Insurance Management

Section A: Objective Type & Short Questions (30 marks)

Part one: Multiple choice: (Each 1 Mark) (Total 100 Marks)

1. India‟s first insurance company was established in

a. 1818
b. 1817
c. 1718
d. 1950
Ans: 1818
2. The word „Ombudsman‟ in Insurance means
a. Appointment of an official to sell the goods.
b. Appointment of an official to inves<gate the complaints.
c. Appointment of an official to inspect the quality of goods.
d. Appointment of an official to supervise the work force.
Ans: Appointment of an official to inves1gate the complaints.

3. Insurance is a
a. Contract
b. document
c. Agreement
d. Both (a) & (b)
Ans: Both (a) & (b)

4. „Asha deep‟ is an Insurance

a. Related to dreaded disease or death
b. Related to theI
c. Related to fire
d. Related to crops
Ans: Related to dreaded disease or death

5. „Actuary‟ is
a. A book that contains death data
b. A book that contains sta<cs of produc<on
c. A person expert in sta<cs
d. A person expert in agent ship
Ans: A person expert in statics

6. „Snobbish‟ customers are :

a. Self loving or egoist customer
b. Those who lack confidence
c. Those who take quick and immediate decision
d. Logical customers who ask a lot of ques<ons
Ans: Self loving or egoist customer
7. What stands for „I‟ in AIDAS related with the knowledge of selling process
a. Ideal
b. Idol
c. Income
d. Interest
Ans: Interest

8. Endowment Policy is
a. Sum of Term Assurance and Pure Endowment
b. Difference of Term Assurance and Pure Endowment
c. Sum of Endowment Assurance and Pure Endowment
d. Difference of Endowment Assurance and Pure Endowment
Ans: Sum of Term Assurance and Pure Endowment

9. In case of Suicide in India

a. It is not a crime
b. It is a crime
c. It has no rela<on with the Insurance Policy
d. None of the above can be said
Ans: It is not a crime

10. USP stands for

a. Unique Sales Promo<on
b. Unique Sales Process
c. Unique Selling Proposi<on
d. None of the above
Ans: Unique Selling Proposition

Part B (Each 5 Marks)

1. Elaborate the functionality of „Married Women‟s Property Act‟ of India
Ans: Functionality of the 'Married Women’s Property Act' of India: The act secures
married women's rights to own and manage property independently of their husbands. It
protects their assets from being claimed by their husbands' creditors and ensures that
property acquired before or during marriage remains solely under the woman’s control,
promoting financial autonomy and gender equality.
2. What are the necessary documents that have to be submitted for getting a License
for agent ship in Insurance Business?

Ans: Necessary documents for Insurance Agent License: To obtain a license for
agentship in the insurance business, the following documents are typically required:

• Proof of identity (e.g., Aadhar card, passport)

• Proof of address (e.g., utility bill, rental agreement)
 • Educational qualifications (e.g., degree certificate)
• Completed application form
• Passport-sized photographs

3. Mention any two Insurance Policies for Handicapped.

Ans: Two Insurance Policies for Handicapped:

• Disability Income Insurance: Provides a regular income if the insured becomes

disabled and unable to work.
• Critical Illness Insurance: Covers specific severe illnesses, providing a lump sum for
medical treatment and financial support.

4. What is „Charter Parity‟?

Ans: Charter Parity: Charter parity refers to the equal treatment of different types of policies
or coverages within the insurance framework. It ensures that all insured parties receive
equitable benefits under similar circumstances, promoting fairness and consistency in claims
handling.

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Section B: Caselets

Caselet 1 (Each 20 Marks) (Total 40 Marks)

Question:
1: What are the basic factors required as you feel for further improvement in Pricing?
Ans: To improve pricing strategies in the insurance sector, several factors should be
considered:
• Customer Insights: Understanding customer needs and preferences through market
research can help tailor pricing models that align with their expectations.
• Competitive Benchmarking: Analyzing competitor pricing can ensure offerings
remain attractive while maintaining profitability.
• Cost Management: Regularly assessing operational costs helps in determining
sustainable pricing that covers expenses without sacrificing competitiveness.
• Technology Utilization: Leveraging data analytics and technology can facilitate
dynamic pricing based on real-time market conditions and customer behavior.
• Regulatory Compliance: Ensuring that pricing strategies comply with regulatory
requirements while remaining competitive is crucial.
• Value Communication: Clearly communicating the value of insurance products to
customers can justify pricing and enhance perceived value.
2: According to some industry watchers, the big players like Reliance the Tata, and the Birlas
contribute to almost 30% of the total premium collected by GIC and its four subsidiaries. And
to the extent, GIC and its subsidiaries could see their business shrink. Comment.
Ans: The significant contribution of large players like Reliance, Tata, and Birla—amounting
to about 30% of the total premium collected by GIC and its subsidiaries—indicates potential
challenges:
 • Market Share Pressure: GIC may experience shrinking market share if it fails to
innovate and compete effectively against these dominant players.
• Pricing Strategies: The presence of these large competitors may lead to aggressive
pricing strategies, potentially forcing GIC to lower premiums, impacting profitability.
• Customer Expectations: Big players often enhance service quality, which raises
customer expectations. If GIC does not match these standards, it risks losing clients.
• Innovation and Adaptation: GIC must invest in product innovation and improved
services to remain relevant in a highly competitive landscape shaped by these
influential market players.
In summary, GIC and its subsidiaries need to adapt their strategies to maintain
competitiveness in light of the influence exerted by major players in the insurance market.

Caselet 2

Question:

1: What according to you, ABCL should have used to claim its best insurance refunds?

Ans: To calculate the amount of claim for the loss of stock due to the fire at ABC Co. Ltd.
and to determine the best approach for claiming insurance refunds, we can follow these steps:

1. Calculate the Closing Stock at the Time of Fire

Stock Calculation:

• Opening Stock (1st April 1999): Rs 30,00,000

• Purchases (1st April 1999 to 15th December 1999): Rs 88,00,000
• Total Stock Available for Sale:

Opening Stock+Purchases=30,00,000+88,00,000=1,18,00,000\text{Opening Stock} +

\text{Purchases} = 30,00,000 + 88,00,000 =
1,18,00,000Opening Stock+Purchases=30,00,000+88,00,000=1,18,00,000

• Sales (1st April 1999 to 15th December 1999): Rs 1,05,00,000

Cost of Goods Sold (COGS):

• COGS: Total Stock Available for Sale−Closing Stock\text{Total Stock Available for
Sale} - \text{Closing Stock}Total Stock Available for Sale−Closing Stock
• To find the closing stock, we need to calculate the COGS first. Assuming a certain
level of stock is left, we can set up the equation as follows.

Closing Stock Calculation:

Using the cost of goods sold:

• Sales from April 1999 to December 1999 = Rs 1,05,00,000

 • Since the cost of purchases rose by 10%, we can assume the cost of goods sold will
also have to adjust accordingly. However, for simplicity, we’ll estimate the closing
stock without further adjustments for now.

1. Estimated Closing Stock: Closing Stock=Total Stock Available−Sales\text{Closing

Stock} = \text{Total Stock Available} -
\text{Sales}Closing Stock=Total Stock Available−Sales
Closing Stock=1,18,00,000−1,05,00,000=13,00,000\text{Closing Stock} =
1,18,00,000 - 1,05,00,000 =
13,00,000Closing Stock=1,18,00,000−1,05,00,000=13,00,000

2. Calculate the Insured Value of Stock Lost

Value of Stock Lost:

• Total Stock Lost = Closing Stock at Fire - Salvage Value

Total Stock Lost=13,00,000−2,00,000=11,00,000\text{Total Stock Lost} = 13,00,000
- 2,00,000 = 11,00,000Total Stock Lost=13,00,000−2,00,000=11,00,000

3. Insurance Claim Calculation

Claim Under Insurance Policy:

• The insurance policy amount is Rs 55,00,000. Since there is a loss of stock, we check
for the average clause.

1. Average Clause:
o This clause states that if the stock insured is less than the actual stock value at
risk, the claim amount will be reduced proportionately.
2. Insured Value vs. Actual Value:
o Actual Value of Stock at Risk (when fire occurred):

Total Stock at Risk=Cost of Stock Lost+Salvage Value=11,00,000+2,00,000=13,00,0

00\text{Total Stock at Risk} = \text{Cost of Stock Lost} + \text{Salvage Value} =
11,00,000 + 2,00,000 =
13,00,000Total Stock at Risk=Cost of Stock Lost+Salvage Value=11,00,000+2,00,00
0=13,00,000

3. Average Calculation:

Insured Percentage=Insured AmountTotal Stock at Risk=55,00,00013,00,000\text{Ins

ured Percentage} = \frac{\text{Insured Amount}}{\text{Total Stock at Risk}} =
\frac{55,00,000}{13,00,000}Insured Percentage=Total Stock at RiskInsured Amount
=13,00,00055,00,000
 o This leads to an insured percentage of approximately 4.23. Since the insured
amount is less than the actual value, the claim would be adjusted.

Final Claim Amount:

• Thus, the claim can be calculated using:

Claim Amount=Loss of Stock×(Insured AmountActual Value)\text{Claim Amount} =

\text{Loss of Stock} \times \left( \frac{\text{Insured Amount}}{\text{Actual Value}}
\right)Claim Amount=Loss of Stock×(Actual ValueInsured Amount)

• Given the average clause comes into effect, we will adjust:

Claim Amount=11,00,000×(55,00,00013,00,000)\text{Claim Amount} = 11,00,000 \times

\left( \frac{55,00,000}{13,00,000} \right)Claim Amount=11,00,000×(13,00,00055,00,000)

This would yield a final claim amount of around Rs 46,69,230 (calculated based on the pro-
rata reduction).

Conclusion

What ABC Co. Ltd. Should Use to Claim Its Best Insurance Refunds:

• Accurate Documentation: Maintain accurate records of stock, including purchase

invoices, sales records, and physical inventory.
• Timely Reporting: Report the claim promptly to the insurance company.
• Expert Valuation: Engage an expert for an accurate assessment of stock loss to
maximize the claim.
• Legal Consultation: Consult legal or insurance experts to navigate the claims process
effectively.

By employing these strategies, ABC Co. Ltd. can ensure it maximizes its claim under the
insurance policy.

Section C: Applied Theory

(Each 15 Marks) (Total 30 Marks)

1: How does Money Back Policy differ from Endowment Assurance? Which one is
a better option and why?

Ans:
Differences Between Money Back Policy and Endowment Assurance

1. Payout Structure:
o Money Back Policy: Provides periodic payments (a percentage of the sum
assured) at regular intervals during the policy term, along with the final
maturity benefit at the end of the term.
o Endowment Assurance: Pays the sum assured upon maturity or, in case of
death during the policy term, to the nominee. There are no interim payouts.
2. Purpose:
o Money Back Policy: Designed to provide liquidity at regular intervals, making it
suitable for individuals looking for regular income during the policy term.
o Endowment Assurance: Primarily aimed at saving for future goals, providing a
lump sum at maturity, which can be used for specific purposes like education,
marriage, etc.
3. Premiums:
o Money Back Policy: Generally has higher premiums due to the regular payouts
and the sum assured at maturity.
o Endowment Assurance: Premiums can be lower compared to money back
policies since there are no periodic payouts.
4. Survival Benefits:
o Money Back Policy: Offers survival benefits at regular intervals, which can help
in meeting financial needs during the term.
o Endowment Assurance: Does not provide any survival benefits; the entire sum
is paid only at maturity or upon death.
5. Death Benefit:
o Money Back Policy: In the event of the policyholder's death, the nominee
receives the sum assured, including any pending money-back amounts.
o Endowment Assurance: In the event of death, the full sum assured is paid to
the nominee, regardless of the maturity status.

Which One is a Better Option and Why?

Choosing between a Money Back Policy and Endowment Assurance depends on

individual financial goals:

• Money Back Policy is better suited for:

o Individuals seeking liquidity and regular income.
o Those who want to meet specific financial obligations at intervals (like children’s
education or other expenses).
o People who prefer receiving returns throughout the policy term rather than at
the end.
• Endowment Assurance is better suited for:
o Individuals focused on long-term savings and wealth accumulation.
o Those who want a lump sum at the end of the policy term to meet significant
future expenses (like buying a house).
o People who do not need regular payouts and can wait until maturity for the full
benefit.

Conclusion

Ultimately, the "better" option depends on personal financial goals, needs for liquidity, and risk
appetite. If regular income is a priority, a Money Back Policy may be preferable. If long-term
saving is the focus, an Endowment Assurance might be the better choice. It's advisable to assess
one’s financial situation and future needs before making a decision.

2: How important is the Consumer Protection Act an in today‟s world of

consumerism?

Ans: The Consumer Protection Act is extremely important in today’s world of consumerism for
several reasons:

1. Empowerment of Consumers

• The Act empowers consumers by providing them with rights, such as the right to safety,
information, choice, and redressal. This helps consumers make informed decisions and
hold businesses accountable.

2. Addressing Grievances

• It establishes a framework for addressing consumer complaints through various levels

of consumer courts, ensuring that grievances are resolved in a timely manner. This
accessibility is crucial in fostering trust in the marketplace.

3. Promotion of Fair Trade Practices

• The Act encourages businesses to adopt fair practices by prohibiting unfair trade
practices such as false advertising, misleading claims, and exploitation of consumers.
This promotes a healthier competitive environment.

4. Consumer Awareness

• The Act has led to increased awareness among consumers about their rights and
responsibilities, helping them to recognize and assert their rights effectively.
Educational campaigns and consumer forums play a vital role in this.

5. Adaptation to Market Changes

• With the rise of e-commerce and digital transactions, the Act has evolved to address new
consumer challenges in the digital age, ensuring protection against fraud, data breaches,
and unfair terms in online transactions.

6. Strengthening Economic Stability

• By protecting consumer interests, the Act contributes to overall economic stability.

When consumers feel protected, they are more likely to spend, boosting demand and
supporting economic growth.

7. Consumer Advocacy

• The Act supports the establishment of consumer organizations that advocate for
consumer rights, providing a collective voice for consumers and enhancing their
bargaining power.

Conclusion
In summary, the Consumer Protection Act is vital in the contemporary landscape of
consumerism. It not only protects consumer rights but also fosters fair practices in the
marketplace, promotes consumer awareness, and adapts to the evolving market dynamics. In an
era where consumers are increasingly vulnerable to exploitation, the Act plays a crucial role in
ensuring their interests are safeguarded.