Irm Cia

CIA 1
Insurance and Risk Management

Submitted by - Mohammad Haider
Registration Number -21211445
Companies Selected for Life

Insurance
1- Kotak life Insurance
2- HDFC Life Insurance
Companies Selected for General

Insurance
1- Kotak General Insurance
2- HDFC ERGO
Introduction
Insurance is a way to manage your
risk. When you buy insurance, you
purchase protection against
unexpected financial losses. The
insurance company pays you or
someone you choose if something
bad happens to you. If you have no
insurance and an accident happens,
you may be responsible for all
related costs.
Kotak Mahindra - Kotak Mahindra

Bank Limited is an Indian banking
and financial services company
headquartered in Mumbai, India. It
offers banking products and
financial services for corporate and
retail customers in the areas of
personal finance, investment
banking, life insurance, and wealth
management.
HDFC - HDFC Bank Limited is an

Indian banking and financial
services company headquartered in
Mumbai. It is India's largest private
sector bank by assets and world's
10th largest bank by market
capitalization as of April 2021. It is
the third largest company by market
capitalisation of $122.50 billion on
the Indian stock exchanges. It is
also the fifteenth largest employer in
India with nearly 150,000
employees.
Life Insurance - Life insurance is a

contract between an insurance
policy holder and an insurer or
assurer, where the insurer promises
to pay a designated beneficiary a
sum of money upon the death of an
insured person. Depending on the
contract, other events such as
terminal illness or critical illness can
also trigger payment.
General Insurance - General

insurance or non-life insurance
policy, including automobile and
homeowners policies, provide
payments depending on the loss
from a particular financial event.
General insurance is typically
defined as any insurance that is not
determined to be life insurance.
Risk- In insurance terms, risk is the

chance something harmful or
unexpected could happen. This
might involve the loss, theft, or
damage of valuable property and
belongings, or it may involve
someone being injured.
Kotak Mahindra Life Insuranc
HDFC Life Insurance
Elements of A Life Insurance Contract
Factors Affecting Risk in Life Insurances
In terms of premium costs, a number of factors

are used to determine your human life value
(HLV). Those can include:
1. Personal Health
Addiction to tobacco and alcohol adversely
impacts your premium. Most insurance buyers are
aware that smokers have to pay a higher premium
compared to non-smokers. In addition to
disclosure regarding addiction to tobacco and
alcohol, the insurance buyer may also have to
disclose the duration for which he or she has
been addicted. The insurer uses this information
to determine the risk profile of the insurance buyer
and hence the premium.
2. Medical History of the insured Medical history is

an important determinant of longevity and as such
as an important consideration for the insurers.
Your medical history will impact your risk level. If
you have a history of minor ailments then it most
probably will not impact your premiums. However,
in case of high-risk diseases like cardiac
conditions, chronic kidney disease, cancer etc.
premiums are likely to go up. If you fail to disclose
your medical history accurately, the insurer may
reject your death claim.
3. Family Medical History

In addition to your individual history, the insurers
also look at family medical history because certain
diseases are genetic, e.g., cardiac ailments,
certain types of cancer etc. If a family member of
the insured is suffering from a serious ailment,
which is hereditary in nature, then the risk profile
of the insured may be impacted adversely. Further
if multiple members of your family are suffering
from the same ailment, then the insurer will assign
a higher risk to you.
4. Occupation
Certain occupations are considered to be riskier
from a health perspective. If you have
occupational hazards that may put your health
and safety at risk, then your insurance premium is
likely to go up. However, it is not just jobs with
occupational hazards that impact your risk profile.
Some insurers also associate desk jobs with a
higher risk of cardiac diseases and assess the
risk of the insured, as such.
5. Income
Why is your income important to the insurer? The
reason is that, the insurers do not want you to be
over-insured. What does being over-insured
mean? It means that your cover should not
exceed the loss of income in the event of an
unfortunate death. Insurance companies use a
concept called Human Life Value (HLV). In simple
terms, HLV is the maximum amount of total sum
assured you can get. Your HLV is determined by
your income, whether from profession or
business, and therefore your income is an
important consideration for the insurers.
6. Qualification - You may ask, "Why is
qualification important for life insurance?" I had
the same question. I learnt that life insurance
companies view people with more education as
being more health conscious and therefore at a
lower mortality risk compared to people with less
education. Therefore, it is important that you fill
the details of your educational qualifications
correctly in the proposal form.
7. Existing Policies
Insurance companies look at the total sum
assured of your existing life insurance policies
relative to your HLV before granting you life
insurance cover, in order to ensure that sum total
of the cover from all policies do not exceed the
HLV. As discussed earlier your insurer would not
want your total sum assured from all your policies
to not exceed the loss of income in the event of
an unfortunate death.
Risk Classifications in Life Insurance
1. Preferred Plus/Elite: the lowest-risk category.

People in this risk class are in excellent health,
are typically younger, and have no other
immediate cause for concern. These people
can expect to pay the lowest premiums for life
insurance.
2. Preferred: a small step down from preferred

plus, preferred class policyholders enjoy lower
premiums due to excellent health but may have
some subtle red flags like higher cholesterol.
3. Standard Plus: Above average health, but

things like blood pressure or body mass index
(BMI) may be outside the ideal range.
Premiums are more favourable than Standard
risk class but you may pay more than someone
in the Preferred or Preferred Plus grouping.
4. Standard: This means typical risk, and for life
insurers, it means an average life expectancy.
Youmay have some health issues in your family
or in your past, which keeps you out of more
preferred risk groups, resulting in higher
premiums.
5. Substandard/Rated: If you are classified as a

higher risk than standard, you are subject to
various degrees or ratings of substandard,
which each insurer approaches a bit differently.
This can be because of health issues or a risky
past. Your premiums may be among the highest
rates, typically at the Standard price plus an
additional 25 percent at every step down in the
ratings.
6. Smoker: Smokers will pay significantly more

due to increased health risk. Insurers will ask if
you smoke or have in the past several years
and may test for the presence of nicotine
routine blood work.
Principles of Life Insurance
1. Principle of Good Faith

A life insurance policy is a two-way contract.
Hence, there must be good faith established
between the insurer and the insured person. It is
of utmost importance that the policyholder
provides the relevant details with honesty to the
insurance company. The client is bound to
disclose all the facts properly. Concealing the
information may result in complications and
serious consequences. In the same way, the
company must also be faithful to clients and
clearly state all the clauses and aspects of the
policy to its clients.
2. Principle of Insurable Interest

This principle specifies that the policyholder must
have an interest in the subject matter. For
example: If you want to purchase a housing
policy, you must have an interest in that; you must
be living in it. In the case of life insurance, it could
be a relationship, family bond etc. The absence of
insurable interest will make the contract invalid.
Also, the insurable interest must prevail at the
time of buying the insurance policy and at the time
of the accident.
3. Principle of Indemnity
Although this principle does not apply to the life
insurance policy, it ensures that the insured gets
the compensation that is equivalent to the actual
loss. The amount will not exceed the loss so that
the insured does not make additional profits from
the company. In simple words, the policyholder
will be provided with an amount equal to the loss
and not more.
4. Principle of Subrogation
This principle is one of the most important,
keeping in mind the unpredictability of life,
Subrogation means that the insured is enabled to
claim compensation from any third party that is
responsible for the loss. The insured is thus
allowed to go for legal methods to recover the
loss. It also gives the insurance company the right
to ownership from the insured to claim an amount
from the third party. 5. Principle of Proximate
Cause
This principle is concerned with the discovery of

the dominant effective cause or the nearest cause
that produced the loss being claimed for under the
insurance. It means that in case of damage, the
direct cause is considered. Hence, this principle is
only applicable when the loss has occurred as a
result of two or more causes. The principle does
apply to every other materialistic policy, but
comparatively, it has rather less significance with
life insurance
. 6. Principle of contribution
This principle can be implied if there more than
one insurer involved. So, the insured cannot make
any profits from different policies.
Purchasing life insurance means entering into a
legal contract between the company and the
insured person. Therefore, it is important to keep
in mind that there should be minimal loss and risk
involved. In such clauses, the owner of the policy
is expected to take the necessary steps to limit
him/her from any damage. This may include steps
to follow a healthy lifestyle, not indulging in life
threatening habits like smoking etc.
8. Nature of the contract

Lastly, the nature of the contract is a fundamental
determiner of cooperation between the client and
the company. Thus, the contract should be simple
and free of invalid information. The contract must
also be signed with the full consent of the client.
Critical Comments
Life Risks Insurance is a life insurance that will

provide you or your loved ones with a lump sum
which would be greatly needed in the event of
critical illness such as cancer and heart attacks or
permanent disability and even death.
Life Risks Insurance enables you to
⚫pay for your medical expenses

⚫ pay for home care
⚫ cover daily expenses pay your rent and repay
loans, if any
⚫ avoid spending your savings or incurring debt

Kotak General Insurance
Kotak Health Care
HDFC

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CIA 1

Insurance and Risk Management

Companies Selected for Life

Companies Selected for General

Kotak Mahindra - Kotak Mahindra

HDFC - HDFC Bank Limited is an

Life Insurance - Life insurance is a

General Insurance - General

Risk- In insurance terms, risk is the

Factors Affecting Risk in Life Insurances

In terms of premium costs, a number of factors

2. Medical History of the insured Medical history is

3. Family Medical History

1. Preferred Plus/Elite: the lowest-risk category.

2. Preferred: a small step down from preferred

3. Standard Plus: Above average health, but

5. Substandard/Rated: If you are classified as a

6. Smoker: Smokers will pay significantly more

1. Principle of Good Faith

2. Principle of Insurable Interest

This principle is concerned with the discovery of

8. Nature of the contract

Life Risks Insurance is a life insurance that will

Life Risks Insurance enables you to

⚫pay for your medical expenses

⚫ avoid spending your savings or incurring debt

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