products provides regular income and capital growth.3 Saving products include life insurance, bank deposits, and mutual funds.

4 Professional advisors can help individuals go through the financial planning process in which they identity their financial needs.

5

Individuals who have capital need to save for the following 3 reasons; to increase their existing wealth as much as possible for future needs,

to ensure that sufficient capital is left behind as an inheritance for their children, and to ensure that there is sufficient income for maintaining a

certain life style once they retire.

6If the Reserve Bank of India announces a series of significant interest rate increases, the prices of a wide range of shares held by an investor

are most likely to decrease.

7 Income needs are addressed in the form of interest payments received if the investments are directly done in corporate bonds

8 The equity-linked savings scheme, the national savings certificates and the endowment insurance policy are effective tax saving instruments.

9 The need for investment advice from an insurance agent normally results from lack of market knowledge

10 When undertaking financial planning for individuals without capital, savings towards an emergency funds is likely to be addressed in everysingle case.


Chapter 06

Understand savings products



7/19

SR Statement1 The changes in healthcare costs over recent years has had a rise in the need for cover as a general impact on healthcare insurance

2 The general need for a pension policy results from the existence of anticipated fall in income.

3The main purpose of the guaranteed insurability rider benefit is to give the policyholder the right to increase cover when a key life event

occurs.4 Health insurance premiums paid for self, spouse and dependent children qualify for deductible from individual's taxable income.

5 A rider that gives the right to the insured to increase insurance cover at various life stages is called guaranteed insurability rider.

6Annuity has an accumulation phase in case of deferred annuity. One may accumulate in any of the insurance company and chose to take

pension from any other insurance company.

7 Under annuity plans, 1/3rd of the corpus can be withdrawn a tax free the time of vesting

8 As per prevailing tax laws, the health policy premium qualifies for tax deduction from taxable income up to certain limit.

9 Cashless facility is available at network hospitals.

10 Immediate annuity plans are ideal for investors who have reached / nearing the age of retirement and have a corpus to invest as a lumpsum

11 Having a Health plan ensures that one may not have to wait to get the treatment benefit.

12It is necessary to take a Health Insurance cover at the earliest, not only because life is very uncertain but also as premiums increase with age

and the cost of healthcare is rising significantly with time13 If one has a group Health plan then he should buy individual health plan.

14 In case of ADBR, the rider death claim shall be paid only if the death is a result of an accident.

15 One can buy additional insurance cover with the help of term Rider in case of endowment and money back plans.

16 Permanent Exclusion in health Policy is misuse of drugs or not following doctor's advice.

17 The claim paid under a family floater health plan will depend on the surveyors.

18Mr X has taken a health insurance policy of 4 lacs from ABC.Later he got married and bought another policy for his wife for 4 lacs. This is an

example of Individual Health Insurance Plan.

19Mr Y has taken a LI policy with a base SA of 7lacs till 65.He opted for PAB rider of 5 lacs with an maturity age of 55 years. He met with

accident and died at the age of 57.His death claim will be 7 lacs.

20 A person aged 30 who wants to plan for his retirement should consider deferred annuity pension plan.

21 A person who is 40 years old and looking for retirement planning should consider retirement plan and health insurance cover.

22Under a daily hospitalization cash benefit plan an admission into the ICU for a critical illness entitles the policy holder to get a fixed amount on

a daily basis, additional amount for ICU, and lump sum amount for critical illness.

23 While taking health riders under a life insurance policy the amount of health rider can be upto the premium paid for the base policy

24Under option of Life annuity with return of purchase price incase the policy holder dies after taking pensions for some time, the future pension

stops and purchase price would be returned to the nominee.

25The amount of term rider under an endowment plan can be maximum upto the sum assured of the base policy. E.g. Mr A took a endowment

policy of 30 lacs for 20 years. He wants to buy a term rider. He can buy upto 30 lacs of term rider.

26 Mr B has died due to Accident. He had a base policy SA of 10 lacs and a ADB rider of 5 lacs.15 lacs will be the claim paid to his family.

27Mr C has taken a joint life annuity plan with his wife. The pension started at the age of 61 but his wife died at the age of 65. Mr C may

continue to get the pension at the 100% paid level.

28 For a policyholder who wants the pensions to continue for the spouse even in their own absence should opt for joint life annuity

29

Mr D met with the accident and was admitted in the hospital for his treatment. He recovered the injuries but got infected with typhoid while

he was in the hospital and subsequently died because of Typhoid.He had a base policy of 10 lacs and a ADB of 6 lacs.His death claim will be

10 lacs.

30 Riders offer additional cover at nominal cost, improve flexibility and provide tax benefits.

31

Under the Guaranteed period annuity the pensions will continue to be paid for a pre-fixed/ guaranteed term. While the policy holder is alive

he/she shall receive the pensions and incase he/she dies during the term the pension will continue to be paid to the beneficiary for the

remaining years of the guaranteed period

32Mr. E is covered under Group Health Insurance for 2 lacs and his wife is covered for 1 lacs. His wife had to undergo a surgery for 2 lacs. He

will get a maximum of 1 lac for the surgery.

33Under the Life annuity option the pension will seize and nothing will be refunded if the policy holder dies after annuities have started,

irrespective of how many pensions he has received.

34Mr. F met with an accident on 21st May 2010 and was admitted in the hospital. He died in Feb 2011 after undergoing the required treatments.

He had taken a policy of Base SA 5 lacs and a ADB rider of 2 lacs. The Death Claim that will be paid to his family will be 5lacs.

35The terms & conditions regarding pre existing illness are different with each company. Some will not cover the problems arising due to the pre

existing illness, while some may cover after a waiting period

36Incase a policy holder wants to buy term rider and critical illness rider in a policy of base SA of 20 lacs he/she can buy both the riders for SA of

20 lacs each.


Chapter 07

Understand other key financial products



8/19

SR Statement


Chapter 07

Understand other key financial products

37 The minimum guarantee in ULIP annuity is payable in case the policy holder pays all the premium or there is no withdrawal made.

38 To leave behind a corpus for the nominees in a retirement plan one must choose annuity with return of purchase price.

39 In annuity plan the pension is taxable.

40 Critical illness riders are available in few plans as declared by the company.41 The amount of Riders that can be taken is regulated by IRDA

42In annuity there may be an accumulation phase, post which 1/3rd of the accumulated fund can be withdrawn and the remaining 2/3rd must be

used to buy pension.

43 The riders will continue to operate in the entire term of the policy provided the rider premium is paid.

44 With effect from 1st September 2010,All ULIPs require a guaranteed minimum return of 4.50%.

45WOP riders help the policy to continue in case the policy holder becomes disabled due to illness or accident and in children policies in case of

death of premium paying parent.



9/19

SR Statement

1Apart from the individual's salary, the benefits of pension, life & health insurance are deeply impacted by whether the job is in the public or

private sector.

2 In the context of financial planning, real needs are actual needs and perceived needs are based on a clients thoughts and desires.

3 For a client who is nearing retirement, the foremost focus during his fact-finding session should be healthcare requirements and estateplanning

4 A client with sufficient needs available for investment might purchase different products based on diverse needs

5 Agent will ask about clients cash flows & their existing investment in fact find.

6An agent can ask different types of questions to help understand their clients needs & these questions can be classified by structure and

purpose.

7 An individuals employment status can influence their financial planning needs and investment capacity

8 An insurance agent should help his client to understand their real financial and protection needs

9 An insurance agents main task is to understand their clients needs and then recommend suitable products

10Any assets, which are no longer suitable or are earning fewer returns than expected, should be reviewed and cashed in for investment into

other assets.

11 Asking the client Do you wish to provide professional education for your children? is an example of closed ended question.

12 Based on the clients profession the agent will ask more details about it13 Clients may not be comfortable in discussing the timing of their death & what will happen to their family

14 Developing good listening skills is important for an insurance agent so that they are able to interpret the answers of the client correctly.

15 During the needs analysis any assumptions made by agent should be confirmed with the client

16Financial plan of the client needs to be reviewed once every 12 months or so to see if there are any changes in the clients needs & whether

the investments are doing as expected.

17 Good communication skills include a good command of the client's local language and dialect & friendly approach towards clients.

18 Just refresh my memory as to how concerned you are about your childrens education is an example of open ended question.

19 In classification by structure, questions can be of 2 types: Open ended and close ended

20 In Closed ended questions clients response is restricted to yes, no, a specific fact or a specific amount

21 Insurance agent needs to gather personal & professional data of the client using a form called fact find.

22 Insurance agent should calculate the monthly surplus available with client & this calculation is a part of process of prioritizing needs.

23 Insurance agents must be extremely careful in handling objections of the client

24 Insurance agents should help their clients to understand their current and future needs

25 Marital breakups can adversely affect the financial planning for individuals

26Once an agent has made their recommendations, some of the common objections that a prospective client may have are that "the products

doesn't meet my needs", "a competitor products are offering additional benefits" & "I don't have the funds for investment".

27 Questioning techniques include using different types of questions and the phrasing of the questions.

28 Questions asked by agent needs to be Personalized according to the client

29 Questions asked by agent needs to be put in simple terms that a client will easily understand

30 The agent may also record the address of clients family physician & the addresses of some close friends of the client in fact find

31 The family details section of the fact find will include number of members of their family, name, age & occupation of the family.

32 The need for life insurance is high amongst the self-employed33 The personal details section of the fact find will include client's name, age, marital status, address, and contact details.

34Tools that can be extremely useful in handling objections of clients are good communication skills, listening skills, asking appropriate

questions.

35 ULIPs is suitable investment plan for an individual who is young unmarried with no dependents.

36 ULIPs is suitable investment plan for DINK Couples.

37 While advising clients the insurance agent must be able to evaluate effectively, the information being provided to them

38 When an individual gets older, chances of obtaining life and health protection will be reduced.

39When both the partners work then financial dependency on one person is reduced. Such couples are also commonly known as Double Income

No Kids( DINK) Couples


Chapter 08

Understand the key considerations when identifying clients needs



10/19

SR Statement

1In order to fulfill the know your customer procedures, at the end of the presentation meeting in the financial planning process the insurance

agent is most likely to request a copy of the customers photograph.

2 Good fact finding not only reveals practical needs but also emotional considerations

3 If the client is residing in rented premises, monthly rent is a major necessary expenses4

Fact finding has an important objective is to identify the client need and also to identify the clients available contribution to invest in financial

planning products

5 Along with the completed form the agents have to submit both the cheque and identification documents.

6 It is wrong to show benefit illustrations at any return %ages apart from 6% or 10%.

7

Amit is the agent advisor and is doing the fact-finding of his client Anand. During a fact finding session with a client, the agent may ask about

clients house hold expenses, rent, utilities such as water, gas and other expenses and children education fees so that the agent can

understand funds which the client can contribute to financial planning and identify how best they can reduce the current expenses if desirable.

8 EPF stands for employer provident fund

9 Existing policies and investments help to reduce the amount of financial provision required to meet the clients financial objectives

10 EPFO stands for Employee Provident Fund Organization.

11 Fact finding form include details regarding financial detail, existing insurance, investment, monthly income and expenditure analysis.

12 Fact finding form includes details regarding financial objectives and considerations, personal details, and future changes.

13 Fact finding shows current financial position of the client, where he stands today and any anticipated changes in future.

14 Financial planning seeks to uncover any anticipated changes to the clients circumstances which will affect their current financial position

15Good fact finding must assemble the information to enable the advisor to quantify the amount required for each need and the provisions that

already exist to meet the need.

16During a fact finding interview the agent asks about employment details such as client's job profile, work place and the earnings to be able to

decide the premium, risk involved in his job and the income that the client has to be protected for.

17Taking the personal details of a client such as DOB, state of health, drinking and smoking habits helps in indicating eligibility of the client to

take an insurance policy, the premium rates applicable and the plan that is suitable

18Personal details such as age and state of health of family & dependents can help identify health insurance needs for the family and cost of

hospitalization to be borne in absence of an insurance cover

19 Most common form of fact finding record is a structured questionnaire

20Ram wants to accumulate money for his sons education. An agent through fact finding process can help a client to identify financial

requirement for fulfilling child's educational need from time to time.

21 An individual staying at his own house will face potential expenses of utility bills, property tax, repairs,etc.

22

Structured interview moves through making the client feel comfortable and relaxed - Explaining the fact finding process and its process The

information gathering session A discussion of priorities and clients personal concerns An agreement, in principle, of main problems to be

addressed by the advisor report.

23 The fact finding questionnaire can be completed through telephone interview or corresponding with client, or a formal interview.

24 Joint financial plans require information of each of the persons i.e. Husband and wife or business partners.

25 Significant assets of the client includes main residence, plots and lands, PPF and postal deposits.

26 Some companies use computerized questionnaire and some companies use structured questionnaire for fact finding27

The benefit illustrations shows the returns at 6% and 10 % returns, It distinguishes between guaranteed and non guaranteed benefits, It shows

all allowable charges levied by the insurer

28It is important to know the total liability of the client while suggesting him an insurance plan. Some aspects which contribute towards the

liability are outstanding loans and payments


Chapter 09

Understand the importance of completing a client fact find as part of the financial planning process



11/19

SR Statement

1A client has been recommended a low-risk investment product by his insurance agent, but the client insists the agent arranges for the money

to be invested in a higher risk product. The agent should Carry out these instructions, but document that this contradicts the recommendation.

2 Keeping the best interest of the client is the key indicator in determining whether the agent has provided an ethical advice3 The main purpose of including commission details in the documentation to clients is to increase transparency.

4 Insurance policy holders would have a reduction in benefits as an impact of low persistency levels

5 Insurance Regulatory & Development Authority has laid down the Code of Conduct for all agents.

6 Good questioning technique can help agents identify the real objections of the clients during sales presentations.

7 A life insurance agent receives remunerations in form of Commission

8 A satisfied client will lead to higher chances of up selling, word of mouth publicity and more reference generation for the agent.

9According to new regulation of IRDA , an agent should obtain a signed copy of benefit illustration together with proposal form from the client

mandatory for all premium size.

10 Agents are at the best position to judge risk profile of the client for the insurance company.

11Agents duty is to not only identify clients needs and provide best available product solution but also help the insurer to avoid adverse

selections.

12 Agents should regularly keep updating themselves not only with their company products but also with competition companies product , tobecome more professional.

13 An agent acts as an intermediary between insurer & customers

14 An agent can receive maximum of 35% of the premium as commission in the first year

15 An agent commission is governed by IRDA regulations.

16 An agent plays an important role in maintaining persistency

17 An Agent should disclose his/her commission rates on a product to the client.

18 An insurance agent can be paid a max of 40% of the 1st year premium only during the 1st 10 yr of the insurer's business.

19Assistance by agents to the clients for better policy services include- helping in making changes in nominations as per clients request &

ensuring change in address is properly followed and maintained by insurer.

20 Before explaining the recommendation in detail, the agent must explain the reason for recommending a certain policy,

21 Before suggesting some products to the clients an agent should ensure that it should match clients needs and requirements.

22Persistency; benefits the clients by helping them achieve their goals, benefits the company by increasing its revenue. and keeps the earning of

the agent through renewal commission

23Churning means- Repeatedly encouraging clients to switch policies or invest in other policies & recommending clients to surrender their

existing policy and invest again in a new policy.

24 Churning results in clients suffering loses in form of surrender charge

25

Circumstances where policy surrender may be recommended could be- Situation in which client has been mis sold and the policy fails to

match his needs. or incase when holding the policy does not prove of good value for money for the client or if client might be facing acute

financial crisis and has desperate need to reduce expenditure or reschedule the debts.

26 Definition for Insurance Agents is clearly mentioned under section 42 of Insurance Act 1938

27During outlining the reasons on recommendations of any policy the agent should highlight the features & benefits of the policy & present a

chart comparing the policy with other available policy

28Duty of Insurance Agent is to provide the best available product solutions for clients needs & to avoid adverse selection for the insurance

company.29 For soliciting & procuring business, an agent has to get license from IRDA

30 Higher persistency helps the insurance companies to maintain profitability & reduce administration costs

31 If dissatisfied , the clients have the right of going for grievance hearing to various authorities.

32 If benefits and returns of the product are not attractive , the client might choose to surrender the policy

33 If the client disagrees with the prioritized needs the agent will have to revise the financial plan.

34 If the client disagrees with the recommendation the agent must ask further questions to find out the reasons for refusal.

35If the client disagrees with the recommendations of the agent on a policy , then the agent must ask further questions to find out the reason of

refusal.

36In case of rejection of the recommendation of the product by the client , the agent should review the product again as per the need of the

client or ask the client to contact him/ her again at a future date.

37In Insurance Persistency refers to the amount of business that insurance companies are successful in retaining without lapse or surrender of

the policy.

38Increased Client satisfaction happens when- Agent regularly remains in touch with the client, and provides policy servicing as required. Further

the company also takes steps like regularly sending reminders and policy fund status to the client for increasing the client satisfaction levels

39Insurance agents should adhere to code of conduct of IRDA, respect fellow agents and give recommendation based on fact finding exercise for

the clients.


Chapter 10

Understand what constitutes good client practice and persistency



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SR Statement


Chapter 10

Understand what constitutes good client practice and persistency

40 Insurance churning practice will lead to the benefit of Insurance agent to earn a higher commission on the new policy.

41 Insurance Companies should look at building long term relationship with clients

42 Insurance license is issued by IRDA

43 Insurer has to disclose the rate of commission for ULIP plan. It is available in benefit illustration documents.44 Short term thinking sometimes leads agents to do churning & product switching.

45 Low persistence adversely affects insurance company, clients & agents.

46 Lower commission rates are applied to- Term insurance, Single premium and annuity plans.

47Maintaining high persistency ratio helps the insurer in reducing administration costs, earning higher revenue due to regular premium payments

across the term & having better expense ratio management.

48 Major characteristic of all profession is to adhere to professional code of conduct.

49Mis selling & mis guiding by agents sometimes in the past has led to surrender of policy by clients and also has created a bad reputation for

the insurance company.

50 Other than pension plan maximum commission an advisor can earn on 1st year premium is 35%

51 Section 42 of the Insurance Act 1938 refers to Licensing of Agents.

52 Some times the clients decide to surrender the policy due to financial crisis in day to day life, or unemployment related issues.

53 Surrendering of policy is not beneficial for either the Insurance company, or the Policy holder or the Agents.54 Switching policies or investment from one to another is known as churning.

55 The agent should never recommend a policy without giving any reasons to the clients.

56The agent should take feedback at every stage of recommendation during presenting a policy as this will help in understanding the clients

needs / feelings.

57 The benefit illustration document shows the details of charges and growth of the fund expected over a period of time.

58A policy can be surrendered in situations where client has been mis-sold policies that do not match their needs, or when clients are holding

products that are not good value for money or when clients are facing some financial difficulties

59The client can reject the agents recommendations if the client doesn't want to make any financial commitment as on yet, or he wants to take

some time and check other options for investment or he is not satisfied with the agents recommendation.

60The clients decision to act differently from agents recommendations may emerge any time during the process of financial planning i.e. at the

time of fact finding, presentation or appointment booking.

61 The commission on renewal premiums due to agent must not exceed 4%62 The commission rates are lower in single premium products

63The ethical behavior of the agent to display includes- Listening and recommending product solution as per the need of the client, Keeping his

Mobile phone in silent mode during the sales call & Showing respect to the views of the customers.

64 The Growth of the fund to be shown in Electronic benefit illustrations, is Six percent & ten percent

65As per the IRDA regulation W.E.F from 1 July 2010 , All insurer have to disclose explicitly the commission of the agents for ULIP's Products, in

the Electronic Benefit Illustrations

66 The job of a life insurance agent is not over until a maturity/ other claim made is settled.

67 The main contact point with insurance company for client is Insurance agent

68

The main duties and responsibilities of an insurance agent are- to help legal beneficiaries & nominees with the claim settlement process when

a claim arises, to help clients to make any necessary changes on the proposal & to ensure the remittance of premiums by the policy holder on

or before due date by giving notice both orally & in writing.

69 The main Responsibilities of Agents are Analysis of Client needs.70 The Process to be followed by agents during need analysis is Research to prepare a unified financial recommendation

71 The Remuneration of agents is governed by IRDA

72 The tool used to identify the need of the client is called Fact finder.

73 Voluntarily closing of the existing policy by the policyholder is called Surrender

74 When client asks for comparison of recommended product with other financial product, the agent should give comparison as asked by clients.

75Insurance agent act as an intermediary between the insurance company and the clients & also has the responsibility of obtaining business for

his company.

76 An agent must look after the interest of the insurer as well as the proposer.

77 The agent has to disclose the scales of commission with respect of the insurance product offered for sale, if asked for

78 Agent should disclose his commission when asked by the client on the particular product.

79 The agent should not hide the charges and other facts of the products



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SR Statement

1In accordance with Section 44 of the Insurance Act 1938, renewal commission due to an insurance agent after the termination of his agency

can only be withheld if there is fraud involved.

2 A trust has to be appointed under the Married Women's Property Act

3 According to sec 41(1) of Insurance act 1938 , the agent who does not comply with the Prohibition of Rebate clause will be fined Rs 500

4 All members of the IRDA are appointed by Govt of India

5An agent can make his own advertisement and publish it in a news paper , soliciting Insurance products, only if it has been approved by the

insurer in writing.

6As per IRDA guidelines on AML , every insurance company must appoint a Principal Compliance Officer, train the agents & intermediaries on

AML policies and conduct internal audits for better control

7Compliance of Prevention of Money Laundering Act is mandatory for Reserve Bank of India, Securities Exchange Board of India & Insurance

Regulatory and Development Authority.

8 Solvency margin means whether the insurer has enough resources to satisfy IRDA that they are able to pay all claims at any given time.

9 Antique & art dealers, film stars & money exchangers are considered as high risk customers under AML guidelines

10 Layering is one of the stages of Laundering the Money.11 India's Life Insurance business in the present form owes its origin from England

12Insurance Act 1938 , contains provision relating to the Manner of Premium Investment, Rural & Social Sector & Maintenance of Insurer's

Solvency Margins.

13 Insurance Act 1938 came into effect from July 1st ,1939

14 Insurance Act 1938 has provision for Prohibition of Rebates.

15 Integration on Money Laundering process means Creating an Impression of an apparent legitimate explanation for the illegal proceeds.

16 IRDA Act 1999 led to the amalgamation of Insurance Act 1938, LIC Act 1956 & General insurance act 1972

17 IRDA is a Corporate Body

18IRDA regulations pertains to protecting the interest of the policyholder, regulating , promoting promote and ensuring orderly growth of the

Insurance Industry & other insurance related matters

19 IRDA replaced controller of Insurance in administering the provision of Insurance act20 Its mandatory for all insurance Company to abide with the Anti Money Laundering policy and accordingly file a copy with IRDA.

21 KYC needs to be carried out even after policy is issued.

22 Life Insurance Company act 1956 regulates the provision for nationalization of Life Insurance Business in India.

23 Salaried employees are low risk customers according to AML guidelines.

24No Agent can be denied renewal commission due to them on renewal premium , in respect of life insurance business in India if there is no

fraud involved.

25 No one can go ahead and solicit Insurance business if he/she has not passed the pre recruitment test as he is neither an agent or Intermediary

26 Prevention of Money Laundering came into effect from July 1st , 2005 , to control corruption in India

27 Prohibition of Rebating is specified in Sec 40 B(1) OF Insurance Act 1938

28 Resident Indians can take Insurance outside India

29 RPG stands for Redressal for Public Grievances30 Sec 40 A (1) of Insurance Act 1938 carries clause on Remuneration of commission for unlicensed agents

31 Sec 40 B (1) of insurance Act 1938 , prescribes limits on expenses of management of life insurance business

32 The First Insurance regulatory act was Life assurance Companies Act 1912

33 The first Life Insurance Company to be established In India was Oriental Life Insurance Company

34 The first statutory legislation to regulate Insurance business in India was Insurance Life Assurance company Act

35 The GBIC comprises of representation from Chairman / Director / Managing director of all Insurance companies.

36The important clauses pertaining to Agents in Insurance Act 1938 , are- Licensing of Agents, Commission payable to agents & Prohibition of

Rebates.

37 The Insurance act 1938 is the most Important Legislation passed in India.

38 The Life Assurance Company Act 1912 , stipulated the periodical valuation of Insurance company by actuary.

39 The majority of the disputes regarding Insurance arises because of repudiation & delays in claims.

40 The Redressal for Public Grievance ( RPG) Rules contain provision for Appointment and office term of Insurance Ombudsman

41 The state level courts under COPA 1986 , can hear insurance disputes upto a value of Rs 10,00,0000

42 The threshold of premium to be paid in cash is limited to Rs 50000

43 Two or more trustees can be appointed under MWPA

44 Under COPA 1986 , the district level courts can hear cases upto an insurance value of Rs 20,00,000


Chapter 12

Understand how relevant legislation affects client advice



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SR Statement

1 Legislation gives Insurance Regulatory and Development Authority the power to specify a code of conduct for surveyors and loss assessors

2 The Standard policy wordings has been left as a key legacy by the activities of the Tariff Advisory Committee

3 An Agent applying for duplication of license has to pay a fees of Rs 504

Applicant for Insurance agent license, coming from a place with more than 5000 population base as per the last census has to be minimum

PUC II or should have equivalent standard pass educational qualification

5 CII stands for Chartered Insurance Institute

6 FDI ( Foreign Direct Investment ) in India for Insurance Sector is limited to Twenty six percentage

7 Federation of insurance Institute formed in 1955 was renamed as Insurance Institute of India in 1987

8 IRDA was incorporated as statutory body in April 2000

9 Life Insurance council was constituted under sec 64 Insurance ACT 1938

10Mission of IRDA is to protect the Interests of the Policyholders, Regulate Insurance Business & Promote and Ensure Orderly Growth of

Insurance Business.

11One of the major provision made by central Govt towards the growth of the Insurance Business in India has been to allow foreign investment

in Insurance Sector

12 Life Insurance council plays a leading role in insurance education , through training and conferences as one of the functions13 The annual statement of Accounts of IRDA must be certified and Audited by Comptroller and Auditor General of India

14 The apex recognized body for Insurance Brokers is IBAI

15 Insurance Institute of India (III) conducts pre recruitment exam for Insurance Agent licensing

16 The Central Govt has given tax benefits Under sec 80 C on premium payment for the year

17 The fees to be paid to IRDA for applying for Life Insurance Agent is Rs 250

18 The general insurance Council relates to managing Insurance Interest of only General ( Non Life ) Insurance.

19 The Insurance Brokers represents the Insurance Buyers

20 The IRDA can cancel the license of the Insurance agent if the agent is found to be of unsound mind by the court.

21 The license for insurance Agent is valid for 3 years

22 The process of freeing the pricing of insurance and allowing the insurer to price their products on risk assessment is called De- tariffication

23 25 hours of training is required for renewal of license for insurance agents24 Under the currently prevailing law , the maximum limit for Investment by FDI is 26%

25 Grants, Returns, Annual statements and particulars of Accounts are the bridge between relations of IRDA & Central Govt of India

26The Life Insurance Council is responsible for creating a positive image of industry and enhancing customer satisfaction, promoting awareness

of purpose and benefit of Life Insurance & to be active link between life insurance and global market.

27

Central Govt of India after due appropriation with Parliament can issue Grants to IRDA for the use of purpose of the ACT. The central GOVT of

India has the Power to make rules for carrying out provisions of ACT ,and may do this by Notification. Central Govt of India can issue

directions to IRDA On questions of Policy.


Chapter 13

Understand how insurance regulation affects client advice



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SR Statement1 An award made by the Insurance Ombudsman will only be binding on the insurer if the complainant accepts this decision..

2Apart from conducting a comprehensive fact-find, the other main action that an insurance agent can take at outset to minimize the risk of

subsequently receiving a customer complaint is to provide detailed disclosures.

3 A complaint can be lodged with IRDA by calling IGCC on the toll free number 1552554 A complaint can be lodged with IRDA by emailing IGCC at [email protected]

5According to IRDA 2002 regulation for protection of policyholders interest the prospectus should clearly state the scope of benefits, whether

the product is with profit or without profit, exceptions and other conditions

6According to IRDA regulation , the prospectus of Insurance company should clearly specify the extent of Life insurance Cover & the that

benefits arising out of Riders should not exceed the SA under the basic product.

7An agent can help in controlling grievance of the policyholder by giving correct product information during the initial sales call, demonstrating

and reviewing the fact finding accurately & disclosing all features ,charges of the products during the sales call

8Before lodging complaint with Insurance Ombudsman , the Complainant Should have made a representation to the Insurer and the insurer

should have rejected or failed to respond within stipulated time frame to the complainant

9Customer Protection in insurance industry is very critical because of Low Financial Literacy level in India & Insurance is not well understood in

India.

10 Customers can register their complaint with the insurance Company through calling up the customer care, writing Email to companies helpdesk & registering a complaint with officer at branch office.

11 Grievance redressal officer is also known as Nodal Officer by some insurance companies

12 If the award is unacceptable by the Complainant , then he can approach Court of Law, Consumer court or the Arbitrator.

13 IGCC has made easy access to grievance redressal cell of IRDA , by Telephone or emailing facility , for the policy holders.

14 IGCC stands for IRDA Grievance Call Center.

15IGMS provides defined TAT on all complaints, grievance registered sharing between Insurance company and IRDA Repository & a standard

platform to all insurer to resolve policyholder grievance.

16In case of non usage of Proposal form , the Insurer will have to obtain and record the information orally or in written and there of confirm with

the proposer by incorporating the same in its cover note or policy .

17 Indisputability clause is stated in sec 45 of Insurance act of 1938

18 Insurance companies in order to make profit should keep interests of Agents, Customers & IRDA into consideration

19Insurance companies must respond within 10 days for any communication sent by policyholders pertaining to providing current status of

policy, noting an assignment & providing guidance on settlement of claims

20 Insurance Ombudsman will reject the complaint if the complainant approaches it directly.

21IRDA (Protection of Policyholders Interest ) regulation 2002 , covers points regarding the prospectus, statements in the policy documents &

settlement of claims.

22 IRDA in consultation with Insurance advisory committee issued the regulations for protection of policy holders in 2002

23 IRDA is not vested with all the power of adjudication

24IRDA now can have complete access over Grievance redressal system across Insurance companies through IGMS ( Integrated Grievance

Management System)

25IRDA regulation 2002 have taken adequate measures to look after the protection of Policyholders through Consumer affair Department,

Integrated grievance management system & IRDA Grievance cell.

26 IRDA will be able to monitor central repository of insurance grievance data through Integrated Grievance Management System

27Its important for the agents to get the grievance resolved as early as possible, guide the policyholder through proper channel on grievance &

add personal touch to the process of solving grievances.

28 Its the responsibility of the insurer to communicate the details of Insurance Ombudsman to the policyholder along with the policy documents.

29 Policyholders or legal heirs of Policyholders can approach District Court under COPA-

30Some reasons for lower penetration of life insurance business in India are- some people do not appreciate the importance of life insurance,

Some people prefer to live with the risk rather than transferring it & Some people are not aware of the benefits of Life insurance.

31 Sometimes the grievance for policyholders arises due to financial literacy issues

32The Agent /insurance company / intermediary are bound by the code of conduct as laid by IRDA, Insurance Council & the recognized

professional body or association of which the intermediary is a member.

33 The agent is a intermediary between client and the insurer

34 The Agents and the insurance companies should keep the interest of the policyholders at the heart while performing their roles

35The aggrieved person's complaint to Insurance Ombudsman in the jurisdiction under which the insurer office falls must be in writing and

addressed to relevant Insurance Ombudsman

36The Clients can face problems/grievances with agents/insurance companies during initial selling stage, renewal premium payment stage or

claim settlement stage.


Chapter 14

Understand the importance of and the process in place for customer protection



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SR Statement


Chapter 14

Understand the importance of and the process in place for customer protection

37The common grievance with regard to insurance occur with the policyholders on claim settlements, policy terms & conditions & policy

servicing.

38The complainant upon not receiving satisfactory solution from Nodal Officer /Grievance redressal officer may approach Appellate Authority,

who has been named by the Insurance Company as the next highest officer .39

The cooling off /free look period is given to the policyholder to review the product he / she has purchased and if disagreeable , then the

policyholder should return the policy with stating the reason , to the insurer within 15 days of receiving the policy documents

40 The agent should be ethical and transparent in dealings with a client and should provide the relevant information accurately.

41The duty of the Ombudsman is to promote a settlement by agreement through Mediation & conciliation between the Complainant and the

Insure

42 The Institution of Insurance Ombudsman was created in 1998 by Govt of INDIA Notification

43 The insurer carrying out life insurance business must respond within 10 days of the receipt of any matter from its policyholders .

44The internal grievance redressal system works in two tier system that includes registering a compliant with the helpline or Insurer office &

Escalation of Complaint to the nodal officer /appellated authority.

45The IRDA regulation stipulates that the decision to be undertaken and communicated by the insurance company to the proposer should happen

within Fifteen days of receiving the Proposal form

46 The main objective of Ombudsman office is to resolve complaints related disputes with regard to term or premium paid of the policy & Nonissue of policy documents

47

The objective of Consumer affair department is to give special focus to and oversee the compliance by the insurer of the IRDA Regulations on

protection of policyholders interest & empower consumers by educating the process and mechanism that are available for redressing

grievance.

48 The policyholder can go to the following for any Insurance related grievance Insurer internal grievance cell, Insurance Ombudsman, or COPA

49The time frame for Insurance Ombudsman to give a recommendation on the receipt of complaint lodged before him is Not later than one

month

50There is a steady increase in the number of complaints being brought to insurance ombudsman , thereby showing higher faith by policyholders

on Ombudsman

51To curb mis-selling , IRDA has recently taken another new initiative which will make the proposal product matrix before the sales actually

happen. This initiative is called Need analysis & Suitability mechanism52 To protect the policy holder interest is an ongoing process done by all key stake holders

53 Typical complaints from customers against insurer include issues related to claims or Policy lapse or premium amounts

54With regard to complaint logged with Insurance Ombudsman, the complaint must be written and addressed to the relevant Insurance

Ombudsman in the jurisdiction under which the Insurer office falls

55 Understating the benefits of the products cannot be termed as a typical complaint surveyed from customers on agents

56 The complainant cannot approach the Insurance Ombudsman simultaneously along with complaint lodged with Consumer court

57 Insurance Ombudsman can reject complaints if they feel there is no loss or damage or inconvenience suffered by the complainant

58Low customer protection leads to high level of dissatisfaction. Transparency in transactions during the entire life of the policy ensures fair

treatment to the customer.

59 Insurance companies are required to honor the award passed by insurance Ombudsman within 15 days

60A well informed & satisfied client is a brand ambassador for the agent & its absolutely important to keep the policyholders interest ahead of

agents interest.61 Insurer should provide complimentary copy of proposal form within 15 days of the acceptance of the proposal

62 License will not be renewed if less than certain specified percentage of policies sold by them are not renewed in a given year

63 Any special clauses or conditions should be mentioned in the policy documents

64 Good service will help in building successful career



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19 Page Summary of 15 Chapters

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Transcript of 19 Page Summary of 15 Chapters