Unit III Irm

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UNIT – III

General Insurance
General Insurance Business - Fundamental Principles of General Insurance – Types - Fire
Insurance Marine Insurance – Motor Insurance – Personal Accident Insurance – Liability
Insurance –Miscellaneous Insurance – Claims Settlement
What is general insurance business?
General insurance is an agreement between a policyholder and insurer wherein the insurance
company protects your valuable assets from fire, theft, burglary, or any other unfortunate
accident. Often, general insurance is confused with life insurance.
General Insurance Business
Property Insurance: This type of insurance provides coverage for physical properties such as
homes, buildings, factories, and other structures against risks like fire, theft, vandalism, and
natural disasters like earthquakes or floods.
Motor Insurance: Also known as auto insurance or vehicle insurance, this type of insurance
provides coverage for vehicles against risks such as accidents, theft, and damage to third-party
property.
Liability Insurance: Liability insurance protects individuals and businesses from the risks of
being held legally liable for injuries or damages caused to other people or their properties.
Examples include public liability insurance, professional indemnity insurance, and product
liability insurance.
Health Insurance: Health insurance covers medical expenses incurred due to illnesses,
accidents, or hospitalization. It provides financial assistance for healthcare services, including
hospitalization, surgeries, medications, and preventive care.
Travel Insurance: Travel insurance offers coverage for unforeseen events that may occur while
traveling, such as trip cancellations, medical emergencies, lost baggage, or travel-related
accidents.
Marine Insurance: Marine insurance provides coverage for ships, cargo, and other maritime-
related risks, including damage or loss of goods during transit by sea, air, or land.
Miscellaneous Insurance: This category includes various specialized insurance products that
cover specific risks not covered by other types of insurance, such as pet insurance, event
insurance, and cyber insurance.
What is the fundamental principle of general insurance?
In the insurance world there are six basic principles that must be met, i.e. insurable interest,
Utmost good faith, proximate cause, indemnity, subrogation and contribution. The right to insure
arising out of a financial relationship, between the insured to the insured and legally recognized.

Fundamental Principles of General Insurance


1. Principle of Utmost Good Faith
This is a primary principle of insurance. According to this principle, you have to disclose all the
information that is related to the risk, to the insurance company truthfully.
You must not hide any facts that can have an effect on the policy from the insurer. If some fact is
disclosed later on, then your policy can be cancelled. On the other hand, the insurer must also
disclose all the features of a life insurance policy.
2. Principle of Insurable Interest
According to this principle, you must have an insurable interest in the life that is insured. That is,
you will suffer financially if the insured dies. You cannot buy a life insurance policy for a person
on whom you have no insurable interest.
3. Principle of Proximate Cause
While calculating the claim for a loss, the proximate cause, i.e., the cause which is the closest
and the main reason for a loss should be considered.
Though it is a vital factor in all types of insurance, this principle is not used in Life insurance.
4. Principle of Subrogation
This principle comes into play when a loss has occurred due to some other person/party and not
the insured. In such a case, the insurance company has a legal right to reach that party for
recovery.
5. Principle of Indemnity
The principle of indemnity states that the insurance will only cover you for the loss that has
happened. The insurer will thoroughly inspect and calculate the losses. The main motive of this
principle is to put you in the same position financially as you were before the loss. This
principle, however, does not apply to life insurance and critical health policies.
6. Principle of Contribution
According to the principle of contribution, if you have taken insurance from more than one
insurer, both insurers will share the loss in the proportion of their respective coverage.
If one insurance company has paid in full, it has the right to approach other insurance companies
to receive a proportionate amount.
7. Principle of Loss Minimization
You must take all the necessary steps to limit the loss when it happens. You must take all the
necessary precautions to prevent the loss even after purchasing the insurance. This is the
principle of loss minimization.
What is General Insurance?
Insurance is our saviour from any unexpected situation that might disrupt our normal life and
well-being. There are two types of Insurance, viz. Life Insurance and General Insurance. While
people have slowly realised the importance of Life Insurance and have become aware of it, they
are still unaware of the varied list of General Insurance products that cover a diverse range of
risks.
1. Property Insurance: Property insurance provides coverage for physical properties such as
homes, buildings, factories, and other structures against risks like fire, theft, vandalism, and
natural disasters like earthquakes, floods, hurricanes, and storms.
2. Motor Insurance: Also known as auto insurance or vehicle insurance, motor insurance
provides coverage for vehicles against risks such as accidents, theft, and damage to third-party
property. It typically includes insurance for cars, trucks, motorcycles, and other vehicles used for
personal or commercial purposes.
3. Liability Insurance: Liability insurance protects individuals and businesses from the risks of
being held legally liable for injuries or damages caused to other people or their properties.
Examples include:
Public Liability Insurance: Covers damages and legal costs arising from injuries to third parties
or damage to their property on the insured premises or due to the insured's operations.
Professional Indemnity Insurance: Protects professionals (such as doctors, lawyers, architects,
and consultants) against claims of negligence or errors and omissions in the course of their
professional services.
Product Liability Insurance: Provides coverage for businesses against claims for damages or
injuries caused by defective products they manufacture or distribute.
4. Health Insurance: Health insurance covers medical expenses incurred due to illnesses,
accidents, or hospitalization. It provides financial assistance for healthcare services, including
hospitalization, surgeries, medications, and preventive care. Health insurance may also include
coverage for dental care, vision care, and mental health services.
5. Travel Insurance: Travel insurance offers coverage for unforeseen events that may occur
while traveling, such as trip cancellations, medical emergencies, lost baggage, or travel-related
accidents. It may also include coverage for emergency medical evacuation, trip interruption, and
travel delays.
6. Marine Insurance: Marine insurance provides coverage for ships, cargo, and other maritime-
related risks, including damage or loss of goods during transit by sea, air, or land. It includes
various types of marine insurance policies such as hull insurance, cargo insurance, and freight
insurance.
7. Miscellaneous Insurance: This category includes various specialized insurance products that
cover specific risks not covered by other types of insurance. Examples include:
Pet Insurance: Provides coverage for veterinary expenses and medical treatments for pets.
Event Insurance: Offers protection against financial losses incurred due to cancellation,
postponement, or disruptions of events such as weddings, concerts, festivals, and conferences.
Cyber Insurance: Covers losses and liabilities arising from cyber attacks, data breaches,
identity theft, and other cyber risks faced by individuals and businesses.
What is of fire insurance?
A fire insurance policy is a type of property insurance policy, which covers the damages and
losses caused to a residential or business property due to fire.
Coverage: Fire insurance policies typically cover damage or loss to property caused by fire,
lightning, and sometimes other related perils like explosion or implosion.
1. Coverage: Fire insurance policies typically cover damage or loss to property caused by fire,
lightning, and sometimes other related perils like explosion or implosion.
2. Types of Properties Covered: Fire insurance can cover various types of properties, including
residential homes, commercial buildings, industrial facilities, and personal belongings within
those properties.
3. Coverage Limits: Policies may have coverage limits, which specify the maximum amount the
insurer will pay out in the event of a covered loss. These limits can vary based on the type of
property insured and the terms of the policy.
4.Premiums: The premium for fire insurance is determined based on several factors, including
the value of the property, its location, the construction materials used, fire protection measures in
place (such as fire alarms or sprinkler systems), and the insurer's assessment of the risk of fire.
5. Exclusions: Fire insurance policies may exclude coverage for certain risks or situations, such
as intentional acts of arson, war, nuclear events, or natural disasters like earthquakes or floods.
Policyholders should carefully review the policy terms and exclusions to understand the scope of
coverage.
6. Additional Coverages: Depending on the insurer and the policy chosen, additional coverages
may be available, such as coverage for smoke damage, firefighting expenses, debris removal,
and loss of rental income.
7. Claim Process: In the event of a fire-related loss, the policyholder must promptly notify the
insurance company and file a claim. The insurer will investigate the claim, assess the damages,
and determine the appropriate compensation based on the terms of the policy.
What is Marine Insurance? Meaning of Marine Insurance
Marine insurance policies are available to everyone who has an insurable interest as per Section
5 of the Marine Insurance Act 1906 (MIA). A marine policy covers loss or damage to cargo or
goods during transportation from the point of origin to the point of destination. There are several
types of marine insurance policies, including those for road, rail, air, and sea transportation, as
well as those for courier and postal services.
Marine Insurance types
1. Coverage for Maritime Risks: Marine insurance provides coverage for various risks
encountered at sea, including damage to ships, cargo, and other maritime property, as well as
liability risks arising from marine operations.
2. Types of Marine Insurance Policies: There are different types of marine insurance policies
tailored to specific maritime interests, including hull insurance for ships, cargo insurance for
goods transported by sea, and liability insurance for ship-owners, charterers, and maritime
businesses.
3. Protection against Perils: Marine insurance covers a wide range of perils, including damage
or loss due to storms, collisions, piracy, theft, fire, sinking, grounding, and other maritime
hazards.
4. Comprehensive Coverage: Marine insurance policies offer comprehensive coverage for both
physical damage to vessels and cargo and financial losses resulting from maritime accidents,
such as business interruption, salvage, general average, and sue and labor expenses.
5. International Scope: Marine insurance is essential for global trade and transportation,
providing coverage for shipments and vessels traveling across international waters and
through .various maritime jurisdictions.
6. Importance for Trade and Commerce: Marine insurance facilitates trade and commerce by
providing financial protection to cargo owners, exporters, importers, and shipping companies
against the inherent risks of marine transportation.
7.Legal and Regulatory Requirements: Marine insurance may be required by international
conventions, such as the Hague-Visby Rules or the Carriage of Goods by Sea Act, as well as by
contractual agreements between parties involved in maritime transactions.
8. Role of Marine Insurers: Marine insurance is typically provided by specialized marine
insurers, underwriters, and P&I clubs with expertise in assessing and managing maritime risks
and claims.
9.Customizable Coverage: Marine insurance policies can be tailored to meet the specific needs
and requirements of maritime businesses, including coverage limits, deductibles, policy
extensions, and additional endorsements.
10. Freight insurance
This section addresses the loss of freight. If the goods are lost or damaged, or the ship is lost, the
shipping business will not be held liable. This insurance can compensate them for their loss.
11. Liability insurance
The ship could be involved in a collision, crash or piracy attack. In such cases, the valuable cargo
is put at great risk. Furthermore, the lives of crew members and others on the ship are in
jeopardy.
Motor Insurance
What is Motor Insurance?
Vehicle insurance or motor insurance is similar to any other insurance coverage, except that it is
mandatory. As the name implies, it is insurance for all types of motor vehicles - motorcycles,
cars, jeeps, commercial vehicles, and so on. The government has made motor insurance
necessary for your protection and the safety of others.
Motor Insurance types
1. Third-Party Liability Insurance: Third-party liability insurance is the most basic and
mandatory form of motor insurance in many countries. It covers the insured's legal liabilities
towards third parties for bodily injury, death, or property damage caused by the insured vehicle.
This type of insurance does not cover damage to the insured vehicle itself.
2. Comprehensive Insurance: Comprehensive insurance provides coverage for a wide range of
risks, including damage to the insured vehicle as well as third-party liabilities. In addition to
covering third-party liabilities, comprehensive insurance typically includes coverage for theft,
vandalism, fire, natural disasters, and accidents.
3. Collision Coverage: Collision coverage specifically protects the insured vehicle against
damages resulting from collisions with other vehicles or objects, regardless of fault. It covers the
cost of repairing or replacing the insured vehicle due to collision-related damages.
4.Personal Injury Protection (PIP) or Medical Payments Coverage: PIP or medical payments
coverage reimburses the insured and passengers for medical expenses incurred due to injuries
sustained in a covered accident, regardless of fault. It may also cover lost wages and other related
expenses.
5. Uninsured/Underinsured Motorist Coverage: This type of insurance provides coverage for
bodily injury or property damage caused by uninsured or underinsured motorists. It helps protect
the insured against financial losses if they are involved in an accident with a driver who lacks
sufficient insurance coverage.
6. Gap Insurance: Gap insurance covers the "gap" between the actual cash value of the insured
vehicle and the amount owed on an auto loan or lease in the event of a total loss due to theft or
severe damage. It helps the insured avoid financial loss if the insurance payout is insufficient to
cover the outstanding loan or lease balance.
7. Rental Reimbursement Coverage: Rental reimbursement coverage reimburses the insured
for the cost of renting a replacement vehicle while their insured vehicle is undergoing repairs due
to a covered loss.
8. Towing and Labor Coverage: Towing and labor coverage provides reimbursement for
emergency roadside assistance, towing services, and labor costs incurred due to vehicle
breakdowns or mechanical failures.
What is Personal Accident Insurance?
Personal Accident insurance or PA insurance is an annual policy which provides compensation
in the event of injuries, disability or death caused solely by violent, accidental, external and
visible events. It is different from life insurance and medical & health insurance.
1. Coverage for Accidental Death: Personal accident insurance typically provides a lump sum
payment to the insured's beneficiaries in the event of the insured's death due to an accident. This
payment can help cover funeral expenses, outstanding debts, and provide financial support to the
insured's dependents.
2. Coverage for Permanent Disability: Personal accident insurance may also offer
compensation in the event of permanent total disability or permanent partial disability resulting
from an accident. The policy defines the criteria for determining the extent of disability and the
corresponding compensation payable to the insured.
3. Coverage for Temporary Disability: Some personal accident insurance policies include
coverage for temporary total disability, which provides financial assistance to the insured if they
are temporarily unable to work due to injuries sustained in an accident. This coverage typically
offers weekly or monthly benefits for a specified period, subject to a waiting period.
4. Medical Expenses Coverage: Personal accident insurance may reimburse the insured for
medical expenses incurred as a result of an accident, including hospitalization, surgery, medical
treatments, and rehabilitation costs. The policy may have limits on the maximum amount
payable for medical expenses and may require the insured to pay a deductible.
5. Accidental Death and Dismemberment (AD&D) Coverage: Some personal accident
insurance policies offer AD&D coverage, which provides additional benefits for specific types of
injuries or losses, such as loss of limbs, eyesight, or hearing, resulting from an accident. The
policy specifies the compensation payable for each covered injury or loss.
6.24-Hour Coverage: Personal accident insurance typically provides coverage worldwide and
applies 24 hours a day, regardless of whether the insured is at work, at home, or traveling. This
ensures continuous protection against accidents, whether they occur during leisure activities,
commuting, or while on duty.
7. No Medical Underwriting: Personal accident insurance policies often do not require medical
underwriting or pre-existing condition exclusions. This makes it easier for individuals to obtain
coverage without undergoing medical examinations or disclosing their medical history.
What Is Liability Insurance?
Liability insurance is an insurance product that provides protection against claims resulting from
injuries and damage to other people or property. Liability insurance policies cover any legal
costs and payouts an insured party is responsible for if they are found legally liable.
Types of Miscellaneous Insurance
Travel Insurance: Provides coverage for trip cancellations, medical emergencies abroad, lost
luggage, and other travel-related mishaps.
Wedding Insurance: Protects against unforeseen events such as vendor cancellations, extreme
weather, illness, or accidents that could disrupt or cancel a wedding.
Pet Insurance: Covers veterinary expenses for illness, accidents, and sometimes routine care for
pets.
Event Insurance: Protects against financial loss from events such as concerts, conferences,
festivals, or weddings being canceled, postponed, or interrupted due to unforeseen
circumstances.
Special Event Liability Insurance: Provides liability coverage for individuals or organizations
hosting events to protect against claims of bodily injury or property damage caused during the
event.
Professional Liability Insurance (Errors & Omissions): Covers professionals against claims
of negligence or inadequate work performance that result in financial loss for their clients.
Surety Bonds: Guarantees performance of obligations or fulfillment of contracts, typically
required in construction, real estate, and other industries.
Credit Insurance: Protects lenders from the risk of non-payment by borrowers due to
bankruptcy, default, or other circumstances.
Identity Theft Insurance: Covers expenses incurred as a result of identity theft, such as legal
fees, lost wages, and costs associated with restoring one's credit.
Cyber Liability Insurance: Provides coverage for losses resulting from data breaches, cyber
attacks, and other cyber threats, including costs associated with data recovery, legal fees, and
regulatory fines.
Tenant Insurance: Protects renters' personal property against losses due to theft, fire,
vandalism, or other covered perils, and may also include liability coverage.
Boat Insurance: Covers boats and personal watercraft against damage, theft, and liability while
on the water.
Event Cancellation Insurance: Covers financial losses incurred due to the cancellation,
postponement, or disruption of planned events, such as concerts, sports events, or conferences.
Kidnap and Ransom Insurance: Provides coverage for ransom payments, legal fees, and other
expenses associated with kidnappings or extortion threats.
Claims Settlement..
What is an insurance settlement?
An insurance settlement is the payment that an insurance company offers to a customer in
response to a claim.
The settlement is the final amount paid to the customer, after their claim has been adjusted (and
assuming their claim is covered by their policy). Once the insurer pays the settlement, the claim
is settled—another way of saying it’s closed or resolved.
Settlement types
Cash Payment: The insurance company directly reimburses the policyholder for the covered
loss in the form of a cash payment. This is the most straightforward and common method of
claims settlement.
Replacement: In cases where the insured item is damaged or destroyed, the insurance company
may provide a replacement item of equal value instead of cash.
Repair: Instead of providing cash or replacement, the insurance company may arrange for the
repair of the damaged property or vehicle. This is common in auto insurance claims for minor
damages.
Reimbursement: The policyholder pays for the covered expenses out of pocket and then
submits receipts or invoices to the insurance company for reimbursement.
Settlement Negotiation: In some cases, especially with complex or disputed claims, the
insurance company and the policyholder may negotiate a settlement amount that both parties
agree upon.
Structured Settlement: Instead of a lump-sum payment, the insurance company may agree to
make periodic payments to the policyholder over a specified period, often used in cases
involving large sums of money or long-term needs, such as for personal injury claims.
Denial: If the insurance company determines that the claim is not covered by the policy or that
the policyholder is not eligible for benefits, they may deny the claim outright. Denials can be
appealed by the policyholder if they believe the decision was made in error.
Partial Payment: Sometimes, the insurance company may determine that only a portion of the
claimed loss is covered by the policy. In such cases, they may make a partial payment to the
policyholder.
Excess Payment: In situations where the policy includes a deductible or excess, the insurance
company will pay only the amount of the claim that exceeds the deductible, and the policyholder
is responsible for paying the deductible amount.
Interim Payment: In cases where the claim process is prolonged or complex, the insurance
company may make interim payments to the policyholder to cover immediate expenses while the
investigation or evaluation of the claim is ongoing.

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