ALL DEPTT - Learning Material

LEARNING MATERIAL
2011
NATIONAL CENTRE FOR INSURANCE LEARNING

NARENDRAPUR
Some thoughts
Few preliminary observations:
1. The inspiration for the project came in the chamber of Shri K P Brahma, GM(P) when it was suggested
that we print a book & make it available to the aspirants in the Class I Promotion exercise.
2. Our fundamental tenet is the Democracy of knowledge. We believe that in the Age of Informationavailability of information should be just a click away for everyone. The competitive edge of a user
group should come from the depth of understanding & utilisation of the available information.
(Incidentally , we at NCIL practice what we preach. We are trying to share with all NICians on the
Company Intranet- all material - as basic reference or as PPT. Our endeavour is to further enrich &
expand this information base.)
3. This is a Team Work. It is a compilation of the work earlier done at Ahmedabad & somewhat updated
& re-organised by the team at HO/ NCIL in Kolkata.
4. For us at NCIL- this was our maiden foray in the field of editing. We tried to learn on the run. In
retrospect we feel that we were somewhat overambitious to begin with- both in terms of tight time
schedule & the content. Our initial target was to create a reference source which will have its utility
beyond the current Promotion exercise & to ensure an uniform layout throughout the content.
5. We have partly succeeded in this but at the cost of time overrun.
6. The material is in your hands now. We await your feedback to improve on this in the next edition.
7. With our one edition experience, we have started working on the next one right now. Please mail
s.k.pradhan@nic.co.in,
a.k.das@nic.co.in,
your
inputs
tos.singh@nic.co.in,
u.bhattacharya@nic.co.in
We acknowledge with thanks the role of all who have inspired &/or contributed to this project now
or in the earlier versions. At the same time, with humility, we regret our editorial shortcomingswhich we hope to overcome with more experience.
Team NCIL
Contents
1. FIRE INSURANCE
1 - 24
2. BUSINESS INTERUPTION (LOP)
26 - 40
3. INDUSTRIAL ALL RISK
42 - 46
4. ENGINEERING INSURANCE
48 - 76
TESTS
76 - 118
5. MISCELLANEOUS INSURANCE
120- 138
TESTS
138-- 173
6. MOTOR INSURANCE
173- 206
TESTS
206- 218
7. MARINE INSURANCE
240- 254
8. AVIATION INSURANCE
256- 299
TESTS
299-324
9. RE-INSURANCE
326- 337
TESTS
338-352
10. FINANCE TESTS
354- 408
11. HUMAN RESOURCE
* 420 469
TESTS 496-502
( * Page numbering error)
This book is for private circulation amongst NICians only.
STANDARD FIRE POLICY PROVISIONS

BASIC PRINCIPLES OF FIRE INSURANCE CONTRACT:
Insurable Interest :
Essential Feature The legal right to insure.
By ownership,
Bailer/ Baillie,
Leaser/ Lessee;
By Agreed Bank Clause;
Goods held in trust; etc.

Actual time when the interest should exist both at the time during issuance of
policy and also at the time of claim. Assignment of Insurable interest in various
situations
FIRE INSURANCE
Utmost Good Faith

The contract put the proposer in a superior position- facts material to the risk with
example - duty of utmost good faith evolves-reciprocal duty- breach of duty may
make the contract void or voidable depending upon the nature of the breachbreach of condition - duration of observance of the duty-before accepting the risk,
throughout the policy- following a loss.
Indemnity
Fire Policy is a strict indemnity policy.
THIS INSURANCE IS MEANT FOR:
Buildings
Plant and machinery
Furniture, fixtures and fittings
Other contents
Electrical installations
Stocks of raw materials and finished goods
Stocks in process
WHO CAN TAKE THE POLICY?
Those who are having insurable interest in the property
Owners
Lessor/lessee
Mortgagors/mortgagees
Bailees
Trustees
Financial institutions that have advanced loans against the property.

PERILS COVERED UNDER STANDARD FIRE & SPECIAL PERILS
POLICY:
Fire- Excl. inherent vice, undergoing heating & drying, burning of

property by public authority.
Lightning.
Explosion/ Implosion excl. to pressure vessels by own explosion/

implosion.
Aircraft Damage.
Riot, Strike& Malicious Damage
Storm including hailstorm, cyclone, typhoon, tempest, hurricane,

tornado, flood & inundation.
Impact damage- rail/road vehicles or animals not belonging to the

insured/ occupier.
Subsidence & landslide/ rockslide.
Bursting, overflowing of water tanks, apparatus & pipes.
Missile testing operations.
Leakage from automatic sprinklers.
Bush fire- excl. forest fire.
All incidental losses like water damage while fighting fire, re-fuelling
charges of the Fire Extinguishers used to fight fire, etc. covered.

EXCLUSIONS UNDER THE FIRE POLICY:
Excess- Applicable to all risks except dwellings with individual owners

For policies having S.I.upto Rs. 10 crs, per location:
5% of claim amount subject to a minimum of Rs 10,000
For policies having S.I.more than Rs. 10 crs but upto Rs. 100 crs. per
location:
5% of claim amount subject to a minimum of Rs 25,000
location:
5% of claim amount subject to a minimum of Rs 5,00,000
location:
For policies having S.I.more than Rs. 2500 crs per location:
N.B. Excess is applicable per event per Insured
The loss/ damage under above perils may be of fire or non-fire in nature. Both
types of losses are covered under the policy. In other words the policy is Material
Damage policy which covers physical losses to the insured property arising out of
all above perils.
STFI Storm, tempest, flood and inundation (Flood group of perils) and RSMD
Riot, Strike, Malicious Damage can be opted out with reduction in premium rate.
A LOSS OR DAMAGE MAY BE SAID TO BE BY FIRE WHEN:
There must be ignition (accompanied with heat &/or flame i.e. some kind
Chemical reaction - oxidation/addition of oxygen from air). A loss or
damage may be said to be by fire when there has been ignition of insured
property which was not intended to be ignited. When insured property
has been damaged otherwise than by ignition as a direct consequence of
the ignition of other property not intended to be ignited.
Damage by smoke, sparks, water etc. consequent on ignition of other

property.
Fire must be accidental and fortuitous.

4
War perils.
Nuclear losses.
Pollution, contamination unless caused by insured perils.
Curios, documents etc. >10,000Rs., Goods held in trust or on commission

unless specifically covered
Change of temp. (Stocks in cold storage)
Pure electrical fires.
Architects etc. fees (beyond 3% of claim amount) & Removal of debris

(beyond 1% of claim amount).
Consequential losses.
Spoilage due to cessation of process.
Theft- during/ after loss.
Earthquake.
Shifting of property to other place But Mechanical items & equipments are
covered for 60 days if shifted for repairs/ renovation etc.
Terrorism damage.
5
Out of the above exclusions certain are covered as ADD-On Covers. e.g.
Terrorism, Earthquake, architects fees(beyond 3% of claim amount) & removal
of debris(beyond 1% of claim amount), spoilage (due to cessation of process),
curios /documents etc. > Rs.10,000/- can be covered for actual value under Misc.
Department (subject to declaration).
EXTENSIONS OR ADD ON COVERS OF FIRE POLICY:
Architects, surveyors and consulting engineers' fees in excess of 3% of

claim amount.
Removal of Debris in excess of 1% of claim amount.
DOS in cold storage due to power failure/ change of temperature due to

insured Peril.
Forest fire.
Impact Damage- Own vehicles.
Spontaneous combustion.
Omission to insure additions, alterations & extensions.
Earthquake (fire & shock).
Spoilage (material damage) covers.
Leakage & Contamination cover.
Temporary removal of stocks.
Loss of rent.
Additional rent for alternative premises.
Start up expenses.
Escalation (upto 25%)

NEW ADD ON COVERS FILED WITH IRDA
1.
2.
3.
4.
5.
6.
7.
Housebreaking
Electrical apparatus clause
Spontaneous combustion (wording modified)
Insurance of jetties, docks and other properties erected in water &
damage by water borne bodies clause
Boiler explosion damage clause
Start up/shut down expenses clause
Accidental damage clause
GENERAL CONDITIONS OF FIRE AND SPECIAL PERILS POLICY:

1.
2.
Misrepresentation, non-discloser of material facts by the insured makes

the policy voidable
Cessation of cover on fall or displacement (other than by an insured peril)
6
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
of insured property on expiry of 7 days

Cessation of cover on material alteration, if unoccupied for more than 30
days or passage of insurable interest
Loss covered under any marine policy is not payable
Cancellation
Duties of the Insured in the event of an occurrence giving rise to a claim
Rights of the Insurer in the event of a claim
Fraudulent means by Insured forfeits all benefits under the policy
Insurer's rights to reinstate or replace the property in case of a claim
Average clause
Contribution
Subrogation
Arbitration
All communications by insured to be in writing
Reinstatement of Sum Insured after a claim
CLAUSES
OMISSION TO INSURE, ALTERATIONS, EXTENSIONS CLAUSE
Buildings, plant & machinery, furniture, fixtures and fittings can be

covered up to 5% of the sum insured without specific insurance.
5% additional premium to be paid at inception.
Within 30 days of expiry of policy all such additions, etc. to be declared

and premium on this account to be adjusted.
TEMPORATY REMOVAL OF STOCKS- CLAUSE
Up to 10% of stocks in process can be covered whilst lying at un specified

locations undergoing process.
10% extra premium to be paid in advance.
No adjustment of premium.
Stocks in excess of 10% of sum insured to be covered specifically.

REINSTATEMENT VALUE CLAUSE
For building, plant & machinery, electric installations, F/F/F only.
Sum Insured to represent Reinstatement value of the property insured.
In the event of loss payment for Reinstatement Value of property of same

kind or type, improvements, if any, to be borne by the insured.
Depreciation not to be deducted.
Average clause is still applicable

7

Reinstatement of property is compulsory.
Within 6 months intimation to reinstate to be given to insurer & actual reinstatement to be completed within 12 months- extension possible with
prior approval of insurer. Otherwise it will follow normal indemnity
without RIV basis.
Reinstatement possible at other site provided liability of the insurers is

not increased.
LOCAL AUTHORITIES CLAUSE
Extension for Reinstatement Value policies endorsed by Local Authority

Clause. Wherever RIV Clause is attached Local Authority Clause is a
must to attach.
No additional premium for this extension.
Covers additional cost to comply with local regulations in reinstating the

property.
Liability if reduced under policy- under clause also reduced

proportionately.
Applies only to the damaged property, prior to extension losses not

covered, additional tax, duty etc. not payable.
AGREED BANK CLAUSE
To be applied when financial institution is interested.
Any money payable to be paid to Bank.
Notice by Co. to 'Bank' sufficient.
Adjustment, settlement, arbitration- if made by 'Bank' binding on the

insured.
Alteration etc. in risk not to prejudice 'Bank' interest.
Co. will be subrogated of 'Bank's rights of recovery from insured on

payment.
DESIGNATION OF PROPERTY CLAUSE
Available without additional premium
Whatever designation is given to a particular item of property in Insured's

books of accounts is accepted as such by the Insurers.
DECLARATION POLICY
Applicable for policy covering stocks only. To take care of frequent

fluctuations in stocks/stock values, Declaration Policy can be granted
8
subject to the following conditions (Standard Declaration Clause J to be

inserted).
To take care of frequent fluctuations in the SI of stock (i.e. current asset)

this policy is issued.
The minimum sum insured shall be Rs 1 crore in one or more locations

and the sum insured shall not be less than Rs. 25 lakhs in atleast one of
these locations. It is necessary that the declared values should
approximate to this figure at sometime during the policy year.
Reduction in SI not allowed during the currency of policy.
Maximum refund on downward adjustment 50% and no upward

adjustment is allowed.
Basis of valuation- The basis of value for declaration shall be the Market
Value only anterior to the loss.
If after occurrence of any loss it is found that the amount of last

declaration previous to the loss is less than the amount that ought to have
been declared, then the amount which would have been recoverable by
the insured shall be reduced in such proportion as the amount of said last
declaration bears to the amount that ought to have been declared.
Basis- Monthly declarations based on either
a) The average of the values at risk on each day of the month or
b) The highest value at risk during the month shall be submitted by the Insured
latest by the last day of the succeeding month.
If declarations are not received within the specified period, the full sum insured
under the policy shall be deemed to have been declared. It is not permissible to
issue declaration policy in respect of:
Insurance required for a short period.
Stocks undergoing process.
Stocks at Railway sidings

FLOATER POLICY
Floater Policy can be issued for stocks at various locations under one
Sum Insured (The Standard Floater Clause I, Annexure A shall be
attached to such policies).
Unspecified locations are not allowed.
Applicable Fire Rate= Highest rate applicable to any of such locations

+10%
Presence of "Kutcha" construction under any location may be ignored for

rating.
If stocks are in godown/ process blocks in same compound, no floater

extra premium.
In case Stocks in a process block are covered under the Floater Policy and
9
the rate for the process block is higher than the storage rate, the process
rate plus 10% loading shall apply.
FLOATER DECLARATION POLICIES
Floater Declaration policy (ies) can be issued subject to a minimum sum

insured of Rs 2 Crores and compliance with the Rules for Floater and
Declaration Policies respectively.
The minimum retention shall be 80% of the annual provisional premium.
Standard Floater Clause I and Declaration Clause J both shall be

attached to Floater Declaration policy.
VALUED POLICY
When market value cannot be ascertained, agreed value policy can be issued for
work of art, curious, etc.
LONG TERM POLICY
It can be issued only for dwellings issued for minimum period of three years and
maximum can be for any number of years but discount is maximum for 10 years
Policies for a period exceeding 12 months shall not be issued except for
"Dwellings".
Mid-term Cover may be granted for the deleted perils of STFI &/or RSMD.
Generally, it is not permissible to grant mid-term cover for STFI and/or RSMTD
perils. The following provisions shall apply, where such covers are granted midterm:
Insurers must receive specific advice from the insured accompanied by payment
of the required additional premium in cash or by draft. This additional premium
shall not be adjusted against existing Cash deposits or debited to Bank guarantee.
Mid-term cover shall be granted for the entire property at one complex
/compound/location covering the entire interest of the Insured under one or more
policy(ies). Insured shall not have any option for selection.
Cover shall commence 15 days after the receipt of the premium.
The premium rates as under shall be charged on short period scale (as per Rule 8)
on full sum insured at one complex/compound/location covering the entire
interest of the insured for the balance period i.e. up to the expiry of the policy.
Payment of Premium: Premium shall be paid in full and shall not be accepted in
installments or by deferred payments in any form.
10
N.B:- It is not permissible to split sum insured of the same property under various
policies for different periods of insurance to derive advantage of deferred
installments for payment of premium. Notwithstanding the above, different
policies may be issued for stocks where circumstances necessitate issuance of
such policies.
Minimum Premium: Minimum premium shall be Rs.100/- per policy except for
risks ratable under Section III and 'Tiny Sector Industries' under Section IV where
the minimum premium shall be Rs. 50/ per policy.
PARTIAL INSURANCE : It is not permissible
to issue a policy covering only certain portions of a building.
Notwithstanding this, the plinth and foundations or only the foundation
of a building may be excluded.
to issue a policy covering only specified machinery (except Boilers),

parts of machine or accessories thereof housed in the same block/
building.
N.B. Where portions of a building and/or machinery therein are under

different ownership, it is permissible for each owner to insure separately
but to the full extent of his interest on the building and/or machinery
therein. In such cases, the Insured's interest shall be clearly defined in the
policy.
Rates for Short Period Insurance: Policies for a period of less than 12
months shall be issued at the rates set out hereunder:
For a period not exceeding
15 days
10% of the Annual rate
do
1 month
do
2 months
do
3 months
do
4 months
do
5 months
do
6 months
do
7 months
do
8 months
do
9 months
For a period exceeding
9 months
The full Annual rate
N.B.: Extension of short period policy (ies) shall not be permitted..
CANCELLATION OF POLICY:
At insured's option Short period scale.

11

At Insurer's option Pro-rata.
Replacement of policy by new annual policy with same or higher S.I.Pro-rata
SUM INSURED
FIRE INSURANCE POLICY- SI SHOULD BE ADEQUATE
OTHERWISE FOR UNDERINSURANCE WE NEED TO APPLY PRORATA CONDITION OF AVERAGE CLAUSE.
S.I. represents the limit of liability under the policy.
S.I. is the amount on which the premium is charged.
Consequences of insuring for < or > than actual value of property is

underinsurance or over insurance.
SUM INSURED FOR BUILDINGS:
Original cost- Inadequate for insurance purpose except when new.
Book value- Not considered in Insurance (Adequate only for the first
year and not for succeeding years- considering the depreciation aspect).
Market value- Present cost less depreciation for age and/ or usage.
Reinstatement value- Present cost of replacement ( No depreciation

applied)
Formulae: Market Value = Reinstatement Value less (-) Depreciation.
Land value not to be included.
No fixed rate of depreciation- it depends upon the age and future

expected life.
Items like electrical installations and fittings to be included in the

building value.
SUM INSURED FOR PLANT & MACHINERY:
SI = Landed cost at site + installation charges.
Reasonable depreciation depending upon the age and future life to be

deducted.
RIV policy has no depreciation.
Items like accessories, electrical fittings and other things which are
necessary for running of the machinery to be included in the machinery
value.
SUM INSURED FOR STOCKS
Raw materials- Cost price including all the expenses like octroi, freight
etc. to bring up to the place.
12
Stocks in Process: Cost of raw materials + process cost including labour,

etc.
Finished goods Manufacturer - Cost of manufacturing.
Wholesaler - Purchase price from manufacturer.
Retailer- purchase price from wholesaler
Profit not to be included - exception Declaration Policy
TARIFF PROVISIONS
General Rules & Regulations
Standard Fire and Special Perils Policy
Dwellings, Offices, Hotels, Shops Located outside the compounds of

Industrial/Manufacturing Risks
Industrial Manufacturing Risks
Utilities located outside the compound of Industrial/Mfg. Risks
Storage Risks (Godown &/or in Open) outside the compound of

industrial/mfg. Risks.
Tank Farms/Gas Holders outside the compound of Industrial/MFG.

Risks
Add-on Covers
Annexure A : Standard Clauses
Annexure B : Proposal Form

RATING OF STADARD FIRE & SPECIAL PERIL POLICY
RATING UNDER THE POLICY DEPENDS UPON THE FOLLOWING
FACTORS:
Occupancy
Construction
Fire Extinguishing Appliances.
Option to delete RSMD &/or STFI Add on covers.
Voluntary Higher Deductible (Excess) opted by Insureds.
Claims experience
Principle of 'One Risk One Rate' whichever will be higher of Process

(Mfg.) risks, or ii) Storage risk,
Entire property in one complex/ compound will attract the same rate
irrespective of kind of occupancy (Mfg./ storage/ utilities etc.).
Dwelling exempted from the above rule.
Two or more factories in the same compound /independent products per

se rating if detached, otherwise the highest rate.
13
FOR STORAGE RISKS RATING DEPENDS UPON OCCUPANCY- TYPE

OF STORAGE
CLAIMS
DUTIES & RESPONSIBILITIES BEFORE LOSS:
Non- hazardous
Category I goods
Category II goods
Category III goods
Open storage
Tank farms, etc.
To intimate insurer
In case of any fall / displacement of building or any part without
operation of any insured peril within 7 days.
Alterations of trade, manufacturing, occupational change immediately.
If un-occupancy for more than 30 days.
Change of interest by sale etc.
For simple risk like dwellings, offices, hotels, shops etc. rating Per Se i.e. on its
own without considering other occupancies in the building.
FOR MULTIPLE OCCUPANCIES:
For Entire Building Tariff Rate Rs. 1.80%o less De-Tariff Discount.
For Contents of individual owner - Per Se (Partially on-merit).

DISCOUNTS APPLICABLE
For fire fighting appliances.
For deletion of certain perils like STFI & RSMD
If sum insured is more than 50 Crores for claim experience.
For opting voluntary deductibles.
Discount for paid up capital.
De-Tariff Discounts for good features/ technical features/ ISO

Certification or other Accreditations.
RATING OF RISKS IN MULTIPLE OCCUPANCIES
One of the principles of rating in fire insurance is that if risks with different degrees
of fire hazards are close to one another then the higher hazard risk may cause
spread of fire to other risks close by. Hence this factor should be considered while
rating a risk. For simplification the tariff has allowed per se rating for contents of
each insured as per their occupancy.
SILENT RISK:
Factories where no manufacturing / storage activities are carried out

continuously for 30 days or more.
Premium rate is lower than working rate.
The silent rates are not applicable if a risk goes silent following a loss
under the policy.
14
DUTIES & RESPONSIBILITIESAFTER LOSS (CLAIM PROCEDURE):
Intimation to fire brigade, police, etc.
Loss minimization exercise to be taken by the insured.
Notice to insurer within 14 days.
Co operation with surveyor when appointed.
Lodge claim within 15 days with supporting documents.
Furnish particulars of other insurances available with the affected

properties.
Enforce rights against third parties.

COST REDUCTION MEASURES
Opt for clause like Designation of Property clause- No Extra premium.
Insure non-stock items on Reinstatement Value basis.
For non-stocks items opt for 'Omission to insure . Clause' and see that
at the end of policy within 30 days the insured send the declaration.
Go for stocks declaration policy for finished goods and raw materials,
send declarations in time to take the maximum advantage.
Floater cum declaration policy decision depends upon the fluctuations in

the stock levels.
When many locations are covered and when it is not possible to keep a
track of sum insured at every location, better to go for a floater policy.
Opt for suitable voluntary excess.
Keep fire fighting system in good working condition, obtain periodical

certificates.
Intimate to the insurer when in any unit production stops for more than 30
days.
Advice decrease in sum insured immediately.
As far as possible go for annual cover- avoid short period covers they are
costly.
15

Though it is cost saving it is not advisable to go for deletion of flood, etc.
unless the unit is situated in area where chances of flood are NILHowever this should be a thoughtful decision.
Riot etc. perils not to be deleted.
Premium can be saved by deleting from the cover the value of plinths and
foundations of the buildings.
ISSUES RELATED TO FIRE CLAIMS:
The processing and settlement of claims constitute one of the most

important functions in an insurance organization. Indeed, the payment
of claims may be regarded as the primary service of insurance to the
client. The prompt and fair settlement of claims is the hall mark of good
service to the insuring public.
The proper settlement of claim requires a sound knowledge of the law,

principles and practices governing insurance contracts and in particular,
a thorough knowledge of the terms and conditions of the standard
policies and various extensions and modifications there under.
Finally we can conclude that prudent underwriting of the policy ensures

prompt settlement of claims which is main stream to satisfy the insured.
INTIMATION OF CLAIM:
Claim intimation is to be given in time along with estimated amount of

loss. In case, claim intimation is delayed, proper clarification is required
to be obtained. Further, amount of loss is not ascertainable instantly, then
sum insured of the affected property may be the point of consideration for
the purpose of appointment of surveyor.
On receipt of claim intimation, the first step is to examine the policy from
the underwriting point of view to confirm the acceptance of liability
under the policy.
Claim is registered and claim no. is allotted and surveyor is appointed

based on the estimated amount of loss declared.
As per present practice, the financial authority for appointment of

surveyor is same as the financial authority for settlement of claim.
As per IRDA guide line, the surveyors are categorized as'A', 'B' and 'C' to
survey and assess the loss under Fire and Engineering Deptt. with the
limit of under noted estimated amount of loss.
Category 'A' : Above Rs. 20.00 lacs (LOP-above 50.00 lacs)
Category 'B' : Above Rs. 5.00 lacs ( do -upto 50.00 lacs)

16
Category 'C' : Upto Rs. 5.00 lacs (no provision)

In case, Interruption Loss is reported, estimate amount of loss is to be added with
estimate amt. of loss under M.D. Policy and then surveyor would be appointed.
FINANCIAL AUTHORITY FOR SETTLEMENT OF FIRE CLAIMS.
Administrative Officer
Assistant Manager
Deputy Manager
Manager
D.C.C.
Regional Manager
R.C.C.
Deputy General Manager
General Manager
Chairman-cum-Managing Director
H.C.C.
:
:
:
:
:
:
:
:
:
:
:
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
1,00,000/2,50,000/10,00,000/15,00,000/30,00,000/40,00,000/80,00,000/100,00,000/200,00,000/400,00,000/--- Actuals.---
Under Fire Insurance variety of buildings, machinery, equipments and stocks are
involved. In addition to a competent surveyor it is recommended that the
Company officials should visit the site of loss as far as possible.
If the estimated loss is within Rs.20,000/- and loss of profits claim is not involved,
the underwriting office shall have the discretion to waive an independent survey
and settle the claim on the basis of the claim form and other supporting documents
after being satisfied that it is admissible under the policy and that the amount
claimed is reasonable and consistent with the extent of damage. Where necessary,
an official in the underwriting office may inspect the damage.
PROCESSING OF CLAIMS:
The documents generally required for processing fire claims:
Copy of the policy complete with term, conditions and
warranties
Section 64VB compliance confirmation
(iii) Claim form duly completed by the insured
(iv) Survey report which should include:
Occurrence of loss
Indication of the cause of loss
Establishment of liability
Assessment of loss
Confirmation of compliance of policy terms, conditions
warranties
Admissibility of the claim

17

Photographs
Police Report* (i) Fire Brigade Report *

*these two reports may be waived if the survey report is clear and does not cause
and doubt on the occurrence as well as extent of loss.
CLAIMS ARISING OUT OF ACT OF GOD PERILS:
Documents like newspaper cuttings, photographs and meteorological reports are
helpful in substantiating such losses. Where the incident is localized, not reported
in the media, the surveyor should enquire about the incident from local
government/statutory authorities and is required to be supported by photographs
of the damage.
LOSSES REPORTED UNDER THE RSDMD & TERRORISM.
In case of isolated losses under the above endorsements, copy of the FIR
lodged with the police is required to be furnished.
Disposal of claims where all records are destroyed in fire &/or allied
perils like flood.
Settlement in these circumstances would generally be a negotiated one

because of non-availability of accounting records and other evidences.
Therefore, the surveyor should be advised to assess such losses on a
realistic and reasonable basis after discussions with the
insured/Bank/Financial Institution (if involved), and if required with
suppliers/customers/statutory bodies like tax authorities, excise
authorities etc.
At present post-loss inspection by LPA is not required. Instead Company

Engineer/Officers may carry out such inspection.
Gross Assessed Loss
Less: Under insurance
Less: Excess
Net Loss Payable

C. Market Value Basis (Stock)
Gross Loss
Less: Salvage
Gross Assessed Loss
Less: Under insurance
Less: Excess
Net Loss Payable.

Under single loss, if Buildings, Machinery and Stocks are affected, only ONE
excess will be applicable. In other words, excess is applicable per event per
Insured.
DISPOSAL OF SALVAGE:
Salvage is deteriorated faster. Therefore, disposal of salvage should be

undertaken on priority basis for and on behalf of the concerned parties
without waiting for the liability to be established with the help & under
supervision of the surveyor. This disposal of salvage guidelines should
always be followed.
Insured officials also need to visit the site of loss and hasten disposal of
salvage. It will also give moral support to the clients at the time of need.
CLAIMS ASSESSMENT:
When the surveyor is required to undertake reconditioning and sale of

salvage on behalf of the Account/interest concerned, he may be paid fees
and actual expenses maximum up to 5% of value realized.
A. Market Value Basis:
Gross Loss
Less: Depreciation
Less: Salvage
Gross Assessed Loss
Less: Under Insurance
Less: Excess.
Net Loss Payable.

B. Reinstatement Value Basis:
Gross Loss
Less: Salvage
SETTLEMENT OF CLAIM WHERE ALL RECORDS REQUIRED FOR

THE ASSESSMENT OF THE CLAIMS ARE DESTROYED IN FIRE &/OR
ALLIED PERILS RISK:
In all such cases like what happened in Mumbai during July 2005 flood
settlement was generally be a negotiated one because of non-availability
of accounting records and other evidences.
The surveyors should be advised to assess such losses on a realistic and

reasonable basis after the discussions with the insured (even with the
18
19
Bank/ other Financial Institutions whenever involved).
If required with suppliers/ customers/ statutory bodies like Tax

Authorities etc. and definitely with the Insurers.
LOSS OF PROFIT /CONSEQUENTIAL LOSS/ BUSINESS
INTERRUPTION LOSSES:
Claims need to be monitored regularly by the insurer to ensure that the

insured is doing the needful to minimize the period of indemnity as much
as possible. If the insured has opted for more indemnity period more is
the likely chances of higher liability for the insurers.
In case the surveyor for MD loss is different from the LOP policy, coordination between both the surveyors is definitely needed and effective
control is to be maintained by the insurer.
Survey report indicating

Cause of loss;
Establishment of liability
Assessment of loss
Confirmation of compliance of policy terms& conditions, warranties and

endorsements.
Admissibility of the claim
Photographs/ Bills & vouchers/ Police report/ Fire brigade report may be
submitted along with the survey report
Since under Fire Insurance variety of buildings, machineries, equipments and
stocks are involved, in addition to a competent surveyor it is recommended that the
insurer should visit site of losses reported as far as possible.
FOR CLAIMS ARISING OUT OF AOG PERILS:
SURVEYOR APPOINTMENT:
Points to be noted
The surveyor must be holding a valid license
Selection of surveyor should be restricted depending on the type of loss

and the nature of the subject matter involved
When for assessment of some losses specific technical expertise is

required - consultants having such technical expertise normally are
associated with the usual surveyors. The consultants' remuneration needs
to be negotiated in advance bearing the expertise in mind and the same
will be in addition to the survey fee payable to the surveyor.
Category of Surveyors (i.e. A,B,C) will be checked and appointment of

surveyor must commensurate with this category & quantum of loss
Appointment of joint surveyor may be done on the merits of the claim.
No second surveyor may be deputed.
Wherever the Loss of Profit losses are involved, the surveyors for the
material damage and the business interruption losses, if several, should
be competent to complement one another. One surveyor can be utilized
for both the material damage
Guidelines on the financial authority for appointment of surveyor ( i.e. H.O. /
R.O./ D.O./ B.O.) will be as per scale followed by each insurer.
DOCUMENTS REQUIRED FOR PROCESSING OF CLAIMS:
Policy copy complete with terms, conditions and warranties.
Claim form duly completed by the insured

20
In addition to the documents specified earlier, other documents like

newspaper cuttings, photographs of the devastating damage and
meteorological reports are normally required in substantiating such
losses. When the incident is localized, not reported in the media or not
recorded by any Meteorological Department, the surveyor should
enquire about the incident from local Government / statutory authorities
and support the description of the occurrence and the loss by taking the
photographs of the damage.
The surveyor should cover in his report the vivid details of the loss,
confirm the incident clearly & unambiguously - then only the documents
of Meteorological Report may be waived. Attention must be paid for
concurrent policies & Agreed Bank (Financial Institute) Clause
LOSSES REPORTED UNDER THE RSMTD PERILS:
In case of isolated losses under the RSMD Perils, copy of the first
information lodged with the police and their Final Investigation Report
of police must be furnished.
The surveyor needs to give detailed report on the occurrence and confirm
that the loss/damage is admissible under the policy.
Loss / damage, if any, arising out of omission or commission not

involving physical damage must be segregated.
FOR ON ACCOUNT PAYMENT TO BE MADE:
Pending final assessment of a claim an On Account payment may be considered
subject to confirmation of the following:
21

Loss due to occurrence of a peril covered by the policy .
The establishment of liability leaves no doubt.
The minimum liability based on assessment on market value basis (in

case of Building, P&M and accessories) that arises under the policy has
been specifically examined & stated by the surveyor.
PROCEDURES FOR FINAL PAYMENT:
When the Final Survey Report is submitted by the surveyor the Claim
Processing Official / Authority will process and recommend the exact
claim amount for approval by the Competent Authority (as per the
Financial Settlement Authority of various claims laid down by each
insurer).
The insured / claimant should be advised of the final amount of claim

approved, with details thereof.
The full & final discharge by the insured (The bank/ financial institution's
discharge where required) must be obtained before release of the
amount of claim.
If the loss or any part thereof is recoverable from a Third Party, a letter of
subrogation and/or assignment and Special Power of Attorney, to suit
special cases, is to be sent to the insured for completion on requisite
stamp paper and return before settlement.
In case of Close Proximity Cases detailed investigation should be

immediately instituted when a loss occurs in close proximity, i.e. within 5
days for all classes of insurance under Fire & Engg. Dept. of the date of
inception of risk. The close proximity mentioned here is in reference to
new insurance or where there has been a break in insurance. Close
proximity investigation should also be carried out in cases where it is
found that insurance has been taken out significantly later than it ought to
have been taken, i.e. the risk has remained un-insured or inadequately
insured prior to the insurance cover under reference.
PROCESS OF CLAIM SETTLEMENT IN CASE OF CO-INSURANCE:
The leader will process the claim on behalf of all the co-insurers. A
decision by the leader regarding claim settlement, taken at the
appropriate level according to the existing tenets of delegation of
financial authority, shall be final and binding on all the co-insurers.
Claims decided at the appropriate level by the leader will not be
processed again by co-insurers, regardless of the amount. The leader will
intimate to the co-insurer details of a claim settled by him with copies of
all relevant reports and documents. The coinsurer will settle his share of
the claim within 15 days from the date of receipt of such intimation from
22
the leader without any delay.
In case of a claim requiring Board decision the decision taken by the

Board of the leader shall be binding on the other co-insurers. There shall
be no separate need for the co-insurers to approach their respective
Boards for decision in respect of such claims. A suitable note may,
however, be placed by the co-insurers before their respective Boards for
information in such cases.
APPOINTMENT OF INVESTIGATOR:
Depending on the circumstances it may be necessary to appoint an

investigator to verify the claimed version of a loss. A separate surveyor
appointment may be considered if any actual physical survey/
assessment are possible and called for. While referring such matter to
R.O. from DO/BO, specific terms of references must be mentioned
clearly to justify its necessity.
The letter appointing the investigator should mention the terms of

reference and make it clear that the report should contain no references or
doubts unless these are well documented and substantiated and can stand
the scrutiny of a court, if so required.
In the absence of any laid down schedule of fees for investigators, it is

advisable to negotiate and decide the fees to be paid in addition to
expenses actually incurred before formally appointing the investigator
and that decided fee to be recorded in the letter of appointment.
Investigator's fees are required to be negotiated and are to be paid in

addition to the expenses actually incurred. The negotiated fees to be
recorded in the letter of appointment to avoid any dispute in future.
CLOSE PROXIMITY CLAIM:
Detailed investigation should be initiated immediately when a loss close
proximity i.e. within 5 days of the date of occurs in inception of the risk. Reference
is to be made to R.O. along with underwriting details to verify the close proximity
aspect. The Close Proximity aspect is applicable for new business or where there
has been a break in insurance.
RECTIFICATION OF POLICY AFTER A LOSS:
When collection of additional premium is required, the same is to be

charged on the affected policy period only in which the claim has arisen.
23
Rectification can be done by the authority competent for settlement of the

claim.
Rectification of a policy after a loss is reported for reasons other than

breach of condition/ warranty should be carried out as under:
Where rectification involves collection of additional premium, the

additional premium may be charged only on the affected policy period in
which the claim has arisen.
Rectification can be done by the Authority Competent for settlement of

the claim.
REPUDIATION OF CLAIM:
If a claim warrants repudiation, the competent authority would be the authority
competent to settle the claim. Letter of repudiation must state the reasons and/or
the policy condition under which it is repudiated.
RE-OPENING OF CLAIM FILES:
Re-opening of the claim file can be done by the authority one step higher than
the appropriate claim settlement authority.
24
25
LOSS OF PROFIT POLICY

Whereas, the insured may have to incur the loss of profit, constant expenses
irrespective of business interruption brought by the accidental fire and allied
perils. The standard fire policy does not offer such benefits. Therefore, there is
a need for a separate policy to take care of the consequential loss. This benefit
is offered by a separate policy which can be an extension of fire policy , or
engineering policy and or project insurance.
The extension of LOP to Fire Insurance is known as FLOP (Fire Loss of

Profit).
The extension of LOP to Engineering Policy is known as MLOP

(Machinery Loss of Profit).
The extension of LOP to Project Insurance is knows as ALOP ( Advance

Loss of Profit).
Loss of Profit Policy can also be termed as Consequential Loss Policy or

Business Interruption Policy.
LOSS OF PROFIT INSURANCE
26
NEED FOR BUSINESS INTERRUPTION COVER

Business Interruption [also known as consequential loss or loss of profits and
hereinafter known as BI) is of recent origin. It was only with the improvement in
the standard of accountancy practice that the possibility of covering financial loss
following fire could be met with a practical solution.
Fire destroys everything that men possess. Fire destroys buildings, Hotels, cinema
theatres, factories, and contents therein such as machinery and stock, shops and
warehouse leaving only crippled remains of man's labour. The only solution to this
ever-present threat is Fire Insurance
When a property is destroyed or damaged [whether by fire or any other insured
peril] the owner of the property is indemnified by the payment of a sum of money,
which will enable them to repair or replace it. This is not, however, the full extent
of their loss. If, for instance, they are a manufacturer then, as the owner of the
business, they will try to sell their products for more money than the sum spent on
buying materials and converting them to completed products. This is their reason
for being in business in the first place. If the facility to manufacture is diminished
because of the destruction of their property, their earnings will fall off or even
cease.
The insurers offer standard fire and special perils policy, which can only take care
of the victim of fire. As a result, only the damaged buildings can be reconstructed,
destroyed plant and machinery can be reinstated and lost stock can be restored
with the compensation paid by the insurer towards such material damages.
27
WHAT HAPPENS TO BUSINESS DURING THE PERIOD OF

RECONSTRUCTION?
NO CONSEQUENTIAL INSURANCE COVERS FOR VARIABLE

EXPENSES.
The destruction caused by fire does not end with the smoldering shell of buildings
or the mangled skeleton of expensive machinery or worthless stocks. Destruction
goes on, business comes to a standstill. The factory cannot produce goods, in other
words, money stops coming on.
The earnings of the business dwindle, if not cease totally while business expenses
have still to be met. Wages and salaries have to be paid. So also overheads, rent,
rates and insurance. The net result - "LOSS". In extreme cases the business may
have to be wound up. This is a very real risk.
However, just as the Material/Property damage policy comes to the rescue of the
insured when he incurs material damage, the profit policy works to protect against
the consequent disruption to the business itself.
If damages occur to the property owned by the insured causing his business to
suffer, the policy would pay the amount of loss resulting from that interruption.
An illustration to demonstrate the impact of fire accident on the business activity
SCOPE OF POLICY:
Loss of earning (Net Profit)
Standing Charges
Increased cost of working

Standing Charges include all fixed expenses such as rent, salary, electricity exp.,
audit expenses etc. which have to be incurred by the insured irrespective of
whether the business activities interrupted due to material damage or loss or
destruction brought by the operation of insured perils.
The indemnification under this policy is admissible only when the insurer admits
the claim for material loss or damage or destruction.
WHAT NEEDS TO BE COVERED UNDER LOP POLICY
SUBJECT MATTER OF
BEFORE FIRE
INSURANCE
Capital
Building, Machinery
and stock
Variable expenses
Cost of raw materials
used. Unskilled Labor.
Variable charges
AFTER FIRE
Fire insurance pays
for these
These expenses diminish in
proportion to the stoppage
in production.
Fixed Expenses
(Standing charges)
Continuing standing
Consequential loss insurance
charges such as salaries, is available for these expenses.
interest, rent etc.
Earning
Net profit
Consequential Loss Insurance

pays for this component
28
BEFORE FIRE
I
Income From Sales
II
Production costs
Raw materials, Unskilled Labor and
Other variable charges
III
Over heads
Rent, rates printing and stationery,
Wages and salaries etc.
AFTER FIRE
50% cut in production
Income from sales
Less: Production costs
Overhead expenses
Net Result
Additional expenses
Purchase of goods elsewhere
Premises on hire
Overtime
NET RESULT - LOSS
Rs.1, 00,00,000
Rs. 60,00,000
Rs. 20,00,000
Rs. 20,00,000
Rs. 50,00,000
Rs. 30,00,000
Rs. 20,00,000
Rs. 50,00,000
Nil
Rs. 20,00,000
Rs. 20,00,000
THEREFORE, THERE IS A NEED FOR INSURANCE PROTECTION

FOR THE RESULTING CONSEQUENCE.
If the premises are destroyed the ` cost of maintenance also is affected. So the
indemnity under the Policy has the following components:
1) Loss of Income
When the factory is unable to function

2) Loss of Income
after the repairs and repurchase until the

entire activity commences.
3) Additional expense
to engage rented building until the damaged
building is reinstated
4) The machines are installed.
5) Indemnity period
must be long enough to cover the above [i]

and [ii]
6) Saving
due to the damage are deducted from the

settlement.
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THE CONSEQUENTIAL LOSS POLICY COVERS :

NET PROFIT : This policy is designed to take care of loss of net profit, which is
differently meant by this policy unlike the net profit derived from trading and P &
L account. Such loss of profit should result from the cause of insured peril covered
under Standard Fire policy and that cause should have brought the interruption of
business.
STANDING CHARGES/ FIXED CHARGES : In spite of the stoppage of the
business, the fixed remuneration and other standardized fixed expenses have to be
incurred by the insured. Such expenses have to be incurred irrespective whether
the business is carried on or not due to the occurrence of the insured peril.
INCREASED ALTERNATE COST OF WORKING : To pay the additional
expenditure incurred by the Insured to maintain the normal business activity
during the period in which the business is affe
TURNOVER : Modern BI policies are based on the turnover of the business.
Profit comes out of turnover and is supported by it. Turnover can be conceived of
as representing the activity of the business, but is defined as the money paid or
payable to the insured for goods sold and delivered and for services rendered in the
course of the business at the premises. Turnover actually consists of Variable
charges, standing charges and net profit as we have already seen. If the ratio of
variable charges of a business to it is turnover is a constant [and this must be so,
because the definition of variable charges is simply those charges, which vary
directly to the turnover.] Then the remainder [the turnover less such variable
charges]. Is also constant to the turnover of the business. Thus, on the basis that
turnover does represent the activity of a business. we can measure this fall in
activity of a business. we can measure this fall in activity [which we do by
calculating the fall in turnover] and then, by applying the remainder constant to the
amount of this reduction, we can get at the true indemnity.
It is against the background of the definition of 'rate of gross profit ' annual
turnover' and standard turnover 'that financial loss will be calculated.
GROSS PROFIT : It may be defined that it is the amount by which the sum of the
turnover and the values of the closing stock shall exceed the value of the opening
stock and specified working expenses. DIFFERENCE BETWEEN
ACCOUNTANT'S AND INSURERS'GROSS PROFIT. The basic difference is
that accountants will take Turnover and deduct Purchases of raw materials to
produce gross profit.Insurers are, however, concerned with identifying that part of
gross profit which
Relates to the business insured and
Can be the subject of an indemnity from insurance

The insured pays only for insurance on those elements of gross profit which
continue to be payable after an interruption in the business [and on net profit] by
using the insurers definition and the premium relates only to the business insured.
Additionally, the insured's accountant will need to know on what basis to prepare
the declaration of gross profit for the insurance company.
30
THERE ARE TWO METHODS IN WHICH THE GROSS PROFIT CAN

BE ARRIVED AT:
ADDITIONAL METHOD : In this method, insured adds standing charges to the
net profit before taxation and excluding capital receipt as per the Profit and Loss
Account of the Company.
DIFFERENCE BASIS : Under this method, gross profit is arrived at as the
"Difference between turnover and variable charges " as detailed below.
Turnover
Less: Whatever trade discounts allowed 20%
10,00,000
2,00,000
8,00,000
50,000
8,50,000
Add: Closing Stock as on 31.03.2001

Less: Opening Stock as on 01.04.2001
Specified working expenses
Less: Purchases net of discounts
Bad debts
GROSS PROFIT
1,00,000
50,000
1,50,000
7 ,00,000
The original definition of gross profit was net profit plus insured standing charges.
The insured's accounts were the starting point. All 'non business' items were
taken out [such as rent and upkeep of let-out portions, stock market gains and
losses etc].
Net trading profit was the surplus left after taking from the turnover of the business
insured All the costs of making it, from purchases of raw material to the cost of
delivery by the insured's vehicles or by post etc .
The 'Difference 'method starts with the accounts but uses them the other way
round. Basically, it lists 'specified working expenses' such as purchases these are
the previously mentioned variable charges which vary directly in proportion to the
turnover. Obviously, if your turnover is down you do not need to buy so much.
Once you have deleted the variable charges you are left with the standing charges
and net profit or [to put it another way ]the gross profit.
STEPS INVOLVED
1) Take out all income and expenditure extraneous to the business insured.
E.G rent of tenanted portions and costs of upkeep of that portion profit or
loss on share transactions [in other firms].
2) Identify the specified working expenses and take them off the total of the
turnover and the closing stock. The result is gross profit.
31
The term 'difference basis' describes the current definition of gross profit which
can be phrased as The difference between turnover plus closing stock and opening
stock plus specified working expenses.
STANDING CHARGES - ILLUSTRATIVE LIST
Salaries to permanent staff
Contribution to PF, FPF, Superannuation, Perquisites, ESI, etc.
Rent, Rates, Taxes, Duties and License fees'
Director's fees, remuneration
Total audit fees and professional charges
Conveyance, Travelling expenses and other office expenses
Interest on loan, debentures, bank charges, guarantee, commission
Dividend on preference shares
Depreciation on various assets
Miscellaneous standing charges
Not exceeding 5% of the total listed insured standing charges.

INCREASED COST OF WORKING
Rent for temporary premises
Payment of overtime
Hire of machinery etc

PERIOD OF INSURANCE:
Period of insurance of LOP policy is usually in consonance with material damage
policy. It runs and expires almost simultaneously.
HOW TO ARRIVE AT THE SUM INSURED

The Sum Insured is based on the gross profit of the business. The sum insured is
extracted from the previous year's account. If the indemnity period is 18 months,
the amount is increased by 50%. This is the basic sum insured. Assuming the
business would be interrupted for not more than 12 months, there are adjustments
to be made and this is where a little forecasting comes in.
Normally business does not standstill, year after year, it generally expands. Then
there is another factor to be taken into consideration i.e. Inflation.
Even if the business does not expand in terms of goods produced the expense and
income levels do expand in terms of money, roughly in conjunction with the
general inflation rate. Therefore, a sum to be insured needs to be drawn from the
previous years accounts and an upward adjustment is done in such a way that takes
care of any future influence of inflationary factors.
It is not sufficient if the sum insured is influenced by such factors pertaining to a
particular period of insurance as the indemnity period commences only in
succession to the date of occurrence of insured peril causing material damages.
Supposing, a loss takes place on the last date of a policy i.e. expiry date of the
policy, the indemnity period may be twelve months from that date or may be
twenty four months from that date or the period agreed between the parties to the
contract. This makes it clear that factors pertaining to the period of indemnity
chosen is very relevant while deciding the level of sum insured.
ADDITIONAL ITEMS THAT WHICH CAN BE INCORPORATED AS
PART OF SUM INSURED
1. WAGES:
Two methods in which wages can be included.
a) PRO-RATA BASIS:
It is possible to cover under a separate policy to claim wages for a Standard Period
for an amount to represent the wages for the selected period. E g
Wages of all employees
The wages of a specified category or categories of employees.
PERIOD OF INDEMNITY
The indemnity period commences with the date of damage and lasts till such time
as the business is restored to its pre-damaged level or the period stipulated in the
policy, whichever comes first. A consequential loss insurance policy insures
earnings of the business lost during the indemnity period.
The wages of all employees who are normally paid on weekly basis.
b) DUAL BASIS:
100% cover for a selected initial period and for the remainder of the indemnity
period, a selected percentage only. On Dual basis it is necessary to have a
minimum indemnity period of 12 months. The sum insured must represent the full
annual payroll. If saving in payroll are made during 100% cover period, such
saving can be carried over to boost the partial cover period during the indemnity
period.
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33
THE SELECTION OF INDEMNITY PERIOD
The insured has the option of converting the combination to a straightforward

100% cover for a stipulated period longer than initial period.
DUAL BASIS PROVIDES A FLEXIBLE COVER : There are two main
advantages to the Dual Basis cover. They are
Carry over of saving
Option to Consolidate
Insurance of lay off and/or retrenchment compensation
Auditors fees
ASCERTAINMENT OF THE LIABILITY OF INSURANCE
What should be identified first before looking at the claim for business
interruption?
Whether there is a standard fire policy and claim for material damage has been
admitted.
What would be period of indemnity in case of reinstatement of property

damaged.
Turnover earned by the insured after the damage but preferably at the different
premises of the insured.
The insurance is limited to reduction in turnover.
Limited to increase in cost of working.
The amount payable as indemnity shall be additional cost of working with

some standing charges of the business insured.
How the premium is adjustable with the gross profit earned by the business
differs from the sum insured during the year.
EVIDENCE FOR ADMITTED MATERIAL DAMAGE OR DESTRUCTION
Basically, it is a precondition that there should be a claim towards material
damages under the policy admissible as the terms and conditions of the standard
fire policy. The insured peril must have operated and the damages resulted.
Inotherwords, the resultant damages that has arisen out of the insured peril
should have been admitted by the insured. A point should always remains the
minds of the insurers that the policy is designed to cover the effect of a cause,
which is falling under the scope of the policy and does not fall under any of the
exception specified in policy.
This brings two situations
34
Insured peril The first one is the situation where the peril operates that is termed as
insured peril as per the policy. Admit both claims material damages and loss of
profit resulting the insured event.
Other unknown peril The second situation is where a peril operates but is not found
in the listed perils of the policy. Under the new circumstances, what do we do .
Reference is made to ensure that it is not found in the exceptions mentioned in the
policy and also verify whether this peril is an insured peril under any other product
of the insurer .
Where property suffers damage by a peril, which might not have been insured
under the policy, the course of the damage may lead to a fire starting. If the
proximate cause of the fire is not specifically excluded, the policy will respond to
the fire damage. However, damage caused by the original peril will not be
recoverable.
It being so, a suitable adjustment need to be made necessarily in the business
interruption period on the ' would have been basis' as if both unknown peril as well
as insured peril had happened separately. Of course, the onus is on the insured to
establish damages separately towards what is covered and what stands uncovered
due to the operation of an other peril unknown to the policy. [ an international
author of a book on practice of insurance says that the insured commits fatal to his
policy if he fails to establish the distinction between the losses].
It is our view the similar effect would happen in the Business interruption policy
too as it operates only on the admission of a claim towards material loss. It will be
explained more in the paragraphs to follow
WHAT IS TURNOVER?
It may be defined as consideration measurable in terms of money received or
receivable by the insured for goods sold and delivered and services rendered in the
course of the business carried out within his premises.
What does not fall under Turnover?
o Any sum receivable for the sale of redundant plant and machinery.
o Income from any source not insured under the policy. Example rental
income from the tenants.
o Any other business carried out within the insured's premises or goods
sold or services rendered but not insured under the policy.
STANDARD TURNOVER
The Turnover during that period in the 12 months immediately before the date of
incident, which correspond, with the indemnity period. Example -Indemnity
period for the restoration of the business disturbed is 01.06.2001 to 30.10.2001
and this period is the period of interruption. The standard turnover for this purpose
means the turnover for a period from 1.6.2000 to 30.10.2000.
35
RATE OF GROSS PROFIT

The rate of gross profit earned on the turnover during the financial year
immediately before the incident. This can be expressed by a formula
Gross Profit/Turnover x 100
Turnover
However, the estimated gross profit for the period of insurance should be based on
the previous years audited accounts but not less than that of the nearest financial
year.
N.B. Standard turnover, annual turnover and rate of gross profit are subject to
adjustment to take care of trend of business and special circumstances affecting
the business. For example a workers' strike, a big event (like IPL for sports goods
manufacturers) providing extraordinary business opportunity.
INCREASE IN COST OF WORKING AND SAVING
The insured may have to incur any additional expenditure for the sole purpose of
averting or minimizing the reduction in Turnover which, but for that expenditure,
would have taken place during the indemnity period in consequence of the
incident. But such expenditure should not exceed the sum produced by applying
the Rate of Gross Profit to the amount of the reduction thereby avoided.
EXAMPLE:
Incurring expenditure for overtime or hiring alternate machinery or occupying the
alternate premises on rent.
Basis of Indemnity for IC
The insured should remember that his payment would not exceed the amount
arrived as under.
Rate of Gross Profit x Reduction in T/o avoided. But, if the insured agrees to pay
more, then this can be expressed in the policy. The limitations which are usually
imposed are largely common sense and are that the increase in cost of working
shall be
Absolutely necessary and reasonable
That increased cost, which is incurred with a purpose to avoid or

minimize a reduction in turnover and therefore a loss of gross profit.
Such IC is only in consequence of the damage [or incident]
Necessarily incurred during the indemnity period and
Equitably limited in the amount payable by insurers

The effect of this equitable limit is to restrict the maximum recovery as increase in
cost in working to the amount that would otherwise have been payable as a loss of
gross profit if such expenditure had not been incurred . This is often referred to as
'the economic limit
36
This limit is clearly equitable but there are occasions when expenditure is incurred
with the agreement of insurers, which proves later to have been uneconomic.
Insurers must then stand by their original agreement.
SAVINGS
Any sum saved during the indemnity period in respect of such of these charges
payable out of gross profit insured based on the past records, may be used to set off
against the standing charges that are constant in nature.
ANNUAL TURNOVER
It is the Turnover during the twelve months immediately preceding the incident. It
is not the Turnover taken from the Audited accounts, as the figures shown in the
Audited Final accounts must have become outdated. The rate of Gross Profit is
applied to the Annual T/o and the proportion of the loss to be borne by the insured
is
Sum Insured
=
Amount payable
Rate of Gross Profit x Annual T/o
Those cost which should continue wholly or in part or deducted from the Gross
Profit amount.
PROVISION FOR UNDERINSURANCE
The sum insured by this item is less than the sum produced by applying the Rate of
Gross Profit on Annual T/o, the amount payable shall be proportionally reduced.
EXCESS CLAUSE
Every claim under the Fire Loss of Profits policy is subject to compulsory
deduction as under:
Other than Petrochemical Risks:
7 days Gross Profit
Petrochemical Risks
:
14 days Gross Profit
ACCUMULATED STOCKS CLAUSE.
If stocks of finished goods which is accumulated is used to maintain the turnover
when production is affected adversely, during indemnity period, account is to be
taken of this use and turnover figures are adjusted accordingly.
SUM TO BE INSURED
The sum insured should be at least one year's gross profit, even if
indemnity period is less that 12 months.
If indemnity period is more than 12 months, the sum insured will be a

multiple (i.e. proportionate) of the annual G.P.
37
Operating profit and insured costs need to be estimated with the help of
data on the current and projected business performance.
Rating
Average (weighted) rate of the contents of the process blocks as per fire
tariff.
+ 25% LOP loading.
+25% loading if the plant is having continuous process.
For indemnity period of more than 12 months Sum insured is to be

increased proportionately.
Sum Insured: NP +SC= GP

WAGES INSURANCE
As standing charges
On separate item on annual basis
Separate item on period basis (pro- rata).
Separate item on Dual basis.
Lay off and retrenchment compensation (Add on ).

ADD ON
Auditors' fees.
Earthquake
Terrorism
Spontaneous combustion
Spoilage cover.
Premises in the Insured's own occupation.
Suppliers & customers' premises.
Electricity station, gas works, and water works.

CLAIMS
o Claims under Lop policies payable only when there is admissible claim
under Material damage policy (i.e. as per Material Damage Proviso).
If claim under MD policy is rejected, claim under LOP policy also not
payable.
An only exception is - when claim under MD policy is not paid because it

is within Excess.
Perils covered under C.L. policy shall be those covered under the
material damage only.
38
However some of the perils covered under M.D. policy may not be
included in C.L. cover.
It is not possible to issue a policy with an indemnity period commencing

at a date later than the date of the damage.
It is not possible to change the indemnity period during policy period.

Minimum Deductibles:
Other than Petro Chemical Risks
Petro chemical risks
- 3 days of Standard Gross Profit

- 7 days of Standard Gross Profit
RATING
The basis rate for consequential loss resulting from destruction or of damage to the
property by the perils covered under the standard fire & special perils policy shall
not be less than 1.25 times the full average of the items covering the contents of the
process blocks of the premises occupied by the insured for the purpose of the
business to which the consequential loss insurance applies except where otherwise
provided.
1) In calculating the basis rate the contents of any storage/ utility blocks
(even if they are communicating with the process blocks) should not be
taken into consideration.
2) For other business premises where no manufacturing process is carried
on, the basis rate shall be 1.25 times the average rate of the contents of the
whole premises.
3) The average fire rate(as basis rate) shall be the percentage which is the
aggregate net premium in respect of the whole annual rate of the standard
fire policy(m.d. policy- i.e. fire & special perils insurance)of contents of
the process blocks and/or the whole premises as applicable under the
item 1 & 2 above bears to aggregate sum insured on such contents.
4) The basis rate should not be altered when the factory becomes silent
during the policy period.
5) Pilot plant and all the laboratories shall be considered as process blocks
for rating.
6) Percntage of the basis rate is applicable on the sum to be insured( 100% of
annual gross profit or above depending on the indemnity period opted by
the insured ) for all the perils normally covered under the material
damage cover.
FOR ADDITIONAL (EXTENSION) COVERS:
1.
Wages (other than those covered as part of gross profit)- on dual

basis( whole wages for initial 4 weeks & for a lesser percentage for
the remaining period of not less than total 12 months).
39
2.
3.
4.
Wages (prorata basis) for a selected period as multiple of basis rate.

Lay-off compensation &/or retrenchment compensation (with
/without notice wages liability) - 50% loading on profit rate for each
item.
Auditors' fees (only for the coverage of the fees required to be paid
for preparation of papers relating any claim assessment) separate
sum insured to be declared and premium to be charged at 100% of
basis rate.
RATE FOR VARIOUS SEPARATE EXTENSIONS TO
BE COVERED UNDER F.L.O.P.
SUPPLIER'S PREMISES.
CUSTOMER'S PREMISES.
INSURED'S PROPERTY STORED AT OTHER

LOCATION
FAILURE OF PUBLIC ELECTRICITY, GAS, WATER

SUPPLY.
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41
SALIENT FEATURES OF INDUSTRIAL ALL RISK

INSURANCE.
Eligibility - All Industrial risks including petrochemicals risks irrespective of
Sum Insured are now eligible subject to compliance of file & use guidelines by
insurers.
POLICY CONSISTS OF 2 SECTIONS VIZ.,
Section I Material damage AND
Section II Business Interruption (following Fire and allied perils (FLOP).
MLOP cover is also available at option of the Insured under Sec II.
SECTION I MATERIAL DAMAGE
INDUSTRIAL ALL RISK INSURANCE
SCOPE OF COVER :
ALL RISK POLICY.
ALL TYPES OF ACCIDENTAL LOSSES OTHER THAN THE

NAMED EXCLUSIONS.
SCOPE OF COVER INCLUDES THE FOLLOWING :
PERILS COVERED UNDER STANDARD FIRE AND SPECIAL PERILS
POLICY. Act of god perils namely STFI, EQ (Fire & Shock), landslide, rockslide
and subsidence.
OTHER SPECIAL PERILS VIZ., (offered free of cost)
Spontaneous combustion.
Sprinkler leakage.
Spoilage material damage.
Leakage and contamination.
Missile testing operations.
Forest fire.
Subterranean fire.
Bursting and over flowing of water apparatus and pipes.
Theft/Burglary
M.B.D.
Boiler explosion.
EEI.
EXCLUSIONS: in two parts 1. Excluded causes 2. Excluded properties
Excluded causes:
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43

Interruption of the water supply gas electricity or fuel systems or failure
of the effluent disposal systems
Collapse or cracking of buildings.
Faulty or defective design of materials, inherent vice, wear and tear.
Corrosion, rust, shrinkage loss of weight, contamination etc.
Larceny.
Dishonesty, inventory shortage.
Coastal or river erosion, normal settlement or bedding down of new

structures
Wilful negligence, cessation of work, loss of market.
War and war group of perils.
Nuclear group of perils.
Destruction of the property by order of public authority.

EXCLUDED PROPERTY :
Money, cheques, securities of any description, jewelry, works of art,

goods held in trust or on commission, computer system records unless
specifically covered.
Vehicle licensed for road use.
Property in transit outside the premises.
Property or structures in the course of construction, demolition or

erection.
Land, Pavements, roads, runways, railways lines, etc. unless specifically

covered.
Livestock, growing crops or trees.
Property damaged as a result of its undergoing any process
Property removed to other location for a period exceeding 60 days.
Loss payable to the property covered under marine policies.
Property more specifically insured under any other policies.

Compulsory or minimum deductibles : All material damage claims are subject
to compulsory deductibles as under:
Policies having Sum Insured upto Rs. 100 Cr per location for Property
Damage (PD) and Business Interruption (BI) : 5% of claim amount
subject to a minimum of Rs. 5 lacs
Policies having Sum Insured above Rs 100 Cr and upto Rs.1500 cr. per
location for Property Damage (PD) and Business Interruption (BI) : 5%
of claim amount subject to a minimum of Rs.10 lacs
Policies having Sum Insured above Rs 1500 Cr and upto Rs.2500 cr. per
location for Property Damage (PD) and Business Interruption (BI) : 5%
of claim amount subject to a minimum of Rs. 25 lacs
44
Policies having Sum Insured above Rs 2500 Cr per location for Property
Damage (PD) and Business Interruption (BI) : 5% of claim amount
subject to a minimum of Rs. 50 lacs
Mega Risks Policies having Sum Insured above Rs 2500 Cr per location
for Property Damage (PD) and Business Interruption (BI) : 5% of claim
amount subject to a minimum of Rs. 50 lacs
SCHEME FOR VOLUNTARY DEDUCTIBLES :
Insured may opt for higher deductibles and based upon the various voluntary
options, premium is suitably decided.
CLAUSES :
Agreed Bank clause.
Architects, surveyors and consulting engineers fees clause3.
Designation of property clause.
Escalation clause.
Omission to insure additions, alterations or extensions clause.
Temporary removal of stocks clause.

SUM INSURED :
For building, plant and machinery, furniture, fixtures and fittings on reinstatement
value basis. For stock on market value basis.
FACTORS FOR RATING:
The detailed risk assessment report of the company engineer.
Compulsory deductibles
Deductibles opted by the insured.
Claims experience.
SECTION II : BUSINESS INTERRUPTION
1.
2.
Loss of Gross Profit arising out of interruption of insured's operation.

Such an interruption arising out of a loss payable under Material damage
section.
SCOPE OF COVER UNDER SECTION II :

1.
2.
Loss of Gross profits & Increase in cost of working.

Loss of Gross Profits arising out of failure of utility services.
EXCLUSION APPLICABLE UNDER SECTION II :

1.
2.
Insured's lack of sufficient capital.

Any restrictions imposed by any public authority.
45
3.
4.
Loss of business due to causes such as cancellation of a lease license or

order etc.
Damage to boilers, economizers, machinery, electronic installations and
data processing equipment.
NB : Arising out of the above, MLOP may be included.
SPECIFICATION : Difference form of specification used.
SUM INSURED :
Estimated gross profit.
Extracted from the previous years profit and loss account.
Facility of return of premium clause.

EXTENTION UNDER SECTION II :
Special perils namely STFI and Earthquake.
Business interruption extended to customers and suppliers premises.

RATING :
As per the procedure adopted in Fire/Engineering portfolio.
COMPULSORY DEDUCTIBLES: All loss of profits claims are subject to
minimum deductibles as under:
Policies having Sum Insured upto Rs. 100 cr and upto Rs. 2500 crs. per
location for PD & BI:
Business Interruption (FLOP)Other than Petro Chemical Risks 7 days of Standard Gross Profit
Petro chemical risks 14 days of Standard Gross Profit
Business Interruption (MLOP) 14 days of Standard Gross Profit
Policies having Sum Insured above Rs. 2500 crs. per location for PD &
BI:
Business Interruption (FLOP) 14 days of Standard Gross Profit
Mega Risks Policies having Sum Insured above Rs. 2500 crs. per location
for PD & BI:
Business Interruption (FLOP) 14 days of Standard Gross Profit
Voluntary Deductibles: May be opted by Insured against which premium may
be suitably discounted.
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47
ENGINEERING POLICIES
TYPES OF POLICIES
PROJECT INSURANCE POLICIES
1.Marine-Cum-Erection(MCE),
2.Erection All Risk (EAR),
3.Contractor's All Risk(CAR),
4. Contractor's Plant & Machinery(CPM),
5. Advance Loss of Profit (ALOP).
INSTALLED MACHINERY POLICIES (ANNUAL POLICIES)
ENFINEERING INSURANCE
1.Machinery insurance (MI),

2.Boiler & pressure plant (BPP),
3.Electronic equipment ins.(EEI),
4.Deterioration of stock(Potatoes)-DOS(P),
5.Deterioration of stock(other than potatoes)-DOS(OTP),
6.Machinery loss of profit (MLOP).
7.Civil Engineering Completed Risks Insurance (CECR)
Other ways of grouping
All Risk policies : Nos. Of project polices as given below fall under the group
Marine-Cum-Erection(MCE),
Erection All Risk (EAR),
Contractor's All Risk(CAR),
Contractor's Plant & Machinery(CPM),

No. Installed machinery policy is in this group
EEI Electronic equipment ins.(EEI),
LIMITED PERIL / NAMED PERIL POLICIES
Boiler & pressure plant (BPP).

DEPENDENT POLICIES
Machinery loss of profit (MLOP).
Deterioration of stock(Potatoes)-DOS(P),
Deterioration of stock(other than potatoes)-DOS(OTP
Advance Loss of Profit (ALOP).
Sec.3(Increased Cost of Working i.e. ICOW) of EEI
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49

Machinery insurance for M/Cs
BPP for boilers

COMPOSITE COVER(MARINE CUM ERECTION ALL RISK POLICY)
Marine/inland transit & erection both are combined in one pool.
All risk policy- exclusions specified
Insures both the Marine and EAR coverage.
Transportation risk of materials from manufacturer's/suppliers' premises

to the erection site comes under Marine coverage.
Comprehensive cover from the time of arrival of the first lot of

materials(Machinery and equipments etc.) at project site /storage at
site/completion of erection/testing/commissioning or taking over, comes
under EAR coverage.
MCE(Marine and EAR) provides virtually a comprehensive cover from

the time of dispatch of the first lot of materials meant for project from
manufacturer's/suppliers' premises to the erection site/entire period of
transit/storage at site/completion of erection/testing/commissioning or
taking over
MCE = M/T + EAR OR CAR
Marine cum erection cover (MCE)
Marine transit & storage-cum-erection (SCE) cover
Coverage as per ICC (A)
Insurance extended to cover
War & SRCC risks

Storage at discharge port
Loading & unloading
Incidental transhipment
In case of Marine Inland Transit
- Coverage as per Inland Transit(Rail or Road) clause 'A;
- Insurance extended to cover Strikes, Riots and Civil
Commotions risk when inland transit is not in conjunction with
ocean voyage
What can be insured ?
Plant & machinery (to be erected)
Entire factory
Expansions
Additions
Civil engineering works

Who Can Insure?
Manufacturer
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Supplier
Purchaser
Contractor
Joint names
Scope of cover - All Risks
Location risks
- Fire
- Lightning
- Theft
- Burglary
Handling risks
-
Impact from falling objects

Collision
Unloading/ loading
Operational risks
Failure of safety devices
Leakage of electricity
Insulation failure
Short circuit
Tearing apart
Centrifugal forces
Explosion/ implosion
Risk of Human Element:
Carelessness
Negligence
Faults in erection
Sabotage
Riots , strikes, terrorism & malicious damage

Acts of god perils
Earthquake(fire & shock)
Landslide/ Rockslide/ Subsidence
Water damage
Flood
Inundation
Storm
Tempest
Hurricane
Tornado
51

Typhoon
Cyclone
Surrounding property
Escalation(Limited Maxi.50% of the SI)
Air freight
Maintenance cover
- limited contract
- extended visits
What is not covered

Exclusions .Applied internationally
Faulty design
Defective material/ castings
Bad workmanship
Rectification of defects
Manufacturer's guarantee
Wilful act
Wilful negligence
Consequential loss
Penalties
Delay
Lack of performance
Loss of contract
Third party liability

- Cross liability
Temporary work/structure
ERECTION ALL RISK (EAR)
Premium rating-basis
Premium rates, terms, policy wordings would depend on
Project size
Special characteristics
Comprehensive details of the project
Assessment of exposures
Period of project
Sum insured (i) Marine: CIF value plus 10% plus Customs Duty Amount;
(ii) EAR: Estimated value of Contract Works(Materials,
wages, construction costs, freight, customs duties ) and
items supplied by the Principal
Marine (imports)
Marine (indigenous)
Erection cost
Permanent civil engineering works

Additional covers:
Construction plant & machinery
Additional customs duty
Express freight (repairs)
Overtime (repairs)
Clearance & removal of debris

52
Covers perils/risks/materials involved in installation of plant & M/cs.
Various stages coveredstorage/erection/cold & hot testing of all kinds of

machinery/maintenance
All risk policy-exclusions specified
Indemnifies almost any form of accidental/unforeseen loss occurring to

property on erection site during the period of insurance
Erection all risk
Insures the projects where the erection of plant & machinery and
equipments & structures are the major part of the project & project have
insignificant civil works.
Erection all Risk
Risks covered: all risks insurance policy and mainly covers the following
named risks:
Location risk: fire, lightning, theft and burglary.
Operation risks: leakage of electricity, insulation failures, short circuit,

explosion, etc.
Human risks like carelessness, negligence, faults in erection,

riot/strike/malicious damage (RSMD).
Natural calamities like storm, cyclone, landslide, subsidence, etc.
Accidental external means like accidental falling of objects, impact and

thereby the resultant damage of property.
Extension of ear policy
To cover extra risks at extra premium (along with the basic cover at basic
premium).
The policy can be extended to cover the following
Third party liability risks
Surrounding property damage

53

Earthquake risks & terrorism risks.
Construction plant and machinery like cranes, dumpers, earth excavators

etc.
Extra charges for overtime, express freight etc.
Increased replacement value ( escalation benefit)

PREMIUM COST IN EAR POLICY
Depends on the term & period of project and nature of project depending
on the hazards associated with it. The rates are in per mille
It is a tariff policy & in the tariff all project names are given in
alphabetical order
Adjustment of sum insured

for variable charges like freight, custom duties, cost of
erection etc. Are adjustable.
Prime cost of plant & equipment is not adjustable and no refund of

premium is considered for this. Exclusions under EAR cover
following perils are excluded :
EXCLUSIONS UNDER EAR COVER
Faulty design
Defective material/ castings
Bad workmanship
Rectification of defects
Manufacturer's guarantee
Wilful act
Wilful negligence
Consequential loss
Penalties
Delay
Lack of performance
Loss of contract
Excess:
Details of EAR underwriting
Sum insured is equal to replacement cost of project. Sum insured is the

landed cost of items at project site plus freight, cost of erection, etc.
Premium installment facility is given in all project policy with period of

insurance more than 12 months
Frequency of installment is either quarterly of half-yearly but client

always prefers qtly. as outgo is less.
the first installment premium must be paid, on or before the

commencement of cover and this first installment premium will be
calculated & collected at being 5 %(of total premium) higher than the all
other equal installments .
Last installment premium should be paid at-least 6 months prior to the

expiry of policy period.
(i)Erection All Risk Insurance (other than combined cycle power plants/ gas
based power plants)-
Erection All Risk Period of cover
Insurance cover under EAR commences after unloading of first

consignment at site.
The policy period continues the entire period of storage, erection, testing
(until testing operations have completed and the project is declared as
successfully commissioned) and maintenance(either limited
maintenance or extended maintenance)
For Sum Insured up to INR 1500 cr. - All deductible amounts appearing in TAC
Tariff would be increased to 5 times of the minimum amount.
For Sum Insured above INR 1500 cr. and up to INR 2500 cr - All deductible
amounts appearing in TAC Tariff would be increased to 10 times of the minimum
amount.
For Sum Insured above INR 2500 cr. - All deductible amounts appearing in TAC
(ii) Erection All Risk :Combined cycle power plants/ gas based power plants-
Erection all risk- extra benefits (extensions)
By payment of additional premium, following can be covered
Increase in policy period.
Removal of debris, contractors plant and machinery, third party liability,

owners surrounding property, escalation(Limited to a Maxi. of 50% of
SI) etc.
Risks of earthquake and terrorism.
Dismantling cover for second hand machinery.
50 MW to 200 MW- 5% of claim amount subject to a minimum of 60 lakhs for

testing & 20 lakhs for normal loss.
200 MW to 300 MW- 5% of claim amount subject to a minimum 100 lakhs for
300 MW and above- 5% of claim amount subject to a minimum 125 lakhs for
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55
CONTRACTORS ALL RISKS POLICY (CAR)
This is an all-risks project policy, always issued for civil engineering

projects like construction of residential complexes, bridges, etc. The
following items can be covered in this policy
Civil works as per contract
Contractors plant and equipments
Cost of clearance &removal of debris
Third party liability arising out of third party's injury, property damage or
any fatal damage in relation to the project activities.
Insured's own surrounding property.
Escalation Benefit will be limited to a maximum of 50% of the Sum

Insured.
PROJECTS COVERED
Civil works for residences, factories, warehouses, bridges, roads, canals,

dams, hospitals, schools etc.
Risks covered: all risks namely fire, lightning, riot, strike, malicious, bad
workmanship, burglary/theft accidental external means etc.
EXCLUSIONS
Nothing is payable for the losses arising out of the following reasons:
Loss or damage due to faulty design.
due to wear and tear, deterioration due to atmospheric conditions.
inventory losses.
War, SRCC and allied risks.
due to nuclear reaction, nuclear radiation etc.
willful act or willful negligence of the insured.
Excess:
(i) Contractors All Risk Insurance (other than combined cycle power
plants/ gas based power plants)-
For Sum Insured above INR 1500 cr. and up to INR 2500 cr - All deductible
amounts appearing in TAC Tariff would be increased to 10 times of the minimum
amount.
For Sum Insured above INR 2500 cr. - All deductible amounts appearing in TAC
(ii) Contractors All Risk Insurance: Specialized risks ( The following risks would
be termed as specialized risks - All works in water, dams, canals, hydro power
projects, tunnels, irrigation systems, caverns.)
Deductible for Material damage: 5 % of claim amount subject to a
minimum of Rs 50 lakhs for normal loss and Rs1.5 Crs for AOG
/Testing/Fire/Explosion/ Collapse/ Major Perils.
CONTRACTORS PLANT AND MACHINERY POLICY

(CPM)
Items covered: cranes, bumpers, excavators , tunnel boring machines etc.

Which are used for the erection/construction of projects.
This CPM policy is issued as an extension of the mother project

policy(i.e. MCE/EAR or SCE/CAR policy) if S.I. of CPM items is less
than 5% of the S.I. of the mother project policy or up to the value of Rs. 25
lacs for these machines . But if value exceeds limit of 5% of project pol.
or Rs 25 lacs in a particular project site then a separate CPM policy has to
be issued.
This policy is given to contractors who may be using plant and machinery
at different projects during the policy period on a separate annual policy
with appropriate earthquake loading considering the sites falling in the
earthquake zones.
This is an all risks policy with specified exclusions printed on the policy.
The cover is operative for machines when they are at work or being
dismantled or cleaning or overhauling or reassembling thereafter.
Rating. Equipments are classified into 5 groups and rates are prescribed
for each group as per internal guidelines.
Equipment covered under the CPM policy at a location are dismantled

and shifted to new/other site and re-erected there at, can be covered on
payment of additional premium at the rate of Rs. 0.20 % for that
equipment.
For Sum Insured up to INR 1500 cr. - All deductible amounts appearing in TAC
SUM INSURED
On new ( current ) replacement value basis including transportation cost

tosite, customs dues and all installation costs..
Escalation maximum to the tune of 25% can be opted by the insured.
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57
A few important Exclusions

Loss or damage due to
electrical or mechanical breakdown for internal explosions
Loss or damage whilst in transit from one project to another
exchangeable parts & tools such as knives, ropes, belts, chains, blades
etc.
wear and tear
Loss of or damage to plant and/or machinery working underground

popularly known as exclusion 'K'. Not applicable to machineries used in
tunneling work.
Loss or damage whilst in transit
War and Nuclear perils

Compulsory Excess:
For all Machinery under Group I,II,III,IV, including cranes above 10
tonne capacity under Group III
EXCESSES
Value of equipments
For claims arising out

of AOG perils
For claims arisingout

of perils other than AOG
Individual value upto

Rs.1 lakh.
10 % of S.I. Subject to a 2 % of S.I. subject to

minimum of Rs. 5,000/- minimum of Rs. 1,500/-
Individual value over Rs. 5 % of S.I. Subject to a 1.5 % of S.I. subject to

1 lakh and upto Rs. 5 lakhs minimum of Rs.10, 000/- minimum of Rs.2, 000/3 % of S.I. subject to a
1.25 % of S.I. subject to
Individual value over Rs.
5 lakh and upto Rs.10 lakhs minimum of Rs. 25, 000/- minimum of Rs. 7,500/1.00 % of S.I. subject to
Individual value over Rs. 2 % of S.I. subject to a
10 lakhs upto Rs. 25 lakhs minimum of Rs. 30, 000/- minimum of Rs. 12, 500/1 % of S.I. Subject to a
Individual value over Rs. 1 % of S.I. Subject to a
25 lakhs upto Rs. 50 lakhs minimum of Rs. 50, 000/- minimum of Rs. 50, 000/Individual value over
Rs. 50 lakhs
1 % of S.I. Subject to a
1 % of S.I. Subject to a
minimum of Rs. 50, 000/- minimum of Rs. 50, 000/-
Boom Section- 20 % of claim amount subject to minimum of Rs. 25, 000/For Machinery under Group V - Rs.2,500/- Flat. Excess.
MACHINERY INSURANCE POLICY
Property covered: all electrical and non electrical (mechanical &

chemical) items like electric motors, transformers, diesel generator
sets, air compressors, boilers, blowers, etc.
Scope of cover : against sudden, accidental loss due to vibration,

maladjustments, falling, impact, collision and the like, obstruction or
entry of foreign bodies, etc.
SCOPE OF COVER
Losses from unforeseen and sudden damage to machinery from following causes:
Faulty material, design, construction, erection;
Vibration, malalignment, maladjustment;
Defective lubrication, loosening of parts, stress, explosion due to

centrifugal force, or internal pressure;
Failure of insulation and electrical breakdown.
Human failures like lack of skill, lack of knowledge & mere negligence.
The cover applies within the insured's premises specified in the policy
while the insured plant is covered under the following situations:
When it is at work or at rest.
While being dismantled for cleaning or overhauling.
During cleaning and overhauling operation.
When being shifted within the premises.
During subsequent erection.
Machinery insurance
PREMIUM:
Premium cost is high due to unfavorable claim experience .rates are in

per hundred of sum insured. 4 different sets of rates for M.I. policy:
Mechanical items;
Electrical items;
Machinery in cold storages and ice plants;
Fertilizer plants / petrochemical plants/ refineries.

POLICY EXCESS
1% of sum insured for each machine subject to a minimum of Rs 2,500/-.
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59
Equipment
Excess against each claim
Excess applicable for Glass Lined

10 % of Sum Insured for each claim
Vessels, Glass & Graphite equipments subject to minimum of Rs. 2500/-.
Exchangeable parts, non metallic parts (except electrical insulation),

operating media, coating of metal parts
SUM INSURED/ AVERAGE
a) For other items i) Furnace Transformers
2% of Sum Insured subject to

minimum of Rs. 2500/-
ii) Photo Copiers
5% of Sum Insured subject to

minimum of Rs. 2500/-.
RISKS COVERED
Mechanical failures like mal-alignment, nom-adjustment of parts,

impact of foreign elements, faulty operation, failure of safety
system/failure lubrication system,etc.
Human failures like lack of knowledge, lack of skill, mare negligence.
Electrical equipments suffer electrical failures or breakdown losses due

to "short circuit, excess/surge voltage, voltage fluctuations, defective
insulations, .. " etc.
EXCLUSIONS -1
Fire and allied perils
Internal fire due to electrical faults in electrical equipment is covered.
Explosion due to centrifugal force & internal pressure is covered.
War & warlike perils
Nuclear risks
Experiments or overload or similar tests
Gradually developing flaws, defects, cracks
Normal wear and tear
Wilful negligence
Sum insured
The S.I. of each individual item must represent its new replacement value
(current replacement value ) including transportation cost to site, custom
duty, insurance premium, other erection & installation cost i.e. Sum
insured = new value + freight + customs duties + other erection &
installation costs.
Optional items:
Cost of civil foundation & oil in transformer & for
Swichgear
Condition of average is applicable for underinsurance
Minimum premium
Rs. 100/
Provision for special rating
Short period rates
As per short period rates for motor insurance.
Escalation to the tune of 25% may be obtained by the insured

INDEMNIFICATION
Repair basis
No deduction for depreciation for parts with unlimited life.
Necessary bills and documents for repairs be submitted.
The value of salvage, under-insurance and excess is deducted from loss.

Total loss basis
Actual value of item after applying depreciation from the replacement

value of item.
EXCLUSIONS-2
Consequential loss
Defect in existence before insurance

Special exclusions
Excess
Damage due to faults/defects for which manufacturer is responsible

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BOILER AND PRESSURE PLANT INSURANCE(BPP)
Items covered: boilers and other pressure vessels (which generate

pressure during their normal operations)
Scope of cover:
Explosion and collapse damage , other than by fire ,to the boiler &/or
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other pressure plant and to surrounding property of the insured.
Legal liability for death, bodily injuries or property of third party.

Sum insured
Current replacement value of these items( to avoid under

insurance)which is inclusive of freight and customs duties, if any and
erection cost.
No Escalation benefit shall be allowed.

EXTENSIONS OF BPP POLICY:
By payment of additional premium ,following risks be covered:
(i) Surrounding property damage
(ii) Damage to third party property, death/bodily injuries.
(iii) Express freight(Air freight excluded), holiday and overtime rates of
wages
(iv) Air freight only
(v) Customs duty
WARRANTIES:
Boiler and pressure plant comes in statutory regulations.
Following conditions specifically apply to BPP:
The insured boiler should be certified by boiler inspector for use.

Otherwise the premium rates to be loaded by 25%.
Boilers being operated by persons holding valid certificates of

competency.
Unqualified permission to operate the boiler from the authority(by the

boiler inspector).
Rating:-basic rate is as per guidelines. additional premium be charged for

extensions like surrounding property damages, third party
liability/property damage, etc.
EXCLUSIONS:- LOSS OR DAMAGE DUE TO
Fire and allied risks of standard fire policy,
Damage by chemical explosion except in recovery boilers and waste heat

boiler.
Wear and tear, wasting of boiler materials.
failure of individual tubes

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COMPULSORY EXCESS:
5% of claim amount subject to a minimum of Rs 10,000/-.
All the extensions of BPP policy will have similar excess as per the basic
policy.
MACHINERY LOSS OF PROFITS POLICY( MLOP)
This policy covers loss of gross profits (consequential losses) following

breakdown of machine/s due to accidental.
This may so happen that after breakdown of a critical machine the entire
manufacturing process comes to a halt .the actual cost for replacing the
damaged part may not be very huge but following losses may follow:
No profits as no production.
Standing expenses like salary, interest, rent, etc. Are to be paid (even after
the loss & stoppage of production).
Extra money may be required to start production from an alternate place

or with some alternative machines on hire [which is known as increased
cost of working (ICOW) ].
All above losses are covered under machinery loss of profit insurance
policy.
For claim to be paid in this policy, firstly the claim should be admitted in
the concurrent machinery insurance policy for breakdown (as per the
material damage proviso of MLOP policy) .
SUM INSURED:Sum insured is being fixed keeping in view the expected gross profit for year
which is equal to net profit plus all insured standing charges calculated on last
year's annual a/c figures' basis (i.e. This can be determined from gross profit
of the previous year and including the trend for increase or decrease expected
in current year of underwriting).
PREMIUM RATE
This depends onRelative importance
(normally expressed in %) of the insured machines in relation to the final
product & in comparison to other machines. Stand-by machinery will reduce
the relative importance, the interruption period and the loss amount.
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INDEMNITY PERIOD
SUBJECT MATTER OF INSURANCE
(defined as the maximum period of interruption following breakdown of

insured machines for which insurer is liable. This can be equal or less than the
policy period) i.e. The liability for payment of loss due to reduction in
turnover/output during this period only, is accepted by the insurer. Higher
indemnity period means higher liability for the insurers, hence higher
premium. Repair facility( in-house/local) will reduce quantum of loss in
policy.
TIME EXCESS
Machinery Breakdown Loss of Profits (Standalone policy with MBD cover)- 14
days of Standard Gross profit
EXCLUSIONS
Time excess( for all loss of profit policies the stipulated deductible
franchise are always expressed in terms of number of days (i.e. The initial
stipulated number of days' period, during which period the loss due to
reduction in turnover/output has always to be borne by the insureds).
Intangible losses such as loss of market/goodwill which are not insurable

risks .
Alterations, improvements or overhauling made while repairing the

insured machines.
Willful or gross negligence of insured(s).
DETERIORATION OF STOCKS INSURANCE
This is also known as stock spoilage insurance policy.
This policy is a consequential loss policy and covers the risk of

deterioration/contamination following breakdown of refrigeration plant
and machinery.
Precondition for this DOS insurance is , first there should be machinery

insurance cover for refrigeration plant and machinery of the cold storage.
There are two kinds of deterioration insurances:

Insures stocks of fish, meat ,prawn ,frog-legs, various fruits (like apples/
oranges etc.), cheese, dairy products, pharmaceutical drugs. this is
known as DOS(otp) Insures stocks of potatoes in cold storage. This is
also called DOS(p) policy. pre-acceptance inspection is a must.
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Contents of cold storages e.g.- potatoes and other than potatoes (fish, sea
foods, cheese, dairy products, fruits, etc.)
Risks covered
contamination, putrefaction and/or deterioration
following a breakdown of refrigerating unit.
SCOPE OF COVER OF DOS POLICY
Loss to contents of cold storages caused by:

Damage to any cold storage machinery by accidental means subject to
admissibility of the claim under M.I. policy covering the cold storage
machines.
Rise or fall in temperature at the cold storage chamber resulting from

breakdown of refrigerating machinery.
Minimum rate of D.O.S.(p)
The minimum period for which the policy shall be issued is 7 months.
For any period less than 7 months, the minimum rate to be charged will
be as under : (a) in respect of cold storages which have opted
for FOES extension Rs. 0.84% ( i.e. Rate with foes is Rs.0.12% per
month).
in respect of cold storage which have not opted for FOES -Rs.. 0.70%
(i.e. Rate w/o foes is Rs. 0.10% per month).
SUM INSURED :
Maximum value of stocks in the cold storage at any one time.

EXTENTION
Failure of electrical supply

At terminal end due to machinery breakdown
At local supply place.
(excluding rationing, fuel shortage etc.)

EXCLUSION:- FOLLOWING LOSSES ARE NOT COVERED
Shrinkage, inherent defects or disease
Improper storage, damage to packing material,

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Insufficient circulation of air,
Willful act on part of insured or his representative.
Excess or deductible franchise as stipulated in the policy

INDEMNITY:
Market value of the stocks at the time of loss.
Rates of dos ( potato)
Rates for deterioration of stocks insurance for cold storage plants
for cold storages which have opted for foes extension the rate will be
0.12% per month or part thereof.
for cold storages which have not opted for foes extension the
rate will be 0.10% per month or part thereof.
note : these rates are to be charged on the sum insured i.e. The
value of the goods obtained by multiplying the actual storage
capacity
SPECIAL CONDITIONS-1
Compulsory excess in two slabs

Without F.O.E.S. extension &
With F.O.E.S. extention

Special conditions:
Pre acceptance inspection for the concurrent machinery insurance policy
as well as for D.O.S. insurance.
Careful underwriting in view of huge loss potential
10% of the claim amount subject to a minimum of Rs.20,000/-.
In respect of those cold storages which have opted for FOES

extension - 20% of the claim amount subject to a minimum of
Rs.20,000/-.
The following deductible franchises are in addition to franchise for lack

of spare parts as follows :
Compressors:- Rs. 1000/

Diffusers:- Rs. 750/ Diffusermotors:- Rs. 750/
Expansion valves:- Rs. 500/-
ELECTRONIC EQUIPMENT INSURANCE

OBJECTS COVERED:
computers, bio-medical equipments, x-ray equipments, audio / video

equipments, all movable/portable electronic equipments, various
medical / equipments like scanners, E.C.G. etc.
This is an All Risks Policy and covers namely the following risks:
Damage due to carelessness, negligence of employees
Fire, lightning, explosion, flood , storm ,earthquake etc
damage due to moisture and humidity.
Riot, strike, malicious damage
Burglary, housebreaking or theft.
Electrical, mechanical breakdown.

THIS POLICY COMPRISE OF THREE SECTIONS:-
SPECIAL CONDITION-2
Pre acceptance inspection is a must.
Detailed inspection report by co. Engineer.
Mid- term inspection if dos claim occurs.
Owner of cold storage to maintain log book for critical machines at least
for compressors with records of temperature & humidity in different
floors in prescribed form.
Stock register- declaration of stocks levels periodically.

EXCESSES APPLICABLE
In respect of those cold storages which have not opted for FOES extension 66
Section-1
Cover material damage to equipments only i.e. Physical/tangible part of
machines with auxiliaries like CPU,VDU(monitors), printers, keyboard, speakers, external modems even the items which provide the
computer environment like room air-conditioners, UPS, voltage
stabilizers all such items are insured against above risks.
Section-2
Cover material damage to external data media. The sum insured shall be
the amount required for replacing lost or damaged data media by new
material and for reproducing lost information only for back-up data but
not for master data.
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Section-3
Covers increased cost of working following breakdown of equipments as
covered under section-1. The additional cost may be for using substitute
edp equipment, for personal expenses and cost of transportation of
materials.
Premium rate is Rs. 1.00 % with annual maintenance contract.
Otherwise in the absence of Annual Maintenance Contract(AMC) the

premium will be loaded by:- 25% loading for equipments with individual
sum insured upto Rs..1 lac & 50% loading for equipments with sum
insured above Rs.1 Lac.
For personal computers with sum insured upto Rs.1lakh, maintenance

agreement warranty is waived.
Excess deductible under E.E.I. policy for m/c S.I.<Rs.1 lac:
For sum insured of individual machine value upto Rs. 1 lac:-5% of the
claim amount subject to minimum of Rs.2,500/- for normal claims.
10% of the claim amount subject to minimum of Rs.2,500/- for

winchester drive & hard disk claims.
Excess deductible under E.E.I. policy for m/c > Rs. 1 lac:
For sum insured of individual machine value above Rs. 1 lac:- 5% of the
claim amount subject to minimum of Rs 2,500/- for normal claims.
25% of the claim amount subject to minimum of Rs 10,000/- for

winchester drive & hard disk claims.
Technical survey : is conducted of all electronic equipments and

computer installations. This insurance cover is given only fort those
equipments which have completed at least 3 months trouble free
operations.
Escalation maximum to the tune of 20% can be opted by the insured.

EXCLUSIONS
information etc
For claims under E.E.I. policy:MATERIAL DAMAGE
Repairs:-indemnity is cost of repairs plus the cost of dismantling and reerection. no deduction for depreciation for parts with unlimited life in
case of repairs (i.e. For partial loss ). The cost of any alterations,
improvements or overhauls shall not be recoverable under the policy.
For claims under E.E.I. policy:

External data media for floppies, discs etc.
Indemnity is for all expenses within a period of 12 months from the date
of loss. expenses incurred will be for restoring the insured external data
media to a pre loss condition. as from the date of loss , the sum insured
shall be reduced for balance policy period unless the sum insured is
reinstated.
Indemnify the additional expenditure following admissible loss in

policy. This may be in terms of hiring additional machines or for using
new premises to carry out the work at higher cost.
RATING
Rate : section i and section ii @ 1.00%
If annual maintenance agreement is not executed the premium will be

loaded by 100%. If annual maintenance agreement is not executed but
the insured has got sufficient in-house facilities for proper maintenance
of the equipments of the equipments, the premium will be loaded by 50%
only. For p.c. no loading.
DISCOUNT FOR FIRE INSURANCE:
Loss /damage due to
Wear and tear,
Defects for which manufacturer is responsible.
Due to willful act of insured.
War, invasion and allied risks
Loss or damage to bulbs, valves, tubes etc.
Consequential loss of any kind in section ii of policy. Any cost arising

from false programming, punching or inadvertent canceling of
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for equipments covered under E.E.I. policy as also under fire policy with
all extensions : a discount of 10% of the applicable E.E.I. rate (for Sec.-I
only);
without any extension or with some extensions only under fire policy:
5% discount on fire rate (for Sec.-I only) .
ADVANCE LOSS OF PROFITS POLICY (ALOP)
Advance consequential loss insurance or loss of profit policy are issued

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only to the principals/owner of the project, in advance of the actual

commencement of business for delay in commencement of the project .
This ALOP policy covers financial loss due to delay in start of project
(because of loss/damage to the project arising out of the insured peril of
the project policy during transit /storage/erection/ commissioning phase
of the project).
WARRANTY
It is warranted that the maintenance agreement in force at the inception of

this policy is maintained during the currency of this policy and no
variation in the terms of the agreement shall be made without the written
consent of the company being obtained.
For the purpose of this warranty the word 'maintenance' shall mean the
following
Safety checks,
Preventive maintenance
Rectification of loss or faults arising from normal operation as well as

ageing.
Claims in this policy are paid when material damage losses are
admissible in terms of project insurance policies like SCE / MCE or
CAR.
Other name of this policy is "Delay in Start Up policy".
This cover shall indemnify the insured in respect of Loss of standing

charges (debt service + fixed cost) & net profit actually sustained due to
the actual turnover falling short of the targeted turnover which would
have been achieved had the delay in project commissioning not occurred
subject to Material Damage proviso.
SCOPE OF COVER PRINCIPAL/OWNER
Loss of gross profit
(also covers any loss minimizing expenses up to the costs thereby

avoided)
Due to delay in project commissioning
Increase in cost of working
(subject to limit of savings in profit)

SCOPE OF COVER CONTRACTOR
In built/operate/transfer ( B.O.T.) contract

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interest on retention money.
salary & wages of employees for maintenance of
site facilities for extended period.
additional higher charges for construction, plant
& machinery.
extension premium for project policy.
loss of revenue (for B.O.T.) projects).

DSU TERMINOLOGY
Indemnity period and time excess.
Standing charges.
Turnover.
Gross profit.
Rate of gross profit (gross profit : turnover).
Rating- ALOP(M.D.- EAR/ CAR) _
(100% R.I. Dependent)

Depends upon
Indemnity period & time excess
Project/ plant capacity
Specification of major equipments
Implementation schedule and buffer time in-built
Reliability of technology used - prototype or time tested ?
Inventory of spare parts
Imported or indigenous equipments
Maximum expected project down time period

RATING - MARINE (ALOP)
(RI dependent)
Depends upon :
Indemnity period & time excess.
Specification of major equipments.
Imported or indigenous origin.
Maximum expected replacement time of major equipment.
Project equipment delivery schedule.

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TIME EXCESS ALOP
(RI dependent)
Advance Loss of Profits Time excess for Contractors All Risk Insurance/
Erection All Risk Insurance (other than combined cycle power plants/
gas based power plants)- - 30 days for first year+ 1 day for each erection
month in addition to 12 months not exceeding 60 days
Advance Loss of Profits Time excess Specialized risks ( The following

risks would be termed as specialized risks - All works in water, dams,
canals, hydro power projects, tunnels, irrigation systems, caverns.) - 45
days for first year+ 1 day for each erection month in addition to 12
months not exceeding 75 days
Advance Loss of Profits Time excess-for Combined cycle power plants/

gas based power plants: 45 days for first year+ 1 day for each erection
month in addition to 12 months not exceeding 75 days for Combined
cycle power plants/ gas based power plantsDSU EXTENSION
Supplier's premises.
Accidental failure of public electricity supply.

Special points to be remembered :
INSURED & UN-INSURED DELAY :
Reasons for all delay would be ascertained and only the delay caused by an
indemnifiable event & indemnifiable in material damage erection policy is
covered.
EXTENSION OF PERIOD :
Any extension of the period of insurance under the EAR section the policy shall
not automatically lead to an extension of the period of insurance of the ALOP
policy.
Basis of loss settlement :
Reduction in turnover
Rate of gross profit
Advance lop
Exclusions
Deductible stated in the schedule.
Any interference in the work directly or indirectly due to the following :

Loss or damage covered under material damage policy unless
specifically agreed,
Loss or damage to surrounding properties,
Loss or damage due to e.g. , volcanic eruption, falling of meteor,

etc,
Loss or damage to the prototype nature of work
Loss or damage due to operating media such as fuels, chemicals,

catalysts, filter substances, heat transfer media and lubricants etc.
EXCLUSIONS
Consequential loss of any kind such as penalties, lack of performance,

loss of contract, fines for breach of contract etc.
Shortage, deterioration or damage to any materials.
Any restriction or reconstruction or operations imposed by public

authority.
Alterations, additions, improvements, rectifications to eliminate the

deficiencies
Non-availability of funds for repair or replacement of damaged items.
Basis of premium rating
Amount of sum insured
Excess and indemnity period limit
The type of project

General and special risk involved
The loss prevention measures and fire fighting facilities provided during
construction.
Relative importance.
The reserve capacities.
The repair facilities.
Major spare parts availability

What we require from insured
Details of contractors when selected
Detailed sequence of works
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of erection/ construction
Bar chart
Geological reports
Ground conditions
Soil investigations
Seismology reports
Nature of piling activities/ foundations
Site protection to avoid flooding
Nearby seas, rivers, lakes
History of flooding
Preventive measures
Drainage etc.
Wet works
WHAT WE REQUIRE FROM INSURED
Fire fighting facilities provided
Full technical details
Confirmation that no unproven / prototypical equipment is involved
Detailed site location plot plan showing proximity to existing units/

habitations
Premium rating
Tariffed- upto sum insured of Rs. 1500 cr.
Beyond Rs.1500 Cr.- it is re-insurance driven.
Instalment facility available for premium payment.

ALOP (underwriting suggestions)
To include following add-on covers:
-third party legal liability including cross liability
-extended maintenance cover
-design defect cover
-escalation clause
Policy suggested with voluntary deductibles
CLAIM PROCEDURE
In the event of loss

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Notify company immediately (within 14 days)
Initiate action to minimise the extent of loss
Preserve damaged parts for inspection
Furnish following information/ documents
Completed claim form
Repair bill, photographs
Replacement invoice, bills
Police/fire brigade/met. Report
Fir, final/ internal investigation report

COVER
Max. SI/SI per day=
Rate of standing charges to shortfall in production and
Increase in cost of working due to insured perils.

Perils covered
Physical loss/ damage to cargo
Loss of mechanical breakdown or damage to the hull & machinery.( as if

insured under hull clauses- voyage or aircraft all risks policy)
Loss of, mechanical breakdown of , or damage to other conveyance on

which property is conveyed.
G.A., salvage or life saving operations.

Duration
Ware house to ware house
Including ordinary course of transit, &
Incidental storages if agreed

EXCLUSIONS
Material damage.
Un satisfactory repairs, from clients' viewpoint causing delays and

consequential losses. provided such repairs are proper as per the
surveyors./ classification societies.
CLAIMS
Supporting papers and evidences to be given by the insured.
In case of loss/ damage notice also to be given to lop underwriters.
If start up date is delayed due to un insured peril, the next claim(insured

peril) will start from the delayed date and not the original date.
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SPECIAL CONDITIONS
Compulsory insurance of cargo under customary marine insurance

policy.(including war and strikes)
The despatch to be made by vessel confirming to the institute

classification clause, otherwise insurers consent required.
Definitions of terms on 'expected' basis against the actual- expected net

profit etc.
There are two other policies
Some part of the compulsory portion & the only optional portion of the
policy involves some cover from various engineering insurance
policies and the policy is known as Industrial all Risk Policy.
The second policy covers the civil engineering subject matter but the
policy is nothing but the wider form of cover of standard fire policy and
the policy is known as civil engineering completed risks insurance
QUESTIONS
BULLET QUESTIONS
Steps to be taken while extending an expired Project Insurance Policy.
To ascertain reasons why the policy was not extended although the
project is not completed.
To find out whether there was any loss after the expiry of the policy.
If there is no loss and the reasons explained by the Insured for not
extending the expired policy is satisfactory; the proposal may be
considered.
The Insurance Company will arrange a pre-acceptance inspection by

a qualified engineer to evaluate the project in terms of percentage
completion as well as the quality of project work.
The sum insured in that case will be reckoned as of incomplete

percentage on 100% project cost.
If the report of the inspecting engineer is not a qualifying report, the

extension of Insurance may be considered.
Accordingly, the Insurance premium bill will be raised at the initial

project premium rate but the premium amount will have to be paid
on the sum insured stated above from the date of expiry of the policy.
If there is a loss, the Insurance Company will impose additional

deductible with a specific condition that for the earlier loss the
company will have no liability.
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If all the conditions are satisfactory the company will issue the
endorsement extending the policy after receipt of the premium.
TRADE QUESTIONS
1. Which one of the following is a mega risk?
a) A petroleum refinery with sum insured Rs 3000 cr
b) An organization having 25 different location with overall SI of Rs
2500 cr
c) A power plant with sum insured Rs 2000 cr
d) A fertilizer plant with SI of Rs 600 cr
2. Silent risk under fire policy in manufacturing premises are treated as silent
risk when?
a) The factory is closed for 1 week continuously
b) The factory is closed for 15 days continuously
c) The factory is closed for 30 days or more continuously
d) None of the above
3. Please indicate which of the following statements is true.
a) Tsunami is a peril covered in standard fire policy
b) Fire policies are agreed value policies
c) Stocks can be covered with replacement value clauses
4. Which one of the considerations are not taken into account for processing
fire claims:
a) Condition of average
b) Breach of warranty
c) Confirmation of Surveyor about verification of books of accounts
d) Distance from fire station
5. Which will be treated as Hazardous goods under Fire and special perils
policy?
a) Methylated spirits
b) Common salt
c) Sodium carbonate
d) Sugar
6. Long term Fire Policy can be issued for dwellings
a) For minimum period of 2 years
b) For minimum period of 3 years
c) For minimum period of 5 years
7. Following Add on covers are not available in standard fire Special Perils
Policy
a) Spontaneous combustion
b) Loss of rent clause
c) Start up expenses
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8. Which of the following losses is not covered under fire insurance policy?
a) Process losses
b) Impact Damage
c) Missile testing operations
d) Aircraft damage
9. In consequential Loss(Fire) Insurance policy, the sum insured is arrived at
by
a) All standing charges plus net profit
b) Specified standing charges plus net profit
c) Only net profit
10. Subsidence and landslide loss covers
a) Coastal and River Erosion
b) Visible physical damage to property
c) Defective design
d) Demolition by government authority
11. Standard Fire Policy contains the following number of conditions
a) 13
b) 14
c) 15
d) 16
12. As per AIFT how many earthquake zones are available?
a) 3
b) 4
c) 5
d) 6
13. Loss or damage to property caused by sprinkler leakage is covered under
Fire Policy if leakage is caused by
a) Heat due to fire
b) Leakage due to repair or alteration to the building or premises
c) Loss or damage to property caused by sprinkler installation
d) Sprinkler installation by either repaired or extended
14. Stock is divided into how many categories for spontaneous combustion
cover
a) 3
b) 4
c) 5
d) 6
15. Which of the following risks is not considered as add on cover?
b) Lightning
c) Earthquake
d) Startup expenses
16. What is meant by spontaneous combustion?

a) Charring due to self heating
b) Spread of fire
c) Change of color or deterioration in quality due to self heat
d) Loss or damage due to fire caused by own fermentation or natural
heating
17. Reinstatement value policy can be issued for
a) Stock in process
b) Building
c) Stock in go down
18. Standard Fire policy covers
a) Loss due to explosion of boiler
b) Loss due to explosion of domestic boiler
c) And (b)
19. Terrorism cover under fire policy can be granted on First loss limit up to
a) Rs. 200 crore
b) Rs. 300 crore
c) Rs. 500 crore
d) Rs. 600 crore
20. Declaration Policy has minimum SI of
a) Rs. 5 Crores
b) Rs. 10 Crores
c) Rs. 1 crore
d) Rs. 0.50 crore
21. Declaration policy can be issued
a) For short period
b) Stocks undergoing process
c) Stocks in Rly Slidings
d) Fluctuation in stock
22. Minimum SI for floater declaration policy
a) Rs. 5 Crores
b) Rs. 10 Crores
c) Rs. 15 Crores
d) Rs. 2 Crores
23. Co-Insurance in Fire Policies pertain to
a) SI distributed over no. of locations
b) Policy shared amongst various insurers
c) Double insurance
d) Insured opting for an higher excess
24. Reinstatement value policy can be given to
a) Stocks
b) Building, Plant & machinery
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c) Stock in process
d) All the above
25. Which of the following statements is incorrect under fire policy subject to
agreed bank clause?
a) Material change in risk does not affect the interest of the Banker
b) Valued policies can be issued whose mkt. value cannot be ascertained
c) In multiple occupancy building per se ratings is permitted
d) Insurable interest does not automatically pass onto the legal heir
26. Ex-gratia settlement in fire policies are
a) Under Insurance
b) Loss outside the ambit of the policy
c) Contribution
d) Subrogation
27. Policy wording after 01/01/2007 cannot be altered earlier than
a) 30.06.2007
b) 30.09.2007
c) 01.04.2008
d) 31.12.2007
28. Project Policies are
a) All Risk
b) Named Perils
c) Consequential Loss
d) Agreed value
29. Fire Business is U/W on the basis of
a) Long tail liability
b) Loss Reserve
c) Profit Margin
d) Probable Maximum Loss
30. Percentage of obligatory cession to GIC is
a) 30
b) 20
c) 15
d) 10
31. CPM is
a) Coverage all risk policy with inclusion of breakdown
b) All risk policy with exclusion of breakdown
c) Self propelled machineries on public/Private Road
32. FOES is an extension under:
a) CPM
b) CAR
c) DOS
d) MBO
33. DSU stands for

a) Delay in start up insurance
b) Derivatives stock units
c) Dead stock under insurance
d) Diluted stock undertaking
34. A machine worth Rs. 40,000/- insured for Rs. 30,000/- under Fire Policy. It
was damaged due to fire and the amount assessed in Rs. 16,000/- . The claim
payable is:
a) Rs. 30,000/b) Rs. 12,000/c) Rs. 16,000/d) Rs. 40,000/35. Material damage proviso under the consequential loss (Fire Insurance)
means:
a) Claims admissible under standard Fire and Special Perils Policy
b) Occurrence of the loss
c) Loss discovered during stock taking
d) Loss of goodwill
36. In an LOP policy, Auditor fees is
a) An Extension
b) A built in cover
c) A part of standing charges
d) Not to be covered
37. Fire at supplier's premises can be a part of
a) a Material Damage Fire policy
b) An LOP policy
c) Is a stand alone policy
d) Has no relevance
38. Common utilities outside the premises can be
a) Rated per se
b) Rated as per the main risk
c) Highest rate to apply
d) Insured separately
39. Storage of Hazardous chemical upto 5% of value at risk
a) Does not affect a claim
b) Renders a claim non-standard
c) Renders a claim as no claim
d) Can be covered after collection of extra premium
40. Cracks appearing in a building on account of subsidence of land below
a) Fire Policy will cover the loss without any extension
b) Claim is payable on repair basis
c) Claim is not payable
d) Fire policy would have covered the claim had an extension been
taken.
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41. A dish antenna(Covered under fire policy) breaks as a monkey jumps on it

a) The claim is payable
b) The claim is not payable
c) The claim is payable as non standard
d) Some other insurance should have been taken
42. The adjustment of sum insured in EAR policy is not done in respect of
a) Freight and Handling charges
b) Custom duties
c) Cost of erection
d) Increase or decrease in cost of contractors' plant and machinery
43. Standby machinery in MBD is
a) Not covered
b) Covered at a discount of 50% in rate'
c) Discount of 75%
d) Only covered when it is put to use
44. Preliminary investigation of loss under Fire Policy includes
a) Whether the loss caused by an insured peril
b) Whether the damaged is covered under the policy
c) Whether adjacent property is damaged
d) All of the above
45. It is not the duty of the insured in the event of a claim under a fire policy to
a) Save as much as possible of the insured property
b) Take all reasonable steps to extinguish the fire
c) Shift the operations immediately
d) Diminish their loss
46. If the insured proposes to get add on cover for STFI during the middle of
the policy
a) The same cannot be covered
b) The same can be covered
c) Covered with a waiting period of 15 days
d) Covered with a waiting period of 30 days
47. Ultra sound machines can be covered under
a) Machinery Breakdown Policy
b) Electronic Equipment Policy
c) Any of (a) & (b)
d) None of (a) & (b)
48. Fire policy covers
a) 12 named perils
b) Unnamed peril policy
c) All risk policy
49. Basis of settlement in Fire policy can be

a) Market value basis only
b) Reinstatement value basis only
c) Market value or reinstatement value basis
50. For a RIV Policy the insured has to give his concurrence for settlement at
market value basis
a) On day of loss
b) Within 12 months from date of loss
c) Within 180 days from date of loss
d) Not at all
51. Sum Insured on Reinstatement value policy should show
a) Cost or rebuilding the subject matter on date of loss
b) Cost of reinstatement of subject matter at time of taking policy
c) Cost of rebuilding subject matter less depreciation on age on date of
loss
52. Indemnification for stocks in Fire policy is based on
a) Invoice value
b) Market value or cost whichever is less
c) Reinstatement value
d) Book value
53. The material damage proviso under FLOP policy states that
a) Loss under LOP is admitted only after there is a loss under the fire
material damage policy
b) The loss of profit policy is independent from the fire material damage
policy
c) The loss under Fire and LOP policies cannot exceed the S.I. under
fire policy
54. The basis rate under Fire LOP policy is based on
a) The average rate of the process blocks under the Fire policy
b) The average rate of all blocks under Fire policy
c) A separate rate for selected block as per FLOP tariff
55. The FLOP policy covers
a) Loss of profit due to reduction in turnover during indemnity period
b) Loss of profit during the financial year
c) Loss of turnover due to fire
56. The gross profit insured under FLOP policy would cover
a) Net Profit
b) Standing Charges
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c) Both the above

57. For covering marine portion under an MCE policy you would require
information
a) S.I. for Inland transit
b) S.I. for overseas transit
c) Both the above
58. Industrial All Risk policy allows under insurance up to
a) 15% of Sum Insured
b) 20% of Sum Insured
c) No allowance for under insurance
d) Underinsurance to be computed as per fire tariff
59. The advanced loss of profit policy covers
a) Loss of projected profit due to interruption of project by an insured
peril
b) Loss of turnover after the commencement of project
c) Loss of projected profit due to non-completion of project
d) Due to insolvency
60. Rating under Petrochemical tariff is based on
a) Material factor of the raw materials and hold up capacity
b) Pressure and temperatures
c) None of the above
d) Both 1 & 2 above
61. Facility of installment premium is available for project policies if the
project periods exceeds
a) 12 months
b) 15 months
c) 18 months
d) 24 months
62. Which one of the following could not be the basis of valuation of Fire
insurance
a) Market value basis
b) RIV basis
c) Contract price basis
d) Original cost basis
63. Standard Fire Policy doesn't cover
a) Fire
b) Spontaneous combustion
c) Lighting
d) Aircraft damage
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64. Fire policies can be issued for a period of more than 12 months in the
following case
a) Shops
b) Factory
c) Dwelling
d) Godown
65. Issue of Fire declaration policy is not possible for
a) Raw material
b) Finished goods
c) Process stock
66. The maximum possible refund under a fire declaration policy is
a) 60%
b) 50%
c) 40%
d) 30%
67. Under Std. Fire & special perils policy debris removal upto 1% of the SI
can be covered at an additional premium of
a) 15%
b) 10%
c) 5%
d) Nil
68. In a fire floater policy the minimum sum insured at one location should
not be less than
a) 50%
b) 25%
c) 10%
69. In which of the following is not applicable in a RIV policy
a) Designation of property
b) Under insurance
c) Depreciation
d) Salvage value
70. In Fire LOP policies, indemnity period means
a) Specified policy period
b) Specified interruption period opted
c) Specified reinstatement period
71. Unless specified, Fire insurance policy covers works of Art up to a limit of
a) Rs. 10,000
b) Rs. 15,000
c) Rs. 5000
d) None
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72. Loss due to flood on account of Tsunami is covered only when

a) STF I cover is not deleted
b) Add on cover EQ is opted
c) RSMD is not deleted
d) a & b above
73. A fire policy on residence attracts an excess of
a) Rs. 10,000
b) Rs. 20,000
c) Rs. 5,000
d) Nil
74. A CAR policy can be issued where civil work in a project is more than
a) 60%
b) 50%
c) 40%
d) 25%
75. Which one of the following is not underwritten in Engg. Dept.
a) CAR
b) EAR
c) IAR
d) CECR
76. Which policy is not issued for a period of more than 12 months
a) CAR
b) MCE
c) SCE
d) CPM
77. Which equipment cannot be covered under EEI policy
a) Personal Computer
b) Laptop
c) Sonography
d) MRI Scanner Equipments
78. Excess is not applicable is case of
a) EAR policy
b) EEI policy
c) Boiler & Pressure plant policy
d) MBD policy
79. Which of the following is not an add on cover under a project policy
a) Surrounding property
b) Third party liability
c) Off site storage and fabrication
d) Debris of uninsured property
80. Terrorism pool is managed by
a) Head office of companies
b) Reinsurance committee
86
c) GIC
d) IRDA
81. In which of the following testing is an inbuilt cover
a) CAR
b) CECR
c) EAR
d) MBD
82. Maximum permissible escalation under an EAR policy is
a) 25%
b) 50%
c) 75%
d) None
83. Which of the following is not a standing charge for LOP/ ALOP
a) Insurance premium
b) Advertisement & publicity
c) Rent and Tenants
d) Raw material cost
84. Time Excess under MLOP policy is
a) Three days
b) Fourteen days
c) Ten days
d) None
85. How many classified group of machineries available under CPM policy?
a) Seven
b) Five
c) Ten
d) Three
86. Mobile construction equipments can be covered under
a) Motor Policy
b) CAR Policy
c) CPM Policy
d) Both a & c
87. Fire Material damage policy does not cover
a) Furniture & Fixtures
b) Stock
c) Standing Charges
d) Stock in process
88. The word CONDITION OF AVERAGE is associated with
a) SUBROGATION
b) CONTRIBUTION
c) UNDER INSURANCE
d) REINSURANCE
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89. PML means

a) Probable Maximum Loss
b) Probable Minimum Loss
c) Possible Minimum Loss
d) Probable Maximum Loss
90. F.E.A. means
a) Fire Eliminating Application
b) Fire Extinguishing Appliances
c) Fire Electrical Appliance
d) Fire Equipments Allowance
91. AOG peril does not include
a) Terrorism
b) Earthquake
c) Flood
d) Inundation
92. Fire Policy does not cover
a) RSDMD
b) Electrical/ Mechanical Breakdown
c) Terrorism
d) AOG peril
93. In the event of a claim under FIRE Policy
a) Sum Insured is reduced by the amount of claim
b) Sum Insured is reduced by amount intimated
c) Sum Insured is not reduced at all
d) None
94. Under EAR policy Cold Testing means
a) Plant is situated at cold place
b) Checking of parts under cold condition
c) Testing of parts under No Load condition
d) Testing of parts under full load conditions
95. HOT Testing under EAR policy means
a) Plant is situated at hot place
b) Checking of parts under hot condition
c) Testing of parts under full or partial load
d) Testing of parts under full load conditions
96. Annual Gross profit means
a) Net profits plus standing charges
b) Turnover minus variable cost
d) Both of 'a' and 'b'
97. The force which causes the current to flow through circuit is known as
a) Electro-magnetic Force (EMF)
b) Watt
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c) Horsepower
98. Certain discount may be given in electric equipment policy if the same
property covered under Fire Policy
a) 5%
b) 10%
c) 25%
d) 50%
99. Selection of sum insured under Fire policy
a) Can be allowed
b) Can be allowed only after charging short period premium rate
c) Cannot be allowed
100. Local Authorities clause under Fire policy is applicable under
a) Declaration policy
b) Standard Fire policy
c) Reinstatement value policy
d) Floater Declaration policy
101. Peril is
a) A cause of loss
b) A degree of loss
c) System to reduce the loss
102. Without prejudice mean
a) Proof of admission of liability
b) Proof of non-admission of liability
c) Both a & b above
103. Ejusdem generics rule means
a) Of different kind
b) Of same kind
d) Both of the above
104. Which of the following is operational phase policy and not construction
phase policy under engineering insurance
a) Contractors All Risk
b) Electronic Equipment
c) Erection All Risk
d) Marine-cum-Erection
105. Machinery Loss of Profits Policy (MLOP) does not provide indemnity
against which one of the following
a) Loss of net profit
b) Insured standing charges
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c) Increased cost of working

d) Civil engineering works
106. Which of the following perils form part of the basic package of standard
fire and special perils policy
a) Earthquake
b) STFI
c) Spontaneous combustion
d) Leakage & Contamination
107. STFI peril can be deleted from Standard Fire Policy
a) At inception only
b) After 3 months from the issuance of policy
c) Can be deleted any time during the currency of policy
d) Cannot be deleted at all
108. If a policy is cancelled at the option of insured
a) Premium adjustment is made on pro-rata basis
b) Premium cannot be refunded
c) Premium adjustment is made on short period basis
d) Policy cannot be cancelled by the insured
109. Which of the following peril is not wind related
a) Storm
b) Inundation
c) Cyclone
d) Hurricane
110. Rates for 5 months short period insurance
a) 40%
b) 50%
c) 60%
d) 70%
111. Cancellation at the option of insured the premium retained by one of the
following method
a) Short period scale
b) Pro-rata basis
c) 50% of premium should be retained
d) No refund of premium
112. Silent rates allowed for the one of the Fire Tariff Section
a) Section I
b) Section II
c) Section IV
d) Section VIII
113. Fire declaration policy cannot be issued for the one of the following items
a) Stock
b) Stock in process
c) Raw materials
d) Finished goods
114. FEA discount can be granted by one of the following methods. Choose the
correct one
a) Mere installation of FEA
b) Inspection of company engineers/accredited engineers/ agencies by
IRDA
c) Insurer can grant at their wishes
115. The sum insured at any one location for issuing Mega risk policy is:
a) Rs. 5000 crores
b) Rs. 10000 crores
c) Rs. 12000 crores
d) None of the above amount
116. The Fire Policy covers the following perils except one on payment of
additional premium
a) Landslide
b) Architects etc. feels
c) Debris removal
d) Forest fire
117. The one of the peril not covered under the basic fire policy
a) Damage by smoke and heat of the fire
b) Damage caused deliberately or accidentally by fire-brigades in the
discharge of their duties
c) Damage to property removed from a burning building caused by
exposure to weather
d) Destruction or damage to property insured by its own fermentation or
spontaneous combustion
118. Exgratia settlements are made by
a) Claim settlement authority
b) One step above
c) Regional claims committee
d) Board of Directors
119. Compulsory excess and A.O.G. excess are not applicable to fire policy
issued to following properties
a) Power Plant
b) Cloth Shop
c) Textile Factor
d) Dwellings
120. Excess in Fire policy is
a) Same amount of excess for fire peril & AOG peril
b) Different amount of excess for fire perils & AOG peril
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c) Different percentage of excess for the peril & AOG peril

121. Which of the following policy normally cover lift cranes, Material
handling plant and equipment in the construction and project sites
a) Contractor Plant & Machinery
b) Contractor All Risk
c) Marine cum erection policy
d) Erection All Risk
122. Long term Fire policy can be issued for dwellings for a maximum period
of:
a) 5 years
b) 2 years
c) 4 years
d) None of above
123. Standard fire policy covers which one of the following perils:
a) Forest fire
b) Earthquake
c) Hailstorm
d) Tsunami
124. Standard fire and special perils policy does not cover:
a) Lightning
b) Forest fire
c) Impact damage
d) Subsidence and landslide
125. An IAR Policy can be issued to an Industrial Risk:
a) With sum insured > Rs. 100 crs.
b) With sum insured < Rs. 75 crs.
c) Housing petrochemical risks
d) All of the above
126. Compulsory excess for a Standard Fire Policy having sum insured Rs. 15
crs. under a non- AOG peril claim is:
a) 5% of claim amount, minimum Rs. 25,000
b) 5% of claim amount, minimum Rs. 10,000
c) 10% of claim amount, minimum Rs. 10,000
d) None of above
127. An Engineering Policy can be issued to cover:
a) Moveable equipment
b) Portable equipment
c) a) & b)
d) None of above
128. Boiler and Pressure Plant (BPP) policy has minimum deductible:
a) Rs. 10,000
b) 5% of claim amount
c) 5% of claim amount, minimum Rs. 10,000

d) No deductible is applicable
129. IAR Policy is subject to maximum deductible of:
a) Rs. 50,00,000
b) Rs. 25,00,000
c) No upper limit
d) None of above
130. CECR (policy) stands for:
a) Civil Engineering contractors' risk insurance
b) Civil Engineering completed risks insurance
c) Civil Engineering construction risks insurance
131. IRDA has not permitted General Insurers to effect:
a) Variations in deductibles
b) Issuance of IAR policy for S.I. less than Rs.100 crs.
c) Changes in basic Policy wordings of erstwhile Fire Tariff
d) Issuance of IAR policy for petrochemical risks
132. Complete pricing decontrol was made effective from:
a) 01st Sept. 2007
b) 01st Nov. 2007
c) 01st Jan. 2008
d) 01st Apr. 2008
133. Insurers are permitted to delete Impact damage cover from SFSP Policy:
a) By allowing additional discount in premium
b) Without allowing a discount in premium
c) Even without the consent of the Insured
134. Machinery Breakdown loss of profits (MLOP) policy has compulsory
time excess of:
a) 14 days
b) 21 days
c) 7 days
d) No time excess is applicable
135. Material damage section of IAR Policy having S.I. more than Rs.100 cr.
but up to Rs. 1500 cr. is subject to deductible of:
a) 5% of claim amount minimum Rs. 10 lacs
b) 5% of claim amount maximum Rs. 10 lacs
c) 5% of claim amount minimum Rs. 10 lacs, maximum Rs. 50 lacs
d) 5% of claim amount minimum Rs. 5 lacs, maximum Rs. 50 lacs
136. Designation of property clause relates to:
a) Machinery Insurance
b) Fire Insurance
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93
c) CPM Insurance
d) BPP Insurance
137. IAR Policy does not cover:
a) Plant and Machinery in open
b) Vehicles registered for general road use
c) Stocks in open
d) Movement of materials within the premises
138. Name of the policy under which operation of several occurrences will
also constitute a single claim:
a) FLOP
b) ALOP
c) ELOP
d) MLOP
139. A D.G. set covered under SFSP Policy removed to repairer's workshop
for repairs caught fire on 73rd day of such removal. The loss under the said
SFSP policy will be:
a) Payable
b) Payable as a 'non-standard' claim
c) Not payable
d) Either of a) & b)
140. The term 'Time Excess' is applicable to:
a) LOP
b) MBD
c) EEI
d) CPM
141. While assessing a LOP claim, Annual Turnover is used to determine:
a) Reduction in Turnover
b) Increase in cost of working
c) Adequacy of Sum Insured
d) Saving in insured standing charges
142. A claim towards Architects, Surveyors and Consulting Engineers Fees as
an Add on cover under SFSP policy can be paid up to maximum of:
a) 5% of adjusted loss
b) 5% of Sum Insured
c) 10% of Sum Insured
d) 7.5% of adjusted loss
143. Sum Insured under Escalation clause in Fire policies is automatically
increased:
a) Instantly
b) On daily basis
c) Monthly
d) Quarterly
144. A claim is reported under an IAR Policy. It is found that the property was
under insured to the extent of 17.5%. Payable amount will be:
a) Assessed loss less 2.5%
b) Assessed loss less 17.5%
c) Assessed loss less 15%
d) Assessed loss
145. Which one of the following statement is incorrect?
a) IAR policy is an All risks policy with named exclusions
b) IAR policy provides for compulsory FLOP cover
c) IAR policy provides for compulsory MLOP cover
d) IAR policy provides for compulsory MI cover
146. Which one of the following statement is incorrect?
a) Fire declaration policy is not permissible on short period basis
b) Earthquake is a peril not covered in Standard fire policy
c) Fire policies are not agreed value policies
d) Stocks can be covered with replacement value clause
147. Midterm cover against Terrorism can be granted:
a) At short period scale of rates effective from date of request
b) At pro-rata premium from date of request
c) At short period scale of rates with 15 days waiting period
d) Can not be granted at all
148. Add on covers under SFSP policy can be included midterm:
a) At applicable annual premium
b) At pro-rata premium
c) At short period scale of rates
d) Can not be included midterm
149. An Engineering policy which is not an annual policy:
a) Contractors' Plant & Machinery policy
b) Contractors' All Risks Policy
c) Civil Engineering Completed Risks Policy
d) BPP Insurance Policy
150. Machinery Insurance does not cover:
a) Internal fires
b) Breakage of parts due to entry of foreign object
c) Gross negligence
d) All of the above
151. Exclusion K of CPM policy relates to:
a) Machinery working under ground
b) War Perils
c) Nuclear perils
d) Transit risks between sites
152. Machinery Breakdown Insurance policy can now be issued to cover
a) moveable/portable equipments like portable DG sets, etc. cannot be
covered under MI policy
94
95
b) moveable/portable equipments like portable DG sets, etc. can be

covered under MI policy without any loading on the basic policy rate
c) moveable/portable equipments like portable DG sets, etc. can be
covered under MI policy with 20% loading on the basic policy rate
d) moveable/portable equipments like portable DG sets, etc. can be
covered under MI policy with 10% loading on the basic policy None
of the above
153. Which of the following policy normally cover lift cranes, Material
handling plant and equipment in the construction and project sites
e) Contractor Plant & Machinery
f) Contractor All Risk
g) Marine cum erection policy
h) Erection All Risk
154. Explosion though a general exception under the policy, but certain
occurrences 'which fall within the term explosion are covered under
a) Marine cum erection policy
b) Contractor Plant & Machinery
c) Contractor All Risk
d) Machinery Insurance Policy
155. In MI policy, basis of indemnification for total loss/constructive total loss
is
a) New replacement value plus cost of removing the damaged
machinery less value of salvage
b) New replacement value
c) Market value plus cost of removing the damaged machinery less
value of salvage
d) Market value
156. In MI policy, Sum Insured represents
a) Current market value
b) New Replacement value
c) Current market value including transportation cost to site, customs
dues and all installation costs.
d) New Replacement value including transportation cost to site,
customs dues and all installation costs.
157. All movable/portable electronic equipments can now be covered under
standard EEI policy
a) with 30% loading
b) with 20% loading
c) without loading
d) with 10% loading
158. General Information required for framing construction phase insurance
for a project
(i) Wind, flood and rainfall statistics at site as well as geological,
hydrological& meteorological reports
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KEY MODEL QUESTIONS

(ii) Copies of contracts giving insurance requirements
(iii)Detailed description of the project including any civil works.
a) only (i) is only
b) (i) &(ii) only
c) (i) & (iii) only
d) All the above
159. In EAR policy
a) Prime Cost of materials is subject to premium adjustment
b) Freight and handling charges, customs dues and construction cost is
not subject to premium adjustment
c) Prime Cost of materials is not subject to premium adjustment
d) None of the above is correct
1. A
2. C
3. A
4. D
5. A
6. B
7. D
8. A
9. B
10. B
11. D
12. B
13. C
14. B
15. B
16. D
17. B
18. B
19. C
20. C
21. D
22. D
23. B
24. B
25. A
26. B
27. C
28. A
29. D
30. C
31. B
32. C
33. A
34. B
35. A
36. A
37. B
38. A
39. A
40. C
41. A
42. D
43. B
44. D
45. C
46. C
47. B
48. A
49. C
50. B
51. A
52. B
53. A
54. A
55. A
56. C
57. C
58. A
59. A
60. D
61. A
62. D
63. B
64. C
65. C
66. B
67. D
68. C
69. C
70. B
71. A
72. B
73. D
74. B
75. C
76. D
77. B
78. C
79. D
80. C
81. C
82. B
83. D
84. B
85. B
86. D
87. C
88. C
89. A
90. B
91. A
92. B
93. A
94. C
95. D
96. A
97
97. A
98. A
99. C
100.C
101.A
102.D
103.B
104.B
105.D
106.B
107.A
108.C
109.B
110.C
111.A
112.C
113.B
114.B
115.B
116.D
117.D
118.D
119.D
120.A
121.A
122.D
123.C
124.B
125.D
126.A
127.C
128.C
129.C
130.B
131.C
132.C
133.D
134.A
135.A
136.B
137.B
138.B
139.C
140.A
141.C
142.D
143.B
144.B
145.C
146.D
147.C
148.A
149.B
150.C
151.A
152.C
153.A
154.D
155.C
156.D
157.D
158.D
159.C
CASE STUDY (1):
CASE STUDY(4):
A fire claim was settled by the Competent Authority for Rs.80.00 lacs under
Agreed Bank Clause and loss voucher was ready but not issued. In the meantime a
third party who supplied some materials to the insured, was not paid their dues,
filed a suit in the High Court against the insured with a prayer that their dues may
be please be paid to them direct from the amount of insurance claim and balance to
be paid to the insured. The Hon'ble High court issued an injunction served to the
insured baring the taking of claim amount from insurance company before the
dues paid to the supplier. This copy of injunction under such case came to the
Insurance Co. as well as concerned Bank for their necessary action.
What would be your stand point?
A fire policy was issued to Textiles Mills for Rs.50.00 Crs. on R.V. Basis. On
intimation of a fire claim, the surveyor initially assessed the loss on R.V. basis for
Rs.40.00 lacs and recommended for 'on a/c' payment of Rs.25.00 lacs based on
indemnity basis and paid accordingly. In the meantime the insured informed to the
underwriter that one of the machinery would not be available (as per supplier's
letter) and they would not wait for indefinite period and request to settle the claim
on Indemnity basis and claim was settled accordingly & loss voucher for balance
amount was forwarded to the insured.
Without discharging the voucher, the same was sent back to the underwriter with a
request to treat the earlier letter as cancelled and claim may please be settled on
R.V. basis as the machinery would be available as informed by the supplier.
CASE STUDY (2) :
Is there any scope to settle this claim again on R.V. basis?
A fire policy was issued to M/s. ABC & Co. covering stock for Rs. 10.00 lacs
which was gutted by fire. While assessing the loss, it was found that value at risk
was Rs.14.00 lacs and no salvage was realized. Claim was settled accordingly.
Surveyor charged his professional fees on Rs.14.00 lacs.
CASE STUDY (5):
Survey fees would be paid on what amount ?

CASE STUDY (3):
A fire policy and fire LOP policy was issued to a Fertilizer Factory with add-on
cover of 'Start up' expenses. This add-on cover was taken by the insured with a
view to be indemnified for the expenses incurred by them in consequent upon a
loss/damage to resume their normal production at the earliest.
While studying the fire LOP policy, the insured thought that this additional
expenses may be automatically covered under the head of the 'Increase in cost of
working' under LOP which covers the additional expenditure which is necessarily
and reasonably incurred for the sole purpose of avoiding or diminishing the
reduction in output during the indemnity period in consequence of damage.
Therefore, 'Start-up' cover is not required to be taken separately under both the
policy & premium outgo would be less.
Insured invited underwriter to discuss in the matter.
What would be your reply?
98
Floater Declaration Policy of various specified jute godowns of JCI (150

locations). Period: 01.04.2005/31.03.2006. S.I.- Rs.110/- Crs. From time to time
S.I. is increased when jute is purchased from the farmers and stored in the godowns
at remote village. Purchase and storing of jute is informed to JCI's Town Office by
the village centre and from town office, Registered Letter is issued to Insurance
Co. with a copy to their City Office.
Jute purchased on 10.05.2005 and informed to Town Office on 11.05.2005. Town
Office issued regd. letter to Insc. Co. on same date which was received by them on
20.05.2005 and premium was booked on the same date from their C.D. A/c. with
them.
There was a fire on 15.05.2005 & estimated loss was Rs.30.00 lacs.
Whether the claim is tenable or not?
CASE STUDY (6):
Fire BMC Policy with Sum Insured of Rs. 80.00 Crs. and voluntary deductible was
5% of Claim amount subject to minimum Rs. 20.00 lacs. under AOG perils and
Rs.10.00 lacs under other perils. A flood loss was reported for amount of Rs.24.00
lacs and surveyor was appointed and based on the claim form submitted by the
insured, the loss was assessed at Rs.18.00 lacs and as per norms of excess, claim
was not paid. Surveyor submitted his bill charging the professional fees on Rs.
18.00 lacs.
99
Whether survey fees would be paid on Rs.18.00 lacs or not?

TRADE QUESTIONSFIRE AND ENGINEERING
1) A factory is covered under Standard Fire and Allied Perils Policy covering
Fire, Explosion, flood group of perils & earthquake as add-on with deletion of
RSMD. The insured proposes to take Fire Loss of Profits Policy to the same
factory. What perils do you cover under Fire LOP Policy?
a) Fire, Explosion, RSMD Perils.
b) Fire, Explosion, RSMD, Terrorism perils.
c) Fire, Explosion, RSMD, Terrorism and Flood group of perils.
d) Fire, Explosion, Flood group of perils & Earthquake as add-on.
2) An Insured proposed to take Fire LOP Policy for his manufacturing unit for an
indemnity period of 24 months. As insurer you should a) Offer installment facility by offering 8 quarterly installments.
b) Collect the full premium in advance before risk commencement along
with Fire MD Premium.
c) Offer 7 quarterly installments with first installment being 5% more than
other installments.
d) None of the above.
3)
Mega Risk' means a risk having

e) PML of Rs.1,024/- crore and above.
f) PML of Rs.1,054/- crore and above.
g) PML of Rs.1,084/- crore and above.
h) PML of Rs.1,094/- crore and above.
4). Which one of the following is a mega risk.

a) A petroleum refinery with sum insured Rs 3000 crs
b) An organisation having 25 different location with overall SI of Rs 2500
crs
c) A power plant with sum insured Rs 2000 crs
d) A fertilizer plant with SI of Rs 600 crs
5)
Silent risk under fire policy in manufacturing premises are treated as silent
risk when a) The factory is closed for 1 week continuously
b) The factory is closed for 15 days continuously
c) The factory is closed for 30 days or more continuously
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6) Please indicate which of the following statements is true.

a) Fire declaration policy is not permissible on short period basis
b) Tsunami is a peril covered in Standard fire policy
c) Fire policies are agreed value policies
d) Stocks can be covered with replacement value clause
7)
Which one of the considerations are not taken into account for processing fire
claims
a) Condition of average
b) Breach of warranty
c) Confirmation of surveyor about verification of books of accounts
d) Distance from fire station
8) Which will be treated as Hazardous goods under Fire and special perils policy
a) Methylated spirits
b) Common salt
c) Sodium carbonate
d) Sugar
9) Long term Fire policy can be issued for dwellings
a) For minimum period of 2 years
b) For minimum period of 3 years
c) For minimum period of 5 years
10) Following add on covers are not available in standard Fire Special Perils
Policy:
b) Loss of rent clause
c) Start up expenses
11) Which of the following losses is not covered under fire insurance policy?
a) Process losses
b) Impact Damage
c) Missile testing operations
d) Aircraft damage
12) In Consequential Loss (Fire) Insurance Policy, the sum insured is arrived at
by
a) All standing charges plus net profit
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b) Specified standing charges plus net profit

c) Only net profit
13) Automatic reinstatement clause deals with a) Insurance of stocks
b) Insurance of plant and machinery
c) Insurance of hazardous goods
d) Claim under fire policy
14) Which of the following is NOT an Add on cover under Standard Fire &
Special Perils Policy:
a) Earthquake.
b) Loss of rent.
c) Spontaneous combustion.
d) STFI Group of perils.
15) The basis of fixing Sum-insured under a Fire Policy for building, Plant &
Machinery and Furniture, Fixtures & Fittings is:
a) Reinstatement value or Book value.
b) Book value or Market value.
c) Market value or Reinstatement value.
d) Reinstatement value or Written Down Value.
16) Under a Fire Floater Declaration Policy minimum premium to be retained
after expiry of the policy is:
a) 35% of the Provisional Premium Charged.
b) 50% of the Provisional Premium Charged.
c) 80% of the Provisional Premium Charged.
17) Cold Storage Stock Damage cover due to Failure of Public Electricity
Supply
a) Is an add-on cover under fire Policy
b) Is not an add-on cover under Fire policy
c) Both are incorrect
d) Both are correct
18) Who can take the extension cover of Loss of Rent under Fire Policy
a) Tenant
b) b Owner of the Building
c) Both
d) Cover not available to anyone
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19)
Material Damage proviso of the Business Interruption policy states

There should be in existence a material damage policy covering the
physical damage to the property for issuance of a business interruption
policy
b) The basic policy should cover loss or damage to raw materials
c) The policy can be issued only for industrial and manufacturing risks
d) A claim for loss or damage to the property should be admissible under the
material damage policy for a claim to be admissible under a business
interruption policy.
1) Statements a and b are correct
2) Statements a and c are correct
3) Statements band d are correct
4) Statements a and d are correct
a)
20) The excess under Standard Fire and Special perils policy is a) 5% of the Claim amount for perils other than Act of God perils
b) 5% of the claim amount subject to a minimum of Rs.10000/- for claims
of Act of God Perils
c) 5% of the claim amount subject to a maximum of Rs.10000/-for claims
other than Act Of God Perils.
d) Rs.10000/- in respect of Act of God Perils
21) An insured takes a fire insurance for building and contents and a machinery
breakdown insurance policy for machineries. A short circuit in one of the
switch boards results in a spark in the air conditioner which results in a fire
damaging furniture in the room apart from the air conditioner. There is a valid
claim under a) Fire policy only
b) Machinery breakdown policy only
c) Both the policies
d) None of the policies
22) Which of the following is not required to be followed while canceling a fire
policy by the insurer a) Notice Period to be given
b) Pro rata premium to be refunded
c) Reason of canceling the policy
d) Formal communication to be sent to the insured
23) Breach of condition precedent to insurance and the claim occurs. It is a) Payable
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b)
c)
d)
Not Payable
Partially payable
Non of the above
24) Breach of condition subsequent to insurance, Policy from 19.12.06 to

18.12.07. Breach of condition on 6.05.07, claim on 16.06.07. Claim is a) Payable
b) Not-payable
c) Only a is correct
d) Only b is correct
25) Property belonging to the company is insured by one of its director in his
name. In case of a claim will it be a) Payable
b) Partially payable depending on the number of directors
c) Not Payable
26) 'A' has purchased a house but the possession and payment is deferred for some
time. Will you insure this house under fire policy ?
a) No
b) Yes
c) Can be in the name of original owner
27) The principle of indemnity is applied in practice through a) Extra premium
b) Excess clause deduction
c) Franchise clause deduction
d) Deduction for depreciation
28) Which of the following statements is true?
a) Statement A:
b) As per IRDA Regulations, there is a legal obligation on the part of
insurers to issue a renewal notice to the insured
c) Statement B:
d) Issue of a renewal notice means that the policy is automatically renewed,
if the premium is paid.
i) Neither of the statements
ii) Only Statement A
iii) Only Statement B
iv) Both Statements
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29) The duty of disclosure of material facts arises

a) Only during the proposal stage
b) Only during the policy period if there is a change of risk
c) Only at the time of renewal
d) All of the above
30) Loss or Damage due to Tsunami is
a) Under Flood, Storm, Tempest and Hurricane Perils
b) Payable only under Earthquake Extension
c) Payable even without Flood
31) Risk covered under IAR policy is a) Fire material damage, Business interruption
b) Business interruption for Fire MD & MI/BPP/EEI items, Burglary
c) Machinery breakdown & MLOP
d) All the above
32) Sum Insured under C L (Fire) Policy is a) Turnover basis
b) Average of earlier 3 years T.O.
c) Gross Profit
d) Current Financial year's Turnover
33) Gross Profit meansi) Net profit plus variable expenses
ii) Net Profit plus Standing Charges
iii) Sales less variable cost
iv) Sales plus standing expenses
a) (i)
b) (iv)
c) (i) and ( ii)
d) (ii) and (iii)
34) Annual turnover under Fire (C L) policy is
Last financial year's turnover
Average three years T.O.
T.O. from the date of interruption to twelve months of the preceding year
Current year's T.O.
35) Which of the following is taken into consideration for arriving at the adequacy
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of sum insured under Fire Consequential loss insurance policy :

a) Gross profit of the current policy
b) Previous financial year Turnover
c) Standard Turnover
d) Annual Turnover
36) Which of the following statement(s) is/are not relevant to Industrial all risk
Policy
I IAR policy can be issued for a petrochemical risk having sum insured more than
Rs.100 crores
II No depreciation applied on partial and total losses arising out of Machinery
Breakdown claims
III Selection of machinery is permitted under Machinery breakdown sum Insured
IV Fire Loss of profit cover is compulsory and Machinery Loss of profit cover is
Optional
(i) and (iii)
only (ii)
(ii) and (iv)
only (i).
37) Which of the following statement is incorrect in case of Reinstatement value
policies.
a) Reinstatement of the affected property should be completed with in 12
month from the date of loss
b) In case reinstatement not effected, then the claim can be settled on
Market value policy basis
c) Value at the risk at the time loss will be taken to arrive the adequacy of
sum insured
d) It permits to settle the Claim on market value basis.
38) Under Standard Fire consequential loss insurance the Time Excess applicable
is
a) 5% of the claim amount or first 3 days of gross profit which ever is higher
b) 5% of the claim amount or first 7 days of gross profit which ever is less
c) As applicable Material Damage policy
d) Nil
39) The sequence to be followed in the fire claim settlement isa) Assessed loss less Depreciation, pro-rata average, salvage and Excess
b) Assessed loss less salvage, depreciation, pro-rata average and excess
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c) Assessed loss less depreciation, salvage, pro-rata average and excess

d) Assessed loss less pro-rate average, depreciation and excess
40) An Insured has taken Standard Fire and Special Perils Policy covering his
fixed assets and stocks. He has opted for Rs.5,00,000 as voluntary deductible
for other than AOG perils. His property got damaged due to Fire. While
settling this fire claim the excess applicable is -a) Rs. 10,000/- as compulsory Excess
b) 5% of claim amount or subject to minimum of Rs 10,000/c) Rs.5,00,000/- only
d) Both compulsory excess of Rs.10,000/- and Voluntary excess of Rs
10,00,000/-.
41) An insured has taken fire policy covering plant and machinery under Standard
Fire and special peril policy. Due to direct impact of Lightning strike on out
door Transformer No.1 and got exploded and got fire. Due to this the out door
transformer No 2 and other surrounding properties are also got damaged. The
liability under the fire policy is -a) Entire claim is payable
b) Entire claim is not payable
c) Only Transformer No. 1 is payable
d) Other than transformer No.1 is payable
42) The identification. Analysis and Economic control which can threaten the
assets and earning capacity of an enterprise is a definition for
a) Risk Management
b) Cost Control Management
c) Financial Crisis management
d) Public Relation Management
43) The three ways in which an insured can control exposure to risk
a) Eliminate, maximize or retention
b) Eliminate, minimize or transfer
c) Eliminate, minimize or investment
44) Negligence, nuisance and defamation are the subject matter under
a) Public Liability
b) Tort Liability
c) Employers Liability
d) All the above
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45) Which of the following is not so important in Property insurance ?

a) Risk Inspection
b) Cover Note
c) Consideration
d) Insurance Policy
46) Statement A: An aggrieved claimant whose petition is pending before The
State Consumer redressal Commission can also approach The Insurance
Ombudsman for speedy redressal of his grievance.
Statement B: A citizen of India whose claim for Rs.15 Lacs was denied by a
Insurer can approach either Insurance Ombudsman or State Consumer
Grievance Redressal Commission for remedy.
a) Only statement A is correct
b) Only statement B is correct
c) Both A and B are correct
d) Both A and B are incorrect
47) Following is not true of an Arbitrator appointed under Arbitration Act 1996:
a) Quantum disputes are referred to him
b) Admissibility disputes are referred to him
c) Act provides for appointment of sole Arbitrator
48) In dealing with any major fire claim in respect of machineries one of the
following is not unimportant.
a) Fire brigade report. .
b) Attendance register of the worker.
c) Metrological report.
d) Acknowledged copy of the audited financial statement filed before IT
department.
49) In Consequential Loss (Fire) insurance Gross profit is defined as:
a) A stated percentage of sales/turnover
b) Net profit plus insured standing charges
c) Gross trading profit minus all standing charges
d) Trading profit exclusive of all capital receipts
a)
b)
c)
d)
By applying the rate of gross profit to the annual turnover

By applying the rate of gross profit to the standard turnover
By applying the rate of gross profit to 1.5 times the standard turnover.
By applying the rate of gross profit to 1.5 times the annual turnover
51) M/s. John & Co. takes Business Interruption Insurance (Fire)) policy with an
Indemnity period of 9 months. The S.I. of the policy will be:
a) A.G.P.
b) 50% of A.G.P.
c) 2 times of A.G.P.
d) 75% of A.G.P.
52) In dealing with any major fire claim in respect of machineries one of the
following is not unimportant.
a) Fire brigade report. .
b) Attendance register of the worker.
c) Metrological report.
d) Acknowledged copy of the audited financial statement filed before IT
department.
53) What is the difference between 1 & 4 in the Richter scale?
a) 3;
b) 100;
c) 9990;
d) 9900
54) What is the maximum value per location may be covered under Terrorism
Cover under Fire Policy?
a) 200 crores;
b) 500 crores;
c) 600 crores;
d) 750 crores.
55) The rate for terrorism cover for non-industrial risk when the value is within
Rs.500 Crores
a) Re. 0.13 %o
b) Re. 0.22%o
c) Re. 0.25%o
d) Re. O.23%o
50) M/s. Khaitan Machine Mfg Co. has taken Consequential Loss fire policy for a
period of 12 months with an indemnity period of 18 months. The average
clause with standard turnover wording of the fire (CL) policy will read as
provided that if the S.I. by this item is less than the sum produced-
56) Rate for terrorism cover for the balance portion over Rs. 500 Crores up to
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Rs.2000Crores for Industrial risk is

a) Re. 0.17 %o
b) Re. 0.22%o
c) Re. 0.13%o
d) Re. O.7%o
57) Rate for terrorism cover for dwelling for any value is
a) Re. 0.08 %o
b) Re. 0.23%o
c) Re. 0.25%o
d) Re. O.17%o
58) Preliminary investigation of loss under Fire Policy includes
a) whether the loss caused by an insured peril
b) whether the damage property is in fact covered under the policy
c) whether adjacent property is damaged
d) All of the above
59) It is not the duty of the insured in the event of a claim under a fire policy to
a) Save as much as possible of the insured property
b) Take all reasonable steps to extinguish the fire
c) shift the operations immediately
d) diminish their loss
60) A fire policy taken for one year is extended for one month by charging
a) Short period note for one month
b) Pro rata premium for one month
c) 50% of the short period note
d) 50% of the pro rata taken for one month
61) If the insured proposes to cover his building for fire and earthquake from
division 1 of the insurance company and his machinery for fire from division
2 of the same insurance company he will be
a) Permitted to insure as per his request
b) Will not be permitted
c) Permitted by owing him to have both the policy in division 1
d) Permitted by owing him to have both the policy in division 2
c) Covered with a waiting period of 15 days

d) Covered with a waiting period of 30 days
63) If computers are covered under a fire policy and in case breakdown of the
computers due to short circuit
a) The claim is payable in full
b) The claim is payable as not standard
c) The claim is not payable
d) The claim is payable at value of the computers at 40% depreciation p.a.
64) If a building is occupied in the ground floor as an Engineering workshop and
first floor as a dwelling by different owners
a) First floor are rated at the higher rate for the two
b) Rated at lower rate for the two
c) rated per se
d) Engineering Workshop is rated at the rate of dwindling
65) Which of the following is true under a Reinstalment value policies
a) The replacement / Reinstalment need not be carried out
b) The replacement / Reinstalment shall be completed within 12 months
c) The insured need not intimate his intension to do the replacement /
Reinstalment
d) All the above
66) Can fire policies be issued for more than 12 months
a) Yes can be issued to all types of premiums
b) Can be issued only for dwellings
c) Can be issued for godown covering non-hazardous goods
d) Can be issued only for godown covering hazardous goods
67) Valued policies can be issued for
a) Properties of a VIP
b) Properties exceeding value of 5 years
c) Properties whose market value can not be ascertained
62) If the insured proposes to get add on are cover for STFI during the middle of
the policy
a) The same can not be covered
b) The same can be covered
68) Which of the following is not applicable for Mid-term cover?

a) Insurers must receive specific advice from the insured accompanied by
payment of the required additional prem. in cash or draft. This additional
premium can not be adjusted against existing case deposit or debited
bank guarantee
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b) Mid-term cover shall be granted for the entire property at one complex /
compound / location covering the entire interest of the insured under one or
more policies insured. Shall not have any option for selection
c) Cover shall commence 15 days after receipt of the premium
d) The premium shall be charged on pro-rata basis
74) Fire at Supplier's Premises can be a part of

a) A Material Damage Fire Policy
b) An LOP policy
c) Is a stand alone policy
d) Has no relevance
69) A silent risk denotes

a) Factories where no manufacturing / storage activities are carried out
continuously for 30 days or more
b) Factories in which machine do not make a noise
c) Factories where trade unions does not exist
75) Common utilities outside the premises can be

a) Rated per se
b) Rated as per the main risk
c) Highest rate to apply
d) insured separately
70) Average clause becomes applicable when

a) Sum insured is lower than the value of risk at the time of loss
b) Properties insured situated at more than one location
c) Insured is a partnership firm and they prefer to accept claim in the
proportion of value of amount invested by each one of them
71) Flood claim on account of operation of an earthquake
a) is payable under a SFSPI policy where the flood perils are deleted.
b) is payable under a SFSPI policy having flood perils covered
c) is payable under a SFSPI policy without the special perils discount and an
extension for EQ
d) is not payable at all
72) Value of foundation and plinth if not included in Sum Insured will render a
building claim due to fire
a) payable in full
b) payable after application of average
c) payable in full after collection of extra premium
d) payable as non-standard
73) In an LOP policy, Auditor fees is
a) an extension
b) a built-in cover
c) a part of Standing charges
d) not to be covered
76) Storage of hazardous chemical upto 5% of value at risk

a) does not affect a claim
b) renders a claim non-standard
c) renders a claim as no claim
d) can be covered after collection of extra premium
77) Cracks appearing in a building on account of subsidence of land below
a) Fire policy will cover the loss without any extension
b) Claim is payable on repair basis
c) Claim is not payable
d) Fire policy would have covered the claim had an extension been taken.
78) A dish antenna (covered under fire policy) breaks as a monkey jumps on it
a) The claim is payable
b) The claim is not payable
c) The claim is payable as non standard
d) Some other insurance should have been taken
79) The adjustment of sum insured in EAR policy is not done in respect of
a) freight and handling charges
b) custom duties
c) cost of erection
d) increase or decrease in cost of plant and machinery
80) Standby machinery or Spare Parts of any machine under MI is a) not covered
b) covered at a discount of 50% in rate
c) discount of 75%
d) only covered when it is put to use
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Trade Test Questions Engg.

1. Following Peril is not covered under Machinery Breakdown Insurance policy
a) Loss or Damage due to Electrical Short Circuit
b) Loss or Damage due to Defective Lubricant or Coolant
c) Loss or Damage due to Terrorism Act
d) Loss or Damage due to Human Error
2. Under Engineering Project Insurance, the maximum percentage of escalation
that can be chosen by the insured is
a) 25% of the Sum insured
b) 25% of the reinstatement value
c) 50% of the replacement value
d) 50% of the sum insured
3. Material Damage proviso of the Business Interruption policy states
a)
There should be in existence a material damage policy covering the

physical damage to the property for issuance of a business interruption
policy
b) The basic policy should cover loss or damage to raw materials
c) The policy can be issued only for industrial and manufacturing risks
d) A claim for loss or damage to the property should be admissible under
the material damage policy for a claim to be admissible under a business
interruption policy.
1) Statements a and b are correct
2) Statements a and c are correct
3) Statements band d are correct
4) Statements a and d are correct
4. An insured takes a fire insurance for building and contents and a machinery
breakdown insurance policy for machineries. A short circuit in one of the
switch boards results in a spark in the air conditioner which results in a fire
damaging furniture in the room apart from the air conditioner. There is a valid
claim under
a) Fire policy only
b) Machinery breakdown policy only
c) Both the policies
d) None of the policies
5. Machinery Insurance Policy provides insurance protection of against
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mechanical & electrical breakdown and also human errors & negligence
a) Electrical & Electrical Machines while at work
b) All machines & tools except electronic machines while at work
c) All machines except electrical machines while not at work
d) All rotating and static equipment while at work or at rest including
human error and negligence
6. Insurance period for Storage cum Erection policy is
a) 1 Year
b) 6 months prior to the final erection
c) 1 month prior to the final erection
d) Period of contract
7. Which of the following is excluded under Electronic Equipment policy?
a) Theft
b) Consequential Loss
c) Riots
d) Fire
8. Sum insured of Contractors All Risk policy is complete estimated erected value
inclusive of
a) Custom duties
b) Wages
c) Freight
d) All of the above
9. Which insurance policy protects contractors, projects, bridges etc
a) Engineering
b) Fire
c) Liability
d) Marine
10. Machinery used for handling materials or constructions are covered under
a) Fire Policy
b) Contractors all Risk Policy
c) CPM Policy
d) Machinery Breakdown Policy
11. Under Electronic equipment policy there is no coverage available for
a) System software
b) Application software
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c) Punched tapes
d) Increased cost of working
b) The time of unloading the machinery at the port of discharge

c) The time after unloading the machinery at the site of erection
d) The time of machinery leaves the warehouse of the supplier
12. An Advanced Loss of Profit policy indemnifies the Principal or the project
owner for
a) The loss of revenue arising out of delay in the completion of the project
due to other contractor's delay which is not in the scope of the policy
holder.
b) The loss of revenue arising out of delay in receipt of project consignment
due to accident during transit period
c) The loss of revenue arising out of delay in completion of project due to
operation of an insured peril covered under SCE/CAR policies
d) The loss of revenue arising out of delay in completion of project due to
Speculative or trade risks which relates to political, social or economic
reasons or shortcomings in the management
13. Mark the most unlikely answer below.
a) In Contractor All Risk Policy fragile items are not covered automatically
b) Contractor All Risk Policies are issued where the scope of project is only
Civil construction
c) Storage Cum erection policies are issued for erection and commissioning
of Electro Mechanical machineries.
d) Storage Cum erection policies are issued where the scope of project
involves civil construction, testing and commissioning of ElectroMechanical machineries.
14. Which of the statement given below is most relevant in case of engineering
operational policies and Business Interruption policies.
a) In case mid term increase in sum insured, the premium chargeable is on
pro-rata basis for the un expired policy period.
b) In case mid term increase in sum insured, the premium chargeable is on
short period basis for the un expired policy period
c) In case mid term increase in sum insured and renewed with the same or
enhanced sum insured with same insured then refund on premium arising
out of difference between short period and pro-rata premium is made.
d) In case mid term increase in sum insured and renewed with the same
insurer then refund on premium arising out of difference between short
period and pro-rata premium is made
15. In Erection All Risk insurance liability of the insurers commence from
a) The time of loading the machinery at the port of loading
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16. Sum Insured under Erection All risk policy can adjusted on completion of
project either by collection or refund of premium except
a) Freight & handling Charges of plant and Machinery
b) Prime cost of Machinery
c) Cost of erection of plant & machinery
d) Customs dues
17. M/s. John & Co. takes Business Interruption Insurance (Fire)) policy with an
Indemnity period of 24 months. Normally premium is collected
a) In 6 equal installments
b) In installments, first installment should be more than 5%, next of the
installments and last installment to be paid six months prior to 24 months
period.
c) In full at the inception of the policy
d) In 12 equal instalments
18. In a EAR policy an indigenous made compressor covered under the policy got
damaged while being shifted from storage yard to site of erection within the
campus. New value of the compressor is Rs.1crore. Repair/replacement cost of
parts Rs 50 Lacs. Salvage value of damaged parts Rs 2 lacs. Policy excess Rs 1
lac during storage erection. Rs 5 lacs during testing. Rs 10 lacs for act of god
perils. No under insurance. Insurance company will settle the loss for
a)
b)
c)
d)
Rs 48 Lacs
Rs 47 Lacs
Rs 45 lacs
Rs 43 Lacs
19. Which of the following is not an exclusion under Contractors All Risk
Insurance Policy
a) The first amount of the loss arising out of each and every occurrence
shown as Excess the Schedule;
b) Loss/damage during erection of plant and machinery;
c) Normal wear and tear, gradual deterioration due to atmospheric
conditions or lack of use or obsolescence or otherwise, rust, scratching of
painted or polished surfaces or breakage of glass;
d) Loss or damage due to faulty design;
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20. M/s. Rahul & Co has taken EAR policy and Advance Loss of Profits policy.
EAR policy period is from 1/8/2006 to 30/6/2007. ALOP indemnity period is
for 12 months. Erection and testing could not be completed on 30/6/2007
because late arrival of machinery. Insurer will be liable for ALOP claim on
account any accident on 1/7/2007
a) If EAR policy alone is extended for further period beyond 30/6/2007
b) If ALOP policy alone is extended for further period beyond 30/6/2007
c) If both EAR & ALOP are extended for further period beyond 30/6/2007
d) As the EAR policy is for 11 months and ALOP indemnity is for 12
months no need to extend any policy as ALOP indemnity commences
from 1/7/2007 which is on 12th month from commencement of EAR
policy
21. ALOP can be issued in the name of
a) Principal, contractors, subcontractors and third parties
b) Principal, contractors and subcontractors
c) Principal & contractors
d) Principal only
22. Which of the policies cannot be issued for a project under construction
a) Contractors' all risk policy
b) Marine -cum-erection policy
c) Machinery breakdown policy
d) Election all risk policy
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A. ALL RISK INSURANCE

All risks policies are issued on Named exclusion basis.
SUBJECT MATTER FOR INSURANCE:
Gold and silver ornaments, cameras, watches, cell phones, laptops,

calculators and such other valuables.
COVERAGE:
1.
2.
3.
4.
5.
MISCELLANEOUS INSURANCE
The policy covers loss or damage to subject matter insured by whatever cause
except those specifically excluded.
It covers any locations within the geographical limit specified in the policy
(normally within India and it can be worldwide also in exceptional cases)
The policy is subject to the usual condition of average.
Unless specified indemnity for individual items is limited to 5% of sum
insured.
Pair and set clause is applicable.
EXCLUSIONS:
Ware and nuclear perils
Cracking, scratching or breakage of glasses unless caused by carrying

vehicles.
Depreciation, wear and tear, moth, vermin etc.
Loss occasioned while cleaning, dying, repairing or restoration process.
Electrical short circuit to electrical machines.
Derangement or over winding of watches.
Loss of money, securities, manuscripts or books of accounts and articles of

consumable nature.
Theft from unattended vehicles
Articles carried under contract of afrieghtment
Consequential losses are legal liabilities.

UNDERWRITING CONSIDERATIONS:
Proposal from known and reputed clients with sound tract record can only be
entertained.
Care of property custody in safe deposit lockers and other safety features.
Items covered and their susceptibility to loss.
Trade of proposer proposals from dealers, money lenders and pawn brokers
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121
may attract special conditions and higher rate of premium. Therefore prior
approval is required.
Availability of list of articles and their approved valuation.
Moral hazard of the proposer
Geographical extensions.
Past claims history.
EXTENTIONS AVIALABLE AT ADDITIONAL PREMIUM:
Infidelity of employees carrying cash.
Strike and riot.
Over night keeping of cash
Occasional large carrying.
UNDERWRITING CONSIDERATION:
B. MONEY INSURANCE
SUBJECT MATTER FOR INSURANCE:
Cash, Demand draft, cheques, postal orders, money orders and current postal
stamps.
COVERAGE:
Single carrying limit
Total estimated annual carrying
Character of the locality, neighborhood etc.
Distances and routes
Mode of transit
Claims history
All other as applicable to burglary policy.
SECTION I: TRANSIT RISK
C. BURGLARY INSURANCE
a.
b.
c.
Money drawn for payment wages, salary petty cash etc. from bank to premises
until the same are paid out.
Money describe above under custody from premises to bank or post office.
Money collected and in the custody whilst in transit to premises, bank or post
office for a period upto to 48 hours from the time of collection.
SECTION II: AT THE PREMISES.
SUBJECT MATTER FOR INSURANCE :

Cash, Stock, FFF, Machinery and other contents of a business or residential
premises
COVERAGE:
Money not described in Sec. I whilst in the locked safe or strong room in premises
against burglary house breaking and hold up.
Risk covered: Sec I Accident and misfortune
Sec II Burglary and house breaking
EXCLUSIONS:
Shortage due to error or mission
Loss of money entrusted to any other person other than the insured or his
authorized employee
Infidelity of employees carrying cash.
Over night keeping unless in a locked safe or strong room.
Loss occasioned by RSMTD.
Money carried under contract of afrieghtment
All exclusions applicable to burglary policy.

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1.
2.
3.
Loss or damage by burglary or attempted burglary.

Damage caused to the premises by burglar is also covered.
Can be extended to cover theft at an additional premium with approval of
RO/HO.
DEFINITION OF BURGLARY:
A theft following a house breaking or a theft followed by a house breaking.
House breaking means a criminal house trespass effected by forcible means to

gain entry to into or exit from the premises section 442 & 445 IPC may be
referred.
TYPES OF BURGLARY POLICIES:
Specific policy
Declaration policy
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Floater declaration policy
First loss policy.
VARIANT FORM OF FG INSURANCE:
EXCLUSIONS:
War perils & nuclear perils
By using authorized keys unless obtained by threat or assault.
Caused or aggravated or assisted by the insured, his family, and his

employees.
Consequential loss
Goods held in trust unless specifically declared.
Recoverable under other policies.
Loss after material alterations.
Security measures
Moral hazard
Attractiveness, susceptibility and criticality and exposure
Previous claims history
Accounting system
Place of storage.
Terms of cover.
Court bonds :
a) Administrative Bond
b) Receivership Bond
c) Liquidators Bond
Customs Bond
Excise Bond.
EXCLUSIONS:
Arising anywhere outside India.
Arising after change of employment conditions without consent of insurers.
Repeat losses involving same person
Deviations from accepted internal check system.
The relationship between annual emoluments and amount of guarantee

sought.
Financial status of the insured
Method of accounting and well established internal check and control system.
Recruitment policy references obtained while offering employment.
Amount of counter guarantee available.
D. FIDELITY GUARANTEE INSURANCE

E. LIABILITY INSURANCE (GENERAL)
COVERAGE:
MEANING OF THE TERM LIABILITY:
Intended to provide indemnity against pecuniary loss caused by infidelity of

the employees.
The fraud and dishonesty should have been in course of discharging specified
duties and also in respect of money or goods of the employers.
Policy ceases the moment the claim is settled for individual policies.
The name of the employee stands deleted the moment any claim involving his
infidelity is reported and settled.
TYPES OF POLICIES:
1.
2.
3.
4.
5.
Individual policy
Collective policy.
Floating Policy
Positions policy
Blanket Policy.
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Legal Obligation of the wrong doer to pay damages to the aggrieved person.
HOW LIABILITY ARISES?
Common Law passed legal decisions and legally recognized customs,

conventions and usages.
Law of Tort :
part of common law
Tort is a civil wrong
Tort arises out of a breach of a duty
Such a breach can be the basis of a civil cause of action.
Statute law Those enacted by legislature e.g., M.V. Act, PLI Act, WC Act etc.
Law of contracts.
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Law relating to Liability:
Evolution of law
Survival of the fittest and the strongest
Code of conduct evolved by the civil society Principle of Equity.
Individual has the right to :
Liberty
Enjoy and be secure in his property and reputation
Privacy
He also has a duty to
Respect others right and
Refrain from harming others by invading their rights.
If, by his wrongful act, he causes harm to others, he is held responsible

(compensation or punishment).
TORT:
Civil Wrong
Arises out of a breach of legal duty
Leads to a civil cause of action
Entails payment of damages or compensation
MEANING OF NEGLIGENCE
Unintended wrong involving breach of legal duty of care.
Blyth V. Birmingham waters company. (1856)
Breach of duty may occur due to either.
1. Act of commission (negligent act) : Doing something a reasonably

prudent man would not do under given circumstances or
2. Act of omission (Negligent omission): Failure to do something a

reasonably prudent man would do under given circumstances.
Breach of duty of care means failure to exercise reasonable degree of care.
Court should decide whether the standard of care required under the
circumstances was observed.
The complainant has to prove that such duty of care was owed by the other.
INSTANCES OF TORT:
Libel
Slander
Assault
Negligence
Nuisance
Liability Insurance deals with only two of the instances of tort viz., Negligence and
Nuisance.
TORT vs. CRIME

TORT
Breach of private rights of individual
as individual.
Action initiated by aggrieved party.
Remedy is in the form compensation.
Adjudicated by civil court.
Civil Liability is insurable
Privity between parties not needed
CRIME
Breach of public rights which affects
the entire society as a society.
State prosecutes the culprit.
Punishment in the form of
imprisonment or fine.
Conviction by criminal court.
Criminal liability is not insurable
as it is against public policy civil
consequences of a criminal act can
be covered.
Require privities between parties.
Duty imposed by law applicable to

the entire society.
Duty arises out of agreement.
Opposing parties may not be

connected.
Opposing parties are parties to the

contract.
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WHEN LIABILITY EMERGES UNDER LAW OF TORT?
It emerges when it is established that :

1. The defendant owed a legal duty of care.
2. The defendant breached that duty of care.
3. The plaintiff suffered injury or damage and.
4. There was a causal connection between (2) & (3).
Mere carelessness where there is no duty to take care existed is not

negligence.
Party complaining has to establish the facts from (1) to (4) to sustain an action
for negligence.
Sometimes negligence may be presumed as per rule res ipsa loquitur.

DEGREE OF CARE:
Degree of care or skill may vary according to particular circumstances
Owner of a property to use it in such a way as not to cause injury or damage to

other persons or their property.
Persons using dangerous things such as explosives, gases etc. are to exercise
more than ordinary care in the control over such properties.
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Towards children.
Much higher degree of care and skill to be exercised by the professionals in

their professional work
A professional need not possess the highest expert skill, it is sufficient to

exercise the ordinary skill of an ordinary competent professional.
STRICT AND ABSOLUTE LIABILITY:
Shriram foods & fertilizers (1986) Escape of Oleum Gas.
An enterprise engaged in hazardous and inherently dangerous activity should

ensure highest standard of safety.
If any harm results on account of such activity, the enterprise must be strictly
and absolutely liable to compensate all those who are affected by the accident.
Exercise of reasonable care or absence of negligence no excuse.
Rylands V. Fletcher exceptions too would not be available.
The larger and more prosperous the enterprise, the greater must be the amount
of the compensation payable.
The MD and Chairman of the company are personally responsible for what
goes wrong in the company.
DEFENCES TO ACTION UNDER THE RULE OF STRICT LIABILITY:
Act of god
Consent/default of the plaintiff
Act of stranger
Statutory authority.
DAMAGES:
Damages means pecuniary compensation recoverable by action for; breach of

contract & tort.
Damages for personal injury claims

(a) Special damages :
(i) actual loss of earning due to injury
(j) medical, nursing or other expenses
(k) Funeral expenses.
(b) General Damages :
(a) pain & suffering
(b) Loss of enjoyment of life and loss of amenities.
(c) Loss of recreational ability and/or
(d) Loss of expectation of life.
Damages for property damage claims

128
(a) cost of repair/replacement of damaged property

(b) loss of use of damaged property
The onus of proving the amount of damages rests on the claimant.

DEFENCES TO NEGLIGENCE ACTION:
1. Volenti Non fit injuria (to him who is willing there can be no injury)
2. Inevitable accident.
3. Act of god or Vis. Major
4. Emergency
5. contributory negligence
6. limitation
7. Accord and satisfaction.
TYPES OF LIABILITY POLICIES:
Public liability (Industrial risk) Insurance.
Public Liability (Non Industrial Risk) Insurance.
Product liability insurance.
Professional indemnity insurance.
Public liability insurance act policy (Government by PLI Act, 1991)
Workmen's Compensation Policy.
Directors & Officers Liability Insurance (No. market agreement)
Comprehensive General Liability/Contingent liability & various other

reinsurance driven cover (no market agreement)
NEED FOR LIABILITY INSURANCE:
Growing awareness among people about their rights
Consumer protection law
Evolution of strict & absolute liability
Enactment of special laws.
Huge cost of defense and large amounts of award.
Inclination of judiciary to promote public cause.
Public interest suits and class action.

LIABILITY INSURANCE POLICIES:
Cover liability under law of tort and Statute law
Cover legal liability of the insured.
Pay to third party damages & legal costs and expenses.
Provide compensation for
Death, bodily injury, illness or disease
Actual physical damage to tangible property
Negligence is to be proved in court of law

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Claims made within jurisdiction of India as per Indian law except for liability
arising out of exports in Product Liability.
Claims first made in writing against insured during period of insurance are
considered for payment.
COMMON FEATURES OF LIABILITY POLICIES:
Indemnity Limits Any one Accident AND Any One Year.
AOA: AOY Ratios 1:1, 1:2, 1:3 and maximum upto 1:4 (No unlimited
liability)
Notification Extension clause
Extended claims reporting clause
Indemnity to others (except professional indemnity)
Cross liability
Claims series clause (No coverage for claim from the same cause which are
made later than 3 years after first claim of the series.
Compulsory and voluntary excess (applicable to both injury and damage).

CONDITIONS:
Notice of claim.
No admission, offer, promise, payment without consent of insurer.
Right to defend.
Give information and assistance
Notification of material alteration in risk.
Payment upto limit of indemnity
Interpretation condition.
Keeping accurate records and declaration of turnover at the time of renewal
Contribution
Cancellation
Reduction of Limit of Indemnity (AOY) on payment of claim.
Excluding losses in case of Fraud
Policy disputes clause.

COMMON RATING FACTORS:
Risk group
Limit of Indemnity (Ratio)
Limit of Indemnity (AOA) opted
Output or Turnover
Receipts
Attendance/seating capacity (e.g. : no. of visitors to the premises)
Wages.
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F. PUBLIC LIABILITY (INDUSTRIAL RISK)

COVERAGE:
Cover for industrial and manufacturing risks.
Cover depots, warehouses, go downs or any premises connected with insured

business, addl. Premium depending on no. of premises covered.
Claims arising out of accidents occurring in insured premises.
Excludes claims arising out of Pollution (unless specifically covered) and

Product Liability.
Risk inspection to be done for new policy and at every fourth renewal where
AOY exceeds Rs. 2.5 crores for Risk Group 1 and 2 and Rs. 1 crore and above
for Risk Group 3 and 4.
EXCLUSIONS:
Contractual liability.
Act of God perils (can be covered as extension)
Deliberate/willful/intentional non compliance of statutory requirements.
Loss of pure financial nature like loss of goodwill/market etc.
Personal injuries like libel, slander etc.
Infringement of plans, copy right etc.
Fines, penalties, punitive and exemplary damages.
War and nuclear perils
Ownership, possession, use of Motor vehicles.
Liability arising out of transportation of hazardous substance (can be covered

as extension)
Use of aircraft, watercraft or hovercraft
Damage to property owned, leased or hired or in custody of insured.
Injury or damage prior to retroactive date.
Deliberate, conscious or intentional disregard of insured's technical or

administrative management to take reasonable steps to prevent claims
Liability which may be specifically covered elsewhere e.g. PLI Act or No

Fault Liability (Non IR only).
EXTENTION POLLUTION:
Cover legal liability towards injury and damage to property due to accidental
(occurred at specific time and place) seepage, pollution or contamination.
Also covers cost for removing, nullifying or cleaning up, seeping, polluting
and contaminating substance.
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Excludes fines, penalties, punitive and exemplary damage.
Subject to additional questionnaire certificate/consent letter from Pollution

Control Board and additional premium.
Extension of Act of god perils (AOG) with additional premium as per

Earthquake zones stated in AIFT.
EXTENSION TECHNICAL COLLABORATORS
Covers legal liability of collaborator (named in schedule) in respect of

technical collaboration agreement between insured and collaborator.
No claim payable unless cause of action arises in India and liability to pay
claim is established against the insured in an Indian contract.
Only Indian Law shall be applicable to actions brought in India.
Subject o additional premium
Need to scrutinize collaboration agreement and any other information

depending on need of each case.
EXTENSIONS: TRANSPORTATION COVER
Covers legal liability towards injury and damage to property due to accident
caused by material/hazardous or dangerous substance whilst in transit by
rail/road or pipelines (Pollution control Board Certificate).
Pollution risk excluded unless specifically covered.
Subject to compliance of statutory provisions
Separate limit of indemnity i.e. AOA/AOY.
Additional premium on indemnity, turnover, pollution and AOG perils

(Pollution and AOG perils if requested).
50% premium charged if taken with premises cover.
Separate policy may be issued with 100% premium and joint name of insured
and transporter (if AOG perils taken, zone should be 1).
PUBLIC LIABILITY INSURANCE ACT, 1991

COVERAGE:
Applicable for those handling hazardous goods and defined in the act.
Limit of indemnity to be not less than paid up capital but within a maximum of
Rs. 15 crore AOY and Rs. 5 Crore AOA
BASIS OF RATING :
Limit of Indemnity and turnover
Equal amount of premium to be collected towards environment relief fund (no

discount in lieu of commission & no service tax on ERF).
CLAIMS
(Deciding authority Dist. Collector)
Reimbursement of medical expenses upto maximum Rs. 12,500
Fatal accident: Rs. 25,000 per person.
PTD;/PPD medical expenses upto Rs. 12,500 plus disablement compensation

upto Rs. 25,000
Loss of wages due to TTD: Fixed monthly relief not exceeding Rs. 1,000 per
month upto maximum of three months for hospitalization exceeding 3 days &
age > 16.
Private property : Upto Rs. 6,000
G. PRODUCT LIABILITY
COVERAGE:
EXTENTION - CARRIAGE OF TREATED EFFLUENTS:
Covers legal liability towards injury and damage to property due to accident
whilst treated effluents are carried by pipelines outside insured premises to
discharge point.
Pollution risk excluded unless specifically covered.
Excludes fines, penalties, punitive and exemplary damages
Subject to compliance of statutory provisions
Additional premium (on indemnity premium) if distance exceeds 1 km. If

distance exceeds 20 KM to be referred to Market Agreement commit.
Legal Liability for injury, damage or pollution arising out of use of the product
except any liability under PLI Act or no fault liability.
For claims arising out of accidents due to defects in products specified in

schedule.
Except for any liability arising out of awards, judgments made under laws of
USA or Canada or any orders for enforcing such awards/judgments (unless
policy includes North American jurisdiction clause).
Risk Assessment at every fourth renewal. For all policies covering exports to
USA & Canada; for policies involving exports to other than USA & Canada
with AOY over Rs. 50 lacs and for policies not involving exports with AOY
over Rs. 2.5 crores.
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133

Excess of % of AOA with minimum of Rs. 2,000 but for USA & Canada 1%
of AOA subject to minimum of Rs. 4,000
Policy to be issued in Indian Currency and claim settled in Indian currency. If

exports are involved and insured requests, policy can be expressed or claim
can be settled in foreign currency, as per blanket approval by RBI.
Claim series means claims arising out of one specific common cause eg.
Same fault in design, manufacture, instructions for use or labeling of products or
supply of same products and/or services or products and/or service showing same
defect.
Insured: Directors and Officers
PRODUCT LIABILITY COVER - EXCLUSIONS:
INSURED EVENT :
Contractual Liability
Deliberate non compliance of any statutory provision.
Pure financial loss i.e. loss of market.
Fines, penalties etc.
War and Nuclear perils
Injury/damage occurred before retroactive date.
Deliberate disregard of insured's technical and administrative management to

take reasonable steps to prevent claims.
Injury to employees.
Costs incurred for repair, reconditioning, modification replacement of any

part or product alleged to be defective.
Cost of recall of product or part thereof.
Arising out of products which with insured's knowledge in intended for

incorporation into structure, machinery or control of any aircraft.
Damage to property belonging to insured or held in trust or in custody or

control of insured or a person in service of insured.
Products failure to fulfill purpose for which they are intended.
Arising out of products that left the custody or control of insured prior to
retroactive date stated in schedule.
H. DIRECTORS & OFFICERS LIABILITY INSURANCE

COVERAGE :
Indemnifies Directors & officers in respect of their legal liability to third party
claimants for a wrongful act whilst managing the business
DEFINITIONS :
Legal Liability to Third party claimants for a wrongful act.
DIRECTOR :
Member of the Board of directors.
OFFICER :
Not defined usually but typically a person with authority to commit the company.
WRONGFUL ACT :
Breach of duty.
Breach of trust.
Neglect, Error.
Misstatement, misleading statement.
Omission.
Other similar acts.
LEGAL LIABILITY TO THIRD PARTIES :
Employees.
Former employees (DIRECTORS).
Shareholders.
Competitors.
Government Bodies.
EXTENTIONS :
Vendor's Clause
For products not manufactured by insured but by contractors, sub-contractors

etc. In their brand name may be covered subject to additional information on
contract between insured and such manufacturers.
TECHNICAL COLLABORATORS INCLUSION CLAUSE.

134
POLICY:
(1) Is on claims made basis (2) continuity if important.
A.
TWO INSURING CLAUSES:

CLAUSE A: Covers D& O where they cannot be reimbursed.
CLAUSE B: Covers D & O where their company can reimburse.
135
B.
List of holding/subsidiary companies.
Copies of circulars sent to members/debenture holders.
OUTSIDE DIRECTORSHIP
Associated companies
Not for profit trusts.
Non related companies
Nominee companies, trusts etc.
I. JEWELLERS BLOCK INSURANCE
OUTSIDE DIRECTORSHIPS - TWO CATEGORIES:

1. Appointed by the company.
2. Elected not at the request of the company.
THREE DIFFERENT STRUCTURES - Single excess, Double excess & Treble
excess.
i.
ii.
Single Excess cover

Applies after any D & O
Liability insurance arranged.
By the outside company
Doubled excess cover applies after.
Any D & O liability insurance
Arranged by the outside company
And any indemnification provided by the outside company.
iii. TREBLE EXCESS cover applies after any D & O liability insurance arranged
by the outside company and any indemnification provided by the outside
company and any indemnification provided by the employing company.
PRINCIPAL EXCLUSIONS:
Dishonesty, fraud, criminal or malicious acts.
Personal guarantees or warranties (unless specifically covered).
Libel, slander and damage to property.
Seepage & Pollution (unless specifically covered).
Liability of D & O on remuneration to which they are not entitled.
Insured Vs. Insured.
REQUIREMENT FROM INSUREDS:
Completed proposal form.
Copies of memorandum & articles.
Copies of last three years audited accounts.
Coy latest half yearly audited/UN audited accounts adopted by board.
Pattern of shareholdings.
List of shareholders with more than 5% of total paid capital.
Name & addresses of directors with % of shares held.

136
Section
Property cover
Perils covered
I
1. Stock in trade and cash in the
Premises
premises in safe
risk
2. Stock displayed on premises.
3. Property in bank lockers.
Fire, lightning,
Explosion.
Burglary/Housing Breaking/
Holdup/theft.
Riot and strike
II
1. Stock in trade whilst in
Custody
custody of directors partners
risk
/employees of the insured.
outside
2. Stock whilst in custody of
premises
person not in regular
employment.
On all risk basis whilst carried

or conveyed outside the
specified premise with named
exclusions.
III
Transit
risks
Stock in trade whilst being only

carried by :
1.Insured Post Parcel
2.Air Freight
3.Angadia
All risk basis within India with

named exclusion.
IV
FFF and Safes
Fire, lightning,
Explosion
Burglary/House Breaking
/holdup/theft
Riot & Strike.
LIMIT OF SUM INSURED AND SPECIAL CONDITIONS
Stock under custody in excess of Rs. 2 lac should be secured in locked safe
after business hours Section II.
Sum insured for Sec II should not exceed Sec I sum insured.
Valuation for Sec. I, II, III shall be cost plus 10%.
Pair set clause is applicable.
Condition of average is applicable for Sec I & IV
Reinstatement facility is available for Sec. I
Loss should be reported within 60 days from the occurrence date.

137
EXCLUSIONS:
Inventory losses, losses occurring cleaning and repairing process.
Articles under use by the insured, his employees and family members
Articles whilst on public exhibition.
Theft from unattended vehicles
Infidelity of all persons involved in the trade.
Loss occurred outside specified locations
Theft by use of authorized keys
Window display after business hours.
AOG perils
Transit risk for export/import.
Loss after passage ownership unless by operation of law
Confiscation by local authority.
In India, the MI product should have simplicity affordability and

proximity of services.
Our option in PSUs is to link our Bancassurance partners and the like and
gather experience and data to evolve the best product.
The Ideal package product should be savings oriented (No Claim Bonus),
protective of credit, life, disability and properties including livestock.
2.
Role of intermediaries in procuring general insurance business.
Fast developing distribution channel.
Corporate agents, bancassurance and brokers are Strong intermediaries
Intermediaries are bound by the code of conduct as per IRDA
They have to adhere to the functions stated by IRDA
Link between the insured and insurer
Have to be fair to the interest of insured and insurer
Provides services to the policy holder
Should be updated with the latest covers available in the market and
happenings in the international market
Should have sound knowledge regarding the underwriting philosophy,

risk retention capacity and solvency margin of various insurers
Should play a role in claims administration and management of insured
3.
Concept of input cost in Rural Insurance
It is used in those classes of insurance where the value of the subject

matter is increasing frequently due to change of status/growth.
In plantation insurance the Sum Insured shall be based on the cost of

cultivation i.e. input cost or cost of raising /development of the insured
plant.
Where the insurers do not have up to date information / expertise in

change of value of the subject matter.
Insurers collect the relevant information from the experts in that field like
State/Central Agricultural Department, NABARD, and Agricultural
Universities.
For input cost the items generally they consider

1) Cost of Land Preparation including Pit making.
2) Cost of Seeds/Seedlings.
3) Cost of manures/fertilizers.
4) Cost of pesticides etc.
For subsequent years of operation for plantation crops additional costs

such as cost of fertilisers, manures, irrigation, cost of pesticide,
Extend watch and ward facility, round the clock armed guard closes circuit
TV.
Special security built vaults, strong room
Moral Hazards
Past claims.
BULLET QUESTIONS
1.
Relevance of Micro Insurance in today's, scenario.
The MI comes from the need for inclusive economic growth i.e. the poor
also getting a fair deal when the Indian Economy grows rapidly
The Micro Finance in increasing in Rural India through Banks NGOs and
SHGs.
The vast credit off-take can be protected by micro insurance only in rural
India.
The large population of the rural India rural finance and technology can
be seamlessly integrated for viable business and distribution models for
MI
MI is widely popular in other developing countries all over the world due
to inability of large insurers to tackle the small needs of rural poor.
Public sector Insurance can fit existing policies for filing newer ones
without damaging their existing financial well being
Understanding the exact needs of various states/ regions by market

research can help us evolve the correct MI product
138
139
insecticide, other plant protection chemicals, labour charges will be

added to the first year cost and thus the sum insured for subsequent years
will be the applied.
Stage wise valuation table of the plantation is to be prepared for future

assessment of loss.
The Input cost may be derived for each proposal by the experts as stated
herein above/from any reputed experts OF the relevant field.
Feasibility Report from the State/Central Government Agricultural

Institutions/Universities to be obtained.
The premium charging as well as claim payment both made purely based
on the concept of input cost.
4. Steps for minimization of losses in Health Sector?
There is robust growth of business in Health Sector and this trend is

expected to continue in future also. Unfortunately, ratio of loss in this
sector has increased with the business growth. Hence, there exists
urgency of minimizing losses.
Aggressive marketing of Health Policies to the people of younger age by

introducing new products, training to the agents and greater incentives
for procuring this business.
Loading of premium on group policies based on their past claim

experiences.
Careful selection TPAs having professionals favorable past records.
Monitoring the working of TPAs on regular basis as the loss ratio in the
health sector increases considerable after introduction of TPA.
The benefits under various heads like Room rent, Doctors fees and
Diagnostic materials etc should have individual limits instead of overall
SI without any sub limits.
Maximum limits of compensation may be fixed for treatment of common

diseases like cataract, kidney stone, and heart ailments etc.
While empanelling Hospitals for cashless service, we may negotiate for

discounts.
Prompt investigation of doubtful cases to detect fraud.
Blacklisting of Hospitals and TPA found resorting to fraudulent means.

5. Scope of cover in Credit Risk Insurance
Two types of risks are covered Commercial and Political
Commercial risk refers to the payment risk related to the buyer including
nonpayment due to insolvency default etc.
140
Political risk refers to the payment related to the country of the buyer
Political risk refers also to transfer difficulties due to economic events

like export license cancellation and war
Policy excludes Inter company sales
Policy excludes also transactions with Government Institutions
Excludes private individuals
If the defaulter is a subsidiary or other department of the same company,

these are excluded from the scope of the policy
6. S.I. under the EAR policy
Cost of erected value of property including freight, custom duty, erection

cost
Adj. clause in respect of material damage section towards freight and

handling charges, custom duty, cost of erection but not towards increase/
decrease in the cost of plant & equipment
Extensions like civil works
Debris removal
CPM
Surrounding property
Expediting cost/ overtime, express rates
Air freight for equipment
Additional custom duty
Escalation in cost upto 50%

MULTIPLE CHOICE QUESTIONS ON HEALTH INSURANCE
1.
Mediclaim policy is basically a:
Benefit policy
Indemnity policy
Neither benefit nor indemnity policy
Both indemnity and benefit policy
2.
Group mediclaim policies are of:
High volume & high margin
Low volume & high margin
Low volume & low margin
High volume & low margin
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3.
The penetration of health insurance in India is around:
5% of the total population
4 % of the total population
9.
4.
The coverage of pre-existing diseases was a major bone of contention in case

of mediclaim policies over the years. Who has defined the pre-existing
diseases recently for use by all Indian non-life Insurance Companies?
Insurance Regulatory & Development Authority
General Insurance Council
Health Insurance Council
GIPSA
10. Insurers, TPAs and Broking Companies cannot raise capital except through:
Preference Shares
Equity capital
Hybrid Instruments
Transfer of shares
5.
Mediclaim policy was introduced by PSU Insurers in the year:
1986
1973
1976
1996
6.
Medical underwriting is practiced in case of:
Group health policies
Community based health policies
Individual mediclaim policies
All the above
7.
The new definition of pre existing disease is being implemented by Insurers

with effect from:
1.4.08
1.6.08
1.4.07
1.6.07
8.
The TAC collects health Insurance data from TPAs and Insurers in respect of:
Policy, members and claims
Policy and claims only
Policies and members only
Claims only
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Critical Illness policy is a:
Indemnity policy
Benefit policy
Both indemnity and benefit policy
Neither of the two
11. IRDA grievance redressal department deals with only:
Cases of delay & non response
Claims dispute
Policy contract dispute
Complaints written on behalf of policy holders by Advocates, agents or

any third party
12. A takes a mediclaim policy with coverage of Rs 5 lacs for a year from 1.1.09.
In May 2009, he prefers a claim for Rs 1.5 lacs. The coverage available to A
for the balance period is:
Rs 1.5 lacs
Rs 3.5 lacs
NIL
Rs 5 lacs.
13. All factors other than one stated below does not determine the premium
payable under a health policy:
Age
Occupation
Sum insured
TPA option
14. Mediclaim policy generally has a post and pre hospitalization benefits for:
30 days and 60 days
60 days and 30 days
30 days and 15 days
15 days and 30 days

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15. Under the Rashtriya Swasthya Bima Scheme the Central and State
Government share the premium in the ratio of:
50:50
75:25
25:75
80:20
16. Under the UHIS policy, a portion of the premium is borne by:
State Government
Central Government
Both Central & State Government
Neither the Central and State Government

17. World Health Day is celebrated on:
April 7
August 15
December 7
December 15
18. A health insurance policy may be cancelled for all reasons except one. Which
one:
Misrepresentation
Fraud
Non-disclosure or non co-operation
Claims history
19. The World Health Organization is headquartered at:
Geneva
Berne
New York
Tokyo
20. All but one statement is not correct in respect of Jana Arogya policy:
The coverage is for poorer sections of the society between the age of 5 to
70 years.
The sum insured per person is restricted to Rs 5000/

Tax benefit under Section 80 D is available for premium paid
The policy can be taken for parents as well.

144
21. What is common to Jana Arogya Policy and group mediclaim policy?
Cumulative and health check up are not payable under both.
Maternity benefit extension is available
Renewal is subject to Bonus/ Malus clause
Both are group policies

22. Group Discount is generally not offered under a Group Mediclaim Policy if
the group size is:
< than 51
< than 101
> than 101
> than 51
23. The underwriting practices of a health insurance company provides for
loading of a tailor-made group policy if loss ratio is > than 70 % to keep it at
70% as if basis. In a particular tailor-made group policy, the loss ratio is 150%.
What would be the loading on renewal to maintain the loss ratio at 70%?
120%
114%
70%
100%
24. Group Discount under a group mediclaim policy is allowed on the group size:
At the end of the policy period
On anticipated group size
Actual size at the commencement of policy
To be adjusted on average group size

25. The basic premium under a group mediclaim policy is:
The total premium computed before applying Group Discount, High

Claims Ratio Loading/ Low Claims Discount and Special Discount, if
any
The total premium computed after applying Group Discount
The total premium computed after applying all discounts
None of the above

26. All except one statement is correct in respect of Cancer Medical Expenses
Policy of the Indian Cancer Society. Which one is incorrect?
The policy is available for members of the society maximum upto the age
of 70 years.
145

The policy is available to individual ordinary, Well Wisher Ordinary,
Well Wisher Corporate and Well Wisher Life Member
The policy covers the member and spouse for Rs 50,000/- and in case of
claim by one the partner is not entitled for any benefit under the policy.
The sum insured of Rs 50,000/- is paid as a benefit in case of detection of

cancer.
32. There could be many ways to reduce health insurance premium. Which one of
the below listed does not help in reducing premium:
Reduction of benefit
Curtailment of coverage by imposing co-payment
By getting subsidy
TPA option
27. Mr A has enrolled himself along with his spouse as members of Cancer
Society from 1.1.09. The insurance will commence from:
1.1.09
1.2.09
15.1.09
None of the above.
33. A Company needs to have a license from IRDA to act as TPA. The amount of
non-refundable processing fees and license fees payable are:
Rs 20,000/- and Rs 30,000/

Rs 30,000/- and Rs 20,000/
Rs 25,000/- and Rs 50,000/
No fees payable
28. Which statement is correct in case of Overseas Mediclaim policy?
Premium is payable in foreign currency and claim is payable in foreign

currency.
Premium is payable in rupees and claim is payable in foreign currency.
Premium and claim is paid only in US dollars
None of the above.
34. A TPA whose application for license has been rejected may apply afresh after:
2 years
1 year
5 years
3 years
29. The premium under OM policy depends on all except:
Age band
Trip band and country of visit
Coverage
Income
35. The license issued to a TPA is valid for a period of:
3 years
2 years
5 years
1 year
30. Which is not a government supported health policy?
UHIS (BPL)
Varishtha/ Sr Citizens policy
RSBY
Rajiv Arogyashree
36. What is the threshold limit of transfer of shares of a TPA to be informed to

IRDA?
5%
1%
10%
26%
31. ABC Company has a tailor-made group mediclaim policy with an Insurer.
The Insurer has 4 TPAs in panel and the policy will be serviced by a TPA.
What is the best way to select the TPA?
Any TPA
Leave it to the option of Insurer
Arrange for a presentation from TPAs and then select
Accept as it comes
37. One of the conditions is not relevant to act as TPA in India. Which one:
A company with share capital and registered under the Companies Act
1956
The minimum paid up capital shall be in equity shares of Rs one crore and
should have working capital not less than Rs one crore any time of its
functioning
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147

The TPA to carry on only health services
Aggregate holding of equity shares by a foreign company may be upto

50%.
38. The look back period for pre-existing disease from first commencement date
of mediclaim policy is:
48 months
36 months
No limits
12 months
39. The look back period for pre-existing disease from the policy commencement
date under Overseas Mediclaim policy:
One year
Six months
No limits
48 months
40. The any one-trip limit and total duration of stay under CFT are restricted to:
60 days and 180 days
30 days and 60 days
14 days and 180 days
15 days and 30 days

41. The mediclaim policy if claim free earns a cumulative bonus. However in case
of a claim the earned benefit is reduced by:
5% of the accrued benefit
10% of the accrued benefit
10% of the sum insured
10% of the claim amount
48 hours
No time limit
12 hours
44. According to recent regulation of IRDA all health insurance policies should
have a mechanism to condone delay up to a specified time for continuity of
benefit in respect of waiting period and pre-existing disease. What is that
period?
15 days
7 days
1 month
3 months
45. Any change in the premium structure and terms of health insurance policy can
be implemented only after the approval of IRDA. However Insurer has to
intimate the changes/ revisions to all policyholders at least:
3 months prior to the date of renewal of policy
1 month prior to renewal
Not necessary to inform before renewal
6 months prior to renewal

46. The fees payable to TPA for rendering health services in the eastern and
western India is:
6% of premium
5.4% of premium
5.5% of premium
None of the above

47. The Sr citizens are entitled for tax benefit under Section 80 D of the Income
Tax Act up to:
Rs 20,000/
Rs 15,000/
Rs 50,000/
Rs 25,000/-
42. A disease is said to be acute when:
It has an abrupt beginning and quick ending
Gradual beginning and long persistence
Left alone can be fatal
Disease without complication

43. The minimum hospitalization period for accrual of benefit under mediclaim
policy is:
24 hours
48. The co-branded health insurance policy with Banks has become very popular
in India. It is an example of:
B2B business model
B2B2C business model
B2C business model
None of the above
148
149
49. Which one of the following policy is a deferred mediclaim policy?
Jana Arogya
Arogyashri
Bhavishya Arogya
Sampoorna Arogya
50. The beneficiary under CGHS and Central Services (Medical Attendance)
Rules 1944 can opt for mediclaim policy. State which statement is incorrect?
They can claim reimbursement from both the sources subject to the total
reimbursement not exceeding the total expenditure incurred for
treatment
The beneficiaries first have to claim on original documents with Insurer

and secondly claim with CGHS on photocopy and certification from
Insurer
The reimbursement from CGHS or other department source will be

restricted to admissible amount as per approved package subject to the
amount not exceeding total expenditure on treatment.
The amount of treatment will be shared under contribution clause.

51. The Rashtriya Swasthya Bima is a smart card based health scheme for BPL
families in states across the country. What is the sum insured under the policy?
Rs 30,000/
Rs 25,000/
Rs 50,000/
Rs 20,000/-
54. Under Rashtriya Swasthya Bima a fixed transport allowance per visit is
allowed subject to an annual limit of Rs 1000/-, what amount?
Rs 100/
Rs 50/
Rs 60/
Rs 30/55. The Rashtriya Swasthya Bima entails only:
Cashless hospitalization
Re-imbursement
Both cashless and re-imbursement
Pre-paid system
56. The age for calculation of premium under mediclaim policy is:
Completed age
Running age
Either of the two

57. The riders in a health insurance policy give additional benefits to a policy
holder but it does not have any investment or saving element. As per IRDA
regulation the benefit arising out of an individual rider cannot exceed the basic
sum insured and the premium paid for the rider is capped at :
30 % of the basic policy cost
40% of the basic policy cost
52. The Rashtriya Swasthya Bima Scheme provides for pre and post
hospitalization beneft up to:
1 day and 5 days
7 days and 15 days
Does not provide for it at all
Total 10 days
53. The BPL families can enroll themselves under Rashtriya Swasthya Bima
Scheme by payment of registration fees of:
Rs 10/
Rs 30/
Rs 50/
Free of cost
59. The health insurance portability in Indian health insurance market will be
implemented with effect from :
1.7.2011
1.1. 2012
150
151
58. The DTC will be implemented in the country from effect from 01.04.2012.
The premium paid for health policies for an individual assessee will be
eligible for tax benefit under Income Tax Act for :
` 50,000 /
` 1,00,000/
` 35,000/
` 15,000/-

1.4.2011
1.9.2011
60. As per IRDA guidelines on portability on health insurance policies ,which
one of the following is not correct :
Provide credit for the period of cover for PED in terms of waiting period
with previous insurer.
Provide credit of the sum insured under previous insurer including

bonus.
Provide credit to the sum insured only & not bonus.
Provide credit to both PED & existing sum insured including bonus.
61. As per portability rules, the existing insurer has to share the entire data base
including the claim details of the policies with their counterparts in:
7 days
10 days
3 days
15 days
62. The application for portability has to be acknowledged by insurer within :
3 working days
7 working days
15 working days
10 working days
65. The Insurance Rules provide that the group Health Premium may be accepted
in installments covering a particular period:
Before the due date
Before the policy commencement date
Within 15 days of commencement of the period
Within 7 days of the date of commencement of the period

66. The standardization of billing procedures in hospitals, contents of discharge
summary & standardization of TPA/insurer & TPA/hospital contract have
been done by:
FICCI Health Insurance Group
IRDA Health Self
General Insurance Council
Health Insurance Council

67. When a Insurer knows more about consumers expected costs than the
consumer themselves and uses marketing or plan design to enroll healthier
people than usual population, it is called:
Cream skimming
Adverse Selection
Lemon dropping
Information Asymmetry
63. For online filing of health insurance products the IRDA has provided for
submission for :
Data base sheet
Self administered checklist
Customer information sheet
Hospital & TPA list
68. It is estimated that health insurers' loss due to fraud is around 10% of the claim
outgo. When normally honest people pad legitimate claims to get higher
amount of claim or to cover excluded items under policy, it is known as :
Soft fraud
Hard fraud
Application fraud
Eligibility fraud
64. As per Section 64 VB of the Insurance Act, 1938 no risk to be assumed by an

Insurer unless premium is received in advance. Rule 58 & 59 of Insurance
Rules 1939 provide relaxation in the payment of premium in all policies
except:
Group Hospitalization Insurance Scheme & Sickness Insurance
Medical Benefit Insurance
Group Personal Accident Policies
Individual health policies
69. The PSGICs shortlisted providers with package rates for identified
procedures in four cities of Mumbai, Delhi, Chennai & Bengaluru for
implementation from 1.7.2010. This exercise by PSGICs is called the:
PPN
PPP
Select Networking
Neworking
152
153
70. Health insurance market has many imperfections and informational

asymmetry is common. Health insurance underwriting is successful when:
If both insured and insurer are informed
If both the insured and insurer are under-informed
If insured is un-informed and insurer is informed
If insured keeps insurer uninformed
c) PA policy
d) Burglary Insurance
6.
Floating cover is not allowed in

a) PA insurance
b) Fidelity Guarantee insurance
c) Burglary insurance
d) Health insurance
7.
Standard Burglary Insurance (business premises) covers

a) Loss occurring without any forcible entry
b) Loss detected while taking inventory
c) Loss arising out of snatching of goods
d) Loss occurring as a result of forcible violent entry
HEALTH & LIABILITY INSURANCE
8.
1. First loss cover is available under

a) House Holders Insurance
b) Shopkeepers insurance
c) Bankers Indemnity
d) Burglary Insurance
Householder's insurance policy does not cover

a) WC of servants
b) Money in transit
c) All risk of valuables
d) PA insurance
9.
Which one is not an insurance policy of indemnity?

a) Health
b) Personal accident
c) Burglary insurance
d) Cash in transit
71. The number of standalone health insurance companies in the country is:
Three
Two
Four
One
2. Bankers Indemnity Insurance Policy covers

a) Burglary from vault
b) Wrongful and dishonest acts on the part of employees
c) Fire of Bank Building
d) Cash in transit
3. Which insurance policy has worldwide geographical scope?
a) Overseas health insurance
b) Cash in transit
c) Personal accident insurance
d) Fidelity guarantee insurance cover
4. PA insurance Policy doesn't cover
a) Death
b) Permanent total disability
c) Permanent partial disability
d) Temporary partial disability
5. Contribution clause is not applicable for
a) All risk insurance for valuables
b) Fidelity Guarantee Insurance
154
10. Which of the following rules is not applicable to air travel insurance?
a) Duration of coverage is limited to period from embarking to
disembarking of the passenger
b) Flight coupons are normally purchased by the policy holder at the airport
c) Maximum limit of compensation in case of Death / PTD is Rs. 12 lacs if
Individual is of 12 years of age and above
d) Maximum limit of compensation in case of Death / PTD is Rs. 7.50 lacs if
Individual is of 12 years of age and above
11. Retroactive period clause is relevant to
a) Personal accident policy
b) Bankers indemnity insurance
c) Workmen compensation insurance
d) Health insurance
12. Pair and Set clause is not a special condition under
a) Fire Insurance
155
b) Burglary insurance
c) All Risk Insurance
d) Baggage insurance
c) Lessor of the aircraft

d) All the above
13. Agreed value condition is applicable to

a) Valuable and curios under fire insurance
b) Marine cargo insurance
c) Vintage car motor insurance policy
d) All of the above
14. Under Sec.I of shopkeeper policy which risk is not covered
a) Lightning
b) Flood
c) Aircraft falling
d) Loss of money
15. Environmental Relief Fund is compulsory along with premium of
insurance of
a)Public liability (Act) insurance
b) Workmen's compensation insurance policy
c) Erection insurance policy
d) Cancer insurance policy
16. Which of the following policies has compensation fixed exactly as per
statute?
a) Workmen's compensation insurance
b) Public liability Act insurance
c) Motor third party insurance
d) (a) and (b) above
17. Service tax is not chargeable along with premium under
a) Burglary insurance
b) Personal accident insurance
c) Health insurance
d) Janata Personal Accident Insurance
18. Stamp duty is to be paid by insured under
a) W.C. Policy
b) Marine cargo transit policy
c) Short period insurance policy
d) Personal accident insurance
19. Aviation Hull Insurance policy can be purchased by
a) Manufacturer of aircraft
b) Operator of aircraft
156
20. Age group of girl child in Bhagyashree policy is revised to

a) Upto 10 years
b) 10 to 25 years
c) Upto 18 years
d) Upto 21 years
21. Workmen's compensation policy is not guided by
a) WC Act
b) Fatal Accident Act
c) Indian Contract Act
d) Trade Union Act
22. Under which policy insured's residence and its contents are covered
a) Transit insurance
b) Mobile insurance
c) Aviation insurance
d) Householder's insurance
23. What is the regulatory requirement of capital for setting up a stand alone
health insurance company in India?
a) 100 crores
b) 50 crores
c) 35 crores
d) 200 crores
24. Meaning of 'legally liable' in a liability policy is
a) Breach of legal duty to take care
b) Contractual liability
c) Statutory liability
d) (a) and (c)
25. The Policy and the Schedule shall be read together as one contract and any
wording or expression to which a specific meaning has been attached in any
part of this Policy or Schedule, shall bear specific meaning wherever it may
appear.
a) This applies to Public Liability policy
b) This applies to Professional Indemnity policy
c) This applies to Workmen's Compensation policy
d) Only (a) and (b)
26. Which of the following is exclusion under the Workmen's Compensation
policy?
a) Insured's liability to employees of contractors
157
b) Liability in respect of employees of insured

c) Liability in respect of workmen contracting any disease whilst
discharging duties
d) (b) and (c)
27. Reinsurance of Public Liability is generally done on which basis
a) Facultative
b) Excess of loss treaty
c) Quota Share
d) Stop loss
28. Under Bhavishya Arogya Policy, premium is not based on
a) Age at entry
b) Retirement age chosen
c) Sum assured opted
d) Sex of the insured
29. Which of the following is not a health insurance product
a) Kisan Package policy
b) Cancer Insurance policy
c) Critical Illness policy
d) Bhavishya Arogya policy
30. Which of the following diseases is not covered in the first year after inception
of a health policy
a) Cataract, Piles and Hernia
b) Diabetes, Jaundice and Stroke
c) Kidney Failure, Cataract and Piles
d) Hypertension, Stroke and Piles
31. Reinsurance of a health portfolio is normally done on
a) Facultative basis
b) Excess of loss basis
c) Quota Share basis
d) Stop loss basis
32. Income tax benefit under Section 80(D) of IT Act is admissible
a) If premium is paid in cash
b) If premium is paid by cheque
c) (a) and (b)
33. The tax relief for annual premium for a health policy for senior citizens is
a) Rs. 10,000/b) Rs. 15,000/c) Rs. 20,000/d) Rs 25,000/158
34. Which of the following is covered under mediclaim insurance policy

a) Dental treatment
b) Cost of Spectacles
c) Cost of Pacemaker
d) Cosmetic Surgery
35. Claim Series Clause in Liability insurance means
a) Single Accident may result in only one claim
b) Single Accident may result in several claims
c) Single Accident may result in a series of claims which has to be clubbed
d) (a) and (b)
36. In liability insurance premium is based on AOA and AOY ratio. Under which
ratio limit of liability may get exhausted after one accident.
a) 1 : 1
b) 1 : 2
c) 1 : 3
d) 1 : 4
37. Under which mediclaim policy , the benefit
reimbursed
a) Universal Health Insurance
b) Jan Arogya
c) Critical Illness
is
paid in cash but not
38. Products Liability policies are normally issued on which of the following
basis
a) Risk Attaching basis
b) Losses occurring basis
c) Turnover basis
39. Find the correct answer: The premium under Mediclaim policy is based on
a) Age
b) Job
c) History of previous surgery
d) Sex
40. Under which of the following liability policies, compulsory excess does not
apply?
a) Industrial risks
b) Non-Industrial risks
c) Products
d) Compulsory Public liability policy.
159
41. Which of the following risks fall under Industrial Risks Liability policy?
a) Exhibitions
b) Permanent Amusement Parks
c) Film Studios
42. In the limits of indemnity under Industrial Risks Public Liability, which
combination of any one Accident and Any one year cannot be generally
allowed under the Market Agreement?*
a) Rs.10 lakh and Rs.40 lakh
b) Rs.10 lakh and Rs.50 lakh
c) Rs.10 lakh and Rs.20 lakh
d) Rs.10 lakh and Rs.30 lakh
43. Which of the following statements is true in relation to Standard group
Mediclaim policy?
Statement A: Cumulative Bonus is not available.
Statement B: Health checkup expenses are not payable.
a) Neither of the Statements
b) Statement a only
c) Statement B only
d) Both statements
44. Under Public Liability Insurance Act 1991 the owner is not liable to pay relief
in the event of:
a) Damage of property of any person
b) Death of workman as defined in the Workmen's Compensation Act
c) Death of any person
d) Injury of any person
45. Under Hospitalization claim in Standard Mediclaim policy, relevant medical
expenses incurred during the period of how many days after hospitalization
are treated as part of the claim:
a) 15
b) 45
c) 30
d) 60
46. The Standard Mediclaim policy excludes any disease (other than diseases
excluded during the first year of operation) for how many days from
commencement of policy.
a) 30
b) 45
c) 15
d) 60
160
47. Under Standard group Mediclaim policy, which of the discounts are not
granted?
a) Long term discount
b) Group discount
c) Low claims discount
48. Which of the following expenses are 'not' payable under Maternity Benefit*?
a) Cesarean
b) Abdominal operation for extra-uterine pregnancy
c) Miscarriages due to accident
d) Pre-natal expenses prior to hospitalization
49. Under Public Liability Insurance Act, a company has to insure for an amount
not less than the amount of the insured's.
a) Good will
b) Paid up capital
c) Turnover
d) Value of assets
50. The maximum amount of premium paid by other than Senior Citizens under
Mediclaim policy that qualifies for income tax benefit is*:
a) Rs. 10,000
b) Rs. 20,000
c) Rs. 7,500
d) Rs. 15,000
51. Which of the following factor does not affect premium for Overseas
Mediclaim Policy?
a) Age
b) Country/Countries to Visit
c) Nationality of the Insured.
d) Duration of cover.
52. Daily compensation benefit is available under which of the following:
a) Individual mediclaim
b) Group mediclaim
c) Cancer insurance
d) Universal Health insurance
53. Accidental death is covered only under:
a) Group mediclaim
b) Ind. mediclaim
c) Cancer insurance
d) Universal Health Insurance.
161
54. Pricing of Mediclaim policy is made based on

a) The pure risk cost method
b) Experience rating cost
A) a only
B) b only
C) Both a & b
D) None of the above
55. No fault liability concept is applicable to which of the following:
a) Public liability (industrial risk)
b) Public liability (non industrial)
c) Compulsory public liability under PLI act 1991
d) Product liability
56. Family discount of 10% in the total premium cannot be allowed to a family
comprising the insured and any or more of the following:
a) Spouse
b) Dependent Children
c) Dependent Parents.
d) Dependent Sisters/Brothers.
57. What is the maximum Cumulative Bonus, which can be earned in a Group
Mediclaim Policy?
a) 10%
b) 15%
c) 50%
58. Under which of the following situations, one month waiting period under
Mediclaim Policy claim is not required:
a) Sudden Heart Attack.
b) Child birth.
c) Accidental injuries.
d) Tooth ache.
59. TPAs are not involved in which of the following policies
a) Group Mediclaim policies
b) Individual Mediclaim policies
c) Universal Health policies
d) Bhavishya Arogya policies
60. The Mediclaim policy was first introduced in India in
a) 1986
b) 1985
162
c) 1987
d) 1990
61. What is the minimum number of persons to be covered for the eligibility of
Family Discount under the Mediclaim Policy?
a) 1
b) 2
c) 4
d) 5
62. Post Hospitalization and Pre Hospitalization expenses are covered for the
following number of days under the Mediclaim policy
a) 45/45
b) 60/30
c) 30/30
d) 75/15
63. Which of the following statement is TRUE in respect of a claim under a new
mediclaim policy?
a) The coverage starts after 15 days from inception of the policy
b) There is a waiting period of 30 days except for accidents
c) There is a waiting period of 60 days
64. Which of the following is excluded in the Standard Mediclaim Policy?
a) Simple Tooth Extraction
b) Cataract Operations
c) Hysterectomy
d) All the above
65. In respect of Mediclaim Policy, TPA denote
a) Third Party Availability for claims
b) Third Party Administrator
c) To Pay Afterwards
66. Which of the following is / are exclusion/s in the Overseas Mediclaim policy
a) All pre existing disease
b) Travel against Medical Advice
c) First USD 100 on every claim
d) All of the above.
67. Following is not an ADD ON COVER under OMP
a) Personal Accident
163
b) Loss of Check in Baggage

c) Delay of checked in Baggage
d) Loss of Spectacles
68. Premium rate under the Overseas Mediclaim policy does not depend on
a) Country of Visit
b) Trip band
c) Age band of the insured
d) Family status of the proposer
69. Universal Health Insurance Policy for BPL families is issued by
a) Private and PSU Insurers
b) PSU Insurers only
c) Central Government
d) State Government
70. UHIS will not cover
a) Earning Member
b) Earning Member spouse and 3 Dependent Children
c) Earning Member Spouse, 3 Dependent Children and Parents
d) Only dependent children
71. Medical Benefit under UHIS is restricted to
a) Rs. 30000/- per family
b) Rs. 30000/- per member
c) Rs.50000/- per family
d) Rs.12500/- per member
72. Claim are settled under the Overseas Mediclaim Policy
a) By the Policy Issuing Office
b) Overseas Claim Settlement Agent
c) Insured pays to the Hospital and seek reimbursement
d) Lloyds of London
d) Admission into a Government hospital

75. Limit of liability in respect of Death under an ACT only public liability policy
a) Rs.25000/b) Rs.50000/c) Rs.12500/d) Rs100000/76. Environment Relief Fund is collected by
a) A Public Sector Banker
b) State Treasury
c) Wild Life Society
d) Insurance Company
77. Rate of Commission Payable under Act only Public Liability Policy
a) Nil
b) 5 %
c) 10%
d) 12.5%
78. In group health insurance covers, the least important underwriting aspect is
a) Financial resources of the client firm
b) Male to female ratio among employees
c) Age group profile of employees
d) Past claims experience
79. In individual health insurance, normally which contingency is not
automatically covered?
a) Cancer
b) Maternity
c) Minor surgery
d) Accidental fall
73. Under the Mediclaim Policy a Hospital in an urban area is one which has
facility at least
a) 20 Beds
b) 15 Beds
c) 10 Beds
d) 25 beds
80. In underwriting group health insurance, the underwriting factors that we do

not consider are
a) Occupation of employees
b) Age of employees
c) Previous claims experience
d) Longevity of life of average Indian
74. Which of the following conditions is not necessary to be fulfilled to consider a

claim under Domiciliary Hospitalization of Mediclaim Policy?
a) There is no availability of beds in the Hospital
b) The condition of the patient is such that he cannot be taken to Hospital
c) The disease is such that necessitates hospitalization
81. Cost of health check-up is available to the insured after an interval of:
a) ONCE IN THREE CLAIM FREE YEARS OF POLICY
b) ONCE IN FOUR CLAIM FREE YEARS OF POLICY
c) ONCE IN TWO CLAIM FREE YEARS OF POLICY
d) Once in every five years
164
165
82. What is the cost of Health check-up under Individual Mediclaim?

a) 1% OF Average SI
b) 2% OF SI
c) 5% OF SI
d) MAXIMUM Rs.2500.
83. Domiciliary Hospitalization Benefit is available
a) MEDICAL TREATMENT EXCEEDING 7 DAYS
b) MEDICAL TREATMENT EXCEEDING 3 DAYS
c) MEDICAL TREATMENT EXCEEDING 10 DAYS
d) MEDICAL TREATMENT EXCEEDING 5 DAYS
d) APENDICITIS
89. Contribution to Environmental Relief Fund is under the PLI Act
a) Rs.50000/b) Rs.100000/c) AN EQUIVALENT AMOUNT OF PREMIUM
d) AN EQUIVALENT AMOUNT OF PREMIUM WITH SERVICE TAX
90. Retroactive date means
a) INCEPTION DATE OF FIRST POLICY without break
b) DATE OF RENEWAL PREMIUM without break
c) EXPIRY DATE OF LAST POLICY
d) EXPIRY DATE OF FIRST POLICY
84. Family discount is available under individual Mediclaim Policy if taken for
the family
a) @ THE RATE 5%
b) @ THE RATE 15%
c) @ THE RATE 10%
d) @ THE RATE 33 1/2%
91. Which is not a NON-INDUSTRIAL RISK under Public Liability Policy?

a) HOTEL
b) LIBRARY
c) PAINT FACTORY
d) SHOP
85. When Insured opts for Mediclaim cover with cashless facility the Premium
amount is loaded by
a) 10%
b) 6%
c) 5%
d) 7.5%
92. For claims made Basis Liability insurance policies

a) Policy period and period of insurance are always different
b) Policy period and period of insurance are always same
c) Policy period and period of insurance may or may not be same
d) There is no difference between the two
86. When Maternity Benefit is extended to Group Mediclaim Policy the

additional Premium is
a) 10%
b) 12.5%
c) 15%
d) 17.5%
87. What is the waiting period in respect to Maternity Benefit extension under
Group Medical Policy?
a) 10 MONTHS
b) 12 MONTHS
c) 7 MONTHS
d) 9 MONTHS
88. Which one of the following diseases do not form part of first year exclusion
a) CATARACT
b) HYSTERECTOMY
c) FISTULA
166
93. Which policy is mandatory if your client is in hazardous industry dealing in

hazardous substance?
a) Product liability
b) Professional liability
c) Public Liability (Non-Industrial)
d) Public Liability Act Policy
94. For claiming compensation under W C policy, accident should
a) Always be within factory premises
b) Always be outside factory premises
c) May be within or outside factory premises
d) Always be at workers residence only
95. Bhagyashree Child Welfare Policy is applicable to:a) Girl Child in the age group of0 to 18 years.
b) Whose Parents age does not exceed 60 years?
c) This Scheme is for one Girl Child in a family.
d) All above.
167
96. Generally Blood Stock Insurance relates to

a) Blood Stock in Blood Bank.
b) Testing of Blood.
c) Indemnity in respect of death of a horse occurring from accident, illness
of disease etc.
d) No such Insurance cover is available.
97. Under Mediclaim Policy the term Medical Practitioner means:a) A person who holds a degree/ diploma from recognized institution.
b) Person who is registered by Medical Council of respective State of India.
c) Both of above.
d) None of above.
98. Under Liability Insurance the terms AOA relates to:a) Assessment of Assets.
b) Against one Accident.
c) Any one Accident.
d) Any other Accident.
99. Under Legal background Trespassers means: a) A man found guilty of cutting trees.
b) A man who enters in forest and passes through.
c) A man who enter property without any right or permission.
d) All of above.
100.The time limit for appeal for National Consumer Forum to Supreme Court is:a) 30 days from the Order of National Commission.
b) 60 days from the Order of National Commission.
c) 90 days from the Order of National Commission.
d) No time limit.
101.In W.C. cases we can go for appeal only on the ground of: a) On guan m
b) Finding of facts
c) Substantial Question of Law is involved.
d) None of above.
102.In Employers Liability Insurance one of the following not covered:a) Personal negligence of the Employer.
b) Negligence of Employees in the performance of their employment
duties.
c) The willful disobedience of the Workman.
d) Personnel negligence of fellow employee.
168
103.In relation to Standard Mediclaim Policy which of the following statement is

correcta) Condition with respect to number of beds must be observed in all the
cases
b) Condition with respect to number of beds is applicable only if the
Hospital is not registered with local authority
c) Condition with respect of number of beds has been waived by IRDA
d) None of the above is correct
104.The benefit of section 80D of Income Tax Act in 2007 Budget has beena) Scrapped
b) Increased
c) Decreased
d) Kept unchanged
105.Which of the following expenses are not covered under Standard Mediclaim
Policy-?
a) Expenses related to Psychological disorders
b) Expenses related to Cancer
c) Expenses related to MTP
d) Expenses incurred towards pace-maker in case of hear disease
106.Which one of the following expenses is not covered under Standard
Mediclaim Policy-?
a) Expenses towards HIV Test of patient before operation which is covered
under this policy
b) Registration Charges of Hospital
c) Dialysis Charges in case of renal failure
d) Angioplasty expenses
107.As per the Public liability act policy the compensation in case of an accident is
a) Structured compensation
b) Unlimited liability
c) As per sum insured
108.Equal amount of premium collected under the PLI Act Policy goes to
a) Prime Minister's Relief fund
b) Environment relief fund
c) Disaster management fund
109.Claim settling authority incase of claims under PLI Act Policy is
a) Divisional Manager/ Sr. Divisional Manager
169
b) Regional Manager/ Chief regional Manager

c) General Manager
d) District Magistrate/ Collector
110.Claims under Public Liability Policy are in the nature of
Legal liability
a) Agreed liability
b) Vicarious liability
111. Under Public Liability Industrial risks Policy pollution risk is
a) automatically covered
b) can be taken as an add on cover
c) cannot be covered
d) any of the above
112.Premium rating for Public liability policy depends on
a) Turnover, Limit of indemnity, No. of Units covered, Risk group
b) Sum insured selected, location of the Risk, Surrounding Property, Past
claims experience
c) Both of the above
113.Which of the following parties can bring an action against a director of a
company giving rise to a claim under the D&O POLICY?
a) Customers
b) Employees
c) Regulator
d) All above
114.What costs cannot be usually covered under a Product Recall cover
a) Product Guarantee
b) Cost of recovering defectives products sent out in the market
c) Cost of advertising to the public
115.Claims under Product Liability policy can be paid in
a) Foreign currency
b) Indian rupees only
c) In Foreign currency with RBI permission
176
116.The retroactive clause under a liability policy defines that

a) Under a claims made policy the loss should occur within policy period in
case of renewal without break
b) The date of inception of cover and the time within which the legal
proceedings should be completed
c) The period of keeping provisions for claim made under the policy
117.Liability policies are called long tailed policies because
a) Actual liability may arise a long period after expiry of the policy for
claims arising during the policy period
b) Provisions for claims have to be maintained on the insurers books for a
long period
c) Both of the above
118.Which one of the following statement is not correct in respect of Liability
Insurances-?
a) Implied principle of Good faith is not applicable.
b) Claims are paid to persons other than the insured
c) The insurer provides indemnity to the insured in respect of his potential
legal liability.
d) Legal costs of the insured incurred with the consent of the insurers are
reimbursed.
119.Which one of the following statements is not correct in respect of the liability
Insurance covers ?
a) It covers Civil Liability arising under Common Law
b) It covers Civil liability arising under Statutory Law
c) It covers both (a) and (b)
d) It cover neither of (a) and (b)
120.In Liability insurance policies
a) Policy period and period of insurance are always different
b) Policy period and period of insurance are always same
c) Policy period and period of insurance may or may not be same
d) There is no difference between the two
121.If your client is in hazardous industry dealing in hazardous substance, which
policy would you suggest
a) Public liability (Non industrial risk)
b) Product liability
177
c) Professional liability
d) Compulsory public liability act policy
122.Under Personal Accident Policy Payment of Compensation in respect of
death, injury or disablement of the insured Directly or indirectly caused by
Venereal diseases or insanity is: a) Cover. Subject to 2% pf capital Sum insured.
b) Cover subject to2% of Sum insured or 2,500/- whichever is less
c) Full amount is payable.
d) Not covered.
123.Anatomy is a science, which deals with: a) Matter pertaining to TV Antenna.
b) Matters pertaining to Aviation.
c) Deals with structure and position of body.
d) None of above.
b) Dependent children
c) Dependent sister
d) Dependent parents
128.In which of the following aspects, Mediclaim and Jan Arogya differs
a) Definition of hospital
b) Cumulative bonus
c) Tax benefit under sec 80D
129.Which of the following is a deferred mediclaim policy?
a) Bhavishya Arogya
b) Jan Arogya
c) Cancer medical policy
d) Overseas mediclaim
Key Multiple Choice Questions on Health Insurance

124.Under Pedal Cycle Policy Legal Liability for Bodily injury, property damage
is:a) Rs.5, 000/b) Rs. 10,000/c) Rs. 15,000/d) Rs. 20,000/125.Which of the following criteria may not be complied with in the definition of
hospital/nursing home, if it is not registered?
a) Fully equipped OT
b) At least 10/15 in-patients beds
c) Tie up with TPA
d) Fully qualified nursing staff
126.For admissibility of expenses on hospitalization, the period of hospitalization
should be
a) Minimum 24 hours in all the cases
b) Minimum 24 hours except in some cases of specific treatment
c) Minimum 3 days
d) No such condition
127.Which of the following does not fall under the definition of Family under the
Mediclaim policy for family discount?
a) Spouse
170
1.
19. A
37. D
55. A
2.
20. D
38. A
56. A
3.
21. A
39. A
57. A
4.
22. B
40. A
58. A
5.
23. B
41. C
59. A
6.
24. C
42. A
60. C
7.
25. A
43. A
61. A
8.
26. D
44. A
62. A
9.
27. B
45. A
63. A
10. B
28. B
46. B
64. D
11. A
29. D
47. A
65. C
12. B
30. B
48. B
66. A
13. B
31. C
49. C
67. A
14. B
32. D
50. D
68. A
15. B
33. A
51. A
69. A
16. D
34. A
52. A
70. A
17. A
35. A
53. B
71. A
18. D
36. A
54. A
171
Key Health & Liability

1.
33.
65.
2.
34.
66.
3.
35.
67.
4.
36.
68.
5.
37.
69.
6.
38.
70.
7.
39.
71.
8.
40.
72.
9.
41.
73.
10.
42.
74.
11.
43.
75.
12.
44.
76.
13.
45.
77.
14.
46.
78.
15.
47.
79.
16.
48.
80.
17.
49.
81.
18.
50.
82.
19.
51.
83.
20.
52.
84.
21.
53.
85.
22.
54.
86.
23.
55.
87.
24.
56.
88.
25.
57.
89.
26.
58.
90.
27.
59.
91.
28.
60.
92.
29.
61.
93.
30.
62.
94.
31.
63.
95.
32.
64.
96.
172
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
C
C
C
A
C
C
B
B
C
B
A
B
D
A
B
A
D
A
C
A
C
A
C
C
D
D
C
B
C
B
C
B
A
173
MOTOR INSURANCE
MOTOR INSURANCE
The Automobile Industry in India occupied a backseat in the overall economic

setup for almost 40 years of independence. The production of all types of
Vehicles was limited, unlike today. After 1980 the government started allowing
foreign collaboration and importing latest technology to produce more efficient
vehicles. The easing of capacity constraints and the broad banding of
production licenses greatly accelerated the expansion and modernization of the
Automobile Industry. As a result of the policy changes the stagnant Automobile
Industry got transformed.
With new liberalization policies encouraging FII (Foreign Institutional
Investment), Automobile giants all over the world started establishing their base
in the Indian Market with companies like Hyundai, Ford etc. flooding the market
with technologically advanced new models of vehicles. This boom in the
automobile industry and the growing consumerism saw a fourfold increase in
the premium income from the motor insurance for all the insurers in India.
Though, motor insurance business contributes almost 40% of the aggregate
premium income all the types of insurance, the claim ratio both for accidental
damages and third party liability prove to be disastrous while comparing with
that of premium. The recent statistics shows that accidental damage of vehicles
is ranging between 115% to 125% and that for liability to third parties in ranging
up to and alarming 300%.
With the flourishing of Automobile Industry, Motor Insurance has become a
lucrative business but requires careful underwriting as the number of accidents
has increased due to explosion of vehicle population, bad roads, rash, negligent
driving and poor maintenance of vehicles.
ROLE OF UNDERWRITER
The underwriter is one who accepts Insurance Business by giving a promise that
he would indemnify the insured in the event of a claim for a property for which
the insurance is being sought on the payment of sum called premium. He has a
significant role to play in order to offer a suitable product to the customers,
vehicle dealers, and financiers and even for the manufacturers. He enters into a
binding contract to honor his commitments to the prospective policy holder.
Unless the underwriters properly price their product and offer the best cover to
the customer keeping in view the changing scenario, other environmental
factors and changed legislations etc. the commitment of underwriter to the
customer may become difficult.
A prudent underwriter should offer the best product mix and ensure that he
remains stable, viable and solvent so that he attains his sustenance under
any situation. The judicious combination of the following factors only
would ensure this:
172
173
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Identification of the risk relating to the type of vehicle for which Insurance is
sought.
Recording of all relevant data of past experience with regard to type of
vehicles and gathering information from the market.
Analysis the data and designing the suitable product
Educating the customer with regard to the design of the product and seeking
suggestions from the customer to offer the product that would aptly suit them.
Assisting the customer to choose the correct value for Insurances and revise
the market value of Insurance appropriately at the time of renewal
Keeping track of claim records
Identifying the perils causing accidents very often and also extent of losses
produced by each peril.
Advising the customer the risk prevention measures.
Conducting frequent customer seminars and educational programs with
regard to changed traffic rules and regulations, change of legislation and other
code of conduct.
Periodical interactions with other insurers so that aggregate exposure in the
market, their claim experience in respect of each category of vehicle, cause of
accident, etc. can be discussed and known.
The insurers should pre-inspect the vehicle before accepting the risk where
there is no continuity of Insurance in case of used vehicles.
Enforcing underwriting controls like fair and reasonable excess provisions,
pre risk acceptance and other safeguards
Maximizing the resources and minimising the cost to remain solvent
Faster claims settlement to achieve maximum customer service.
Besides, underwriter's personnel are given periodical training and keep them
abreast of the updated environment changes.
The focus should be on IT development to cope up with the demanding
expectations of the customers.
Motor Vehicle Insurance
Type of cover required Comprehensive, Third party, Fire only, Theft only,
Fire/Theft and Third party only.
i. Type of use of vehicle
ii. Details of the vehicle
iii. Age, experience, past claims experience, previous insurance, if any
iv. Value of the vehicle including accessories fitted thereon.
Sum Insured Insurable value
The value of the property being insured is determined based on various factors
such as
174
Manufacturing cost
Profit margin of the manufacturer
Transportation charges
Tax and Duties
Cost of Insurance
Intermediary Commission
Suitable loading with regard to increase in value due to market

fluctuations
Cost of accessories and other value addition
Any other extra cost, which may be material for valuation of property,
offered for Insurance.
The selection of value is usually the option of the insured and such value so fixed
will be the maximum limit of liability in the event of loss. It is also on the basis on
which premium is collected. This value is called sum insured which can increase
or reduced during the currency of the policy.
Sum insured is name of Insured Estimated Value (I.E.V) in Motor Insurance,
which is now being proposed to be called as Insured's Declared Value
Cover Note:
A cover note is an unstamped document issued based on the details given in the
proposal form confirming the acceptance of the risk from the date and time of
receiving the consideration (premium).
This document is issued immediately only under circumstances where the
issuance of the policy is not feasible. This cover note is a replica of the policy to be
issued.
The validity of the cover note is 60 days, which can be further extended at the
option of the insurer, if necessary.
Policy Form:
After a contract has been concluded between the proposer and the insurer, it is
recorded in a document called a policy.
The policy is not the contract but only the evidence of it. In the event of a dispute,
it is the policy to which the attention of the court will be drawn unless the insured
brings the evidence to prove that there is a discrepancy between the policy and the
fact.
Endorsement:
From time to time, it is necessary to make alterations in the wordings of a policy to
take note of changes in the material facts submitted earlier in substitution for one
175
item to another. It would be costly and time consuming to issue a new policy for
every alteration. Therefore, any changes to the original policy are noted by way of
issuing an Endorsement.
use of vehicle for hire or reward, pace making reliability trial and speed testing and
used for any purpose in connection with motor trade.
Two Wheeler : Motorcycle is a mechanically self-propelled two-wheeler with gear
or without gear but a kick starter vehicle is treated as Geared vehicle for Insurance
Rating.
Scooter: It is a mechanically propelled two-wheeler with variable gears.
Period of Insurance
Usually, the insurance is offered only for 12 months, as most of the insurance
contracts including accident and liability insurance are annual policies.
When the liability of the insurer commences under the contract of the policy, the
policy is said to attach or in other words the risk is said to attach or it begins to run
from that time.
Auto cycles: Pedal cycle mechanically assisted by a motor engine upto 75 cc.
Capacity.
DUTIES OF THE INSRUED AT THE TIME OF TAKING INSURANCE
COMMERCIAL VEHICLES
1.
The Insured should declare all the materials facts relevant to the risk for which
insurance is sought such a type of vehicle, purpose of usage, model of the
vehicle, age of the vehicle etc.,
Good carrying vehicle (private carriers) : The owner of the transport vehicle who
uses the vehicles only for carriage of goods, which are his properties, or carriage of
goods, which are necessary for the purpose of his business.
2.
History of past claims
3.
Name of the previous insurers if any who have declined accepting the risk
offered for Insurance or cancelled the policy.
Good carrying vehicle (public carriers) : The owner of the transport vehicle who
uses the vehicles only for carriage of goods, which are not his properties, or
carriage of goods, which are necessary for the purpose of his business.
4.
Maintenance of the vehicle in the most efficient manner as though he is

uninsured
5.
The Insured should bring to the notice of the Insurer about any alterations
subsequent to the issuance of the policy, e.g.; accessories insured should
remain in the vehicle during the entire period of insurance.
6.
It is obligation on the part of the insured to declare any accidents that have
taken place whether material or not to this Insurance.
TYPES OF VEHICLE
There are different categories of vehicles plying on the road in accordance with the
provisions of the Motor Vehicle Act.
Public service vehicle : A motor vehicle used for carrying passenger and includes
motor cab, contract carriage and stage carriage.
1.
2.
3.
Motor cab: Motor vehicle used to carry not more than 6 persons excluding
driver for hire or reward.
Contract carriage: Motor vehicle which carry passengers for hire or reward
under a contract and the vehicle used as whole for an agreed sum either on
time basis or point to point basis.
Stage carriage: A motor vehicle which can carry more than 6 passengers
excluding driver for hire or reward with fares paid by individual passenger for
the whole journey or for stages of the journey.
MISCELLANEOUS TYPE OF VEHICLE All other vehicles, which do not fall

under any of the categories enlisted above, are classified under this category.
Examples are: Ambulance, Tractor and Trailer, Road Rollers, Excavators etc.
TYPES OF INSURANCE
Motor vehicles : Any mechanically propelled vehicle used upon roads and
includes a chassis to which body is not attached and trailer but does not include
vehicle run or fixed rails or specially adopted for use within the factory premises.
1.
2.
Private car : Private car is a type of a vehicle used for social, domestic, pleasure and
professional purpose and not for carriage of goods (other than samples) excluding
178
Act Only Policy (Third party liability towards death and/or bodily injury
and/or property damage)
Comprehensive Policy (Accidental damages to the vehicle insured or loss of
the vehicle and liabilities to third party towards death and/or bodily injury
and/or property damage)
179
3.
4.
5.
6.
Act only with Fire and/or Theft

Fire and/or theft only
Motor Trade Policies
Internal Road Risk Policy
to another. Usually the vehicles involved are un-registered and uninsured under
Normal Motor policy.
SCOPE OF MOTOR INSURANCE
TYPES OF INSURANCE POLICIES

ACT ONLY POLICY: It is the minimum cover required under the motor vehicles
act and provides compensation for death and/or bodily injury and/or property
damage to third parties out of use of motor vehicle in the public place for which the
Insured is liable to pay. The extent of liability is as per the Motor vehicle Act.
COMPREHENSIVE POLICY: An Insurance policy which covers Accidental
Damage to the vehicle involved in an accident along with or in addition to the third
party liability.
ACT ONLY AND FIRE AND/OR THEFT: A restricted cover under
comprehensive policy by which the insurer accepts to insure the risk of Fire and/or
theft only of the vehicle to be insured in addition to third party liability. This
decision is taken by the underwriter after considering the various factors such as
make, model of the vehicle, declinature of Insurance by previous insurers, past
claims experience etc.
FIRE AND/OR THEFT RISK: This cover is given if the vehicle to be insured is
laid up in the garage of if it remains unused.
Laid up Vehicles:
Laid up vehicle is one, which is laid up in the garage and not in use for a period of 2
consecutive months or more and not left for repairs due to an accident.
Concession is provided for such vehicles provided the period of suspension should
not extend beyond 12 months from the original expiry date of the policy. The lay
up period will be counted from the date of surrender of Certificate of Insurance.
MOTOR TRADE POLICIES: Motor Trade policies are designed to extend the
facility of Insurance to Motor vehicle Manufacturer, dealer and repairer who deal
with Motor vehicles that remain in their custody as part of their trade. Trade
policies are given to those who are authorized to have own trade plates by
Registered Transport Authority. This policy takes care of damage to the vehicle,
bodily injury to Third Party and third party death. This insurance is unlike to the
normal motor insurance policy given to the registered owner of the vehicle.
TRANSIT RISK INSURANCE: This policy is issued to manufacturer or dealers.
This policy takes care of transport risk during the period of transit from one place
180
Underwriters and insured mutually agree to the scope of the contract and other
terms and conditions such as
A. Insured perils
B. Conditions to the contract to be observed by the insured and the insurer during
the currency of the policy.
C. The value for which insurance is done.
D. Period of the contract of Insurance.
E. Period of the contract of insurance
F. Procedure to be followed in case of material alterations.
G. Rate of premium compatible with the risk covered.
H. Right of the insurers
I. Duties of the insured
J. General exclusions (These exclusions cannot be deleted the breach of which
will render the contract void ab-initio)
K. Specific exceptions, which are outside the scope of the contract
L. Procedures to be followed in the event of claim
M. Termination of Contract.
INSURED PERILS
a)
b)
c)
d)
e)
f)
g)
h)
i)
Fire/Explosion/Self Ignition or Lightning

Burglary, housebreaking or theft
Riot and Strike
Malicious Act and terrorism
Earthquake (Fire and shock damage)
Flood
Accidental external means
Whilst in transit by rail/road/inland water way/Lift or elevator or air
and slide/Rock slide
The expression whilst thereon means like the accessories insured must have been
on the vehicle at the time of Insurance as well as at the time of claim.
Accidental external means the happening of something unexpected or unforeseen
and it excludes loss arising from natural causes within. The word external refers to
outwardly visible. It means that what is not internal
Example: Loss or damage to the car due to overheating is not covered.
181
Self-Ignition: It appears to include the damage or loss caused by the internal

defect of the care, which is the direct cause for fire.
The term malicious damage is intended to include loss arising to the malicious act
of a third party and not the act of he insured. If it results from the insured, the act
becomes willful.
Accessories
Accessories are those items, which are not necessary for running of the vehicle,
but which the vehicle is required to carry with it under motor vehicles Act. This
will depend upon the class of vehicle and its use.
Example: Rear view mirror, crash guard
Electrical/Electronic Items
Electrical/Electronic Items refers for insurance purpose items that are fitted to the
vehicle in addition to those that is provided by the manufacturer of the vehicle
including accessories.
With regard to the details of perils for different type of vehicles, the student may
refer to the annexure and comparative charts.
Cancellation of policy
A. At the option of the insurer 7 days notice by registered letter to the insured at his
last mentioned address. The insured is entitled to refund of premium for
unexpired period and the insurer retains the premium for expired period
proportionately.
B. At the option of the insured 7 days notice and the insured is entitled or refund of
premium on the number of days unexpired and the insurer will retain the premium
for the period in which the risk was in force more than proportionately on short
period basis provided no claim has been preferred by the insured.
No cancellation is allowed if the ownership of the vehicle is transferred to the new
owner unless the evidence of from policy for the vehicle is produced.
Transfer of policy in the event of the death of the Insured
The policy will lapse after 3 months from the date of death of the insured or until
the expiry of the policy whichever is earlier.
a. Otherwise, the legal heirs can get the policy transferred subject to their
application with
i. Death certificate of the insured and legal heir ship certificate
ii. Proof of title to the motor vehicle
iii. Copy of the policy
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c. Insurance company reserves its rights to abide by any order of the court, with
regard to declaration about the legal heirs and ownership of the vehicle and the
nominee will not have any right to the order of the court.
Transfer of Policy in case of change of Ownership
The policy benefits stand to accrue to the buyer of the vehicle once sale
consideration is paid and suitable endorsements made in the certificate or
registration provided the transfer of insurance from the original owner to the new
owner ought to be done within 15 days of sale, as per Motor Vehicle Act, if not
done the accidental benefit to the damage or loss of the vehicle is forfeited on the
16th day itself but the Act is generous towards third party liability.
Premium : The contract of insurance comes into force only when the consideration
is paid by the insured to insurer who promises to indemnify the insured in the event
of claim.
It is a precondition that premium ought to be collected prior to the commencement
of risk upon which the promise of the insurer rests. The insurers can turn down the
liability if consideration is not paid prior to the occurrence of loss. The
consideration so paid by the insured is known as premium. The insurance act is
very specific and emphatic the collection of premium in advance to the
commencement of insurance contract is an absolute necessity and any breach in
this regard will be termed as violation of act provision under section 64 VB, in
turn, the insurers can reject the claim if loss arises.
FACTORS THAT DETERMINE THE QUANTUM OF PREMIUM
The amount of premium to be paid by the insured is depending upon various
factors.
a. Value of the vehicle
b. Additional accessories
c. Extra fittings like electronic and non electronic item
d. Type of vehicle
e. Age of vehicle/model of vehicle
f. Zone where the vehicle is plying
g. Cubic capacity/seating capacity/gross vehicle weight
h. Perils covered
i. Combination of risks like comprehensive cover, third party and fire or theft or
fire and theft.
j. Past claims experience
The premium must be calculated in accordance with the premium computation
tables appearing in the tariff separately for different types of vehicles.
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Rate of premium is different for accidental damages to the insured's own vehicle
and liability risk to third party.
The insured cannot choose to pay premium only for accidental damages and he has
to necessarily take third party liability with accidental damage to vehicle; whereas,
the risk of third party liability can be separately taken and premium paid.
Premium payable on a policy is based on the value for which insurance is sought
and must be calculated in accordance with premium computation tables appearing
in the tariff.
ANNUAL PREMIUM : As motor policies are annual policies, the premium
consideration is collected for 365 days. It is not permissible to insure for more
than one year under motor insurance.
PRO RATA PREMIUM : Under some circumstances, depending on provisions
made available in the tariff, premium is charged in proportion to the number of
days for which the risk has been in fore. Such premium is known as Pro rata
Premium.
Situations under which short period premium is collected

i. When the policy is issued for a period less than 12 months
ii. When the policy is cancelled at the request of the insured.
PREMIUM REBATES : The insurer recognizes the merit of claim free clients and
the premium for renewal period is reduced by way of bonus. The bonus is
rewarded on premium for the value of the vehicle and not on premium for third
party liability.
Tables of no claim bonus are provided in the tariff for different category of
vehicles.
This discount goes with the insured and not with the vehicle i.e., if the vehicle is
sold, the new owner is not eligible for the no-claim bonus. However, the previous
owner can substitute the discount for any new vehicle, which he may purchase
during three years from the date of transfer. In case if the vehicle is sold to spouse
or children or parents, the discount passes on to such persons. Similarly, if a
vehicle is used or operated by an employee for an institution and the same is
transferred to him at a later date, he can avail and no claim discount.
For persons coming abroad, discount can be allowed provided he produces a letter
to that effect that he is eligible for the discount, within three years from the expiry
of the overseas policy.
In case of renewals, the no-claim discount can be granted to the insured only if he
renews his policy within 90 days.
Situations where pro rata premium is charged

i. Due to the change of ownership of the vehicle, the insurance gets transferred
to the new owner. This may happen during the currency of the policy period
and the new owner may like to have the extension of policy period so that he
gets an insurance policy for note more than complete 12 months. The insured
can get such extension of policy with a suitable premium for additional period
of insurance without letting the insured to have a revised policy for a period
more than 12 months.
ii. Some insured desire to revise their policy period to coincide with the financial
year or assessment year
iii. When the insured desires to enhance the value of vehicle during the currency
of the policy in order to cope with the market value.
iv. Any additional extra items like electronic or non electronic items
subsequently fitted in the vehicle can be added to the value of the vehicle
insured during the currency of the policy with suitable additional premium
v. Sometimes insured may desire to reopt the extraneous perils like earthquake,
flood, riot & strike during the currency of the policy which he had originally
opted out by enjoying reduced premium.
AUTOMOBILE ASSOCIATON MEMBERSHIP : If the insured is member of a

recognized automobile association, a discount of 5% shall be granted subject to a
maximum of Rs.50/- for Two-wheelers and Rs.100/- for Private cars.
SHORT PERIOD PREMIUM : There are occasions where the insured needs
insurance for a period less than 365 days. Such facility is allowed but the insured
has to pay the premium on short period basis. The premium for short period is
slightly higher than the regular premium-rating factor. It means policy for short
period is more expensive than normal annual policies.
VOLUNTARY EXCESS DISCOUNT : Some insured desire to avoid preferring

insurance claims to the extent, which can be borne by them within their financial
limits. This is called Insured bearing first portion of each and every claim arising
out of accident. The premium is reduced based on the quantum chosen by the
insured as per tariff.
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185
VEHICLES USED IN OWN PREMISES AND CONFINED SITES :A reduction

in premium is allowed if the vehicle is not licensed for road use and used in own
premises where public have no access to. Similar discount is allowed for goods
carrying vehicle, which need not be registered, and which are used in confined
sites where public has no access.
VEHICLES SPECIALLY DESIGNED FOR HANDICAPPED PERSONS : A
Discount in premium for vehicles, which are specially designed for and used, by
handicapped persons and institutions engaged exclusively in the service for
handicapped and mentally retarded, of course, as per the provision of the MV act.
Personal Accident Insurance : Insured choose to take personal accident policies for
the occupants of the vehicle including owner and driver. The additional premium
is being charged based on PA table selection. It can be given for unnamed
occupants too. Premium for Increased liability against third party property or
unlimited insurance for legal liability.
COMMENCEMENT OF RISK : The risk commences immediately on the
issuance of insurance policy. The details of policy and what it contains are given
as under.
Policy: Policy is a stamped document, which forms the evidence of contract of
Insurance. In the event of dispute, the terms and conditions embodied in the policy
are referred to in the court of law.
Policy issued by Insurance companies has the following sections:
The Preamble clause: This clause introduces the parties to the contract namely the
Insurer and the Insured.
The Recital clause: Recital clause expresses what is agreed between both parties
and narrates the period of Insurance and about the consideration.
The Operative clause: The operative clause speaks about the perils covered,
exclusions and General exceptions.
The Schedule: This clause talks about the subject matter of Insurance covered
along with terms and conditions applicable to the policy.
The Attestation clause: This specifies the duly constituted authority to issue
policies, namely the authorized signatory.
The above are the various sections that are common to Insurance Policies.
In line with the above, Motor Insurance policy deals with the following sections:
The parties to the contract namely the Insurer and the Insured.
The perils covered under the policy
Specific exclusions
General Exceptions
Conditions
The perils covered, exclusions, exceptions and conditions for different type of
vehicles of a Motor Insurance policy is shown below in the form of comparative
chart and the policy forms are available in the form of Annexure for ready
reference.
Termination of contract
A contract of insurance can be terminated on the following circumstances
a. At the option of the insurer
b. At the option of the insured
c. Double insurance
If it comes to the knowledge of the insurer or the insured finds that there are two co
existing policies for the same vehicle for the same period, the one which was taken
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first remains and the next policy gets cancelled and the premium is refunded by
retaining a nominal amount towards administrative and document expenses.
Retention of minimum premium is necessary in the event of cancellation to take
care of administrative expenses.
CONCESSION FOR VEHICLES LAID UP
If a vehicle is laid up in garage and is not put to use for a continuous period of more
than 2 months, the liability of the insurers under the liability risk section of the
policy is suspended for such period and a concession is given to the insured. The
concession is given in two forms and the insured can chose whichever he wants.
a. Prorate refund of premium for such period. This refund is granted in the form
of credit and not as cash i.e., such refund can be adjusted against the premium
for subsequent renewal.
b. The policy period can be extended after the expiry of the policy for a period
equal to the period of such lay up.
Under Accidental Damage section The cover is suspended for the period during
which the vehicle is laid up in garage and not in use and
a. Restricted cover for fire and/or theft is granted for the period of lay up and a
refund of premium on pro rata basis is made after charging a premium for the
restricted cover. Again the refund is on credit basis and not cash.
b. As an alternative, the insured can extend the policy period after the expiry of
the policy for a period equal to the period of lay up.
A notice in writing must be given to the insurers regarding the lay up and the
certificate of insurance must be surrendered.
Such lay up of vehicle must not be meant for repairing the vehicle.
The period of suspension of cover shall not extend beyond 12 months from the
expiry date of the policy.
FORMS OF LOSSES
Direct loss and/or damage to the Insured vehicle resulting from

accidental means caused by insured peril proximately.
Indirect loss and/or damage (Third party Liability) Indirect loss and/or
damage to the insured by legal liability.
1.
Direct Losses and or Damage: It refers to physical loss of the property i.e.
vehicle by way of theft or visible physical damage to the vehicle due to
accident.
2.
Indirect Loss and or Damage: As a result of accident, the owner of the vehicle
may be made legally liable to compensate the third parties for their death
and/or bodily injury and/or property damage. Such compensation is called
Liability arising out of use of vehicle in public place. It means the insurers
meet the legal liability payable by the insured to a third party due to accident.
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Third party means any person other than the Insured and the Insurer:
Liability means The amount of financial compensation legally payable by the
insured to the third party.
Public place means According to Section 2(24) of MV Act, it is a road, street, way
or other place, whether thoroughfare or not, to which the public have a right of
access and includes any place or stand at which passengers are picked up or set
down by a stage carriage
Example:
A. Motor car sustains damages by hitting against a compound wall of another
person and in the process resulted in the death of a pedestrian. Before arrival
of police on the scene, the stereo was also stolen.
In the above case:
a. Direct loss and/or damage :
(i) Damage to vehicle
(ii) Loss of stereo
b. Indirect loss and/or damage of Third Party liability :
(i) Death of the pedestrian
(ii) Damage to compound wall
From the past experience, a few instances of proximate causes are given as under
A. Damages to vehicle whilst attempting to save a cyclist or pedestrian
B. Damages resulting from bursting of tyres
C. Damages resulting from mechanical breakdown
D. Damages to vehicle due to skidding in the heavy rain
E. Small vehicles hit by over speeding heavy vehicles
F. Vehicles damaged whilst in the parking place
G. Accidents due to animals
H. Damages due to poor visibility due to fog and bad roads.
I. Overturning by hitting trees or parapet or road dividers and other stationery
objects
J. Accident to vehicles due to pits on sides of the road by public Authorities.
DUTIES OF THE INSURED
i. Duty of the assured to do his best to avert/avoid or minimize loss.
This duty arises from the duty of good faith he owes to the insurers and more
usually from the express conditions of the policy.
ii. If accident caused by fire or collision or any external means, he must take such
measures as are reasonable to extinguish fire or to prevent further loss by
removing the vehicle to nearby safer place.
iii. He is not to interfere with the efforts of other persons engaging in helping to
reduce or minimize loss.
iv. For that purpose he should take steps to remove the vehicle insured to a place
of safety unless he finds that all hope to save it useless.
If his failure to perform these duties is willful, it may be an evidence of fraud
disentitling him to recover anything on the policy.
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It has become an absolute necessity that the insured complies with the
conditions imposed by the insurer, which are embodied in the policy form.
The Duties of the Insured prior to the occurrence of loss
a. He should take reasonable steps to safeguard the vehicle from any loss or
damage and act as if uninsured
b. The Insured should maintain the vehicle in the most efficient and roadworthy
condition.
c. The company as at all times, shall be at liberty to inspect and examine the
vehicle or any part of the vehicle and also any driver or employee of the
insured.
After the occurrence of accident
a. It is the duty of the Insured to exercise care and concern in the event of
accident and also at the time of break down of the motor vehicle.
b. The Insured should exercise due diligence and precautions to ensure that the
damaged vehicle is immediately attended to so that the aggravation of further
loss and deterioration to the damaged vehicle is prevented and avoided.
c. Any aggravation of damages due to non-attendance, non repairing the
damaged vehicle or driving the vehicle without repairing the damages
amounts to failing from the duties of the insured. The insured is solely
responsible for such lapses and will be made to bear the loss or damage.
d. Notice of loss to be given immediately to the insurance company.
e. The insured should extend all the assistance and necessary information with
regard to the claim
f. All legal documents such as letters, writs or claims, summons received should
be immediately forwarded to the insurance company
g. Notice shall be given with regard to any prosecution, inquest or fatal inquiry
to the insurance company
h. Insured should lodge FIR with police authorities with regard to theft or
criminal acts, which may lead to claim.
i. Insured should also co-operate with the insurance company in securing the
conviction of the offender.
Legal Proceedings
a. In case there is any contributory negligence with regard to third party claims,
insured should not make any admission, offer or promise for payment of
indemnify to any third party without the consent of the insurance company.
b. If necessary, the insurance company will conduct the defense in settlement of
claim/legal proceedings/prosecution on behalf of the insured. The insured
should extend all assistance and co operation to the insurance company.
Settlement of the claim at the option of the insurer
a. Insurance has the option to either allow the insured to repair the damaged
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b.
c.
vehicle or reinstate the damaged parts or replace the motor vehicle or its
accessories. The payment may be made by cash.
The insurance company will pay for the loss or damages and also the
reasonable cost of fitting such damaged parts (labour charges)
Such payments shall not exceed the sum insured (which is estimated value of
the vehicle chosen by the insured at the time of taking policy or renewal
provided the market value of the vehicle including accessories is not less than
the estimated value of the Insured.
Application of principle of contribution due to Double Insurance in the event of

claim
In case of double insurance, the insurance company will only pay its ratable
proportion of the loss or damage or any compensation or cost or expenses.
In case the insured is having more than one policy for the same vehicle with
two different insurers each insurer will pay only in proportion to their Sum
Insured.
Reference to Arbitration in respect of Dispute admissible claims with regard to
quantum difference
In case of dispute regarding quantum of loss or damage where the insurers
admit liability, such disputes shall be referred to Arbitration. Arbitration
proceedings are discussed in details in the next chapter.
Time Limit for filing Suit in the Court of Law
If the Insured fails to prefer any claim within twelve calendar months from
rejection of liability in the Court of Law, the insured loses the rights of
remedy.
Observance and fulfillment of terms and conditions of the terms and conditions of
the policy
a. Since the policy terms and conditions are given in the policy based on the true
information and details given by the insured to the best of their knowledge the
insured is bound to comply with the same; and such compliance shall be the
condition precedent to any admissible liability under the policy. The contract
of insurance of insurance is subject to implied and express conditions, which
expects the insured to observe the conditions precedent and conditions
subsequent.
Common Exclusions that are applicable to all types of vehicle in the event of claim
a. Geographical Area: If the vehicle sustains damages or the vehicle is lost and
if any liability is incurred, that should have been only due to an accident that
takes place within India.
b. Contractual liability is excluded
c. No insurance claim is payable if
i. The insured violates the condition of limitations as to use
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d.
e.
f.
g.
h.
ii. If the vehicle is driven by any person other than the driver whose name if
any is specified in the policy
The insurers will pay only for the resultant damages or less in consequent to
the accident and not for consequential loss that may arise due to the non usage
of the vehicle, like
i. Rent for alternate care
ii. Loss of earning whilst the vehicle is in the garage for accidental repairs.
No liability arising directly and indirectly or contributed by ionizing
radiations, or contamination by radioactivity from any nuclear fuel or nuclear
waste from the combustion of nuclear fuel.
Damage caused by nuclear weapons material is not admissible
No claim due to war, warlike operations
The act of terrorism is excluded.
Role of a Surveyor
Surveyors are being authorized and placed in different categories depending on
their professional qualifications and their special competence gained by
experience. Once they are empanelled, their services are being utilized by
insurance companies operating in India in different fields of working. They play a
very vital role in the insurance field not only prior to the acceptance of risk but also
after the occurrence of loss. Insurance companies are utilizing the services of
surveyors for pre inspection of major risks and on the assessment of insurance
liabilities. The remuneration depends on the quantum of assessed admissible
liabilities of insurers.
Any Association or group or a firm or an individual can become surveyors
provided they have competence in the field like Chemical Engineering,
Automobile Engineering and Chartered Accountancy etc.
What is expected of surveyors?
1. They should develop their product knowledge or insurance based on their
specialization and keep on updating the changes.
2. They should be highly competent in handling the assignments given by
insurers and be helpful both to their insurer and the insured.
3. They should be neutral, unbiased and free from prejudice in their approach
towards the customers while handling the claims
4. Their attitude should be polite and the decision should be firm in respect of the
assessments and should avoid the style of rudeness towards the customers.
5. He should exercise due diligence, care while assessing the Quantum of
liability and in the process the concern towards the interest of the policy
holders should not be lost.
6. THE DUTIES OF THE SURVEYOR SHOULD BE DISCHARGED
SCRUPLOUSLY and the honesty and integrity should be maintained at the
highest degree.
7. THE SURVEYOR SHOULD REMEMBER THAT HE IS INDEPENDENT
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and his role is indispensable to ensure that the promises of both parties are
fulfilled.
FUNCTIONS OF SURVEYORS IN MOTOR INSURANCE
1. The job of the surveyor begins as soon as the allotment of survey is done by
Insurance companies. He should collect the necessary work allotment for
each job along with claim papers such as claim intimation letter of the insured,
Estimate of the repairers submitted by the insured and relevant policy copy.
2. The surveyors should immediately reach the spot of accident and advise the
insured to remove the damaged vehicle to the safe place or reputed repairers
workshop.
3. He should assist the insured, if necessary to lodge the FIR and produce the
vehicle to the RTO authorities.
4. He should take necessary photographs of the damaged vehicle
5. He should ascertain the actual cause of accident and the extent to which parts
are damaged.
6. His primary duty is to estimate on his own the likely expenditure towards the
cost of Labour (Removing the dent, painting etc.) and cost of parts to be
replaced, if required.
7. The surveyor should negotiate with the repairers and accurately decide the
quantum of liability without letting the repairers to manipulate the cost of
repairs by inflating the bills and also estimating the parts for replacement,
which are repairable at a minimum cost.
8. The surveyors should justify that the cause of the loss is due to insured peril
and the extent of damage is in conformity with the nature of accident that took
place.
9. The Surveyor should conduct the survey at the repairers' workshop
immediately and permit the repairers to dismantle the vehicle in the presence
very carefully to find out the external and internal damages, if any.
10. There should not be any communication gap between the surveyor and the
repairer as well as surveyor and the insurer.
11. The surveyor should keep the insurers informed about the developments of
the claim periodically and keep the insured posted about what he has
discussed with the repairers with regard the accidental repair works to be
carried out.
12. He may have to verify the bills of the parts to ensure the avoidance of inflated
bills by the repairers.
13. The surveyor should finalize his report with regard to the admissible liability
in respect of cost of repairs, Labour charges, replacement of parts and the
value of salvage. He should ensure that the report is concluded after re
inspecting the repaired vehicle so as to confirm that the repairers have actually
carried out replacement of new parts and other repair works as agreed by
repairers.
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14. The report should be submitted with his due recommendations confirming the
genuineness of the claim, the authenticity of proximate cause (cause of loss),
and verification of vehicular records.
15. His report should be submitted at the earliest so that the insured does not suffer
under any circumstances for want of financial assistance.
DUTIES OF THE INSURER
Verification and Recording of claim: It is the foremost duty of the insurer
immediately when a claim is reported to verify
a. Whether the vehicle is insured or not
b. Whether the premium is paid in advance before date and time of accident
Whether the policy is in force or not
c. This is to ensure that the loss falls within the policy period.
d. Whether the loss and/or damage is caused by an Internal Peril as described in
the policy.
Once he is satisfied on the above aspects, the insurer will proceed to register the
claim and issue a claim form to be insured.
Appointment of Surveyor
On obtaining the completed claim form from the insured along with the Estimate
of repairs the insurer appoints the surveyor to assess the nature, cause and extent
of loss and/or damage. The surveyor is appointed based on competence, expertise
and experience in the field in which he is to undertake the survey preferably an
Automobile Engineer.
Collection of Documents
The insurer then collects vehicular records depending upon the type of vehicle lost
and/or damaged due to an accident. It is mandatory on the part of the insurers to
fill the Supplementary to the claim form statement the particulars extracted after
verifying the original vehicular records such as Registration Certificate, Driving
License, Permit, Trip sheet etc. depending upon the type of vehicle for which claim
is lodged. He collects reports from external agencies such First Information
Report and Fire Brigade Report depending upon the circumstances of the accident
and/or loss
Liaison
The insurer should liaison with the insured informing him to cooperate with the
surveyor to submit the documents required by the surveyor in order to release his
survey report and at the same time keep in touch with the surveyor to submit his
report after satisfying himself with all aspects of the claim. The position of the
claim their requirements and developments are clearly communicated to both the
insured and the surveyor.
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Compliance
The insurer will ensure that the insured has complied with all the conditions under
the policy and fulfilled his duties prudently as if he is uninsured.
Valuation
The insurer obtains the survey report and evaluates his liability taking into account
the survey report and bills submitted by the insured. He will see all aspects of the
claim with regard to depreciation applied by the surveyor, excess and more
importantly the Salvage value of the damaged parts/vehicle. After fully satisfying
himself about the genuiness reasonableness and compliance with terms and
conditions of the policy the claim is processed and recommended for settlement.
Updating of Records
Once the claim is approved for payment by the competent authority, the claim is
settled and proper entries are made in appropriate registers.
Methods of claim settlement
Types of losses
a. Partial loss
b. Total loss
Partial loss
i. Accidental damage to the vehicle
ii. Theft/loss of accessories or parts of the vehicle
iii. Additional expenses like towing and spot repairs.
When vehicle sustains damages in an accident and the insured incurs the
expenditure in order to repair the damaged parts of the vehicle in addition to the
towing charges to the repairer shop which is less than the insured value of the
vehicle under the policy, the loss or damages fall under the partial loss.
Example: Cost of repairs
a. cost of parts replaced
b. Labour charges towards painting and replacing the damaged parts
c. Cost of removal from the Accident spot to the repairers workshop
Total Loss
There is a total loss when the insured vehicle is stolen by somebody or the vehicle
is so damaged that it cannot be repaired without incurring expenditure more than
the sum insured or the vehicle is so damaged that the damaged value of the vehicle
be as of no value, such losses fall under Total loss.
The insurance company practices different modes of claims settlement depending
upon the nature of claim, extent of repairs and the market value of the vehicle on
the date of accident.
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MODES OF SETTLEMENT
a. Repair basis
b. Total loss basis
c. Cash loss/salvage less loss basis
A. Repair basis
The surveyor ascertains the total internal and external physical damages to the
vehicle and identifies the nature of damages, cause of accident and then
determines the extent of damages.
Once the surveyor is satisfied with the geniuness of the claim taking into
account the cause of accident, the perils insured, he arrives at the cost of
repairs, cost of replacement of parts and the salvage value. He then discusses
and negotiates with the repairer to arrive at a consensus and authorizes the
repairers to carry out the repair work relevant to the accident.
Under this repair basis, the insured should bear a portion of the repair cost for
depreciation which is based on the age of the vehicle finding place in the
policy. The surveyor suggests the settlement of claim on repair basis only
when he is satisfied that the quantum involved in economical in comparison
with that of market value and sum insured whichever is less.
The insured is required to submit the relevant bills for cost of labour, the cost
of parts and the cost of removal from the spot of accident to the repairer's
workshop. On submission of bills and surrendering of salvages to the insurer
the claim will be processed and settled.
The settlement of claim under repair basis fall under partial loss as the repair
liability of the insurer less than the value insured.
Total loss basis
Under many circumstances, the insurance company may opt to make over the
damaged vehicle if the claim on repair liability found to be on the higher side,
uneconomical as compared to the market value under this basis.
The insurer may have to incur additional expenditure like garage charges; cost
of disposal in the form of advertisement, auction charges and/or sales charges
and total insured value may be paid, if it is less than the market value just prior
to the loss.
In case the vehicle is lost by theft, the market value of similar vehicle, same
type and model or sum insured, whichever is less.
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Cash loss or salvage less loss basis

This is a kind of settlement when the insured chooses to retain the damaged
vehicle and insists for immediate payment based on the cost of repairs. The
insurance company ascertains the resale value of the damaged vehicle (on as
in where in condition) and pays the difference between the market value of
similar undamaged vehicle as on date of accident and the market value of the
damaged vehicle. Such repair cost is restricted to 75% of the admissible
claim on repair basis in respect of cash loss basis.
The insurance company chooses one of the above three modes of settlement
which ever is more economical
Example
Maruti Esteem model 2002 met with an accident
Sum insured of the vehicle is
The market value on the date of accident is
Rs.
Rs.
5, 00,000/4, 50,000/-
Rs.
Rs.
Rs.
Rs.
4, 00,000/50,000/375,000/25,000/-
The cost of repairs

a. Cost of labour is b. Replacement of parts
Less salvage:
The resale value of the damage vehicle is

Rs.
SETTLEMENT OF CLAIM ON REPAIR BASIS
1. Repair basis:
2. Total loss basis:
Market value
Less
Resale value of the
Damaged vehicle
AddAdvertisement expenses
Add
Garage expenses
Net Liability
3. Cash Loss basis
Market value
Less:
Resale value of
The damaged vehicle
Net Liability
2, 00,000/-
the damaged vehicle for disposal, the resale value of the damaged vehicle may not
be the same as on date of damage to that of resale value on the date of settlement,
because the damaged vehicle may further deteriorate in kind and value.
It is noteworthy to mention that there is a special clause known as Excess clause,
it means that the amount that will be specified in the policy and any claim in excess
of that amount will be the liability of the insurers, which may be voluntarily chosen
by the insured or imposed by the insurers compulsorily. In respected of the above
referred claim, if the excess is Rs. 10,000/- net liability will be reduced to the
extent as though Rs. 10,000/- is the insured's first bearing portion.
VEHICULAR RECORDS
Requirements of documents in the event of claim
Two Wheeler (motor cycle/scooter/mopeds)/private cars
Registration certificate: It is a certificate issued by the computer authority
confirming ownership of the vehicle in whose name the vehicle stands registered.
The ownership of the vehicle lies with the person whose name has been mentioned
in the RC book. The vehicle should bear the registration number in both front and
back and the Regional Transport Authority is the competent body to issue the
Registration certificate. The Registration certificate will carry in it the name of the
Registered owner and vehicle particulars such as Registration Number, Engine
Number, Chassis Number, Make, Model, Color of the vehicle, Cubic Capacity,
carrying capacity etc. Any financial interest in the form of Hire purchase or
Hypothecation will be included in the R C book.
Driving license: Driving License means License issued by the Competent
Authority namely Regional Transport Authority authorizing the person specified
therein otherwise than as a learner to drive a specified class of motor vehicle. The
Drivers License contain particulars such as Name of the Driver and his address,
age, validity period of license and the class of vehicle he is entitled to drive.
Rs.
Rs.
3, 75,000/4, 50,000/-
Rs.
Rs.
Rs.
Rs.
2, 00,000/5, 000/10,000/2, 65,000/-
A Driver should hold a valid Driving License at the time of accident. A valid
license means Any person holding a permanent Driving License Other than
Learners License) in force and is not disqualified from holding such license.
Rs.
4, 50,000/-
Driving License is required in all claims involved in accident except for the
following circumstances,
Rs.
Rs.
2, 00,000/2, 50,000/-
1.
2.
For parked vehicles

Theft or Burglary of the vehicle
Cash loss settlement is more essential than the other two modes of settlement
which is Rs.3, 75,000/- and Rs. 2, 65,000/-. Whereas under cash loss settlement
the amount is Rs. 2,50,000/- which is almost less than 75% of the repair liability
(i.e. 75% of 3,75,000/- = Rs. 2,81,250/-)
In case if the insurance company settles the claim on total loss basis and takes over
Taxation book: It is mandatory for all vehicles plying on the public place to pay
the prescribed Road tax to State Government. The Road tax can be paid on
quarterly, half years or Annual of life time which is entered in the RC book of the
respective motor vehicle. A claim is admissible only if Road tax is paid in full as
on the date of accident. Certificate of Insurance in force is a must for RTO
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197
authorities to accept tax. In case of stolen vehicle the payment of road tax may be
waived.
Documents required in the event of claim for Commercial vehicles
1.
2.
3.
4.
5.
6.
7.
8.
Registration Certificate
Driving license
Taxation book
Fitness certificate
Permit
Trip sheet
Weigh slip/load challan
First information report (FIR)
involved in the accident, witness and also whether the accident was reported to
Police.
The details required in the claim form are vital in deciding whether there is liability
for the insurers and hence it has to be filled in, clear legible and descriptive manner
to the extent possible
Estimate: The insured should provide a detailed quotation as to the number of
parts to be replaced or repaired, along with the cost and Labour charges from the
repairer to whom the vehicle is to be entrusted for repair. This forms the basis for
arranging survey.
Documents required for theft claim
1.
First Information Report: First Information Report is report given by the

Police Authorities based on the statement given by the Insured or his
representative immediately after the occurrence of the theft. The case is
registered in CR Diary under Indian Penal code and the report given is the FIR
which is one of the proofs of the occurrence of the theft.
2.
Non-Traceable Certificate: When the vehicle is not traced after a reasonable

period of reporting the theft, the Police Authorities issue Non-Traceable
certificate in their prescribed format stating that the vehicle is undetectable.
3.
Final Investigation Report : The police authorities will finally prepare a

Final Investigation Report stating that the vehicle is un-detectable obtaining a
certified copy of the order passed by the Court accepting the report. The
Insured should produce a copy of the Final Investigation Report to the insurer
during the settlement of the claim.
Letter of Subrogation: The insurer established his right by getting the rights
of the insured transferred to him by executing a bond in non-judicial stamp
paper called Letter of Subrogation. The letter has to be executed by the
insured immediately on acceptance of liability by the insurer. This Letter of
Subrogation is normally executed for theft claims after payment of the claim
to the Insured where the Insurer has right over the vehicle stolen when
recovered at a later date.
Fitness certificate: Fitness certificate is a certificate issued by Regional Transport

Authority confirming that the Vehicle is in Road worthy condition to ply on the
public place.
CFX form cancellation of fitness:
When a commercial vehicle meets with an accident, the Motor Vehicle Inspector
inspects the vehicle on the spot and issues a CFX (Cancellation of Fitness) report
which means the fitness of the vehicle is suspended temporarily till the repairs to
the vehicle is carried out by the owner of the vehicle. Once the vehicle is repaired
the vehicle is to be shown to the RTO Authorities and Fitness Certificate will be
revalidated.
Permit: Permit is a document issued by a Competent Authority specifying the
boundaries or limits upto which the vehicle is authorized to ply in a public place
and also the nature of goods it can carry. The permit contains details such as Name
and address of the holder of the permit, Area of operation, goods permitted to be
carried, and validity period of permit.
Example : The area of operation can be limited by the type of permit whether
National permit or State permit, public carrier permit or private carrier permit, or
stage carrier permit or contact carriage etc.
Separate permit is issued for vehicle carrying inflammable materials.
Trip sheet: It is a document to be prepared for every trip undertaken by the vehicle
whether it is Goods Carrying or Passenger Carrying Vehicle.
It is a Log book stating the particulars of goods carried or passengers travelled
according to the type of vehicle. Trip sheet has to be closed on daily basis and also
on trip to trip basis.
Claim form: Claim form is issued by the insurer to the Insured immediately when
a claim is reported. Issuance of claim form does not mean acceptance of Liability.
The claim form should be duly filled in by the insured in all respects. The claim
form contains details such as Insured particulars, vehicle particulars, Details of the
driver', Place, time, cause, nature and extent of damages, Details of third parties
ARBITRATION : Arbitration shall be conducted under and in accordance with

the provision of the Amended Arbitration Conciliation Act, 1996.
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199
4.
Though for accidental damage claims the insurer has a Subrogation Right to sue
and get reimbursement from the negligent party it is not enforced due to the
presence of Knock for Knock Agreement.
Original Vehicular documents along with all the keys pertaining to the vehicle
have to be surrendered.
Only when a claim is admitted : In case any dispute or difference of opinion

between the insured and the insurers as to the quantum of claim to be paid under
the policy, the matter can be referred to Arbitration. Such facility is available only
in case of admissible liability.
Rejected claim cannot be referred to Arbitration :In case insurance company has
disputed or not admitted the liability in respect of any policy issued due to
technical reasons, the matter of dispute shall not be referable to arbitration.
Arbitration Proceedings :The difference as to the quantum of admissible claim
shall be referred to the sole arbitrator who will be appointed in writing by both the
parties.
If they cannot agree upon a single arbitrator within 30 days, any party invoking
arbitration, the matter will be referred to a panel of three arbitrators comprising of
two arbitrators, one appointed by each party to the dispute or difference.
The third arbitrator has to be appointed by such two arbitrators and arbitration
shall be conducted under the Act.
Award by Arbitrators : The right of action or suit upon the Insurance policy can be
taken only when the award by such arbitrators with regard to the quantum of loss or
damage is obtained, it means it is a condition precedent that the award should be
obtained first and then only right of action or suit upon the Insurance policy shall
lie.
IN CASE OF REPUDIATED CLAIM :When a suit in the court of law is not filed
within twelve calendar months from date of insurance company disclaiming the
liability to the insured, It is considered for all purposes that the claim is deemed to
have been abandoned or given up by the Insured, In which case no amount is
recoverable by the insured from the Insurance company there after.
RELEVANCE OF MATERIAL FACTS IN THE EVENT OF CLAIMS :It has
become an absolute necessity that the insured declare all information that is
needed by the insurer in the proposal form and that only influence the admissibility
of claim.
We have already seen the relevance of material facts. It is open to the Insurance
Company to allege and prove that the policy give rise to a claim which was
obtained by non-disclosure of relevant material facts or by representation of a fact
which was false in some material and contract of Insurance becomes consequently
void ab-initio.
The policy was obtained by fraud; the policy becomes void from the inception. A
plea under this clause cannot be disallowed on the ground that in spite of the
alleged misrepresentation, the policy was not cancelled by the insurers.
The following are considered to be material facts which warrant special attention:
200
Avoid the misstatement of age of the vehicle
Warranty that the vehicle would be driven by a person who has been
convicted of motoring offences.
Previous refusals of other insurers to insure the vehicle
Allegation that the policy was obtained after the accident in collusion
with other persons.
KNOCK FOR KNOCK AGREEMENT : The Knock-for Knock agreement is in
agreement entered into among the Insurers writing motor insurance. The
agreement provides that in the event of damages caused by collision or attempt to
avoid collision between two vehicles, the Insurer of each vehicle will bear his own
loss within the limits of his policy, irrespective of legal liability and will not
enforce his subrogation rights, if any against the other insurer.
Points for Mental revision
Accident Legal liability to third parties
Third party claims
KNOCK FOR KNOCK AGREEMENT
We have seen how Tort gives rise to Liability towards Third parties.
Tort modified in India in the form of
Workmen's Compensation Act: According to the Act, if any Employee

dies or is injured during the Course of Employment, the Employer is
liable to pay compensation.
Employees liability Act
Fatal Accidents Act
Motor Vehicles Act

What is Third party liability?
The insured becomes legally liable to any third party for bodily injured or death
that has arisen due to the use of his motor vehicle in the public place. What is that,
that can be claimed from the Insurance Company is the financial liability payable
to a third person other than the insured and the Insurer.
MACT : Third Party claims are usually adjudicated by the Motor Accident Claims
Tribunal (MACT). The MACT is a statutory body set up under SECTION 110 of
the Motor vehicles Act, The claimant has to move the Tribunal within a period of 6
months from the accident. Summons received from the Tribunal should be
accepted and defense has to be entered on time.
It is not necessary that the Third Party claim should be settled only after the MACT
gives its award. A compromise may be a solution for settlement. As a matter of
fact, many claims of litigation expenses of the Insured.
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To defend a claim in MACT or to negotiate a claim for a compromise settlement

we have to collect a large number of facts. In getting information in the actual
negotiation the Investigator can play a very useful role as a part of his duties.
MACT Tribunals are not conferred any extraordinary power than what is vested
with the courts under law of torts. The job of the MACT is only to expedite speedy
settlement of third party claims. Of course, the settlement of claim under MACT
is subject to the terms and conditions of the Insurance contract and M.V. Act
Provisions.
LOK ADALAT: Lok means People and Adalat means Court. So Lok Adalat
is formed for quick justice and speedy disposal of claims for Road accident victims
whose cases are pending in MACT and other property and civil suit.
With relevance to Motor Insurance Lok adalat plays a significant role in dealing
with cases pertaining victims of road accidents before Motor Accidents Claims
tribunal.
Cases are taken up at Lok Adalat only if at least one hearings is over in MACT are
Court. The Insurance Company before taking up the cases before LOK ADALAT
will ensure negligence of the Motorist is evident and all documents in support of
the claim are in order because the claim placed before the Lok Adalat cannot be
withdrawn.
The decision of the Lok Adalat does no have a legal binding on both the parties and
need not be accepted by either of the parties. But in principle it is accepted as
effective system to negotiate and arrive at a Amicable settlement acceptable to
both the parties.
Once the settlement is effected it is binding on both the parties and is generally
acceptable by the Tribunal. Thus Lok Adalat has helped in clearing a lot of cases
pending before MACT thereby helping the petitioner in getting a reasonable
compensation and also helps Insurance Company to uphold their image as a
provider of social security.
LIABILITY TO THIRD PARTIES
1. The Liability should arise, due to an accident caused by the use of Insured
vehicle anywhere in India.
2. The Insurance company will indemnify the Insured for all sums including
claimants cost and expenses for which the Insured should become legally
liable to pay
a. In respect of death of a person or bodily injury to any person and
b. Damage to any property of only third party
3. When the Insured incurs any cost and expenses with the consent of the
Insurers the same will be paid by them.
4. The Insurance Company will indemnify any liability that may arise due to the
driver, provided the driver observes and fulfils the terms and condition of the
policy and also the exception as though he is uninsured.
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5.
The company may at its option.

a. Arrange for representation any inquest or take inquiry in respect of any
death for which the insurance company will indemnify the insured.
b. Insurance company will take any proceeding to any court of law for any
alleged offence relating to any event that falls under the subject of
indemnity under the policy.
Types of Compensation
1. General Damages
2. Special Damages
General Damages:
General Damages are damages awarded by the court of Tribunal for pain, suffering
reduced earning capacity, inconvenience and loss of life.
The General damages will depend upon the state of injury, the Medical
examination, the X-ray test Medical evidence, pain in leg, leg gets swollen when
the injured walks, unable to do heavy work, slight deformity in the legs for the
whole life.
SPECIAL DAMAGES : Special Damages is awarded to the Insured who is
hospitalized and medical expenses that are incurred and for financial loss of
income because of absence of someone to replace the injured to carry on business
or loss of income due to absence from duty this kind of damages will not prevent
much difficulty in assessing damages. Remaining without salary amount to
special damages, Loss of maintenance expenses if injured, earning at the time of
accident will also fall under the head special damages.
In the case of death:
In order to ascertain the quantum of damages in case of death the following criteria
should be considered by the Tribunal
a. Age and the health of the deceased when the accident was caused
b. The status of the deceased, his earning capacity and his contribution to the
family
c. The loss caused to the family by his death
d. The damage he suffers from pain and suffering and duration of the same of the
same,
e. Whether he died immediately or after the expiry of some days
f. Loss of expectancy of life
COMPONENTS OF AN AWARD
1. The award contains the just compensation made by the tribunal
2. Specifies the person to whom the compensation to be paid
3. It specifies the amount, which shall be paid by the driver of the vehicle or
owner, insurer, involved in the accident or by all or any of them as the case
may be.
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OMBUDSMAN
The hardships and expensive legal recourse available to individuals in the event of
delay in or dispute of quantum of settlement of a claim prompted IRDA to establish
an Independent Arbitrator known as OMBUDSMAN
Ombudsman was established in November 1999 by IRDA to arbitrate insurance
related disputes for quick, low cost and prompt settlement of claims at the cost of
Insurance companies. Earlier to this the only options available to people were to
go to the Consumer Forum or Civil Court to settle their differences. The
Ombudsman now has representation in 12 different notified jurisdictions
throughout the country.
Here the process is very simple. Any Insurance related complaint can be filed in
the notified jurisdiction. Ombudsman entertain complaints only on individual life
or non life policies, as long it is non commercial in nature up to an extent of Rs. 20
lacs. As an arbitrator, the Ombudsman has to take unbiased and independent
decision to ensure that the common man receives fair and just compensation from
the insurance company.
How to file a compliant with Ombudsman:
1. A letter in writing stating the facts of the case along with documentary proof.
2. Complaint to Ombudsman should be filed within 1 year from the date of
repudiation of claim by the insurer
3. Ombudsman will not interfere if the insured has already approached the
consumer forum or filed suit in Court of Law
4. Complaint should be filed with in the jurisdiction of the insured.
Role of Ombudsman:
1. On receiving the complaint, if Ombudsman finds a prima facie case, response
is sought from the insurer within 14 days.
2. If on receiving the petitioner's claim, the circumstances of the case,
documentary evidence and cross examination reveal that the claim of the
petitioner is fraudulent in nature, the claim is immediately dismissed.
3. Settlement is done in 3 ways.
a. Settlement on reference
b. Settlement following mediation
c. Settlement through mediation and award
If company has credible alternative arbitration mechanism the IRDA can exempt
the insurance companies from the authority of Ombudsman, so far no insurance
has sought for such exemption.
Motor Third Party Insurance Pools
Public sector general insurance companies arbitrarily loading premium for
commercial vehicle act Insurance due to heavy incurred loss ratio
Even most of the companies denied the act insurance for commercial
vehicle.
Private insurance companies showed total avoidance towards

underwriting commercial vehicles act only policies.
The federation of transport operators represented the matter to IRDA to

intervene and regulate the pricing structure. Also, to issue direction to
companies not to deny act only policies.
Therefore IRDA has come out with an idea of Third Party Insurance
Premium pool.
Whereby all TP Premium of Commercial Vehicle (Both Act and Package

policies) pooled together and the management of pool vested with
General Insurance Corporation
GIC after retaining its statuary cession of 20% cedes the balance to all the
companies in the ratio of their gross direct premium.
Claims also shared on the same pattern.
The underwriting offices also get 10% procurement cost.
This pool arrangement encouraged all the companies including public

and private sector to accept commercial vehicles act only policies.
After acceptance a copy is sent to both the parties. The parties must confirm
acceptance within 15 days. The Ombudsman directs the insurer to settle the claim
within 15 days. If the directive is not accepted by the insurer, Ombudsmen can
declare an award.
Indian Motor Third Party Insurance Pool [IMTPIP] which came into effect from
01.04.2007
GIC (Re) is the Pool Administrator
All registered General Insurance Companies in India dealing in Motor

will be members of the pool.
They shall collectively, mandatory and automatically participate in

pooling arrangement.
All operating offices of the pool members will underwrite pool business
and they receive 10% reinsurance commission on premium booked.
The pool U/w liability policy only & liability portion of package policy
of all commercial vehicle segment. Business u/w by members w.e.f.
01.04.2007.
Pooling mechanism is multi lateral reinsurance mechanism between u/w

insurer and all registered General Insurance Companies.
20% ceded to GIC-Re as statutory session
Balance 80% shall be shared by all members in the same proportion of
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205
Settlement through mediation, when the insurer contests the complainant's claim
Ombudsman investigate the complaint and gives suitable guidelines for
settlement within a month
TGDP bears to Total Market GDP in respect of all classes of business for
that financial year.
Underwriting business and claims settlement will be as per General

Insurance Council directives.
All Insurers as leaders meet claims and other expenses, make

provisioning for claims, share the same with Co-insurers in pre agreed
ratio.
Conciliation process in Motor TP Claims
Identify cases suitable
Admissions of liability sec 64 VB/DL/Permit/FIR/Investigation

confirming accident/ Income/ Dependency / Factor PM Report
Medical Certificate for disability
Age Proof
Advocate's recommendation
Moving court for conciliation
Offer to the claimant
Jaldh Rawat only in injury cases

Underwriting considerations for u/w passenger carrying commercial vehicles
Model
Carrying capacity
Permit route
Fleet
Past claim experience
Terrain(Geographical area) where plying
Age/ experience of drivers/ conductors
Private/ Public
Road worthiness of vehicle/ Inspection
PA for passengers
Other Insurance from the same insured
Voluntary excess
Own workshops/ access to quality workshops
Member of association/ safety equipments.
Owner & driver same.
Motor Bullet Questions

1.
Discuss Motor Third Party Insurance Pools.
Public sector general insurance companies arbitrarily loading premium

206
2.
for commercial vehicle act Insurance due to heavy incurred loss ratio
Even most of the companies denied the act insurance for commercial
vehicle.
Private insurance companies showed total avoidance towards

underwriting commercial vehicles act only policies.
The federation of transport operators represented the matter to IRDA to

intervene and regulate the pricing structure. Also, to issue direction to
companies not to deny act only policies.
Therefore IRDA has come out with an idea of Third Party Insurance
Premium pool.
Whereby all TP Premium of Commercial Vehicle (Both Act and Package

policies) pooled together and the management of pool vested with
General Insurance Corporation
GIC after retaining its statuary cession of 20% cedes the balance to all the
companies in the ratio of their gross direct premium.
Claims also shared on the same pattern.
The underwriting offices also get 10% procurement cost.
This pool arrangement encouraged all the companies including public

and private sector to accept commercial vehicles act only policies.
Describe briefly Indian Motor Third Party Insurance Pool [IMTPIP] which
came into effect from 01.04.2007.
GIC (Re) is the Pool Administrator
All registered General Insurance Companies in India dealing in Motor

will be members of the pool.
They shall collectively, mandatory and automatically participate in

pooling arrangement.
All operating offices of the pool members will underwrite pool business
and they receive 10% reinsurance commission on premium booked.
The pool U/w liability policy only & liability portion of package policy
of all commercial vehicle segment. Business u/w by members w.e.f.
01.04.2007.
Pooling mechanism is multi lateral reinsurance mechanism between u/w

insurer and all registered General Insurance Companies.
20% ceded to GIC-Re as statutory session
Balance 80% shall be shared by all members in the same proportion of

TGDP bears to Total Market GDP in respect of all classes of business for
that financial year.
Underwriting business and claims settlement will be as per General

Insurance Council directives.
All Insurers as leaders meet claims and other expenses, make

provisioning for claims, share the same with Co-insurers in pre agreed
207
ratio.
3.
4.
Describe the conciliation process in Motor TP Claims.
Identify cases suitable
Admissions of liability sec 64 VB/DL/Permit/FIR/Investigation

confirming accident/ Income/ Dependency / Factor PM Report
Medical Certificate for disability
Age Proof
Advocate's recommendation
Moving court for conciliation
Offer to the claimant
Jaldh Rawat only in injury cases

What are the underwriting considerations for u/w passenger carrying
commercial vehicles?
Model
Carrying capacity
Permit route
Fleet
Terrain(Geographical area) where plying
Age/ experience of drivers/ conductors
Private/ Public
Road worthiness of vehicle/ Inspection
PA for passengers
Other Insurance from the same insured
Voluntary excess
Own workshops/ access to quality workshops
Member of association/ safety equipments.
Owner & driver same.
2.
TP pool is formed to share the profit or loss of Motor TP business of all general
Insurers in the following classes of business.
a. Motor TP Claims and premium of Private Cars.
b. Motor TP Claims and premium of 2 wheelers.
c. Motor TP Claims and premium of Commercial Vehicles.
d. Motor TP Claims and Premium of All Class Motor Business.
3.
In Motor TP claims even if we did not take place under sec 170 of Motor
Vehicle act in lower courts, we can go on appeal on quantum.
a. True
b. False
c. Joint appeal with insured
d. We can appeal directly to Supreme Court.
4.
The risk of overturning as a tool trade is covered in respect of a dumpers under

a. A standard commercial Goods carrying vehicle B policy.
b. A standard miscellaneous type of vehicles B policy.
c. A standard miscellaneous type of vehicles A policy at an additional
premium.
d. None of the above.
5.
The concept of No fault liability as envisaged in MV Act 1939 is reflected in

a. Section 163 of MV Act
b. Section 149 of MV Act
c. Section 140 of MV Act
6.
Constitution of Motor Vehicle Claims tribunal falls in the jurisdiction of

a. Central Government
b. State Government
c. Supreme Court
d. District Courts
7.
Compensation payable in case of death under the relevant section of 'No Fault
Liability' is
a. Rs. 25,000
b. Rs. 12,500
c. Rs. 30,000
d. None of the above
8.
Solatium Fund established under M.V. Act 1939, deals with

a. Accident cases
b. Death cases
QUESTIONS
1.
Under the Motor Vehicles Act, a public place is

a. A place owned by a public limited company.
b. A place where public meetings are held.
c. A place where any member of public has a general right of access.
d. A place where the public grievances are heard.
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209
c.
d.
9.
Injury
Hit and run cases
As per M.V. Act, following injuries are treated as simple injuries

a. Fracture of wrists
b. Dislocation of bone
c. Scar on the face
d. Loss of vision
10. Which of the following about multimodal transporter is not true

a. MTO is to be registered
b. He is responsible for the transportation of the consignment
c. Liability of MTO is unlimited
d. He is not responsible for arranging insurance of the consignment
11. The concept of Lok Adalat was mooted by
a. Dr. S.N. Bhagwati
b. Mr. P.N. Bhagwati
c. Mr. Lok Naik
d. Mr. P.N. Adlakha
12. Which of the following documents is not relevant to bodily injury claims for
processing third party claims under motor policies?
a. Coroner's report
b. Driving Licence
c. Police Report
d. Medical Certificate
13. Application for compensation under Solatium scheme has to be made to:
a. Corporate office of an insurance company
b. Claims enquiry officer nominated by State Government
c. Nominated divisional office of the insurance company
d. Claims settlement commissioner nominated by the State Government.
14. A MACT award for Rs. 40000/- for a petitioner for simple injuries. Insurance
Company wants to go on appeal to High Court. The minimum deposit under
Sec 173 is to be made at the MACT for appealing in this case is
a. Rs 10000/b. Rs 25000/c. Rs 20000/d. Rs 40000/15. A MACT awards Rs 9000 for a pedestrian who meets with an accident.
Insurance Company wants to go on appeal as the injury was very minor. The
210
option available is
a. Go on appeal on normal course
b. File a writ I high court
c. File a SLP in the Supreme Court
d. Company has to satisfy the award
16. Owner resides at Kanpur had taken a Motor TP Policy from Delhi. The
vehicle meets with an accident at Kolkata injuring a person, who had retired
from services and resides at Guahati. He had very simple injuries. Find out
from the list the places where he can file MACT case.
a. Anywhere in India
b. Kolkata/Gauhati
c. Gauhati/Kanpur/Kolkata
d. Gauhati/Kanpur/Kolkata/Delhi
17. A married person dies in road a accident. His wife files a case in MACT Pune,
whereas his parents file the case at Mumbai. What is the correct step to be
taken to handle the situation from the list of option below?
a. Wait till the Court decides in one case and then go for appeal.
b. Go the high court for stay in both the cases in the initial stages itself.
c. Wait till one case is decided and bring this fact to another court for
dismissal of the pending case.
d. Take affective steps in both the courts by filling certified petition copies
FIR sets to transfer the case to either of the courts for clubbing together.
18. Sec 163A of MV Act 1988 related to
a. No fault Liability
b. Hit and run case
c. Structured Compensation
d. Insurer's defense
19. Insurers' defense available under following sections under MV Act
a. Sec 140 and 147
b. Sec 149(2) and 170
c. Sec 165 and 166
20. Motor Vehicle's Act 1939 was amended in
a. 1960 and 1999
b. 1988 and 1994
c. 1995 and 2002
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21. Motor Vehicle's Act 1994 was promulgated mainly for the purpose of
a. Doing away with the provisions of previous acts
b. Protecting the loss arising out of the use/carrying of hazardous goods
c. Improving upon the provisions of previous acts.
d. All of the above
22. For registration of vehicles, the RTO's requirement as per the provisions of
MV Act is submission of
a. Policy schedule
b. Policy schedule and certificate of insurance
c. Original certificate of insurance
d. Proof of sale
23. Grace period for filing of an appeal before High Court in MACT cases is
a. 180 days
b. 90 days
c. 120 days
d. No grace period at all
24. Under which section of MV Act, an insurer can defend the liability before
MACT
a. Section 163
b. Section 170
c. Section 149 (2)
d. Section 166
25. A brand new vehicle meets with an accident on the first day of insurance cover
and what percentage of depreciation the vehicle's fibre part attracts
a. 50%
b. As per percentage table
c. 30%
d. Nil
26. Can CNG/LPG fuel attachment to a vehicle be insured provided the insured
submits:
a. Invoice copy
b. Proof of endorsement in the RC
c. Declaration in proposal form
d. Physical verification of unit
b.
c.
d.
Petition filed before the lower court

Lower court order obtained under Section 170 of MV Act
Insurer's Vakalat
28. Under which section of MV Act 1988, no person shall allow any other person
to use a vehicle in a public place unless the vehicle is covered by an insurance
policy complying with the requirements of the ACT
a. 146
b. 147
c. 148
d. 149
29. Section 161 (3) of MV Act pertains to
a. Structured compensation
b. No fault liability
c. Hit and run compensation
30. Of the following exclusions under the Motor Policy, which one does not
appear under general exclusions of the policy?
a. Driving without a valid driving license
b. Driving under the influence of intoxication
c. Geographical area
d. Breach of limitations as to use clause
31. Under the motor comprehensive policy, towing charges in respect of a
damaged vehicle include the cost of
a. Protecting the vehicle
b. Removing it to the nearest repairers
c. Re-delivery to the insured
d. All of the above
32. A motorcar with manufacturing date as 12/04/1939 is
a. An obsolete car
b. Is a vehicle not insurable
c. Is a car classified as classic
33. A vehicle not road worthy can be ideally offered the following covers
a. Burglary policy
b. Motor policy covering fire
c. Motor policy covering theft
d. Motor policy covering fire/theft as per GR 45
27. The most essential document required for filing of an appeal before high court
in MACT cases
a. Award deposit receipt
34. One passenger bus was covered under Motor package policy while parked in
the garage at night extra horn, tyres and decorative fittings were stolen. The
212
213
claim is payable:
a. In full
b. Only 50% is payable
c. Payable on Non-standard basis
d. Not payable
35. Premium from the following classes of vehicles goes to the Motor insurance
pool:
a. Total premium collected on private car & 2 wheelers
b. OD premium and liability premium collected on commercial vehicles.
c. Liability and PA premium collected on Commercial vehicles.
d. Total premium collected from Goods carrying vehicles.
36. Important documents required to process the Motor Third Party claim
include:
a. Copy of FIR charge sheet
b. Name and address of the person injured and killed in accident.
c. Certified copies of injury/post mortem report.
d. All of the above
37. What is the trump card for the success of the TP Pool
a. 10% commission on the Premium
b. Distribution of Premium and liabilities amongst insurer.
c. Commitment of insurers to serve insuring public
d. All of the above
38. In a MACT Claim, in case of a death of a married male with dependent Father
and Brother, the applicable multiplier is as per the Schedule of M.V. Act, will
be
a. Multiplier applicable to the deceased as per his age
b. Multiplier applicable to the father of the deceased as per his age
c. Multiplier applicable to the brother of the deceased as per his age.
39. Under the motor tariff, Miscellaneous Vehicles do not include
a. Motorised rickshaws
b. Mobile dispensaries
c. Ambulance
d. Hearses vehicles to carry coffins to funeral
40. The liability of the owner of the motor vehicle to pay compensation for death
claims on no fault of him under the Motor Vehicles Act, 1988 is
a. Rs. 50000
214
b.
c.
d.
Rs. 10000
Rs. 25000
Unlimited
MOTOR MODEL QUESTIONS

1.
In which year MV Act was first enacted

a. 1929
b. 1939
c. 1959
d. 1988
2.
What is meant by the term IDV

a. Insenes Declared Value
b. Insured's Depreciated Value
c. Insured Declared Value
d. Insurance determining value
3.
Motor cover note is generally issued for

a. In all cases
b. For renewal only
c. For new vehicles
d. Only for third party & theft
4.
The maximum validity period of a motor cover note is

a. 15 days
b. 30 days
c. 60 days
d. 365 days
5.
Motor insurance is statutory in respect of

a. Comprehensive risks
b. Act only cover
c. Act only fire and theft extension
d. Trade Risk
6.
In case of break in insurance

a. Pre-inspection of vehicle is mandatory
b. Insurance is not available at all
c. Mere declaration from insured only will suffice
d. None is required
7.
Which is the single largest portfolio in PSU non life insurance companies
a. Fire
b. Health
215
c.
d.
8.
Motor
Marine
Under what circumstances the concept of total loss settlement is considered

a. Repairing cost exceeds more than 75% of IDV
b. Insured's refuses to get it repaired
c. Repairing cost exceeds more than 50%
d. None
9.
Articulated vehicle means

a. Two wheeler attached with the side car
b. Ambulance with oxygen cylinder
c. A motor vehicle to which a semi trailer is attached
d. None
10. Third party means employees
a. Insured and its employees
b. Insurer
c. Any other person other than a & b
d. None
11. Motor Insurance Amendment Act 1989 came into effect
a. 1st April 1989
b. 1st June 1989
c. 1st July 1989
d. 1st Sept. 1989
12. Which section of the Motor Vehicle Act deals with Act liability cases?
a. Section 140 & 166
b. 140 & 161
c. 140
d. 166
13. What is the maximum NCB allowed under Motor OD Premium
a. 30%
b. 50%
c. 45%
d. 65%
14. Which of the following vehicles is recognized as Vintage Car
a. Vehicle manufactured before 31.12.1960
b. Vehicle manufactured before 1940
c. Vehicle manufactured before 1959
d. Vehicle manufactured before 1939
216
15. Which document is not required in settling motor TP injury claim

a. Policy copy
b. Coroner's Report
c. Road challan
d. Driving License
16. Mr. A sold his vehicle to B who was enjoying 50% NCB what % of NCB
would be enjoyed by 'B'
a. 50%
b. 25%
c. 15%
d. Nil
17. Maximum liability under TPPD without payment of premium under 2
wheeler is
a. Rs. 2000
b. Rs. 3000
c. Rs. 5000
d. Rs. 6000
18. Vehicle enjoying 50% NCB lodged an OD claim. What would be NCB
allowable in its next renewal?
a. 15%
b. 25%
c. Nil
d. 30%
19. Maximum amount of discount available under Motor OD premium in case
where owner is having Automobile Association membership
a. 10%
b. 20%
c. Rs. 200
d. Rs. 500
20. Under hit and run case what amount is payable in case of death?
a. Rs. 20,000
b. Rs. 30,000
c. Rs. 25,000
d. Rs. 40,000
21. In case of partial loss settlement, % depreciation applicable to rubber items is
a. 30%
b. 40%
217
c.
d.
50%
60%
22. Which of the following type of the vehicles do not generally carry overturning
risk as a tool of trade?
a. Auto rickshaw
b. Dumper
c. Mobile drilling rigs
d. Both b & c
23. IDV of a vehicle is 2.5 Lakhs, assessed loss is 2.05 lakhs. What would be
insurer's liability?
a. Rs. 2.05 Lakhs
b. Rs. 2.05 Lakhs less excess
c. Rs. 2.50 lakhs
24. While underwriting a commercial vehicle which of the following is not
considered?
a. Past OD claim history
b. Break in insurance
c. Vehicle type
d. Past TP claim history
25. For an investigator's report in a TP claim, following is not true:
a. Investigator's report brings out the location/time of accident
b. Report should provide number of passengers being carried at time
accident
c. The report is an accepted legal document in court
d. The report should verify the authenticity of the RC book
26. Motor Policy does not cover
a. Property damage
b. Liability
c. Health
d. Personal Accident
28. Motor Trade Policy can be given to

a. Motor Dealers
b. Motor vehicle financiers
c. Individuals
d. Motor vehicle inspector
29. Lok Adalat settlement for MACT cases are
a. Compromise settlement
b. Award given by court
c. Award given by a special tribunal
30. Sec 140 of MV Act deals with following
a. Appeal to High Court
b. Structural Compensation
c. No fault liability
d. Defenses available to insurer
31. Depreciation is applicable on the basis of the following
a. Age of the party
b. Driving license
c. Age of the vehicle
d. Route permit
32. Which one of the following loss is not payable under Motor Package Policy?
a. Cost of motor parts
b. Cost of Glass pats
c. Labour charges
d. Consequential loss
33. In case of Total loss which one is considered for settlement of claim
a. Market value of the vehicle
b. Depreciated value of the vehicle
c. Cost of parts and labour charges
d. Insured declared value
34. Which type of cases are placed before Lok Adalat
a. Hit and run cases
b. Workmen's compensation cases
c. Consumer forum cases
d. Cases pending before motor acct. claims
27. The IDV is based on

a. The market value
b. Invoice value
c. Book value
d. Commercial value
35. The amount of compensation payable in case of death u/s 140 of MV Act is
a. Rs. 15000
b. Rs. 7500
218
219
c.
d.
Rs. 25000
Rs. 50,000
36. The amount of compensation payable in case of Grievous injury in Hit and
Run case is
a. Rs. 40000
b. Rs. 15000
c. Rs. 2500
d. Rs. 25000
37. Long term Motor Insurance Policy is now available for the following classes
of vehicles
a. Private Car
b. Two wheeler
c. Commercial vehicle
38. Agreed value policy in Motor Insurance can be issued for
a. Classic cases
b. Commercial vehicle
c. Vintage car
d. Private cars
39. Maximum towing & spot repair charges payable in event of claims under
commercial vehicle
a. Rs. 1500
b. Rs. 1000
c. Rs. 500
d. Rs. 2500
40. Maximum towing & spot repair charges payable under Pvt. Cars vehicle
a. Rs. 1000
b. Rs. 1500
c. Rs. 1200
d. Rs. 2000
42. Rating of goods commercial vehicle is based on

a. Carrying capacity of vehicle
b. Unloaded weight of the vehicle
c. Gross vehicle weight of vehicle
d. Age of the vehicle
43. Which of the following does not have policy excess?
a. 2 wheeler
b. Commercial vehicle
c. Private car vehicle
44. Which of the following statements is true for NCB?
a. Policy is renewed after 12 months of expiry
b. NCB earned can be substituted
c. Vehicle stands transferred to spouse following death of insured
d. All the above
45. Which section of the MV Act deals with the defense available to the insurers
under Motor Policy in respect of MACT Claims?
a. Section 140
b. Section 143
c. Section 170
d. Section 163 (A)
46. A motor accident claim victim can file a case in MACT for compensation
a. At the place of accident
b. At the place where he resides
c. At the place of issuance of policy
d. All of the above
47. 'Dealer' means a person who is engaged in
a. Building bodies for attachment to chassis
b. In repair of motor vehicle
c. In the business of hypothecation, leaving etc.
d. Authorized entity for sales and service of new vehicles
41. Which of the following statement is correct?

a. Motor policy issued for a short period can be extended
b. Motor policy can be extended by collecting difference of premium on
short period basis.
c. Motor policy can be extended by collecting difference of premium on
pro-rata basis.
d. Motor policy issued on short period rating cannot be extended.

a. Transfer of ownership shall not affect admissibility of liability in respect
of Act only policy
b. Transfer shall apply within 10 days to the insurer
c. Fresh proposal form is required for transfer
d. Transfer of own damage portion is automatic
220
221
49. Which of the following is not relevant in Motor Vehicle Insurance?

a. Sec 146 of the Motor Vehicle Act 1988
b. WC covers for workmen in charge of operation & maintenance of
vehicle.
c. IDV
d. Reinstatement
50. By which section of Motor Vehicle Act Motor Vehicle Insurance is made
obligatory for plying in public places
a. See 146
b. See 170
c. See 176
d. See 420
51. Which of the following is not relevant for determination of TP compensation
under motor policy?
a. Age
b. Income
c. Sex
d. Dependency
52. No Fault liability means No fault on the part of
a. Public
b. Insured Vehicle
c. Third Party
d. Insurers
53. Which of the following is relevant for hit and run cases?
a. Prime Ministers relief fund
b. Environment relief fund
c. Solatium fund
d. Public Provident Fund
54. The transferee is entitled for a OD claim only when
a. RC is transferred in his names
b. Sale consideration is paid
c. Insurance policy is transferred in this name
d. He holds a valid driving license
55. The categorization of surveyor is done by
a. Head office of the company
b. GIPSA
c. IRDA
d. Institute of Surveyors
222
56. Which one of the following is relevant for calculating repair liability under
Motor OD?
a. New for old
b. Depreciation
c. Survey fees
d. Garage rent
57. Compulsory Excess for two wheelers is
a. Nil
b. Rs. 50
c. Rs. 100
d. Rs. 150
58. The Cover note issued for a motor vehicle does not contain
a. Name of insurer
b. Engine and chases No. or registration no.
c. Name of the driver
d. Validity Period
59. Non disclosure of a material fact shall make the policy
a. Valid
b. Void
c. Voidable
d. Enforceable
60. Which is not a factor for rating a two wheeler policy?
a. Side car
b. Membership Automobile Association
c. Make
d. Age of the owner
61. Geographical extension is not allowed to which one of the following
countries
a. Nepal
b. Bhutan
c. Afghanistan
d. Maldives
62. Under Total loss claim settlement basis:
a. Wreck need not be surrendered to the insurer
b. Partial salvage can be surrendered and partly can be retained by the
insured.
c. Full wreck has to be surrendered before claim settlement
d. Full salvage/wreck can be surrendered after settlement
223
63. In case of Motor accident involving TP injury as well as own damage:

a. FIR is a must
b. Only police certificate is sufficient
c. Intimation to the insurer alone is sufficient
d. Driver statement
64. In a goods carrying vehicle:
a. Six persons can be carried as passengers
b. Any number of persons as passenger can be carried
c. Only six persons as coolies for the purpose of loading/unloading can be
carried
d. Strictly neither coolies nor any other persons can be carried
65. In a 2 wheeler motor cycle policy, where owner/rider, who died in a road
accident whilst on drunken driving. Identify the correct statement
a. As there is no prohibition in the State, 100% PA claim can be settled to his
wife who is the claimant.
b. As it is a death due to drunken driving, considering contributory
negligence 75% can be settled on non-standard basis, on compassionate
ground.
c. Claim has to be totally rejected as it is a drunken driving
d. 25% of the SI can be settled not more than that.
69. In case of motor vehicle accident, report of motor vehicle inspector is called
for to know
a. The quantum of loss
b. The model of the vehicle
c. Whether the accident was caused due to any mechanical breakdown
d. Third party loss
70. IDV principle brought peace in motor claim settlement because:
a. It liability at minimum
b. It guides total loss settlement
c. It reduces disputes over total loss valuation
d. Both (b) and (c)
71. Breach of trust occurs when:
a. Theft takes place from guarded parking lot
b. Theft takes place from owners' friend's house
c. Theft takes place due to negligently forgotten of key with the vehicle
d. Theft takes place with disappearance of driver with the vehicle
72. Percentage of depreciation in airbag is:
a. Depending on the age of the vehicle
b. Like depreciation of plastic parts
c. Like fibre glass components
66. In case of sale of motor vehicle:

a. Transfer of motor insurance policy is automatic to the purchaser
b. Transfer of name in the motor policy can be effected at the time of next
renewal
c. Transfer of insurance policy to the purchaser can be effected any time
between name transfer in the RC to the expiry date of the policy
d. The transferee should apply within 14 days from the date of transfer of
ownership of the vehicle
73. Which feature is not a u/w consideration for Motor Dept?

a. Color of car
b. Cubic capacity
c. Age of vehicle
d. Hire & reward
67. Which of the following is not an accessory in motor vehicle?

a. Fog light Assy
b. Steering wheel cover
c. Driver seat assy
d. Sun visor
74. IDV of new vehicle represents

a. Invoice price
b. Invoice price less 5%
c. Ex factory price
d. Cost on road less 5%
68. Cash less settlement can only be done when:

a. Total loss is not possible
b. Salvage cannot be evaluated
c. When the vehicle/claimant owner had died in the accident
d. Repairing of vehicle is economically not viable
75. IMT 23 deals with

a. Compulsory excess
b. Exclusion of special perils like flood, storm, typhoon
c. Exclusion of riot, strike and terrorism
d. Replacement of lamps, tyres etc.
224
225
76. Which of the following is Miscellaneous and special type of vehicle?

a. Scooter
b. Trailer
c. Agricultural tractors
d. Taxi
77. IDV of a vehicle of 7 years old is
a. Current invoice price less 50%
b. Market price of 7 years old vehicle
c. Invoice less 70%
d. Not to insure at any value
78. Which of the following countries is not covered under extension of
geographical areas?
a. Bangladesh
b. Bhutan
c. China
d. Nepal
79. Concession for laid up vehicle can be given in which of the following cases
a. Vehicle can not be used due to accident
b. Vehicle laid up in garage and not in use for more than one month
c. Vehicle laid up in garage and not in use for more than 2 months
d. Vehicle under police custody
80. Motor pool takes care of the following business
a. Obligatory cession
b. Declined insurers
c. Third party commercial vehicles
d. Third party all vehicles
81. Motor reinsurance is normally done on the following basis
a. Quota share
b. Facultative
c. Surplus treaty
d. Excess of loss
82. Motor trade road risk policy can be underwritten on the basis of
a. Type of vehicle
b. Trade certificate
c. Dealership
d. Vehicle in transit
226
83. Motor third party insurance is not required for two wheelers only when the
cubic capacity is less than
a. 100 cc
b. 35 cc
c. 50 cc
d. None
84. Section 173 of MV Act relates to
a. TP property damage
b. Appeal cases
c. Fault liability
85. No appeal lies in High Court if the MACT compensation amount is less than
a. Rs. 1 Lakhs
b. Rs. 50,000
c. Rs. 10,000
d. Rs. 25,000
86. Non Motor Policy can be issued in the following case
a. Mobile crane
b. Private car
c. Commercial vehicle
d. Motor cycle with 50cc
87. Under section 170 of MV Act insurer can get the right to contest the TP claim
on all grounds as of the owner in which of the following cases
a. Collusion between driver and conductor
b. Collusion between insured and claimant
c. Collusion between driver and claimant
d. Collusion between insurance co. and claimant
88. Which of the following losses are not excluded under OD section of package
policy?
a. Consequential loss
b. Depreciation of wear and tear
c. Mechanical and electrical failure
d. Fire damage
89. The Insurer can cancel the policy by sending notice of
a. 10 days
b. 15 days
c. 7 days
d. 30 days
227
90. No claim discount can be allowed provided a fresh policy is obtained within
a. 30 days
b. 180 days
c. 90 days
d. 15 days of the expiry of the previous policy
91. In case of a private car package policy, the insured may authorize repairs
necessitated by damage caused under policy provided estimated cost of such
repairs does not exceed:
a. Rs. 1000
b. Rs. 500
c. Rs. 250
d. Rs. 1200
92. As regards risk of 'explosion' to be covered, it means:
a. Only internal
b. Both internal and external
c. Only external explosion
d. Covered only by additional premium
93. Sum insured of a vehicle is based on:
a. Insured Market value
b. Insured Declared value
c. Insured Draft value
d. Insured Estimated value
97. TP insurance was first made mandatory in:

a. India
b. England
c. USA
d. Soviet Union
98. An MACT case can be filed:
a. In the area of accident
b. Anywhere in India
c. Any place near to U/W office
d. At the place where the victim belonged to
99. Which of the following is incorrect?
a. Insurance of a Motor Vehicle is compulsory
b. Policy can be insured for TP cover only
c. Educational qualification of the proposer
d. Anti theft devices fitted in the vehicle
100.Which of the following doesn't have a bearing while accepting a motor
proposal?
a. Moral hazard of the insured
b. Roadworthiness of the vehicle
c. Educational qualification of the proposer
d. Anti theft devices fitted in the vehicle
94. TP premium on a private car

a. Ceded entirely of GIC
b. Ceded entirely of India Motor Pool
c. Retained by U/W Company
d. Shared by all PSUs
101.Owner of goods traveling along in a goods vehicle will be treated for the
purpose of claims as:
a. Insured
b. Third party
c. Gratuitous passenger
d. Employee
95. TP Provision in a claim is kept

a. Present trend of local courts
b. Age factor of deceased
c. Rate of interest prevalent
d. All above factors
102.Claim Enq. Officer and Claim Settlement Commissions are part of:
a. MACT
b. EST Act
c. Soratium Fund
d. WC Act
96. What is not required in a Theft Case?

a. DL
b. Subrogation Bond
c. FIR
d. FR
103.OD Claim under Comml. Vehicle chemical tanker will be considered if the
driver has:
a. Valid DL to drive any vehicle
b. Valid DL to drive a tanker
c. Valid DL endorsed with handling of hazardous chemicals
d. Valid DL with 5 years experience in driving a tanker
228
229
104.Application for compensation to be made at MV Act

a. Place of accident
b. Place of insurance
c. Place of residence of the claimant
d. Any of the above
105.The time limit normally allowed for presenting claim petition u/s 166 is
a. 3 months
b. 6 months
c. 9 months
d. 1 year
106.In respect of TP Claims, the insurance company can repudiate liability
a. Only if it proves that the DL was not valid and the driver was disqualified
from having a license on the date of accident
b. If the driver was in possession of the learning license
c. If the DL had expired
107.On the date of accident, the Insured had sold the vehicle and the policy was not
transferred under the circumstances
a. The Insured Co. can deny TP Liability
b. The Insured Co. cannot deny TP liability
c. The insured Co. can pay OD claim and deny TP claim
108.OD claims arising out of collision of vehicles are processed on the basis of:
a. Normal claims handling procedure
b. Knock for knock agreement
c. Market agreement
d. Memorandum of understanding
109.Red lining in Motor Insurance means
a. Scope of the policy
b. Compliance of notice period
c. Timing requirements
d. Geographical limits
110. A third party liability is often awarded against more than one insurer in case of
a. Dispute on admissibility of claim
b. Absence of insurance policies
c. Unenforceable policies produced
d. Contributory negligence
230
111. By collecting additional premium Rs. 25 to cover the workmen in-charge of

the vehicle, the policy provides an option for preferring a claim under:
a. MV Act only
b. WC Act only
c. Either MV Act or WC Act
d. Common law
112. Refund of premium on account of double insurance of motor vehicles can be
allowed on pro-rata basis only for the period during which
a. The policy proposed for cancellation is in force
b. The policy not proposed for cancellation is in force
c. Both the policies are in force on the date of cancellation
d. Both the policies are concurrently in force
113. WC Claims under Motor Policies can be appealed only after
a. Conditional satisfaction of the order of the labor commissioner
b. Compliance of notice period
c. Approval of competent authority
d. Satisfaction of the award
a. Misc. type of vehicles warranting registration as per MC Act can not be
covered under CPM policy
b. Excess applicable to miscellaneous type of vehicle is 0.5% of IDV
subject to a minimum of Rs. 2500.
c. An ambulance can be insured as a private car
d. Claims arising out of accident due to overturning of vehicle whilst in
operation as a tool of trade is payable under a standard motor policy
115. Which document is not required for OD claim processing?
a. Registration book of vehicle
b. Assessed loss statement
c. Driving license of driver while accident
d. Driving license of the insured
116. Following documents are not required for TP claim processing:
a) Summon from Court
b) Purchase receipt of vehicle
c) Police report
d) Insurance Policy
117. For which type of vehicles India is divided into three zones:
a) Private Car
231
b) Commercial Vehicle Passenger carriers

c) Two Wheelers
d) Motor trade
118. What are the other countries, which cannot be covered under motor vehicle
insurance issued in India?
a) Nepal
b) Bangladesh
c) Myanmar
d) Pakistan
124.Insurance Agency Commission is not allowed under

a) Commercial vehicles
b) Two wheelers
c) All Third party insurances
d) Only third party private car insurance
125.Insurer's liability towards third party ceases
a) When owner is not the insured
b) When new owner shows another insurance policy
c) After motor total loss claim is paid
d) On the death of the insured
119. Sunset clause refers to

a) Vintage vehicles
b) Constructive total loss
c) No claim bonus
d) Expiry of the policy
126.Motor vehicle insurance is not compulsory if:

a) Engine is below 35 cc without gear
b) If it is registered as per MV Act
c) If it is being used within a premises all the time
120.Public place is defined under MV Act as:

a) Factory premises
b) Public needs
c) All places where public can access
d) Public sector companies premises
127.What is not a factor for making provision for Motor TP claim?

a) Applicant's amount claim
b) Legal expenses
c) Interest on delayed settlement
d) Interest already gained on incurred claim not yet paid
121.For constructive total loss under motor vehicle policy payable loss has to
constitute more than what percentage of IDV
a) 50%
b) 60%
c) 75%
d) 90%
122.Which one is an add-on cover under motor vehicle insurance?
a) Volcanic outburst
b) Mechanical Break Down
c) Meteorite strike
d) Personal Accident coverage to employees
123.Which is not a factor for structured compensation under Motor Third Party
liability?
a) Age of the deceased
b) Dependency of the complaint
c) Income of the deceased
d) Income of the insured
232
KEY MOTOR INSURANCE TRADE QUESTION PAPER

1
11 B
21 B
31 D
12 A
22 C
32 D
13 D
23 B
33 D
14 C
24 C
34 D
15 D
25 A
35 C
16 C
26 B
36 D
17 D
27 C
37 A
18 C
28 A
38 A
19 B
29 C
39 A
10 D
20 B
30 A
40 A
233
KEY MOTOR MODEL QUESTION PAPER

1.
33.
65.
97.
2.
34.
66.
98.
3.
35.
67.
99.
4.
36.
68.
100. C
5.
37.
69.
101. B
6.
38.
70.
102. C
7.
39.
71.
103. C
8.
40.
72.
104. D
9.
41.
73.
105. B
10.
42.
74.
106. A
11.
43.
75.
107. B
12.
44.
76.
108. A
13.
45.
77.
109. B
14.
46.
78.
110. D
15.
47.
79.
111. C
16.
48.
80.
112. D
17.
49.
81.
113. D
18.
50.
82.
114. B
19.
51.
83.
115. D
20.
52.
84.
116. B
21.
53.
85.
117. B
22.
54.
86.
118. C
23.
55.
87.
119. C
24.
56.
88.
120. C
25.
57.
89.
121. C
26.
58.
90.
122. D
27.
59.
91.
123. D
28.
60.
92.
124. C
29.
61.
93.
125. B
30.
62.
94.
126. A
31.
63.
95.
127. A
32.
64.
96.
234
1.
As per sec. 158 (6)

a) It is mandatory for police to forward a copy of accident report within 30
days to insurance company
b) The owner of the vehicle has to produce within 30 days the certificate of
insurance to the police
c) The owner of the involved vehicle is required to give any information as
required by the police officer to determine whether the vehicle was or
wasn't being driven in contravention of sec. 146
d) It is mandatory for the officer in charge of the police station to forward a
copy of accident report within 30 days to Claims tribunal as well as the
concerned insurance company.
2.
The loaded truck was going from Chandigarh to Delhi. A vendor with the
permission of the driver undertook a journey in between in the cabin of a truck
with a bag of vegetables meant for sale. He died in accident when the truck hit
a road side tree. As per which section of the MV Act, the insurance company
can say that the vendor with head load of goods is not covered?
a) Sec. 147
b) Sec. 149 (2)
c) Sec. 170
d) No defence is available to the insurance company since owner of the
goods are covered under the amended act.
3.
As per sec. 170

a) Appeal on negligence issue in High Court cannot be filed unless petition
u/s 170 has been filed in the trial court
b) Appeal in High Court challenging the quantum can be filed only if the
petition u/s 170 has been filed in the trial court.
c) The defence by insurance company is available to establish the fraud case
at the trial court
d) Insurance company can contest the case on breach of policy conditions.
4.
The insured of a private car has lodged a claim under third party section of the
package policy claiming compensation of Rs. 30,000/- which he had given at
the spot of the accident to the injured victim to get away from the furious mob.
He has produced a valid stamped and notarized receipt from the injured.
Which section allows payment of compensation to the insured under the said
235
circumstances?
a) Sec. 151
b) Sec. 157
c) Sec. 158
5.
6.
9.
An unskilled & bachelor labourer aged 23 years dies in an road accident.

Which of the following documents is vital for determining the compensation
payable?
a) Age proof of the deceased
b) Income proof of the deceased
c) Occupation of the father
d) Age of the mother of the deceased.
The Branch Manager of an Insurance company is travelling in the company
pool car and insured under a package policy with legal liability to driver. The
accident resulted in the death of the Branch Manger and injury to the driver.
As per the terms and conditions of the package policy, compensation is
payable to
a) Driver only
b) Branch Manager only
c) Both to the driver and Branch Manager
7.
Which document is the most essential for settlement of injury claims before
Lok Adalat?
a) income certificate of the injured
b) age proof
c) injury certificate
d) medical bills
8.
What is the limitation period for filing appeal in the High Court?
a) 90 days from the date of the award
b) 30 days from the date of the award
c) 90 days from the date of the award plus the time taken by court to supply
certified copy.
d) 30 days from the date of receipt of certified copy of award from the
advocate
236
Who is competent witness to depose on behalf of company to deny negligence

in an accident involving two vehicles insured by two different companies?
a) Driver of our insured vehicle
b) Driver of other vehicle
c) Our investigator
d) Police officer
10. As per the landmark judgment of Apex Court in Sarala Varma Vs. DTC casea) Prospective income is to be taken into account while calculating
compensation for the deceased person engaged in permanent job prior to
his death.
b) The loss of dependency for death cases is to be calculated on the basis of
number of dependents
c) Income tax and professional tax is to be deducted before calculating the
loss of income
d) All of the above.
11. Compensation in motor accident cases on the principle of no fault liability is
payable under
a) Sec. 166 of M V Act
b) Sec. 140 of M V Act
c) Sec. 163A & Sec. 140 of M V Act
d) Sec. 163 A of MV Act
12. The land mark judgment in NIC Vs. Challa Bharatramma relates to the
following documents
a) Permit
b) DL
c) Fitness certificate
d) Cheque dishonour
13. What defence is available to insurer to deny liability in a claim of motor
accident involving a bus against death/injury to the passengers?
a) The drunkenness of driver
b) No Fitness of the bus
c) Overloading of passenger carrying capacity
237
d) All of the above

e) None of the above
14. What is the time limit for filing WS in MACT Case as per the CPC
ammendment?
a) 30 days
b) 60 days
c) 90 days
d) No time limit
ANSWER KEYS
Question No. Answer
1
D
2
A
3
B
4
D
5
D
6
A
7
C
8
C
9
A
10
D
11
C
12
A
13
B
14
A
238
239
MARINE CARGO
PECULIARITIES OF MARINE INSURANCE
MARINE INSURANCE
Governed by a special Act called Marine Insurance Act 1963
Cargo policies are freely assignable
Insurable interest is a must at the time of loss-ppi makes all the difference
Inco Terms is only an indication who can insure
Utmost Good Faith is a statutory obligation on the insured as per the Act
Indemnity Under Marine Insurance
In the manner and to the extent agreed
Normally CIF plus 10% which is intended to include the general

overheads and perhaps a margin of profit
Provides a commercial or modified form of indemnity
Value agreed in case of total loss and a percentage depreciation in case of

partial loss
STANDARD FORM OF MARINE POLICY
The current policy form contains no insuring conditions
The terms and conditions are setout in the appropriate Institute Cargo
Clauses and other Clauses.
Policy is issued for covering individual consignment from named

starting point to final destination point.
It should be stamped as required by the Indian Stamp Act.
A contract of marine insurance shall not be admitted as evidence unless it

is embodied in a marine policy in accordance with the Marine Insurance
Act 1963 (Sec. 24)
SCHEDULE OF MARINE POLICY

BESIDES NAME OF THE INSURED AND ITS POLICY ISSUING OFFICE
DETAILS THE SCHEDULE
1. Policy Number
2. Name and address of the assured with bank interest if any
3. Name of the vessel carrying the cargo
4. Description of the voyage/transit
5. Subject matter insured with description of packing description of the
marks and numbers
6. B/L; R/R; L/R with dates
240
241
7.
8.
9.
The sum Insured Basis of Valuation

The premium Marine and War & SRCC
Name and address of the surveyor/claim settling agent to be approached
in case of claim.
10. Terms of Insurance cover granted clauses, special conditions and
warranties.
CARGO POLICIES COVERAGES
Policy form does not contain insuring clauses
Terms of cover are specified by means of various Institute Cargo Clauses

and endorsements attached.
The prominent clauses are :

a) Institute Cargo Clauses A, B & C
b) Institute Ware Clauses (Cargo)
c) Institute strikes Clause (Cargo)
d) Institute Ware Clauses (Air Cargo)
e) Institute strikes Clause (Air Cargo)
f) Institute Rail/Road Clause
g) Strike Riots and Civil Commitions clause
h) Institute Trade Clauses
INSTITUTE CARGO CLAUSES A, B & C COVERAGE
INSTITUTE CARGO CLAUSES 'C' COVER
1) Fire or explosion
2) Vessel/Craft being stranded, grounded, sunk or capsized
3) Overturning/derailment of land conveyance
4) Collision or contact of vessel, craft or conveyance with any external
object other than water
5) Discharge of cargo at a port of distress
6) General Average sacrifice
7) Jettison
8) General Average and Salvage charges incurred to avoid loss from any
clause(s) except those excluded.
9) Liability under Both to blame collision clause of the bill of lading.
10) Charges reasonable and properly incurred to avert/minimize an insured
loss and to preserve and pursue recovery rights.
11) In the event of termination of transit at a port or place other than
destination port or place resulting from a risk covered, EXTRA
CHARGES incurred in unloading, storing and forwarding insured cargo
to destination.
242
INSTITUTE CARGO CLAUSES 'B COVER

Besides all coverage under ICC 'C', the ICC 'B'
Covers the following addl. Perils.
Earthquake, volcanic eruption or lightning
Washing overboard
Entry of sea, lake or river water into the vessel, craft, hold, conveyance,
container, lift van or place of storage
Total loss of any package lost overboard or dropped whilst loading or

unloading from vessel or craft.
Extraneous Perils that can be covered ICC 'C' & 'B' at appropriate addl. premium
Theft, pilferage and/or non-delivery
Fresh water and rain water damage
Damage by hooks, oils, mud, acid and other extraneous substances
Heating and sweating
Damage by other cargo

The above perils are automatically covered under ICC 'A'
GENERAL EXCLUSIONS UNDER INSTITUTE CARGO CLAUSES
1. Willful misconduct of the Assured
2. Ordinary leakage, ordinary loss in weight/volume, or ordinary wear and
tear of the subject matter insured
3. Insufficient and unsuitability of packing
4. Inherent wise or nature of the subject matter
5. Delay even though caused by insured perils
6. Insolvency or financial default of the ship owners
7. Nuclear perils
8. Unseaworthiness and unfitness of the vessel/conveyance (if the Assured
is not aware of)
9. War and warlike perils and strike perils.
War perils and strike perils can be covered concurrently by attaching Institute War
and Strike Clauses.
DURATION OF COVER UNDER INSTITUTE CARGO CLAUSES
1. The risk attaches from the time the goods leave the warehouse or place of
storage at the place named herein for the commencement of the transit,
continues during the ordinary course of transit and terminates either.
2. On delivery to the consignees or other final warehouse or place of storage
at the destination named herein.
243
3.
4.
On delivery to any other warehouse of place of storage whether prior to

or at the destination named herein which the Assured elect to use either,
a) For storage other than in the ordinary course o transit or
b) For allocation or distribution
or
On the expiry of 60 days after completion of discharge over side of the
goods hereby insured from the oversea vessel at the final port of
discharge, whichever shall first occur.
INSTITUTE TRADE CLAUSES

1) Institute Commodity Trade Clause A, B & C
2) Institute Coal Clauses
3) Institute Jute Clauses
4) Institute Natural Rubber Clauses
5) Institute Timber Trade Federation Clauses
6) Institute Bulk Oil Clauses
7) Institute Frozen Food Clauses Exclg. Meat
8) Institute Frozen Meat Clauses 'A' & 'C
INLAND TRANSIT RAIL/ROAD CLAUSES 'C'
RISK COVERED UNDER CLAUSE - C
1. Fire
1. Lightning
RISK COVERED UNDER CLAUSE - B
Besides coverage under 'C' the clauses 'B' additionally covers :

1. Breakage of bridges
2. Coalition with or by the carrying vehicle
3. Overturning of the carrying vehicle
4. Derailment of accident of like nature to the carrying rail
wagon/vehicle
Delay
Inherent vice or nature of subject matter
War perils
Strike perils
(Strike perils can be covered at an additional premium by attaching SRCC clauses)
TIME LIMITS AS PER TRANSIT CLAUSES OF VARIOUS CARGO
CLAUSES
ICC A, B AND C
60 DAYS
ICC AIR CARGO

30 DAYS
INLAND TRANSIT
7 DAYS
WAR CLAUSES (SEA)

WATERBORNE
WAR CLAUSES (AIR)

ON DISCHARGE
STRIKE CLUASE (SEA)

60 DAYS
STRIKE CLAUSE (AIR)

30 DAYS
SRCC
7 DAYS
COMMODITY TRADE
60 DAYS
COAL
60 DAYS
JUTE
15 DAYS
NATURAL RUBBER
30 DAYS
TIMBER
60 DAYS
BULK OIL
60 DAYS
RISK COVERED UNDER CLAUSE - A

All risks except those specifically excluded
INCIDENTAL CLAUSES
COMPREHENSIVE CLAUSE
INSTITUTE REPLACEMENT CLAUSE
PAIR AND SET CLAUSE
CUTTING CLAUSE
LABLE CLAUSE
PICKING CLAUSE
CARBLING CLAUSE
INLAND TRANSIT RAIL/ROAD CLAUSES - EXCLUSIONS
Willful misconduct
Ordinary/inevitable loss or damage
Insufficient or unsuitable or preparation
FACTORS INFLUENCING THE RATING

1. VESSEL
Overage
Tonnage
244
245
Flag
GA Expenditure
Cost of entering and leaving the port of refuge and the cost of loading and
reloading of cargo at a port of refuge and incidental storage charges
Hire charges for craft for lightening the vessel or hire charges for tugs
used to tow the vessel to a port of refuge
Wages and maintenance of crew members for the extra time
Type
Classification
2. SUBJECT MATTER
Nature of packing
Bulk or bagged cargo
Inherent vise or Nature of cargo

3. PROPOSER
Status
Moral Hazard
4. Terms of Cover
Restricted
All Risk Cover

5. VOYAGE
Route
Distance and Destinations

GENERAL AVERAGE
A loss caused by or directly consequential on a general average act.
The act include a GA sacrifice as well as a GA expenditure Voluntarily

and intentionally but reasonably made or incurred in time of peril for the
common safety of the property imperiled in a maritime adventure
GA Sacrifices
Damages to ship's anchors and/or cables whilst attempting to refloat a

stranded vessel
Bulkhead broken to reach the seat of fire in the lower holds
Sails and spares lost while forcing the vessel off the ground
Burning of ships materials as fuel to reach nearest port of refuge in time

of peril
Jettisoning of cargo and freight lost on the same
Damage to other cargo by water used for fire fighting
246
Sue and Labour Charges
Incurred in terms of duty of the assured clause
Expenses reasonably incurred for averting or minimising the loss
Payable irrespective of percentage even in addition to total loss
Incurred short of destination
Reconditioning cost to prevent aggravation of damage-hides damaged

by sea water extra fader for live cattle on board
Incurred when loss is eminent/threatened not short of destination is

particular charge as well as sue and labour
Salvage Charges
Remuneration charged on no-cure-no-pay basis by the salvors who

voluntarily and independently of any contract render services to rescue or
save the property endangered at sea
The charges are substantial. The admiralty Court and other courts
recognise and encourage such charges
The salvors are having the lean over the property saved till their charges
are paid
TYPE OF CARGO POLICIES
Specific Policy
Open Policy
Special Declaration Policy
Annual Policy
Open Cover
Sellers' Contingency Policy
Duty and Increased Value Policy

SPECIFIC POLICY
Isolated shipments covered by issue of individual policies for a specific

voyage/transit
247
OPEN POLICY
A type of floating policy and it is a stamped documents
To take care of frequent transit with considerable turnover
Issued for covering inland transit
Sum insured normally representing annual turnover can be enhanced

from time to time to suit the requirement
Unstamped certificate can be issued for each dispatch/declaration Sec

31 of the Act declaration should be in the order of dispatch
Sum insured stands reduced gradually to the extent of dispatches

declared
Policy ceases on expiry date or on exhaustion of the total sum insured

whichever shall first occur
Limit per bottom and limit per location clearly specified
Basis of valuation specified
Rate of premium and terms of cover agreed in advance and remained

unchanged throughout the policy period
Provide for inspection of insured's records
Subject to cancellation with 30 days notice

SPCIAL DECLARATION POLICY
SDP is form of floating policy to clients having large turnover and

frequent inland dispatches minimum turnover stipulated is Rs. 2 crores
accepted on the basis of completed proposal
Can not be assignable or transferable but claim can be settled in favour of

consignee with consent of the insured
Sum insured shall be on the basis of previous year's turnover or estimated

annual turnover
Entire premium charged on the total turnover/sum insured is collected in

advance discount in premium up to a maximum of 50% is allowed on
slab system based on turnover
times SCL or 3% of T/o the rate of premium is charged on these limits

only and not on the total turnover
Policy is subject to condition of average
Policy is not assignable or transferable no contract of afrieghtment is

necessary
Accepted on the basis of completed proposal
Reinstatement of sum insured upon payment of claim is permitted
Basis of valuation should be prime cost plus expenses incidental to transit

OPEN COVER
To provide continuous, automatic and guaranteed coverage to a regular

importer or exporter issued for a period of 12 months with out specifying
the sum insured only limit per bottom and limit per location are
specified
Unstamped document only an agreement in writing
Individual stamped certificate/policy is issued on receipt of shipment

details
Rate of premium terms and conditions are setout in the open cover and
remain unchanged throught the period
Unintentional genuine omissions is held covered
Subject matter is broadly defined
Basis of valuation is specified
Cancellation 30 days for marine & 7/2 days for War & SRCC
ANNUAL POLICY
Issued for 12 months period
Only to cover transport of goods belonging to or held in trust by the

insured amongst depots owned or hired by the insured within the country
The sum insured should represent estimated annual turnover premium

depends on distance and single carrying limit e.g. < 80 km twice SCL or
1% of T/o; > 8- km and < 500 km 4 times SC or 2% of T/o >500 km 6
SELLER'S INTEREST CONTIGENCY
To cover physical loss or damage to consignment sold on FOB and C&F

contracts in case the buyer repudiates the sale or fall to honour the
shipping documents by reason of total loss of consignment during
voyage.
Normally combined with the seller's cargo insurance covering the goods
from his warehouse until it is loaded onto the ship. When it is done so,
the cover attaches during transit from warehouse to ship and gets
suspended after loading on to the ship. The cover reattaches with
retrospective effect when the above contingencies takes place.
Consequent expenses on storage and transshipment are not covered.
Claim recoverable under ECGC of India is also not payable
Existence of such policies should be made more secretive to avoid

possible misuse.
248
249
The insured's status and the moral hazard are the prime factors for the
acceptance of the proposal.
1.
2.
DUTY & INCREASED VALUE POLICY
Insurance is on increased value of the cargo by reason of payment of

custom duty at destination.
Insurance is on increased value by reason of market value of goods at

destination on the date of landing
Not on agreed value policy and pays for only pure indemnity.
Can be issued only when there is a basic CIF Insurance
Issued in favour of persons holding import license or any other persons in

whose favour the import license is officially endorsed.
The scope and duration are identical to the CIF Insurance.
In case of duty insurance a fraction of rate of premium of CIF insurance is

charged and in case of increased value 100% rate of premium is charged.
Claim is admissible only when claims under CIF policies admitted.
Cannot be issued after arrival of the vessel at destination.
MARIN HULL
Intend to provide insurance cover to ship owners' for their various

insurable interest
SUBJECT MATTER FOR INSURANCE

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Hull & Machinery

Freight at risk
Disbursement and Increased value
Premium reducing
Return of Premium
Loss of hire
Loss of Profit
Ship repairs
Builder's Risk
Charter's Liability
COVERAGE
Terms of cover for the marine hull policies are set out in the form of
Institute Time Clauses Hulls
The variation limiting the hull cover is provided as follows :

250
Institute Time Clauses-Hulls-Total Loss, General Average and

three-fourths (3/4ths) Collision Liability (01.10.1983)
Institute Time Clauses-Hulls-Total Loss only (including Salvage,
Salvage charges and sue and Labour), 01.10.1983
Institute Time Clauses-Hulls-Disbursements and Increased Value (Total Loss

only, including Excess Liabilities), 01.10.1983
ITC-HULLS, 01.10.1983
Indemnity provided for :
1. Total loss of vessel including actual and constructive total loss.
2. Cost of repairing damages it includes particular Average and General
Average sacrifices.
3. Unrepaired damage allowance for depreciation in the value on expiry
provided the ship has not become a total loss during the policy period.
4. Sue and Labour expenses
5. Salvage charges
6. General Average Contribution
7. 3/4th collision liability
PERILS COVERED
Uncontrollable:
Perils of the seas, rivers, lakes or other navigable waters;
Fire, explosion;
Violent theft by persons outside the vessel;
Jettison;
Piracy;
Breakdown of or accident to nuclear installations or reactors;
Contact with aircraft or similar object, or objects falling there from land
conveyance, dock or harbour equipment or installation;
Earthquake, volcanic eruption or lightning.

Controllable:
Accidents in loading, discharging or shifting cargo or fuel;
Bursting or boilers, breakage of shafts or any latent defect in the

machinery or hull;
Negligence of master, officers, crew or pilots;
Negligence of repairers or charterers, provided such repairers or

charterers are not the assured under the policy;
251
Barratry of master, officers or crew provided such loss/damage has not
resulted from want of due diligence by the assured, owners or managers.

Other Perils:
Pollution Hazards provides cover if the vessel is damaged by deliberate
action by govt. authorities following casualty covered under the policy to
avoid pollution.
3/4th Collision liability

1.
2.
3.
Loss/Damage to any other vessel or property on any other vessel;

Delay to or loss of use of any such other vessel or property thereon;
General Average of, salvage of, or salvage under contract of, any such
other vessel or property thereon;
TERMINATION CLAUSE
On change of classification
Change, suspension, discontinuance, withdrawal or expiry of class of the

vessel.
Change of ownership or flag
Transfer of management
Change of charter on bareboat basis
Requisition for title or use of the vessel 15 days cover provided for
regularisation
UNDERWRITING CONSIDERATIONS
Type of vessel
Construction
Name of the builder
Year of make
Age of the vessel
Tonnage (GRT & DWT)
Single/Double bottom
Single/Twin engine
Flag
Trade
Singleton/Fleet
Management of Vessel
Prevailing repair cost
Collision bulk head
Propulsion
Engine particulars
Capacity of fuel tank
FEA
Valuation
Classification
Registration
Pre Insurance Survey
Trading Warranty
Claims experience
Cover Required
Moral Hazard
PROTECTION & INDEMNITY COVER
Association of ship owners for mutual benefit with separate legal entity
managed by board of directors and full time employees.
Financed by initial premium paid by members. Additional requirements

are paid by members on calls.
Provide protection to its members towards

1. Statutory obligation towards master and crew members as provided
by mercantile shipping Act.
2. Contractual liabilities towards cargo owners as per provided in the
bill of lading.
3. 1/4th Collision liability
4. Cost incurred towards removal of wreck from the harbour/port
5. Damage towards Jetties, wharves etc and other properties of the port
authorities.
TYPES OF LOSSES
1. TOTAL LOSS ACTUAL
Where the subject matter is destroyed, or so damaged as to cease to be thing of the
kind insured, or when the assured is irretrievably deprived off.
2. CONSTRUCTIVE TOTAL LOSS
When the subject matter is reasonably abandoned because either the actual total
loss appears unavoidable or to prevent the actual total loss the required
252
253
expenditure is more than the saved value.

When the insured is deprived of the subject matter and it is unlikely that he can
recover it or the cost of recovery would exceed its value when recovered.
3. PARTICULAR AVERAGE
Partial loss of the subject matter which does not include a general average loss.
4. GENERAL AVERAGE
GA sacrifices as well as a GA expenditure voluntarily and intentionally but
reasonable made or incurred in time of peril for the common safety of the property
imperiled in a maritime adventure.
5. SUE & LABOUR CHARGES
These are incurred in terms of duty of the assured clause. These expenses
reasonably incurred for averting or minimising the loss. It is payable irrespective
of percentage even in addition to total loss. It should Incurred short of destination.
Reconditioning cost to prevent aggravation of damage hides damaged by sea
water extra fader for live cattle on board.
6. PARTICULAR CHARGES
Reconditioning cost incurred when loss is eminent/threatened not short of
destination is particular charge as well as sues & labour.
7. SALVAGE CHARGES
Remuneration charged on no-cure-no-pay basis by the salvers who voluntarily
and independently of any contract render services to rescue or save the property
endangered at sea.
8. EXTRA CHARGES
Survey fees and sale charges etc.
254
255
AVIATION INSURANCE
HISTORY
AVAITION INSURANCE
WRIGHT Brothers - The real pioneers 1903
Initial Flight Records:
1903
duration12 seconds
height 120 ft
1918/19 duration one hour speed 125 miles per hour for 33 hrs (nonstop)
By Charles Lindborgh Translantic Flight from America to Europe
Highest recorded number of single type of aircraft ever manufactured DC

- 3 - DAKOTA by Douglas USA.
1st commercial flight - London - Paris in 1919.
British and French Industry produced 'CONCORDE' that used to fly

faster than the speed of sound.
BOEING X AIRBUS Industries presently dominate the Market.
Research and development is proactive in prevention of accidents eg.

ANTI -COLLISION System, Smoke Detection System.
1910 First Accident Damage Cover offered
Only Passenger and Third Party Liability Covers issued initially.
Post 1st World war First Policy under Aviation business was issued in
Marine Hull Section to cover the aircraft.
Aviation Insurance influenced by Marine and Accident Insurance
1934 British & European Underwriters formed International Union of

Aviation Insurers
Post World War II British Aviation Insurance Group developed a

comprehensive policy with Hull and Liability Sections
1960 LAD was set up
1993 AVN 67B
09/11 incidents had given huge impact on Aviation Insurance.
AVIATION INSURANCE CUSTOMERS:
Airlines
Private Operators
Pilots / Crew
Aircraft Manufacturers / Repairers / Service Providers at the airport
Airport Owners
Re-fuellers
256
257
law, military or usurped power or attempts at usurpation of power.
IMPORTANT AVIATION COVERS:

Aircraft Policy covering Aircraft Hull and Liabilities
Spares All Risks Cover
Hull War Risks Cover
Pilot / Crew Personal Accident
Pilot Loss of License
Airports Owners / Operators' Liability
Aircraft Refueling Liability
Hull Deductible Insurance
Unearned Premium Insurance
b) Any hostile detonation of any weapon of war employing atomic or

nuclear fission and/or fusion or other like reaction or radioactive force or
matter.
c)
Strikes, riots, civil commotions or labour disturbances.
d) Any act of one or more persons, whether or not agents of a sovereign

power, for political or terrorist purposes and whether the loss or damage
resulting there from is accidental or intentional.
e)
Any malicious act or act of sabotage.
f)
Confiscation, nationalisation, seizure, restraint, detention,

appropriation, requisition for title or use by or under the order of any
Government (whether civil military or de facto) or public or local
authority.
DEFINITIONS
AIRCRAFT : The word aircraft would mean the aircraft described herein and in
addition to the airframe shall include power plants, propellers, rotors and
appliances forming part of the aircraft at the inception of coverage hereunder,
including parts detached and not replaced by other similar parts.
FLIGHT: Flight means from the time the Aircraft moves forward in taking off or
attempting to take off, whilst in the air, and until the Aircraft completes its landing
run. A rotor wing aircraft shall be deemed to be in Flight when the rotors are in
motion as a result of engine power, the momentum generated there from, or
autorotation.
GROUND: Ground means whilst the Aircraft is not in Flight or Taxiing or
Moored as defined above.
TAXIING: Taxiing means movement of the aircraft under its own power (other
than in flight as defined above). Taxiing shall not be deemed to cease merely by
reason of a temporary halting of the Aircraft.
MOORED: Moored means, in the case of aircraft designed to land on water,
whilst the aircraft is afloat and is not in Flight or Taxiing (as defined above), and it
includes the risks of launching and hauling up.
g) Hi-jacking or any unlawful seizure or wrongful exercise of control of the

Aircraft or crew in flight (including any attempt at such seizure or
control) made by any person or persons on board the Aircraft acting
without the consent of the Insured.
Furthermore this Policy does not cover claims arising whilst the Aircraft is outside
the control of the Insured by reason of any of the above perils. The Aircraft shall be
deemed to have been restored to the control of the Insured on the safe return of the
Aircraft to the Insured at an airfield not excluded by the geographical limits of this
Policy, and entirely suitable for the operation of the Aircraft (such safe return shall
require that the Aircraft be parked with engines shut down and under no duress).
EXTENDED COVERAGE ENDORSEMENT (AVIATION

LIABILITIES): AVN52D
1.
WHEREAS the Policy of which this Endorsement forms part includes the
War, Hi-Jacking and Other Perils Exclusion Clause (Clause AVN48B), IN
CONSIDERATION of an Additional Premium of ....................., it is hereby
understood and agreed that with effect from ....................., all sub-paragraphs
other than ............ of Clause AVN48B forming part of this Policy are deleted
SUBJECT TO all terms and conditions of this Endorsement.
2.
EXCLUSION applicable only to any cover extended in respect of the deletion

of sub-paragraph (a) of Clause AVN48B
WAR, HI-JACKING AND OTHER PERILS EXCLUSION

CLAUSE (AVIATION) AVN48B
This Policy does not cover claims caused by
a)
War, invasion, acts of foreign enemies, hostilities (whether war be

declared or not), civil war, rebellion, revolution, insurrection, martial
258
259
Cover shall not include liability for damage to any form of property on the
ground situated outside Canada and the United States of America unless
caused by or arising out of the use of aircraft.
3.
4.
LIMITATION OF LIABILITY
The limit of Insurers' liability in respect of the coverage provided by this
Endorsement shall be a sub-limit of US$ 50,000,000 or the applicable Policy
Limit whichever the less any one occurrence and in the annual aggregate
except with respect to passengers to whom the full Policy limit(s) shall apply.
This sub-limit shall apply within the full policy limit and not in addition
thereto.
AUTOMATIC TERMINATION
To the extent provided below, cover extended by this Endorsement shall
TERMINATE AUTOMATICALLY in the following circumstances:
(i) All cover
-upon the outbreak of war (whether there be a declaration of war or not)
between any two or more of the following States, namely, France, the
People's Republic of China, the Russian Federation, the United
Kingdom, the United States of America
(ii) Any cover extended in respect of the deletion of sub-paragraph (a) of
Clause AVN48B
- upon the hostile detonation of any weapon of war employing atomic or
nuclear fission and/or fusion or other like reaction or radioactive force or
matter whosesoever or whomsoever such detonation may occur and
whether or not the Insured Aircraft may be involved
(iii) All cover in respect of any of the Insured Aircraft requisitioned for
either title or use
-upon such requisition
PROVIDED THAT if an Insured Aircraft is in the air when (i), (ii) or (iii) occurs,
then the cover provided by this Endorsement (unless otherwise cancelled,
terminated or suspended) shall continue in respect of such an Aircraft until
completion of its first landing thereafter and any passengers have disembarked.
5.
REVIEW AND CANCELLATION

a) Review of Premium and/or Geographical Limits (7 days)
Insurers may give notice to review premium and/or geographical limits such notice to become effective on the expiry of seven days from 23.59
hours GMT on the day on which notice is given.
260
b) Limited Cancellation (48 hours)

Following a hostile detonation as specified in 4 (ii) above, Insurers may
give notice of cancellation of one or more parts of the cover provided by
paragraph 1. of this Endorsement by reference to sub-paragraphs (c), (d),
(e), (f) and/or (g) of Clause AVN48B - such notice to become effective on
the expiry of forty-eight hours from 23.59 hours GMT on the day on
which notice is given.
c)
Cancellation (7 days)
The cover provided by this Endorsement may be cancelled by either
Insurers or the Insured giving notice to become effective on the expiry of
seven days from 23.59 hours GMT on the day on which such notice is
given.
d) Notices
All notices referred to herein shall be in writing.
AIRCRAFT INSURANCE POLICY:

The Insurers will pay for:
(Agreed Value / Insured Value)
Accidental loss of or damage to the Aircraft

Accident means any one accident or series of accidents arising out of one
event.
Disappearance - aircraft is unreported for sixty days after the

commencement of Flight
Expenses necessarily incurred for the immediate safety of the aircraft

consequent upon damage or forced landing.
(up to 10 % of the Amount Insured)
Exclusions under this Section
(Loss of or Damage to Aircraft):
wear and tear, deterioration, breakdown, defect or failure

But Accidental loss of or damage to the Aircraft consequent upon wear
and tear etc. is covered.
Damage to any Unit by anything which has a progressive or cumulative

effect.
IMPORTANT DEFINITIONS:
Flight means
Fixed Wing: from the time of the aircraft moves forward in taking off or
attempting to take off, whilst in the air and until the aircraft completes its
landing run.
261
Rotor Wing: when the rotors are in motion as a result of engine power,
the momentum generated there from.
Taxiing means movement of the aircraft under its own power other than
in flight. Taxiing shall not be deemed to cease merely by reason of a
temporary halting of the aircraft.
Moored means in the case of aircraft designed to land on water, whilst the
aircraft is afloat and is not in flight or taxiing.
Ground means whilst the aircraft is not in flight or taxiing or moored.

SECTION II
LEGAL LIABILITY TO THIRD PARTIES:
Sums which the Insured is legally liable to pay in respect of
Accidental bodily injury
Accidental damage to property caused by the Aircraft or by any person or

object falling there from.
What is not covered:
- Injury or loss sustained by
Director / Partner
flight, cabin or other crew
passenger
- Loss or damage to any property belonging to or in the care, custody or
control of the Insured.
SECTION III LEGAL LIABILITY TO PASSENGERS
Legal liability towards
accidental bodily injury (fatal or otherwise) to passengers whilst

entering, on board, or alighting from the Aircraft and
Loss of or damage to baggage and personal articles of passengers arising

out of an Accident to the Aircraft.
GENERAL EXCLUSIONS (APPLICABLE TO ALL SECTIONS):
Illegal Uses
Outside the Geographical Limits
Piloted by any person other than the pilot
Transportation by Other Conveyance
Landing and Take-off from a place not complying with the

recommendations laid down by the manufacturer
Contractual Liability
262
Number of passengers exceeds the declared maximum number of
passengers.
Claims payable under any other policy or policies.
Nuclear Risks Exclusion.
War, invasion, acts of foreign enemies, hostilities, civil war etc.
Hostile detonation of any weapon of war employing atomic or nuclear

fission and/or fusion or radioactive force or matter
Strikes, riots, civil commotions or labour disturbances.
Terrorist act
Malicious Act or Act of Sabotage
Confiscation, nationalization seizure, restraint, detention, appropriation,

requisition for title or use by or under the order of any Government
Hi-jacking or any unlawful seizure or wrongful exercise of control of the

aircraft.
CONDITIONS (APPLICABLE TO ALL SECTIONS):
Due Diligence
Compliance with air navigation and airworthiness orders and

requirements issued by any competent authority.
Immediate notice of any event likely to give rise to a claim.
Right to Insurers to take control of all negotiations and proceedings to

settle, defend or pursue any claim.
Right of Subrogation.
Notice of Variation in Risk.
Notice of Cancellation.
Law and Jurisdiction
The terms of the policy to apply separately of each aircraft covered under
the policy in the event of two or more aircraft being covered.
Limit of Indemnity not to exceed the Limits specified in the Policy.
False and Fraudulent claims will result in Policy becoming void.

IMPORTANT CLAUSES:
AVN 23A
Unlicensed Landing Ground Suitability Clause
AVN 26A
Aircraft Laying up Returns Clause
AVN 34
Passenger Voluntary Settlement Endorsement
AVN 38B
Nuclear Risks Exclusion Clause
AVN 46B
Noise and Pollution and Other Perils Exclusion Clause
AVN 48B
War, Hi-jacking and Other Perils Exclusion Clause
(Aviation)
263
AVN 52E
AVN 62
AVN 67B
AVN 72
AVN 76
Extended Coverage Endorsement (Aviation

Liabilities)
Search and Rescue Extension Clause
Airline Finance / Lease Contract Endorsement Clause
Contract (Rights of Third Parties) Act 1999 Exclusion
Clause
Supplementary Payments Clause
SPARES ALL RISKS COVER:

Physical Loss of or Damage to
the Spares
Engines
Equipment
-owned or operated by insured
-whilst on the ground or being carried as cargo in transit, or
-whilst on the ground or other premises for storage.
Information Required:
Value of the Spares
Where the spares are stored
Limit any one Location
Limit any one sending / transit

War and Allied Perils:
Both Hull and Liability Sections of the Aircraft Policy exclude war perils
War, Hijacking and Other Perils Exclusion Clause (Aviation) - AVN 48B
Many of the risk Excluded under AVN 48B can be covered, but the
method of achieving the coverage varies.
Hull: Aviation Hull War and Allied Perils Policy-LSW 555C/D
Liability: Extended Coverage Endorsement (Aviation Liabilities)AVN52D/E/F/G
AVIATION HULLWAR AND ALLIED PERILS POLICY:

SECTION I LOSS OF OR DAMAGE TO AIRCRAFT
War, invasion
Strikes, riots, civil commotions or labour disturbances
Any act for political or terrorist purposes
Any malicious act or act of sabotage

264
Confiscation, nationalization, seizure, restraint, detention by any
Government
Hi-jacking or any unlawful seizure or wrongful exercise of control of the

aircraft (made by any person or persons on board the aircraft).
SECTION II
EXTORTION AND HI-JACK EXPENSES
Indemnification up to 90% of the limit stated in the Schedule for:
threats against aircraft / its passengers / crew
extra expenses necessarily incurred following confiscation

EXCLUSIONS
The Policy will not cover Loss or damage caused by:
a) War between any of the following States:
UK
USA
France
The Russian Federation
China
b) Confiscation by any Government named in the schedule
Use of any chemical, biological or biochemical materials unless

used in the Hijack or for extortion purpose.
This exclusion also does not apply to use of such materials on board
the aircraft. If the material is outside the aircraft the policy would
provide coverage only when there is resultant physical damage to
the aircraft only when the wheels of the aircraft are not in contact
with the ground.
Any emission, discharge, release or escape originating external to

the Aircraft that causes damage to the Aircraft as a result of
contamination without other physical damage to the Aircraft
exterior is not covered by the Policy.
d) Any debt, failure to provide bond or security or any other financial cause
under court order
e) Repossession by Title Holder
f) Delay, loss of use and consequential losses.
g) Any use of radioactive contamination or matter. This Exclusion not to
apply to loss of or damage to an Aircraft if such use originates (i)on board
the Aircraft or (ii)external to the Aircraft and causes physical damage to
the Aircraft whilst the Aircraft's wheels are not in contact with the ground
h) Any use of an electromagnetic pulse. This exclusion not to apply to loss
of or damage to an Aircraft if such use originates on board such Aircraft,
whether it is on the ground or in the air.
i) Atomic or nuclear fission and/or fusion or other like reaction. Any
265
radioactive contamination and electromagnetic pulse resulting directly

from such detonation is also excluded.
POLICY FEATURES:
The Hull War Risk Policy is subject to the same warranties, terms and conditions
as are contained in the Assureds Hull ''All Risks'' Policy except as regards:
i) The premium,
ii) The obligations to investigate and defend,
iii) The renewal agreement (if any),
iv) The amount of deductible
v) Aggregate Limit
Aggregate Limit
First introduced after the events at Dawson's Field in Jordan in

September, 1970.
This is a specified maximum sum that will be payable in respect of any or

all claims made in respect of events occurring during the Policy period.
This limit will usually be around the sum of the top three valued aircraft.
Notice of Cancellation
7 Days notice for review of premium rates and geographical limits.
Notice of Cancellation: 7 days prior to the end of each quarter from inception.
Automatic Cancellation: Within 7 days from the time of any hostile detonation of
any weapon of war employing atomic or nuclear fission and / or fusion upon
outbreak of war between the five countries.
LSW 555C
The exclusion relating to the use of chemical, biological or biochemical
materials does not apply when the material is used in
i) The Hijacking provided there is a loss of or damage to the aircraft
ii) Any threat against the Aircraft / passengers / crew only in respect of
payments toward extortion and hi-jack expenses.
The Policy also excludes loss of or damage to the aircraft due to the use of
radioactive contamination or matter
LSW 555D
The exclusion relating to the use of chemical, biological or biochemical

materials not to apply to hijack and extortion as in LSW 555C.
The exclusions if the use of such materials is on board such Aircraft OR if

use of such material is external to the Aircraft causing physical damage
whilst the Aircraft's wheels are not in contact with the ground. Damage
due to contamination without any external damage is not covered.
The above conditions will also apply to the exclusion relating to use of
radioactive contamination or matter.
War write-back on Liability Cover:
Prior to 9/11 war write-back on Liability cover was by way of attachment

of AVN 52C cover. The write-back was available to the full extent of the
liability limit.
Post 9/11, underwriters began restricting their liability in respect of war

exposures by introducing AVN 52D/E.
EXTENDED COVERAGE ENDORSEMENT (AVIATION LIABILITIES)
AVN 52E:
Coverage
The perils excluded under AVN 48B are written back to the Liability Cover subject
to additional premium. In respect sub-para a of Clause AVN 48B (War, invasion,
acts of foreign enemies, hostilities, civil war, rebellion, revolution, insurrection,
martial law, military or usurped power or attempts at usurpation of power), the
policy does not cover liability for damage to property on the ground situated
outside Canada and USA unless caused by or arising out of the use of aircraft.
Limitation of Liability
The Limit of Insurers' Liability is limited to the extent specified. Unlike the
liability limit this limit is an aggregate limit.
EXTENDED COVERAGE ENDORSEMENT (AIRCRAFT HULLS) AVN 51
Provides Limited Hull Write back Cover
When attached to the HAR Policy, the perils excluded under paragraphs
(c), (e) and (g) of the AVN 48B are written back.
WAR AND ALLIED PERILS Cover for Spares
If the spare parts and equipment are insured for all risks under the Hull
Policy, the war risks coverage will be afforded under the Hull War and
Allied Perils Policy.
If there is a separate Policy for Spares, coverage against war perils will be
provided by that policy by addition of :
Institute War Clauses CL 258 and
Institute Strike Clauses CL 260.
Automatic Cancellation
Upon outbreak of war between France, China, the Russian Federation,

UK and USA
266
267
Hostile detonation of any weapon employing atomic or nuclear fission
and / or fission.
Repossession of the aircraft for either title or use.

Review and Cancellation
7 days notice to review premium and / or geographical limits.
48 hours notice following a hostile detonation of atomic or nuclear

weapon
7 days notice for cancellation
PILOT / CREW PERSONAL ACCIDENT INSURANCE:

Covers the Insured, their employees
TYPES:
Named Personnel on 24 hour basis
Un-named personnel whilst they are boarding / alighting from / flying in

one of insured's aircraft.
EXCLUSIONS:
Death and Disablement from
War, invasion etc.
Radioactive contamination
Dangerous activities
AIRPORT OWNERS' AND OPERATORS' LIABILITY

SECTION 1
Bodily injury or property damage:
a) In or about the premises specified in the Schedule, as a direct result

of the services granted by the Insured.
b) Elsewhere in the course of any work or of the performance of any
duties carried out by the Insured or his employees in connection with
the business or operations specified in the schedule.
SECTION 2
Loss of or damage to Aircraft or Aircraft Equipment:
not belonging to the Insured
whilst on ground in the care, custody or control or
whilst being serviced, handled or maintained by the Insured

SECTION 3
Bodily Injury or Property damage arising out of
Products / goods
Manufactured / repaired / serviced / supplied / distributed by the insured
Provided the products / goods which form part of or are used in

conjunction with aircraft and only after such goods / products have
ceased to be in the possession or under the control of the insured.
AIRPORT OWNERS' AND OPERATORS' LIABILITY EXCLUSION
Liability arising out of the operation of an airfield control tower (unless

previously agreed by the Insurers)
Suicide or Attempted Suicide
AIDS
Deliberate exposure to danger
Pregnancy or childbirth
LOSS OF LICENSE INSURANCE:
Operating crew of the aircraft are required by law to have a valid

professional license from the Competent Authority for carrying out their
professional duties.
The issuance and renewal of the license is subject to certain terms and
conditions.
The License is liable to be suspended either temporarily or permanently.
This insurance covers consequential loss arising out of suspension of the

license on medical grounds.
268
AVIATION INSURANCE RATING:
Experience Rating Premium reflects the loss experience of the

Individual Risk.
Class Rating Risks are allocated by classification.

Aviation Insurance is a mixture of Class Rating and Experience Rating.
AVIATION INSURANCE - UNDERWRITING ASPECTS:
Aviation Business can be categorized into:
Airline Business - Operating with a fleet of large aircraft.
General Aviation Business - All other business will come under General
Aviation Business.
269
Underwriting Considerations:
Lease Agreements
Government Regulations
Aviation Insurance Business
Geographical scope of operation including nature of terrain
Concentration of Population
Extent of Exposure vis--vis limit
General Aviation Business
Airline Business
Law in the countries where aircraft operates
Claims Experience
For Passenger Liability Number of Passenger seats, Type of

Passengers, Liability Limit on Admitted basis, Regulations applicable.
Fixed Wing Large Aircraft
For PA to Pilots and Crew Whether 24 hours cover required or flight

only cover required, experience of the pilot, nature of aircraft operated,
Accident History, Limit required vis--vis earnings.
For Loss of License Cover Age of the Pilot, Limit required vis--vis
earnings.
Fixed Wing Small Aircraft
Rotor Wing Aircraft

For Airport Owners' and Operators' Liability Cover:
For Hull All Risk Cover:

1. Type of Business (Airline / General Avn.)
2. Type of aircraft (FW / RW)
3. Model
4. Age of the aircraft
5. Size of the Aircraft
6. Value of the aircraft
7. Use
8. Maintenance of the Aircraft
9. Pilots
10. Area of Operations
11. Claims Experience
12. Fleet size
13. Aircraft Utilization
14. Market conditions
15. Client - Operator, Reputation, Capability
For Liability Cover:
Aircraft Size
270
Aircraft Movement,
Number of passengers,
Revenue Earnings,
Number of Airports to be covered.

Aviation Insurance Airlines in India:
National Carriers : Air India, Indian Airlines
Established Private Carriers : Jet Airways, Air Sahara, Air Deccan,

Kingfisher, Spice Jet, Paramount Airways, Go Air, Indus
Cargo/Courier Services: Blue Dart

Aviation Reinsurance
Retention is an amount an insurance company is willing to risk for its own account
from a single loss.
Factors Influencing Retention:
1. Capital & Free Reserves.
2. Estimated Premium Income.
3. Profitability of Portfolio.
271
4.
5.
6.
7.
Size of the Portfolio may not be suitable for Treaty Protections.
Type and Spread of Risks.

Reinsurance Type and Cost.
Corporate Strategy.
Market Conditions.
Time Consuming.
Higher Administrative Costs.
Suitable for:
Factors Affecting Aviation Reinsurance Program:
Large losses affecting individual risks
Territorial scope
- HAR, HWR covers of GA Business.

- Standalone Liability covers like Refueling Liability, Airport Owners' &
Operators' Liability etc.
- Airline Fleet Policies.
Aircraft Manufacturing, Repair and Maintenance Activities
Liability Covers long tailed
Expertise of the Insured

Proportional Treaties:
Insurer can react more quickly
Independence in Operation for the Insurers
Lower Administrative Costs
Are not very popular as:

- They do not produce Adequate Capacities
- An Insurer does not get the advantage of the worldwide results and is
insulated from worldwide trends.
- International Expertise Unavailable
Suitable for:
General Aviation Business
Excess of Loss:
Specific Excess of Loss Suitable for Liability Covers, AVN 52E covers,
Hull Deductible Covers.
Facultative:
Each risk needs to be negotiated on its own merits.
Re-insurers like to have more control over underwriting of the risk.
Better cash flow.
Expertise of the facultative reinsurer is available.
World rates may differ from regional experience.

272
Current Scenario:
Aviation Insurance constitutes a miniscule percentage of the Indian insurance
market accounting for 1.7% of the premium underwritten by all the non life
insurance companies. Globally the premiums have been falling since 2001 due to
reduction in the number of accidents. But major losses incurred by airlines
globally in 2007, around $1.8 billion have been a setback to the aviation insurance
sector. The crash of a TAM Airbus A320 in Sao Paulo, Brazil in July and a Kenya
Airways B737 near 'Douala', in Cameroon in May, alone are expected to cost
airline insurers almost $700million. With the cost of claims soaring, the capacity
reducing, the market becoming hard, the rates of premium are expected to rise.
The Indian aviation industry is moving at a fast pace growing at a rate of 18 per
cent annually and this growth is expected to continue. IATA reckons India to be a
driving force behind the world's civil aviation business that is globally expected to
grow from US$ 5.1 billion to US$ 5.6 billion this year. Government estimates are
that India's fleet will be around 500-550 aircrafts by the end of 2010, which was
only 130 a few years ago. International budget carriers, especially low-cost
carriers are making a beeline for India. India continues to grow steadily with a 7
per cent increase in the number of flights.
The number of air travelers increased by 38.5 per cent in 2006-07 and are
anticipated to double over the next decade. Handling of such traffic will require
more airports, aircrafts, pilots, and ground handling person. To sustain this growth
several improvements are envisaged, including government's airport
modernization plan involving investments of US$ 9 billion by 2010.
With the entry of low cost airlines along with fleet expansions and increasing
corporate aircraft ownership, and projected growth in various spheres of aviation
industry there will be demand for various aviation insurance products and the
market is all set to expand in a major way.
Aviation insurance is a specialized branch of insurance. The risks are evaluated
based on information such as(i)name, address, age, business of the aircraft owner
273
(ii)aircraft make, model, year of manufacture and value (iii)purpose for which
aircraft will be used (iv)name, age, ratings and experience of the pilots,(v)type of
hull and liability coverage (vi) past loss experience. Aviation market is different
from other non life insurances and in terms of size is much smaller than that of
other non life branch of insurance .Though the limits of acceptance for offices are
low or nil, the marketing officials and underwriters of operating and Regional
Offices must have sufficient knowledge of aviation insurance products to
understand the requirement of the clients and explain the coverage, terms and
conditions to the customers. To equip the personnel dealing with aviation
insurance this Manual includes at length profiles of nine aviation policies catering
to different proposers of aviation Insurance.
Different Policies in Details:

Aircraft Hull/Liability
Class Type: TB.
Policy code: 71; Class code: Various; Dept. code: 43.
Rate of Commission (%): 5%
Acceptance Limit (Rs): BO- Nil, DO- Nil, RO- Nil, HO- All.
Minimum Premium (Rs): 100/1. Introduction
Product
The Policy is a comprehensive cover comprising three sections. While section I
provides cover for accidental loss or damage to aircraft, section II indemnifies the
insured against legal liability for compensation to third party. Under section III
insured is indemnified in respect of legal liability for compensation for accidental
death / bodily injury to passengers, damage to baggage and personal articles of
passengers.
Customer
Owners/ Operators of airlines,
Owner of aircraft, Helicopters
Manufacturer of aircraft, helicopters
Flying Club,
Training School,
Agricultural application
Government Civil Aviation Department
2. The Insurance Cover
Section I
Provides cover for accidental loss or damage to the aircraft against accidental loss
or damage from whatsoever cause arising while in flight or taxiing or on the
ground or moored.
274
Section II
Provides cover for insured's legal liability to third party for compensation against
accidental bodily injury (fatal or non fatal) to persons and accidental damage to
property caused in direct connection with the aircraft.
Section III
Provides cover for insured's legal liability for compensation for accidental bodily
injury (fatal or non fatal) to passengers while entering into, being carried in or
alighting from the aircraft.
Legal Expenses
The Company also pays (within the agreed limits of liability), legal expenses
incurred with its written consent in connection with claims for death or injury to
passengers or third parties, or loss of or damage to property of third parties.
Exclusions
Illegal purpose or any purpose other than stated;
Outside the Geographical limits stated;
Piloted by any person other than stated;
Total number of passengers carried exceeds the declared number stated;
War, hijacking and allied perils;
Nuclear risks.
Conditions
Insured shall use due diligence to avoid accidents;
Compliance with all air navigation and air worthiness orders and
requirements;
Immediate notice of any event likely to give rise to a claim. Policy may be
cancelled by insurers or insured by giving 10 days notice. If cancelled by
the insurer they will return prorate portion of premium. If cancelled by
the Insured, return of premium shall be at the discretion of the Insurer.
Extensions
On the written request of the Insured and on payment of additional

premium, the Policy can be extended to cover passenger liability on an
Admitted Liability basis instead of Legal Liability (AVN 34A).
The Policy can be extended to indemnify the Insured in respect of his

legal liability for compensation for damage to or loss of passengers'
personal baggage while being loaded into, carried in or unloaded from
the aircraft but only when arising out of an accident to the Aircraft.
3. Underwriting Guidelines
Duly completed proposals forms are to be referred to HO, Technical for

approval of rates/ terms.
275
The proposal form should be duly completed and should be checked for
the following:
- Make/Type of the Aircraft;
- Engine Number and Type;
- Year of Construction of Aircraft;
- Maximum Take off weight;
- Seating Capacity;
- Use of Aircraft;
- Area of Operation;
- Details of Insurance required (viz, Hull All Risks, Hull War Risks,
Third Party, Legal Liability, Passenger Legal Liability, PA to
Pilot/Crew, Baggage Liability);
- Period of Insurance;
- Details of Pilot (Whether Named Pilots or any pilot with valid
license, Total Flying hour's experience);
- Maintenance;
- Claims experience of client, craft, and pilot.
Determination of sum insured/values to be insured:
Section I - Sum insured is determined on Agreed Value basis
Section II Limit of Indemnity to be fixed for AOA/AOP
Section III- Separate limits of Indemnity for Passenger Legal Liability &
Baggage Liability
Rating:
The factors determining the rate are the types of aircraft (Fixed Wing/Rotor Wing),
Year of manufacture, use, area of operation, take of weight, maintenance Pilots,
Annual utilization
Claims experience, limits of Indemnity. Hull All risk rated as a percentage of
aircraft value.
Duly completed proposals forms are to be referred to HO, Technical for approval
of rates / terms.
Excess/Deductibles:
Mainly depends upon the value of the Aircraft.
4. Documents for Claims Settlement:
Documents in respect of aircraft details, flight details, accident report, Certificate
of Airworthiness/registration, Crew details, Maintenance & engineering
information, Passenger Manifest.
276
Aviation Hull war and Allied Risks

Class Type: TB.
Policy code: 71, Class code: Various, Dept. code: 43.
Acceptance Limit (Rs): BO- Nil, DO- Nil, RO-Nil, HO- All.
Minimum Premium (Rs): 100/1. Introduction
Product:
The Policy covers loss of or damage to aircraft due to war, hijacking and allied
perils which is excluded from Hull all risk policy (by attaching clause AVN 48B).
After the Israeli raid on Beirut airport of 28 December 1968, the London Market
introduced a war and hijacking exclusion clause, (clause AVN 48B) which after
undergoing certain amendments is forms part of every Hull and Liability policy.
Customer:
Owners/ operators of airlines,
Owner of aircraft,
Manufacturer of aircraft
Flying Club,
Training School,
Agricultural application
Government Civil Aviation Department
Owners of Helicopters
2. The Insurance Cover:
Basic Coverage (loss or damage to Aircraft):
War, invasion, civil war, rebellion, revolution, military coup;
Strikes, riots, civil commotion;
Acts for political or terrorist purpose;
Malicious acts;
Confiscation/requisition of aircraft by Government, etc;
Hi-jacking.
Exclusion
War between UK, USA, France, Russian Federation, China
Confiscation by government of registration
Confiscation for financial default/repossession by title holder
Delay, loss of use, consequential loss
277
Use of chemical or biological materials

Hostile use of radioactive contamination
Hostile use of an electromagnetic pulse
Hostile detonation of nuclear weapons
Conditions:
Insurers may issue seven days notice to review premium and/or geography limits
at any time;
Automatic review of premium and/or geographical limits on expiry of seven days
from hostile detonation of nuclear weapons;
Insurers may cancel policy by giving seven days notice;
Automatic cancellation of policy in the event of war between UK, USA, France,
Russian Federation, China;
Material change in operations provision.
Extensions:
Legal Liability of the Insured towards Passenger and Third Party due to war and
allied perils can be covered by charging additional premium written back into the
Hull/Liability Policy.
3. Underwriting Guidelines:
Duly completed proposals forms are to be referred to HO, Technical for

approval of rates / terms.
Details of Pilots (whether named pilots or any pilot with valid license/
total flying hours experience).
Limits:
Each aircraft covered for the same Agreed Value as under Hull all risk Policy
subject to a Policy aggregate sum insured per annum.
Aviation Personal Accident (for crew members)

Class Type: TB.
Policy code: 71, Class code: 42, Dept. code: 43.
Minimum Premium (Rs): 100/1. Introduction:
Product:
A Policy designed to provide compensation to pilots and members of the crew
against injury, disablement or death arising out of an accident caused by
accidental, external, violent and visible means while entering into alighting from
or being as pilot member of the crew or passenger in any licensed standard type of
aircraft anywhere in the world. Such risks are excluded under PA policy and hence
a separate PA policy has been introduced to cover crew members.
Customer:
Pilots, Co Pilots, members of crew, Engineers, Technicians, Navigators
Basic Coverage:
The Policy covers crew against injury, disablement or death arising out of an
accident caused by accidental, external and visible means while entering into
alighting from or being as pilot member of the crew or passenger in any licensed
standard type of aircraft anywhere in the world. The compensation payable is as
per table below provided the injury sustained results in death / disablement within
twelve months of the occurrence of the accident
Rating:
Hull war risks rated as a percentage of aircraft value on similar basis to Hull All
Risks.
Sr.
No.
1.
2.
Excess/Deductibles:
Suitable excess is to be imposed.
3.
4. Documents for claim settlement:

of Airworthiness/registration, Crew details, Maintenance &engineering
information, Passenger Manifest.
278
4.
Cover (Within twelve

Table - A
Table - B
Table - C
months of date of accident)
Death.
100% of CSI 100% of CSI 100% of CSI
Loss of sight of two eyes
Nil
100% of CSI 100% of CSI
/two limbs/one eye,
one limb) .
Loss of one limb or sight
Nil
of one eye, Loss of one limb
or loss of sight of one eye.
Temporary total disablement.
Nil
1% of CSI
1% of CSI
for maximum for maximum
52 weeks
52 weeks
279
Sr. Cover (Within twelve

No. months of date of accident)
5. Permanent total disablement
caused otherwise than by
loss of limbs or sight.
6. Permanent partial
disablement
i. Loss of toes all
ii. Great Both phalanges
iii. Great one phalanx
iv. Other than Great, if more
than one toe lost.
v. Loss of Hearing:
a. Both ears
b. One ear
vi. Loss of four fingers and
thumb of one hand.
vii. Loss of four fingers
viii. Loss of thumb:
a. Both phalanges
b. One phalange
ix. Loss of middle finger
a. Three phalanges
b. Two phalanges
c. One phalange
x. Loss of ring finger
a. Three phalanges
b. Two phalanges
c. One phalange
xi. Loss of little finger
a. Three phalanges
b. Two phalanges
c. One phalange
xii. Loss of meta corpuses
First or Second
Third, Fourth or Fifth
xiii. Any other permanent
partial disablement
Table - A
Table - B
Table - C
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
As per the %
of CSI below:
20%
5%
2%
1%
Nil
Nil
Nil
Nil
Nil
Nil
50%
25%
40%
Nil
Nil
35%
Nil
Nil
Nil
Nil
25%
19%
Nil
Nil
Nil
Nil
Nil
Nil
6%
4%
2%
Nil
Nil
Nil
Nil
Nil
Nil
5%
4%
2%
Nil
Nil
Nil
Nil
Nil
Nil
4%
3%
2%
Nil
Nil
Nil
Nil
Nil
Nil
3%
2%
As assessed
by Doctors
Exclusions:
Suicide, self injury;
Any breach of law by Insured;
Any breach by the insured of any air navigation/air worthiness orders;
280
Insanity, Insured being under the influence of drugs/intoxicating liquor;

Test flights;
Insured taking part in any military, naval or air force operations;
Insured engaged in Aerobatics, Experimental flying, racing, record attempt, speed
trial, abnormal flying.
Conditions:
Accidental death shall not be presumed by reason only of the disappearance of the
insured person.
Policy may be cancelled on the following ground and accordingly Prorata
premium can be refunded:
- Change of employer
- Request for cancellation and subject to no claim reported under the policy
- Absence of valid license.
Extension: Nil.
All proposals should be referred to HO for approval or rates and terms.
Sum Insured is the Capital Sum Insured and is generally 3 to 5 times the annual
income of the Insured Person.
Sr.
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Age of Pilot
18 to 55 yrs
18 to 55 yrs
18 to 55 yrs
56 to 60 yrs
56 to 60 yrs
56 to 60 yrs
60 and above
60 and above
60 and above
Table of
Benefits
A
B
C
A
B
C
A
B
C
Capital Sum Insured

5 times of annual Income
2.5 times of annual Income
It is not desirable to increase the CSI mid-term of the Policy.
In the case of substantial increase in salary the CSI can be increased subject to
- Declaration by insured that he does not have any knowledge of illness
- Enhanced CSI should not be more than 25% of the existing Policy
281
Rating:
Rate is to be charged on the Capital Sum Insured and ranges from 0.40% to 1.00%
and depends on the profession and the type of cover (on duty/off duty).
Rate for 24 hours basis inclusive of on-duty cover:
Table of Benefits
Pilots
Engineers/Technicians
A
0.50%
0.40%
B
0.75%
0.60%
C
1.00%
0.80%
Excess: Nil.
Medical Report, Discharge Certificate from the Hospital/Nursing Home
Police Report, DGCA Report
Death Certificate, Post Mortem Report, Death Certificate
Certificate from Employer as to last use of License
Medical Certificate/Doctors Certificate on PPD/PTD
Any other document required to deal with PA Claim
Aviation Fuelling & Re-fuelling Liability

Class Type: TB.
Minimum Premium (Rs): 100/-
Exclusions:
Loss of property of the insured other than aircraft of others while being fuelled or
re-fuelled by the insured.
Bodily injury, property damage caused by any mechanically propelled vehicle on
road traffic/any public highway and aircraft, used or operated by or on account of
insured.
Liability for bodily injury to any person who at the time of sustaining such injury
is engaged in the service of the insured or acting on his behalf.
Liability assumed by the insured by agreement under any contract unless such
liability would have attached in absence of the agreement.
Condition:
No liability shall be admitted without the consent of the insurer, who shall be
entitled to take over and conduct the defense of any claim.
Extension: None
All proposals are to be referred to HO for approval of rates and terms along with
relevant details.
The Sum Insured is the limits of indemnity to be selected by insured for any one
occurrence and any one period limit separately for bodily injury and property
damage.
Rating: Rates are reinsurance driven and hence reference has to be made to HO
Technical / RI Dept.
Rates for cancellation:
Policy period in force
1. Introduction:
Product:
The policy covers bodily injury including death to third party, or damage to
property caused by accident arising out of insured's business as suppliers of
aviation fuel including the fuelling and or re-fuelling of aircraft at the locations
mentioned in the schedule.
2. The Insurance Cover
Basic Coverage
The Policy covers bodily injury including death, or damage to property caused by
accident arising out of insured's business as suppliers of aviation fuel including the
fuelling and or re-fuelling of aircraft at the locations mentioned in the schedule.
282
Up to 1 month
More than 1 month & up to 2 months
More than 9 months
283
Refund % ( percentage)
of annual premium
80
70
60
50
40
30
25
20
15
No refund
Excess/Deductibles:
Amount of deductibles are based on limit of Indemnity and hovers in the region
of 2 % of Sum
Insured (SI), subject to minimum of USD 50,000.
4. Documents for Claims Settlement
Claim form
Court award
Legal opinion
Exclusions:
Loss of damage to turbine engine or accessory unless such damage is crossed by
fire, explosion, ingestion, external forces.
Use of the aircraft for any illegal purpose or any purpose other than stated
Aircraft is outside the Geographical limits stated
Aircraft is being piloted by any person other than stated
Total number of passengers carried exceeds the declared number stated
War, hijacking and allied perils
Conditions:
It is a condition precedent to the liability of the insurer that the insured should
affect an aircraft hull and space all risk insurance.
Policy is subject to same warranties, terms and conditions provided the

Aircraft Hull and Spares all risks insurance prior to happening of the loss.
Aviation Hull Deductible

Extensions: None.
Class Type: TB.
Acceptance Limit (Rs): BO-Nil, DO-Nil, RO-Nil, HO-All.
Product:
Airlines at times have to bear a percentage of the loss in view of the deductibles
imposed in the
Hull All risk Policy thus facing financial difficulty by purchasing this policy the
airline operators/owners can get relief from bearing the deductibles which are
substantially high and cause financial constraints for the owner/operator.
Customer:
Airline owners/airline operators
Basic Coverage:
The Policy provides indemnity against the amount of deductible applied on the
Hull/ and spares all risk policy.
284
of rates / terms.
The proposal form should be duly completed and should be checked for the
following:
- Make/Type of the Aircraft;
- Engine Number and Type;
- Year of Construction of Aircraft;
- Maximum Take off weight;
- Seating Capacity;
- Use of Aircraft;
- Area of Operation;
- Details of Insurance required ( Viz Hull All Risks, Hull War Risks, Third
Party
Legal Liability, Passenger Legal Liability, PA to Pilot/Crew, Baggage
Liability);
- Period of Insurance;
- Details of Pilot (Whether Named Pilots or any pilot with valid license, Total
Flying hour's experience).
285
All proposals are to be referred to HO for approval of rates and terms along
with relevant details.
Sum insured is the difference between the HAR deductible and the insured
amount under the hull all risk policy.
Aggregate limit during the policy period applicable.
Rating:
A flat amount charged in respect of a specific Aircraft
Profit Commission After expiry of the policy and subject to renewal with the
insurer, insurer may agree to return to the insured a profit commission
Excess: Nil.
of
Airworthiness/registration, Crew details, Maintenance &engineering
information, Passenger
Manifest.
Aviation loss of License (Group)

Class Type: TB.
Policy code: 71; Class code: 35; Dept. code: 43.
Product:
Operating pilots of aircraft are required to have valid license. In the event of the
License being suspended on medical grounds such as illness, disease contracted or
injury sustained during the policy period, either temporarily or permanently, the
Loss of License policy provides for payment of compensation in case of disability.
The policy is not a general health insurance and does not cover expenses incurred
for medical treatment and loss of revenue.
Customer:
Pilots Association, Airlines
286

Basic Coverage:
In the event of the persons insured suffering bodily injury or illness resulting at any
time whether during or after the period of insurance (but not beyond a period of
five years after the expiry of this insurance) in their incapacity then the
compensation as detailed below is payable:
Item
Number
Type of Disablement
Compensation
Incapacity causing Permanent

Total Disablement (otherwise
Item 1 than due to psychosis or
psychoneurosis or epilepsy)
After deduction of any payments

made under other items 3 or 4 the
balance of one hundred per
centum of the Capital Sum
Insured

Total Disablement due to
psychosis or psychoneurosis or
epilepsy

balance of eighteen per centum of
the Capital Sum Insured
Incapacity causing Temporary

than due to psychosis or
sychoneurosis or epilepsy)
At the rate per calender month for

not more than twelve months or
up to the prior Death or
Permanent Total Disablement of
the Insured Person . **In the case
of Total Disablement of the
Person Insured of two per centum
of the CSI

epilepsy
At the rate per calendar month for

the Insured Person.**In case of
Total Disablement of the Person
Insured of one and half per
centum of the CSI
Item 2
Item 3
Item 4
Item 5
Legal and /or other costs incurred Up to Rs. 2000/- per life insured.
with consent of the Company
*Liability of the Company will not exceed 100 per centum of the CSI
*No compensation is payable in respect of the first 90 days of the incapacity
consecutively or in the aggregate in any one year of insurance
** Company is entitled to withhold payment of the balance of the CSI for
twelve calendar months after expiry of said 90 days but paying to the person
insured compensation at the rates mentioned above.
287
Definition:
Incapacity means any incapacity causing the permanent total disablement or
temporary total disablement of the life assured.
Permanent Total disablement means any disablement due to bodily injury or to
illness, disease or disability including natural deterioration of the life assured
which is of a permanent nature and prevents him/her from attending to the
occupation.
Temporary Total disablement means any disablement due to personal injury or
illness, disease or disability including natural deterioration of the life assured
which is a temporary nature and entirely prevents him from attending to the
occupation.
Exclusions:
Death of the Insured Person
Any personal injury, illness, disease or disability existing prior to the inception
of the
Policy
Insured Person taking part in riots or civil commotion
Intentional self injury, suicide, provoked assault, dueling, fighting or venereal

diseases
Associations if the same has been obtained through the offices of any such
association.
This insurance shall apply while the insured is anywhere in the world.
Insurer has the liberty to appeal against suspension, restriction or loss of license
in the name of the insured and the insured shall provide information and
assistance for defense.
Extensions: Nil.
Proposals should be accepted only from in the age group of 18-65 years having
valid license issued by DGCA and medically fit to hold the same. Types of License
issued to pilots are:
ALTP: Airlines Transport Pilots License;
CPL: Commercial Pilots License
The Policy should not be issued as a Stand alone product and should be issued to
clients who place their aviation business i.e. Hull All Risk and Personal
Accident (Aviation) insurance.
Deliberate exposure of the Insured Person to exceptional danger
At the time of acceptance of proposal, proof of satisfactory electrocardiogram

within the past 24 months must be provided.
Any personal injury, illness, disease or disability giving rise to a claim under any
previous Permanent Total Disability
All proposals should be referred to HO for approval of rates and terms.
Riding or driving in any kind of race
Chronic alcoholism
Sum Insured is linked to the income of the insured and age of the insured:
Conditions:
Disputes to be referred to Medical Referee
Insured to authorize Company to seek opinion of the principal medical officer of

the competent civil authority to ascertain whether or not an incapacity is
presumed to prevent him to follow his occupation
Insured Person may, if required have to submit to an independent medical or

surgical examination
Policy will cease automatically if the Insured Person loses or terminates his
membership of anyone of the Aircrew Association Extensions.
Insured if required shall submit to an independent medical or surgical

examination.
Policy to cease if insured losses or terminates his membership of any aircrew

288
Sr. No.
1
2
3
4
5
Age of Pilot
Up to 45 years
46 to 50 years
51 to 55 years
56 to 57 years
58 years and above
Capital Sum Insured

1 time of annual Income
Mid term enhancement of Sum Insured:

It is not desirable to increase the CSI mid term of the policy. However in the case of
substantial increase in salary the CSI can be increased subject to submission of:
- Medical Certificate issued by DGCA
- Medical assessment report of DGCA
289
- TMT& Blood Sugar (PP)

- Enhanced CSI should not be more than 25% of the CSI in existing Policy
Rating:
The rate is charged on the Capital Sum Insured as per following details:
Age
Pilots
18 to 40 yrs
1.00%
41 to 45 yrs 46 to 50 yrs
1.00%
1.50%
51 to 56 yrs
57 to 60 yrs
1.75%
2.00%

Basic Coverage:
In the event of the person insured suffering bodily injury or illness resulting at any
time whether during or after the period of insurance (but not beyond a period of
five years after the expiry of this insurance) in his incapacity then the
compensation as detailed below is payable:
Item
Number
Type of Disablement
Compensation

Item 1 than due to psychosis or
psychoneurosis or epilepsy)

balance of one hundred per
centum of the Capital Sum
Insured

epilepsy

balance of eighteen per centum of
the Capital Sum Insured

than due to psychosis or
sychoneurosis or epilepsy)
At the rate per calender month for

the Insured Person . **In the case
of Total Disablement of the
Person Insured of two per centum
of the CSI

epilepsy
At the rate per calendar month for

the Insured Person.**In case of
Total Disablement of the Person
Insured of one and half per
centum of the CSI
Excess: First 90 day as time excess from the date of commencement of incapacity.
Item 2
Claim form, Medical Reports, Discharge Certificate, DGCA Certificate on
incapacity to hold
License, certificate from the employer on the last use of the License.
Item 3
Aviation loss of License (Individual)

Class Type: TB.
Product:
Operating pilots of aircraft are required to have valid license. In the event of the
License being suspended on medical grounds such as illness, disease contracted or
injury sustained during the policy period, either temporarily or permanently, the
Loss of License provides for payment of compensation in case of disability. The
policy is not a general health insurance and does not cover expenses incurred for
medical treatment and loss of revenue.
Customer: Pilots
290
Item 4
Item 5
Legal and /or other costs incurred Up to Rs. 2000/- per life insured.
with consent of the Company
*Liability of the Company will not exceed 100 per centum of the CSI
*No compensation is payable in respect of the first 90 days of the incapacity
consecutively or in the aggregate in any one year of insurance
** Company is entitled to withhold payment of the balance of the CSI for
twelve calendar months after expiry of said 90 days but paying to the person
insured compensation at the rates mentioned above.
291
Types of License:
Extensions: Nil.
ALTP: Airlines Transport Pilots License
CPL: Commercial Pilots License
Proposals should be accepted only from pilots in the age group of 18-65 years
having valid license issued by DGCA and medically fit to hold the license.
The Policy should not be issued as a Stand alone product and should be issued
to clients who place their aviation business ie Hull All Risk and PA(Aviation)
insurance.
Exclusions:
Death of the Insured Person
Any personal injury, illness, disease or disability existing prior to the

inception of the

Policy
Insured Person taking part in riots or civil commotion
Sum Insured is linked to the income of the insured and age of the insured:
Intentional self injury, suicide, provoked assault, dueling, fighting or venereal

diseases
Sr. No.
1
2
3
4
5
Deliberate exposure of the Insured Person to exceptional danger
Any personal injury, illness, disease or disability giving rise to a claim under
any previous
Permanent Total Disability
Riding or driving in any kind of race
Chronic alcoholism
Conditions:
Disputes to be referred to Medical Referee
Insured to authorize Company to seek medical to ascertain whether or not

incapacity is presumed to prevent him to follow his occupation
Insured Person may, if required have to submit to an independent medical or

surgical examination
Policy to cease if insured losses or terminates his membership of any aircrew

Associations if the same has been obtained through the offices of any such
association.
This insurance shall apply while the insured is anywhere in the world.
Insurer has the liberty to appeal against suspension, restriction or loss of

license in the name of the insured and the insured shall provide information
and assistance for defense.
292
Age of Pilot
Up to 45 years
46 to 50 years
51 to 55 years
56 to 57 years
58 years and above
Capital Sum Insured

1 time of annual Income
Mid term enhancement of Sum Insured:

It is not desirable to increase the CSI mid term of the policy. However in the case of
substantial increase in salary the CSI can be increased subject to submission of:
- Medical Certificate issued by DGCA
- Medical assessment report of DGCA
- TMT& Blood Sugar (PP)
- Enhanced CSI should not be more than 25% of the CSI in existing Policy
Rating:
The rate is charged on the Capital Sum Insured
Age
18 to 40 yrs 41 to 45 yrs 46 to 50 yrs 51 to 56 yrs 57 to 60 yrs
Pilots
1.00%
1.00%
1.50%
1.75%
2.00%
Engineers/
Technicians
0.80%
0.80%
1.20%
1.40%
1.60%
293
Table
Type of Disablement
Compensation
Excess: First 90 day as time excess from the date of commencement of incapacity
Death (Within twelve months of

Table A date of accident)
100% of CSI
Table B Death (Within twelve months of

date of accident)
1
100% of CSI
Loss of sight of two eyes/two

limbs/one eye, one limb/ (Within
twelve months of date of
accident)
3
accident)
4
accident)
5
accident)
Table C Benefits as per Table B &
Permanent Partial Disablement
2
Claim form, Medical Reports, Discharge Certificate, DGCA Certificate on

incapacity to hold License, Certificate from the employer on the last use of the
License.
Aviation Personal Accident (crew member)

Class Type: TB.
Product:
A Policy designed to provide compensation to pilots and members of the crew
against injury, disablement or death arising out of an accident caused by
accidental, external and visible means while entering into alighting from or being
as pilot member of the crew or passenger in any licensed standard type of aircraft
anywhere in the world. Such risks are excluded under PA Policies.
Customer:
Pilots, Co Pilots, members of crew
Basic Coverage:
The Policy covers crew against injury, disablement or death arising out of an
accident caused by accidental, external and visible means while entering into
alighting from or being as pilot member of the crew or passenger in any licensed
standard type of aircraft anywhere in the world.
294
100% of CSI
100% of CSI
100% of CSI
100% of CSI
% of the CSI
Additional E x p e n s e s i n c u r r e d f o r 2.5% of the CSI or Rs. 2500/Benefits transportation of insureds dead whichever is lower
body
Exclusions:
Death/Bodily injury arising out of/traceable
Suicide, self injury;
Any breach of law by Insured;
Any breach by the insured of any air navigation/air worthiness orders;
Insanity, Insured being under the influence of drugs/intoxicating liquor;
Test flights;
Insured taking part in any military, naval or air force operations;
Death /Bodily injury or any illness.
Conditions:
Accidental death shall not be presumed by reason only of the disappearance of the
Insured Person.
295
of rates / terms.
The proposal form should be duly completed and should be checked for the
following:
- Make/Type of the Aircraft
- Engine Number and Type
- Year of Construction of Aircraft
- Maximum Take off weight
- Seating Capacity
- Use of Aircraft
- Area of Operation
- Details of Insurance required ( Viz Hull All Risks, Hull War Risks, Third Party
Legal Liability, Passenger Legal Liability, PA to Pilot/Crew, Baggage Liability)
- Period of Insurance
- Details of Pilot (whether Named Pilots or any pilot with valid license, Total
Flying hour's experience).
All proposals referred to HO for approval of rates and terms.
Sum Insured is the Capital Sum Insured and is generally 3 to 5 times the annual
income of the Insured Person.
Rating:
Rate for 24 hours basis inclusive of on-duty cover:
Table of Benefits
Pilots
0.50%
0.75%
1.00%

Aviation Product &Grounding And other Aviation Liabilities Insurance

Class Type: TB.
Product:
The policy provides cover for Insured's legal liability to pay compensation to third
parties for bodily injury or property damages caused by an occurrence arising out
of the product hazard.
The insurer will indemnify the insured for their legal liability to pay as damages for
the loss of use of completed aircraft, occurring after delivery to and acceptance by
a purchaser or operator of such aircraft for flight operations and caused by a
grounding arising out of the product hazard.
Customers: Manufacturers, Distributors, Importers and Exporters of aviation
products.
Coverage A
Personal injury and property damage liability.
The company will indemnify the insured for their legal liability to pay
compensation including defense cost for death / bodily injury or damage to
property including use of loss of property caused by an occurrence arising out of
the product hazard
Coverage B:
Grounding Liability:
The company will indemnify the insured for their legal liability to pay as damages
including defense cost for the loss of use of completed aircraft, occurring after
delivery to and acceptance by a purchaser or operator of such aircraft for flight
operations and caused by a grounding arising out of the product hazard.
Certificate from Employer as to last use of License
Any other document required to deal with PA Claim

296
Definitions:
Product Hazard means the handling or use of or the existence of any condition in
an aircraft product provided such aircraft product has ceased to be in the
297
possession or under the control of the insured.

Grounding means a complete and continues withdrawal from all flight operations
or use of aircraft in the interest of safety by the authorities of the country where
aircraft products will be used or by mutual agreement of the insured and
manufacturer /operator of the aircraft.
Aircraft product means completed aircraft, airship, missile, helicopters, launch
vehicles, gliders.
Coverage:
Coverage A:
Grounding liability limited to 20% of the above limits.
Rating:
Excess: Suitable excess to be imposed
Any liability for death, bodily injury/sickness of an employee of insured
Loss of use of any aircraft which has not been destroyed except with respect to
an aircraft which has made an emergency landing.
Claim form
Legal liability arising from any restriction on or withdrawal from the use of
aircraft product not involved in an occurrence.
Court award
Coverage B:
BULLET QUESTIONS
Loss of use of aircraft during maintenance overall or alterations while being

used for purpose other than relating to ground.
Exclusion:
Legal opinion.
1.
How a marine cargo policy differs from other conventional policies like fire
or motor?
Noise and pollution and other perils
It is enough that the insured is having insurable interest at the time of loss
it is not required at the time of taking the policy.
War, hijacking, strike, riot, civil commotion, hostile detonation of any

weapon of war, employing atomic and nuclear fission.
Either a consignor or consignee can take a policy and the same depends
upon the terms and contract of sale viz., CIF, C & F or FOB.
A marine cargo policy is an agreed policy whereas most other policies are
strict indemnity policy. The SUM insured in Marine policy can be CIF +
10% for indigenous items or CIF + 15% for import/exports.
Conditions:
Notice of occurrence or grounding When an occurrence or grounding takes
place, written notice shall be given by or on behalf of the insured to the policy
issuing office.
Subrogation rights are more used in marine cargo insurance than any
other insurance policies in the form of recovery from carriers.
Extensions: Nil.
Marine cargo policies in general are voyage policies whereas; most other
policies are time policies. In general there is no period of insurance other
than for open policies, open covers or special declaration policies etc.
Limits of indemnity to be selected by proposer for any one occurrence and

any one period.
298
There are three parties involved in marine cargo insurance viz., insured,
insurer and carrier.
arine cargo policies are easily transferable and the benefits of the policies
cans be transferred to the person who has insurable interest at the time of
loss.
299
Marine cargo policy is one where the stamp duty is recoverable from the
insured.
Certificate number, place and date of issue.
Open cover/Open policy number.
Name and address of the insured.
Normal Terms and conditions forming part of Marine Open Cover.
Basis of valuation: CIF plus 10% or more.
Declaration: The assured is bound to declare each and every shipment

individually or in batches and obtain a certificate of insurance for
individual or group of shipments as per arrangement.
Certificate of Insurance: The certificate issued against declarations will

bear stamp duty and show premium, both of which will be collected from
the assured or be adjusted against the cash deposit.
Loss prior to declaration: In the event of loss prior to declaration and/or

shipment on board the vessel, the basis of valuation shall be the prime
cost of the goods.
Limit per bottom: Limit of aggregate value of shipments/consignments

per vessel or other conveyance at any one time.
Limit per location: The location clause seeks to limit the value of pre
shipment accumulation, which may take place due to some unexpected
causes such as strikes, labor disturbances in the sport. Such
accumulation of cargo in a particular location may create catastrophic
exposures in the even of occurrence of some perils like storm, riot etc.
Inspection of records: The insurer has the privilege at any time during
business hours to inspect the records of the assured in respect of the
shipments coming within the terms of the opens cover.
Under Deck: Subject to warranty as to under-deck or on-deck shipment.

Generally arrangement is made for shipment under deck while on deck
shipment on special rates and terms to be separately agreed upon.
Cancellation: either party giving 30 days notice in writing may cancel

open cover, provided the risk has not already attached. However War &
SRCC risk for shipments other than to or from USA are subject to
cancellation by 7 days notice and War & SRCC risk for shipments to USA
are subject to cancellation by 48 hours notice.
Insuring clauses: Subject to Institute Cargo Clause (A), Institute War

Clauses (Cargo) and Institute Strikes Clauses (Cargo) attached with the
open cover.
1.
Certificate of Insurance is issued against open covers or open policies, as

applicable and is subject to the terms and conditions of such open cover or
open policies. What are the major contents of certificate of insurance.
300
Description of goods, number of packages & nature of packing.
Voyage details along with Bill of Lading no. & date, transshipments, if
any.
Consignment Value.
Remaining value of sum insured in case of open policy.
Premium and stamps duty.
Certificate issued against open cover to be stamped.
Terms and conditions of insurance as per the open cover or policy.

The changing Aviation policy in India, the basic considerations for granting
Aviation Insurance are:
No of Air lines/ Operators have grown
Consolidation and merger of various air carriers
Fleet size have grown up
New types of air crafts have come up
India has become a hub for corporate Jet / Helicopter travels
Boeings / Air buses have established their maintenance hubs in India
Modernization, expansion and development of new Green Field Airports are

taking place
Safety norms have been adopted and due to excellent record of pilots, no. of
accidents have come down resulting into reduction in Reinsurance premium
as these policies are highly RI driven
The coverage given under this segment is for Hull All Risks [HAR], War
Risks, Liability for passengers
Crew insurance now even fog insurance, Delayed Baggage Liability,

Delayed Flight landing due to traffic congestion are in great demand
While rating a Flying Club Aircraft what are the under writing
considerations that to be looked into
Type of Aircraft and the value
The experience of regular pilot

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The number of members of the club
The geographical area in which the club operates
The facilities at the airfield used regularly by the club

6.
The wages of individual masters and workers are insurable in

a) W C Policy
b) Marine Cargo policy
c) Marine Hull Policy
d) Aviation Policy
7.
As per Marine Inland Transit Policy the Risk commences from the time
a) The goods leave consignor's warehouse
b) The goods are being loaded on the vehicle
c) The goods reach the buyers warehouse
d) All the above are correct
8.
TPND is the common abbreviation used to denote

a) Transit, piracy and non delivery
b) Theft, piracy and non delivery
c) Theft, pilferage and non delivery
d) Transit, pilferage and non delivery
9.
Marine cargo insurance policies are

a) Strict indemnity policies
b) Pure indemnity policies
c) Commercial Indemnity policies
d) Benefit policies
The frequency of usage of the aircraft
The experience of the chief flying instructor

Whether there is any maintenance contract with outsider and their credibility
MARINE MODEL QUESTIONS

1. Time Charter hire is
a)
b)
c)
d)
2.
3.
4.
5.
To charter a vehicle for a specified period

To take a loan on vessel for a specified period
To take a vessel on hire for a specified period
To hire a vessel and pay after a specified time
Which of the following is not true for COGSA,1971 (Carriage of goods by

sea Act)
a) It brings uniformity in condition of carriage by sea
b) It is compulsory for ship owners to issue a B/L
c) It is compulsory for shippers to mention particulars & conditions of the
goods
d) The liability of the carrier is limited to 666.7 SDRs per package per unit
A carrier under COGSA, 1971 is liable if
a) Open or uncovered vehicle is used
b) There is defective packing
c) Marks or numbers are used
d) Livestock is carried
What is a 'slip'
a) A mistake in the policy
b) A kind of dress
c) A correction in the policy
d) Evidence of contract of marine insurance
In marine insurance, the insurable interest should be there
a) At the time of issuance of policy
b) At the time of payment of claim
c) At the time of occurrence of loss
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10. Sue and Labour clause is

a) The amount and labour incurred in filing a suit
b) Payable even after total loss is paid
c) GA losses can be recovered under this clause
d) The cost incurred in averting or minimizing any loss
11. Air transport operators do not have a legal liability towards
a) The general public (Third Parties)
b) The passengers
c) Consigners or Consignees
d) Crew and staff
12. In Aviation Insurance, what is not true of Warsaw Convention, 1929
a) It was the 1st convention to deal with the problem of conflict between
legal system of different countries
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b) It is in force in many of the countries

c) It laid down the fundamental principles in so many legal aspects of
international travel by air
13. Which of the following is not true of the International Air Transport
Association (IATA)
a) It was founded in 1945
b) It seeks to promote safe, regular air travel
c) It promotes economical air travel
d) It is an association of governments
14. In Marine insurance, the term Paint Brush Piracy is used to denote
a) A kind of piracy of the goods from the vessel
b) Piracy of paintings and brushes
c) Change of the color of the ship to conceal its identity and escaping with
the goods on board
d) Entry of pirates into the vessel with paints and brushes
15. Which of the following is not relevant for General Average
a) Insured perils
b) York Antwrep rules
c) General average Act
16. As per Marine Insurance Act 1963, which of the following is not an
Implied Warranty
a) Lawful adventure
b) Seaworthiness of the vessel
c) Seaworthiness of the cargo
d) Lost or not lost
b) The ship owner and the underwriters of the vessel respectively

c) The master of the vessel and the ship owner respectively
d) The ship owner in consultation with the underwriters and the master of
the vessel
19. In marine insurance a p.p.i. policy is
a) An honor policy
b) A no subrogation policy
c) An illegal policy
d) All the above
20. For an export marine consignment which one of the clauses will be
applicable
a) ITC (A)
b) ITC (B)
c) ITC (C)
21. Duty and increased value insurance can be granted for the following
consignments
a) Export consignments
b) Road risks in India
c) Rail risks
22. As per ICC (C) following loss or damage is not covered
a) Fire
b) Earthquake
c) General average sacrifice
d) Washing overboard
17. Subject to any express provision in the policy is a standard phrase in

Marine Insurance Act 1963 to denote that
a) The Act is supreme
b) The Assured is supreme
c) The policy is supreme
d) The underwriter is supreme
23. Under marine insurance, cover may be granted for shipments which
have commenced transit but may have been actually lost under the
following provisions /clauses
a) Sue and Labour clause
b) Not to inure clause
c) Lost or not lost clause
d) Losses not known clause
18. Who can declare general average and who can appoint the average
adjusters?
a) The ship owner and the master of the vessel respectively
24. INCOTERMS are internationally accepted commercial terms defining

respective roles of buyer and seller which of the following is odd term out
a) CIF
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305
b) CFR
c) FAS
d) WTO
b) ICC(B)
c) ICC(C)
25. Which of the following is not an important document for a Marine Cargo
claim in respect of an export consignments
a) Invoice and pacing list
b) Duly filled claim form
c) Bill of lading/ airways bill
d) Bankers certificate confirming export proceed
26. Which of the following risk is/are covered under aircraft hull/ liability
policy
a) Accidental physical loss or damage to the aircraft
b) Bodily injury / death to the passenger/s
c) Loss of passenger's baggage and bodily injury/ death and property
damage to the third parties
d) All the above
27. Which of the following is to be taken into account while underwriting
Marine Cargo Business
a) Nature of Cargo
b) Details of Convergence
c) Packing details
d) All of the above
28. Which of the following insurance policies does not require a formal
proposal form
a) Marine Hull
b) Fire
c) Marine Cargo
d) Aviation
29. Under the Institute Cargo Clauses, the risk commence
a) When invoice is received
b) From the Time the Lorry receipt is issued
c) When the Cargo leaves the warehouse of the consignor
30. Which of the following represents the widest form of coverage?
a) ICC(A)
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31. For which of the following extra premium is charged?

a) Vessel's Overage
b) Vessel's under tonnage
c) Non classification
d) All the above
32. For which of the following term of sale, the buyer/ importer normally
arranges the cargo insurance cover for the overseas transit
a) CIF basis
b) FOB basis
c) Both the above
33. For Inland Transit, 'Duration Clause' limits the coverage to
a) 7 days of arrival of consignment at destination town
b) 7 days of arrival of consignment to the warehouse of consignee
c) 60 days of arrival of consignment at destination town
d) 60 days of arrival of consignment to the warehouse of consignee
34. What is not true for a Marine Open Cover
a) Open cover is proof of an insurance cover
b) Open cover gives the term of cover during policy period
c) Open cover is a stamped document
d) All of the above
35. After issuance of Marine Open cover which document gives the
particulars of insurance for individual voyages?
a) Marine certificate
b) Marine Policy
c) Cover note
d) Any of the above
36. If a Marine consignment is being sent to an appreciating market, what
clause can be attached to ensure that the appreciation of value of
consignment is covered in case of loss?
a) Duty clause
b) Increased value clause
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c) Protection and Indemnity clause

37. In case of various consigners are affected due to operation of a common
peril, for saving a marine adventure; the loss would be apportioned by
declaration of
a) General average
b) Particular average
c) Average clause
38. In case additional expenses are incurred to complete the voyage the
charges incurred would be recovered under
a) General average clause
b) Sue and labor clause
c) Increased value clause
d) Limitation Clause
39. What is the full form of sale term 'FAS'
a) Free Alongside Ship
b) Free Alongside Steamer
c) Free Alongside Steerage
40. A Marine cargo underwriter is expected to know
a) Port facilities
b) Shipping practices
c) Labour disturbances at ports
d) All the above
41. Under a marine Hull cover a loss can be declared as a CTL if
a) The vessel is abandoned to discretion of the underwriters
b) If more than one interest is involved in the salvage
c) If there is excessive third party liability
42. In case of liquid cargo, the term ullage refers to
a) Quantity that cannot be discharged
b) Quantity that were destroyed
c) Quantity that disappeared
d) Non standard packing
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43. Sue and labor charges are usually paid

a) In addition to damage to goods but limited by the sum insured
b) In addition to damage to goods and can exceed the sum insured
c) As a fixed percentage of sum insured
44. Particular charges means
a) Loss or damage caused by a sea peril insured against
b) It is a general sacrifice to save the marine adventure
c) It is an expense in addition to sue and labour charges incurred for
preservation of a subject matter
45. For covering various risks associated with port operation the following
cover is an internationally accepted cover
a) Property all risk policy
b) Mega project policy
c) Port package policy
d) Special contingency policy
46. One of the purpose of Draft survey is to
a) Find out the weight of commodity on board the ship
b) Find out the extent of damage to commodity while being unloaded from
slip
c) Find out the weight of personnel on board the ship
47. What does the term Phantom vessel in maritime frauds denotes
a) Nonexistent vessels said to be transporting goods
b) Poor quality vessels transporting high value cargo
c) Vessel belonging to flags of convenience
48. In a marine cargo policy, the insurable interest should exist
a) At the time of commencement of transit
b) At the time of acceptance of proposal
c) At the time of loss
d) At the time of proposal
49. Which of the following marine cargo policy is not assignable
a) Marine cargo specific policy
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b) Certificate issued under open cover

c) Certificate issued under open policy
d) Annual policy
c) Sue and labour charges

d) Port charges
56. Which one of the following differentiates the salvage charge from the sue
and labour charge
a) Food expenses for crew members
b) Incurred independent of any contract
c) Incurred short of destination to complete the voyage
d) Expenses for extra fodder for animals on board
50. CIF Contract means

a) Co-insurance form
b) Cost input freight
c) Cost insurance freight
d) Cost incidental freight
51. The maximum indemnity available under a marine open policy in
respect of a consignment awaiting shipment at the port is
a) Total sum insured under open policy
b) Limit per bottom
c) Total value of particular declaration
d) Limit per Location
57. Which of the following is not a Trade Clauses

a) Institute Replacement Clause
b) Institute Bulk Oil Clauses
c) Institute natural rubber Clause
d) Institute Coal Clauses
52. Which of the following is not a stamped document

a) Open cover
b) Open policy
c) Specific policy
d) Special declaration policy
58. Overseas Transit Policy Institute Cargo Clauses 'C' the duration of cover
comes to an end
a) 30 days after landing at the port
b) 45 days after landing at the port
c) 60 days after landing at the port
d) 90 days after landing at the port
53. Running down clause in a marine policy relates to

a) Age of the vessel
b) Collision
c) Termination of insurance
d) Age of the consignment
59. The Institute clauses have been drafted by

a) TAC
b) Institute of London Underwriters
c) Lloyd's
d) GIC
54. Liability under Both to blame collision clause of ICC (A) has a
reference to
a) Shipping Bills
b) Lloyd's firm
c) Proforma Invoice
d) Bill of Lading
60. In marine insurance parlance, 'average' means

a) Premium
b) Cost
c) Freight
d) Loss
55. Which one of the following is an extra charge under a marine cargo
policy
a) Auction fee for disposal of salvages
b) Salvage charges
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61. Shut out Cargo means a cargo which is

a) Not loaded onto the ship due to late arrival
b) Thrown out of the ship
c) Shut in the bonded warehouse
d) Rejected by the buyer
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62. PPI in marine cargo policy means

a) Pre & Post Inspections
b) Policy Proof of Interest
c) Post parcel Identification
63. Subrogation in marine insurance refers to transfer of
a) Right of recovery
b) Right of possession
c) Right of ownership
64. Proof of shipment is evidenced by
a) Bill of Lading
b) Bill of Exchange
c) Bill of Treasury
65. Marine Policy offers
a) Pure indemnity
b) Strict Indemnity
c) Adequate indemnity
d) Modified form of Indemnity
66. Survey fees reimbursable to the insured in a marine policy to the extent of
a) 25%
b) 50%
c) 75%
d) 100%
67. Find odd one out
a) Flag of convenience
b) Polish Register of Shipping
c) Lloyd's Register
d) Bureau veritas
68. In which of the following the loss assessed is not ratably reduced in the
proportion of sum insured bears to the value at risk
a) Particular Risk
b) Partial Loss
c) Total Loss
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d) Sue and Labour charges

69. Which one of the following is an exclusion under th collision clause of
ITC-Hulls
a) Loss of life in other vessel
b) Loss of life in insured vessel
c) Loss of property of other vessel
d) Both a & b above
70. In Marine hull policy the subject matter for insurance shall be
a) Hull & Machinery
b) Freight and Disbursement
c) Premium reducing
d) All the above
71. 1/ 4 collision liability is covered by
a) P& I club
b) Hull Underwriters
c) Lloyd's
d) Reinsurance
72. For issuing a marine cargo policy,
a) LR or R/R is a precondition
b) LR or R/R reference number above is sufficient
c) LR or R/R is not at all necessary
d) Undertaking from the consignor is sufficient
73. After settlement of a cargo claim
a) Proceeding against the carrier by the insurer is simultaneous
b) Only the insured has to proceed against carrier and to recover and remit to
the insurer
c) Anytime, at leisure recovery proceeding can be initiated
d) Recovery proceeding is not at all necessary
74. After issue of marine cargo policy shipment could not be effected due to
expiry of the L.C. Insured seeks repayment of premium of Rs. 100000/-.
In this case which of the following is appropriate
a) Insurer decline refund of premium, saying policy has been issued already
b) Retaining Min. Premium and effect refund for the balance amount is in
order
c) Retain 50% of the premium and to refund the balance
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d) Substitute the premium for any subsequent transit

75. In an export policy, goods are sold in mid sea and the buyer changed the
destination. Insured was getting refund from insurance company stating
that the goods have not reached the destination stated in the policy. In
such case which of the following could be appropriate.
a) Refund is very well in order
b) Refund should not be granted, as the shipment and transit had
commenced
c) As transit, as per policy deviated in the mid sea pro rata refund of
premium according to the distance covered can be effected
76. General average means
a) Age of the ship and its year of built
b) It is the average age of the ship in a fleet
c) It is a sacrifice in terms of cargo and freight incurred in times of the peril
of the sea to save the adventure.
77. In a Hull policy Freight is to be covered by the ship owner in any of the
following manner
a) Has to be insured separately
b) To be included in the Hull policy itself
c) Both a & b
d) Freight cannot be insured at all
78. Particular charge in a hull policy means
a) Loss or damage caused by a sea peril insured against
b) It is a general sacrifice made in times of peril
c) It is an expense in addition to sue and labour for the prevention of the
subject matter
79. Which branch of insurance is codified by way of an Act in India
a) Marine Hull
b) Marine Cargo
c) Both (a) and (b)
d) None of (a) and (b)
80. In case of which of the following insurances, the stamp duty is borne by
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the insured
a) Fire Insurance
b) Personal Accident Insurance
c) Marine Cargo Insurance
d) Health Insurance
81. Insurance cover note cannot be issued in case of
a) Marine Insurance
b) Fire Insurance
c) Health Insurance
82. Which of the following information is not reflected on the schedule of
Marine Insurance Policy (Cargo)
a) Identification of vessel or conveyance
b) Type of contract between seller and buyer
c) Invoice details issued by seller
d) Description of voyage or transit
83. Seller's Contingency Policy cover can be issued in case of
a) CIF contract
b) FOB contract
c) Either of the above (a) and (b)
d) None of the above (a) and (b)
84. In case of CIF contract the Insurable Interest of the seller ceases
a) Once the goods leave the factory gate
b) Once the goods are discharged at the port of discharge
c) Once the goods are put on board
85. For an exporter having frequent exports which one of the following will
be more useful
a) Open policy
b) Open cover
c) Open Declaration policy
d) Annual Marine Policy
86. In which of the following, war risk can be covered by paying extra
premium
a) Personal Accident Policy
315
b) Health Insurance Policy

c) Marine Inland Transit Policy
d) Marine Overseas Transit Policy
87. In India Marine Cargo Insurance was detariffed in the year
a) 1992
b) 1993
c) 1994
d) 1998
88. Which of the following perils is not covered under ICC C Clause
a) Washing Overboard
b) General Average Sacrifice
c) Both a & d
d) Entry of sea, lake or river water into vessel
89. In case of Marine Insurance, which one of the statement is correct with
respect to GRT of the ship
a) Risk increases with the increase in GRT
b) Risk decreases with the decrease in GRT
c) Risk decreases with the increase in GRT
d) The GRT does not play any role on risk
90. In case of Marine Insurance vessel approval is done by
a) GIC
b) GIPSA
c) Individual Companies
d) IRDA
91. Which one of the exclusion gets deleted in case where the full shipload
cargo is transported through duly 'approved' vessel
a) Loss/ damage/ expense caused by inherent vice or nature of the subject
matter insured
b) Ordinary leakage, ordinary loss in weight or volume or ordinary wear
and tear
c) Loss/damage/expense arising from insolvency or financial default of the
owner, managers, charterers or operators of the vessel
92. Which one of the following cannot be termed as the valued policy
a) Fire Standard policy
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b) Marine cargo policy

c) Marine hull policy
d) Jeweler section under householder's policy
93. if the repair expenditure required to prevent actual total loss exceeds the
value, it would be known as
a) Actual total loss
b) Particular Average
c) Constructive total loss
d) General Average
94. In marine insurance, even a voluntary and deliberate loss can be paid
under
a) Total loss
b) Particular Average
c) No policy can cover voluntary and deliberate loss
d) General Average
95. With regard to stamp duty in marine cargo policy, which one of the
following statement is correct?
a) Different for sea voyages and for other than sea voyages
b) Rate is same for all types of voyages
c) Rate for air voyage is different from road/rail
d) Rate is different for rail and road voyages.
96. For damage claim of CARGO monetary claim notice with the SHIPOWNERS should be lodged within
a) One month from the date of bill of lading
b) Fifteen days from the date of arrival of cargo
c) Seven days from the date of arrival of cargo
d) Five days from the date of arrival of cargo
97. Theft peril is covered under
a) ICC C
b) ICC A
c) ICC B
d) ICC I
98. Proximate Cause is
a) Remote cause
b) Indirect cause
317
c) Active and Efficient cause

d) Other
99. General Average arises when property involved in common Maritime

adventure
a) The cost of vessel removal from one port to another
b) Temporary repair of accidental damage effected during the course of
voyage
c) Cargo is discharged and or jettisoned to save the ship
d) None
100.Recoveries from Third Parties under Marine Policy is based on the
principles of
a) Contribution
b) Subrogation
c) Assignment
d) Contribution & Subrogation
101.What is not a Shipping document
a) Bill of Lading
b) Bill of Entry
c) Mate Receipt
d) Invoice
102.Bill of Entry is prepared for
a) Excise duty
b) Custom duty
c) Sales Tax
d) OCTROI
103.What is not a Marine Insurance Clause?
a) Inchmaree Clause
b) Sue and Labour Clause
c) Continuation Clause
d) Cross Liability Clause
105.Which of the following peril does not appear under ICC C

a) Earthquake, Volcanic eruption or lightning
b) Fire or explosion
c) Overturning or derailment of Land conveyance
d) Discharge of cargo at a port of distress
106.The Marine Insurance Cover is available in the following forms
a) Specific Policy
b) Cover Note
c) Open Policies/ Open Covers
d) All of the above
107.Which document in the absence of specific policy helps the bank to
authenticate the existence of insurance cover and relate it to the
documentary bill?
a) Certificate of Incorporation
b) Certificate of Insurance
c) Certificate of college
d) None
108.Which of the following statement is not correct
a) A valued policy is one, which specifies the agreed value of the subject
matter insured.
b) The insured value is the amount specified in the policy as the value of the
insured property
c) Sum insured is the total amount of the subscriptions of the insurers in the
policy
109.Which of the following does not form part of a marine adventure
a) Ship
b) Freight
c) Ship owner's liability to cargo owner
104.Which is not a General Average Claim?

a) When Fire Breaks out on board the ship and in order to extinguish it water
is poured on and chemicals are applied.
b) When there is a collision with another vessel or other casualty and the
cargo is discharged to enable the vessel to be repaired
c) There is theft and missing of packages
110. Which of the principal factors affect the rating of every cargo insurance
a) Vessel
b) Nature of cargo
c) Conditions of insurance
318
319
d) All the above

111. Which loss or damage is not covered under institute cargo clause 'C'
a) Fire & Explosion
b) Overturning & Derailment of Land conveyance
c) Vessel or craft being stranded, grounded, sunk or capsized
d) Washing overboard
112. Which peril is covered under marine hull policy
a) Jettison
b) Fire & Explosion
c) Piracy
d) All the above
113. GRT means
a) Gross Rare Tonnage
b) Gross Report Tonnage
c) Gross Register Tonnage
d) None of these
114. To whom marine policy cannot be issued
a) Purchaser of goods
b) Seller of the goods
c) Transporter of goods
d) Bankers having financial interest
115. Identify incorrect statement
a) All marine policies are not freely assignable
b) Special declaration policy (SDP) is not assignable
c) Marine policy is not assignable when goods are on high seas
d) Marine policy is not assignable when goods are in bonded warehouse
b) Duty insurance can be granted to overseas seller

c) Duty insurance can be granted to bankers
d) Duty insurance can only be granted to the holder of import license
118. Identify incorrect statement
a) All marine policies are valued policies
b) Special declaration policies are valued policies
c) Duty insurance policy in marine is a valued policy
119. Which of the following statements are relevant to underwriting of fishing
vessels
a) Geographical features of area of operation
b) Classification by one of the major classification society
c) Proposal form
d) All the above
120.State the correct statement among the following
a) Marine cargo policy is transferred by way of payment of additional
premium
b) Marine policy is transferred only after obtaining fresh proposal form
c) Marine policies are freely assignable
121.Which of the following statement is correct
a) Insurable interest should exist at the time of effecting marine insurance
b) Insurable interest need to exist only at the time of loss
c) Insurable interest should be present throughout the currency of the policy
116. Which of the following is not a term of sale in marine

a) C & F
b) CIF
c) FOB
d) CFP
122.Identify the wrong statement

a) Constructive total loss is a total loss claim
b) Constructive total loss is a loss occurred during the course of
construction
c) Notice of abandonment is necessary for a constructive total loss claim
d) Constructive total loss is affected midway between actual total loss &
partial loss
117. Identify correct statement

a) Duty insurance cannot be granted
123.Which of the following is false in relation to marine cargo insurance

a) Claim survey fees are payable by insurers only if the claim is payable
320
321
b) Under every marine policy for export shipments, a certificate of

insurance is issued
c) General average losses are covered only under Institute cargo clause (A)
All risks
d) B only
124.Which of the following policies are freely assignable without the consent
of insurers
a) Marine cargo
b) Burglary
c) Marine Hull
d) Fire
129.Which of the following statements is false in relation to marine cargo

insurance?
Statement A: The entire marine cargo tariff is governed by tariff or
market agreement.
Statement B: Special storage insurance is granted in conjunction with
inland transit policy.
a) A only
b) B only
c) Both
d) Neither
125.Which of the following risks are automatically covered without extra

premium under Institute Cargo Clause 'A'
a) Breakage only
b) Leakage only
c) Strikes riots and civil commotion
d) Breakage & Leakage
130.Which of the following covers is suitable for regular export/import

shipment?
a) Open cover
b) Special Declaration policy
c) Annual policy
d) Duty insurance
126.If loss or damage is not apparent at the time of taking delivery from ocean
carriers written must be given to the carrier's representative within
___________ days of delivery
a) 7
b) 30
c) 10
d) 3
131.Which of the following insurances is not relevant to inland transit?

a) 'Increased value' insurance
b) Special storage risks insurance
c) Special declaration policy
d) Annual policy
127.Which of the following General Exclusions under Institute cargo clauses

can be covered at extra premium under ICC (B) & (C) clauses
a) Malicious damage
b) Inherent vice
c) Ordinary leakage
d) Ordinary loss in weight
128.Which of the following statements is true?
Statement A: Marine cargo policies are valued policies.
Statement B: Marine Hull policies are valued policies.
a) Both
b) A only
c) Neither
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132.Which of the following document is common to claims processing under

marine import policies and inland transit (Rail/Road) policies?
a) Invoice
b) Copy of protest
c) Bill of lading
d) Lost Overboard certificate
133.Which of the following statement(s) is true?
Statement A: Certificates of insurance are issued under both open covers
and open policies.
Statement B: Certificates need not be stamped when the original policy is
stamped.
a) Neither of the statements
b) Only statement A
c) Only statement B
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d) Both statements
134.Which of the following documents provide evidence of loss of cargo
during loading operations?
a) Bill of entry
b) L.O.B. Certificate
c) Copy of protest by the master of the vessel
D) Ship Survey Report
Key Marine
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
C
D
C
D
C
C
A
C
C
B
D
D
D
C
D
D
C
C
D
D
D
D
C
D
B
D
D
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
C
C
A
D
B
A
C
A
B
A
B
A
D
A
A
B
C
C
A
A
C
D
C
D
A
B
D
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
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A
B
A
C
B
D
A
B
A
A
D
D
A
C
D
D
A
B
A
B
B
C
C
C
C
C
D
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
C
B
A
B
D
C
C
C
C
C
A
C
D
A
D
B
C
C
D
D
B
D
C
A
D
B
C
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
134.
C
D
D
D
C
C
C
D
D
C
D
C
B
C
C
A
D
D
A
A
A
A
A
A
D
C
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REINSURANCE
The direct underwriters seek insurance covers for their insurance Portfolio with
another insurer. This arrangement is known as Reinsurance. The direct insurer
becomes the reassured and the other insurer is known as Reinsurer. There are
various reasons, which prompt the insurers to go in for reinsurance arrangement.
Such reasons are given under:
NEED / BENEFITS OF REINSURANCE
REINSURANCE
ACCEPTANCE OF LARGE RISK IS POSSIBLE:

To acquire increased capacity of the insurer with a view to accept large risks which
may not be possible within his financial limits, he may go in for reinsurance
protection.
Example: Insurers may wish to insure high valued risk like Madras Refineries
LTD or Bharath Petroleum or Bharath Heavy Electrical or Oil and Natural Gas
Corporation worth of more than 1000 crores and it may not be possible for an
individual company to undertake entire risk within his own financial limits.
Therefore, he chooses to depend on reinsurance protection.
ACCEPTANCE OF VARIETY OF RISKS IS MADE EASIER

They may underwrite more business of various natures than what could be
underwritten within their financial resource.
Example: The insurers may like to insure Aviation and also liability towards
passengers in addition to the cargo sent by air and also the storage of cargo in air
port areas or in Harbor areas. This could be possible only when they depend on the
reinsurance arrangements.
EXPOSURE CAN BE LIMITED

The original insurers may like to limit their insurance exposure to any one loss or
occurrence, which he can bear within his financial limits.
Say for Example, Private Insurers in India are with an Authorized capital of just
Rs.100 Crores and they may not able to pay the claim more than the net earned
premium in one loss or one occurrence Nor they would desire to retain the claim
payment solely on their shoulders, which might destabilize their financial
position, and it would only affect their capital base. Maintaining the solvency ratio
within the prescribed by the IRDA is a condition precedent to sustain in the
insurance industry, otherwise, the insurer would be ruining their financial
base/networth, therefore, even established and experienced insurance companies
need to make such protection so that their financial position is stronger and have
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the highest claim paying ability to fulfill the promise made.

Therefore, they will have to depend on rensurance arrangement.
Stability and Viability can be further strengthened

The Original Insurer may like to stabilize their underwriting operating surplus.
Keeping the above purposes in view insurers desire to acquire reinsurance
products and try to position them in the market. The underwriters issue thousands
of policies covering property "Risks against wide range of perils for varying sum
insured". The concern of the underwriter is in the first place to take the possibility
of any one Risk being greater than it is prepared to withstand and that amount
which he fixed prudently is known as "Retention".
Commission: The Proportional reinsurer pays off the commission to the reinsured
slightly more than what they have incurred towards acquisition cost.
Profit commission: The reinsurers recognize the prudent underwriting capacity
of the reinsured and motivate them by giving them a fixed and agreed percentage
of profit made out of reinsurance contract.
Sliding Commission: The reinsurer may increase the percentage of profit
depending upon reduction in claim cost ration. A percentage of decrease in claim
ratio will have a corresponding and progressive increase in the percentage of
commission payable.
Say Example: 10% reduction in claim ratio may increase the percentage of
commission by 5% or so.
RETENTION
Certain terms used in reinsurance

Reinsured: He is the original insurer who seeks reinsurance from other insurers.
Even the reinsurer can become the reinsured when he selects to reinsure his own
portfolio of what he has reinsured. Reinsured is also known as cedant.
Reinsurer: The one who accepts the risk offered by the original insurers from their
portfolios insurance.
Treaty: Treaty means an agreement, which may be automatic with details or
without details to be submitted to the reinsurer. It can be sometimes blind treaty.
Net Retention: It is a level of sum chosen by the original insurer, which he thinks
can be limit of his own liability that can be borne from any one loss within his
financial limit.
Gross retention: The retention of the original insurer and share of the quota share
treaty reinsurer is known as gross retention.
Line: The retention limit may be net or gross that is "One line" in accordance with
the provision of the reinsurance treaty.
Deductible: Deductible is the sum selected by the insurer as a maximum monitory
amount that he is capable of retaining himself within his financial limit. This is
often known as excess point or deducible.
Cover Limit: It is sum, which is the maximum limit or reinsurer that he will bear
from any loss. This can be reinstated in the event of any loss in accordance with the
provisions of reinsurance contract.
Ultimate net loss: This is the net liability of the reinsurer after deduction towards
the salvage and recoveries.
Retrocession: this is an arrangement of reinsurance made by the reinsurer for their
reinsurance portfolios. It means a reinsurance arrangement for reinsurance.
Layers: Reinsurance arrangement can be made in layering. Mainly for
catastrophe risks
The insurer is aware that the some types of risk are more likely to have a fire hazard
than other because of the physical hazard associated with them and account of the
trade process, feature of construction and nature of goods utilized.
Example:
Saw Mills use different type of machinery, wood, wood shaving and other
inflammable materials which are susceptible to fire than most of the building used
for residence, office, restaurant and even for hotel purpose. It goes without saying
that likelihood of loss is dissimilar for both the risks. The insurers will always
shown lots of interest to retain a higher amount for his account for simpler risks
than more hazardous risk.
The retention amount selected by the insurers based on the sum insured for the
property would depend on classification of the risk underwritten, normally it is at
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The insurer should identify a limit of his own liability, which he can conveniently
bear on his own without ruining his capital base. In other words, he should choose
a level of sum and fix it as a maximum monetary amount that he is capable of
retaining himself within his financial limits. This is very often called as Excess
point or amounts deductible in case of claim.
The Retention is determined based on risk classification
- Dwellings, offices, hotels, restaurants, etc.
- Light Engineering workshops where leather or plastic is not used
- Electronic goods manufactures and textile factories
- Furniture manufacturers.
- Chemical Factories and Para medical
- Petrochemicals
variance according to the perception of the hazards. Mostly the risks are classified
according to the features like Proximity to fire brigades.
Presence of fire extinguishing appliance etc.
The concept of the retention is very important from the point of view of
underwriters as it is only helps the underwriters to determine the amount of
reinsurance products required.
In property insurance, the concept of EML and PML is felt more relevant with
regard to Reinsurance arrangements.
ESTIMATED MAXIMUM LOSS (EML)

EML means Estimated Maximum Loss. According to International Reinsurance
Market, It is "An Estimated of Monetary Loss which could be sustained under a
single risk as a result of a single fire or explosion considered by the insurer within
the realm of a probability.
It is fell by the insurers that the occurrence of an event will not endanger the entire
value of the property insured under fire insurance. Say for Example, the insurers
have underwritten a Building and the machinery worth or Rs.50, 00,000/- and the
possibility of this value getting affected in total in an event of fire may not be to the
extent of Rs.50, 00,000/- It may be to the extent of 50 to 60% of the value ranging
from Rs.25 lacs to 30 lacs.
They may assume that seeking reinsurance for full sum insured is not necessary
and therefore they may depend on the Maximum Estimated Liability of Rs.30 Lac
and seeks the reinsurance only for such sum.
In other words the maximum liability of the insurers would be Rs.30 Lac which is
less than the sum insured.
PROBABLE MAXIMUM LOSS (PML)

This insurers are under the compulsion to select the aggregation of the retention
that may be arising out of the losses to a variety of insured property such as houses,
office, manufacturing plant, petrol stations lots of other types of high value
property spread over the wide geographical area that may be affected by
catastrophe like STFI, earthquake, hurricane, cyclone etc.
The need arises to consider the Maximum Probable loss that may be likely due to
such a disaster by catastrophe and conflagrated risk. The insurer need to select the
maximum Probable loss that the insurer could suffer in the event of such a natural
calamity and decide a level of sum it could retain for its won account without
endangering its very solvency.
Factors that determine the retention limit:

The value of the property insured
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The physical and moral hazard involved

Location and surrounding areas where insured property is situated
The geographical area involved
The class of risk and its past experience
Classification and discrimination of risk
The probability of out brake of fire
The susceptibility to damages
The extent of damages likely to be sustained
The possibility of extinguishment
The financial strength of the company in terms of the capital and Investments
The liquidity and the immediate realizable value of assets
Financial Soundness and favorable solvency position of insurers
The willingness of the insurers to part with their capitals to individuals and
series
The nature of market in which the particular insurer is operating
The insurers' growth potentiality and the pattern of loss settlement
The size of the risk that is being selected for reinsurance arrangements
Thus, the reinsurance depends on how much of the liability the insured can retain
for his account. The concept of retention is very significant and it depends on the
extent and type of reinsurance required.
TREATIES
The Forms of reinsurance those are applicable to property insurance
The insurers normally select the treaties to be used for property insurance from the
following options.
Proportional Treaties
Quota share treaty
Surplus treaty
Facultative treaty
Non-proportional treaties
Excess of loss treaty of any one risk
Excess of loss of any one event
Stop loss ratio of any one event

TYPES OF PROPORTIONAL TREATIES
Quota share treaty:
This is kind of reinsurance arrangement where the original insurer known as
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Cedant agrees to cede each and every risk that he underwrites at a certain fixed pre
determined percentage subject to terms and conditions and upper limit embodied
in the contract of reinsurance.
Example if an insurer decides upon a 25% Quota share, then he would cede 25% of
all his business within his retention pattern and reinsurer would receive 25% of all
premiums on such business but pay 25% of all commission and 25% of all the
claims arising on such business subject tot he maximum limit. Quota share treaty
may incorporate an event or cession limit in the contract of insurance to contain the
losses arising from a single event.
Supposing the upper limit of the QTS is Rs.50 laces, when 25% of risk
underwritten reaches the amount of Rs.50 Lac, the original insurer needs to either
bear it on his own or seek additional reinsurance for the surplus amount.
Surplus treaty:
This is a kind of arrangement where the original insurer seeks reinsurance
arrangement for such risks which exceeds his retention limit or gross retention
limits of both his and his quota share treaty reinsurer. Since this arrangement is for
surplus of what is borne by him and met by the quota share treaty Reinsurance is
known as surplus treaty.
The capacity of the surplus treaty is always a multiple of ceding companies
retention. Further, multiples of the retention on lines can be added beyond the first
surplus treaty and second surplus treaty and so on. The premium and the claim will
be paid accordingly.
Facultative Obligatory treaty:
Under this arrangement the choice of ceding the risks is resting with the original
insurer and reinsurer cannot reject what is ceded to him subject to the parameters
of contract of reinsurance and similarly he cannot question in case reinsurer does
not cede any risk underwritten by him.
Facultative Reinsurance Treaty:
This is one of the oldest systems of reinsurance arrangements. Under these
methods, the reinsured needs to submit all the details of the risk to.
Reinsurer for their perusal and decide either to accept or reject. The option of such
decision is purely of reinsurer.
Therefore, this system proves to be unfavorable, cumbersome and
administratively theme consuming and uneconomic.
But, reinsured seeks reinsurance under this system where there is automatic
reinsurance, for such risks, or such risk fall outside the scope of the treaty
arrangements or sometimes limits under treaties are exhausted.
It is also possible that some of the high valued risk necessarily be covered under
facultative reinsurance.
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REINSURANCE - PROGRAM
The reinsurance program of the insurer will depend upon the following factors
Types of portfolios to be reinsured

The portfolios consisting of various sum insured: Quota Share Treaty or
Surplus Treaty or Excess of loss Treaty per risk is the most suitable
proportional reinsurance.
Where accumulation of risk is involved the program of reinsurance depends
on PML or EML, usually Excess of loss per occurrence is preferable.
Portfolios with unlimited liability Quota Share Treaty / Excess of loss Treaty
per occurrence is preferable
Portfolios subject to wide fluctuation Quota Share Treaty is preferable.
OBJECTIVES OF REINSURANCE PROGRAMS IN PROPERTY
INSURANCE
There should be an automatic reinsurance cover for the risk underwritten by
the insurer.
The treaty should have adequate capacity to cope up with the insurers
underwriting large risk and risk varying sum insured.
The reinsures offer sufficient scope of cover that can take care of the risk
undertaken by the original insurers.
The type of reinsurance taken would have its own economic advantage over
other type of reinsurance arrangement.
The reinsurance selected would extend the security and continuity of
reinsurance arrangements.
Proportional treaties like Quota Share Treaty, surplus treaty and obligatory treaty
are suitable to property insurance. Facultative method of reinsurance arrangement
is made when the treaty limited is exhausted and risk underwritten is not falling
under scope of treaties.
Commission
Normal Commission is paid under proportional treaties reinsurance arrangement
ranging between 2.5% to 20%. Usually this is being paid to take care of direct
insurers commission and administrative expenses and a small percentage of over
riders.
Supposing the direct insurer in case 17% of Gross premium income and resume
20% of commission from reinsurer, 3% will become over rider
Sliding Scale Commission
Sometimes reinsurer may offer a percentage of commission more than what is
given in particular year at the time of renewal to exhibit a kind of recognition by
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way of incentive in order to reward the good claim experience during the currency
of the contract of reinsurance.
For example % increase in commission for 10% reduction in the claim ratio.
1% increase for 20% reduction in the claim ratio.
2% increase in commission for 30% reduction in the claim ratio
The upward revision in commission for reduction in claim ratio and downward
revision in case of increase in claim ratio. This kind of system is known as sliding
scale commission.
Profit Commission
Usually the surplus treaty reinsurers offer to reward the good underwriting
experience of direct insurer at the end of the year by sharing the percentage at a
certain agreed percentage which forms part of the terms of the RI contract.
There are three types of profit commission usually in practice.
1. Pro-rata basis
2. Three years average system
3. Loss extinction basis
Example 1
Three years average system
Profit during the first year, say
2004 and 2005

2005-06
2006-07
Agreed Profit Commission @ 15%

Three years average profit
= (3+6+12)/3
Profit Commission Payable @ 15% = 700000X15%
Example 2
Loss Extinction basis
Profit during the first year, say
2004 and 2005

2005-06
2006-07
= Rs. 300,000
= Rs. 600,000
= Rs. 1,200,000
= Rs.700, 000
= Rs. 105,000
= Rs. Minus 300,000

= Rs. Minus 600,000
=Rs. 1,200,000
Agreed Profit Commission @ 15%

The losses of previous two years set off against the third year profit and the balance
profit works out to Rs. 300000 and 15% of profit commission works out to Rs.
45,000/-.
This kind of commissions can be allowed only in case of professional reinsurance
agreements.
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Non-proportional reinsurance treaties:

Unlike proportional treaties, non-proportional treaties are made based on loss
experience. Sum insured is not the basis of reinsurance as done in proportional
treaties. The premium is based on loss experience only. It may be a flat premium or
fixed percentage of premium r based on incurred claim ratio known as burning
cost ratio. Non-proportional reinsurance treaties are usually arranged in order to
take care of Catastrophes and conflagrates risks.
Catastrophe treaties are only useful to take care of perils of windstorm, hurricane
etc, which usually endanger and ruin wider area. These arrangements are done in
layers.
Types of Non-proportional treaties
1. Excess of loss treaty:
Under this reinsurance arrangement, the reinsures pre determines a level of sum
that he can retain from any loss without ruining his capital base. Say for example:
he decides that he can bear only unto
Rs.10 laces per risk, he will make reinsurance arrangement for any loss in excess
of his limit of Rs.10 laces.
Supposing a loss occurs and 10 numbers of shops are damaged by the insured peril
and claim reported in Rs.25 lacs by each insured.
The original insurer will retain Rs.10 lacs for each insured and claim Rs.15 lacs for
each insured from the reinsurer and in which case he will be bearing a total amount
of Rs.1 crore and receive Rs.1.5 crores from the reinsurance.
The amount retained by the reinsured is known as deductible. And the amount
borne by the reinsurer is known as the cover limit.
In this arrangement the reinsured bears the loss of Rs.10 lacs per risk, as his
deductible and the Cover Limit of the reinsurer is Rs. 15 Lacs per risk.
Therefore this excess of loss treaty arrangement is known as "Per risk cover" or
"Working covers".
The insurer knows well based on his past records and form the experience of others
as to how many claims will be more than his own account of deductible. The
insurer will seek reinsurance for all losses exceeding his deductible of whatever
sum he had mentioned in the scope of cover.
Excess of Loss Treaty "Per Event Cover"

Under this system, the reinsured will bear only one deductible irrespective of the
number of risks in the loss occasioned by an event. Say for example, if the
reinsurance has been on per event basis, in the above example the reinsured would
have borne only Rs.10 lacs and claimed from the reinsurer a sum of Rs.2.5 crores
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minus his deductible of Rs.10 lacs, i.e. Rs.2.4 Crores.

Arrangement of reinsurance for catastrophe risks in layering
Example: Reinsured deductible Rs.50 lacs
Layering:
Rs.1, 00, 00,000/- Xs
Rs.50, 00,000/- Reinstatement 2 at 50% of premium
Rs.2, 00, 00,000/- Xs
Rs.1, 50,000/- Reinstatement 1 at prorate as to time
Rs.4, 50, 00,000/- Xs
Rs.3, 50, 00,000/Rs.10, 00, 00,000/-Xs
Rs.8, 00, 00,000/
Hours Clause
Hour's clause is being incorporated in the contract of reinsurance mainly to take
care of certain perils, which occur again and again. This clause is incorporated into
property treaties where weather perils are insured and which can affect property
over 1000 of square miles and last for several days as in the case flood, hurricane,
tornado and cyclone. The number of hours varies from peril to peril. 72 hours is
appropriate for earthquake and weather perils.
STOP LOSS RATIO:

This insurance cover is taken when annual result of the insurance company is
subject to volatile loss ratio.
This reinsurance is taken against hailstorm and crop insurance. This reinsurance
operates only after all other reinsurance recoveries are made.
Under this system reinsured usually shares with the reinsurer may be 10% or by a
monetary limit.
The purpose of this reinsurance is to restrict the annual aggregate losses to a pre
determined percentage of the annual net premium income of the original insurer
from his fire portfolio:
Example: M/s. Botham Companies underwrites a fire portfolio of Rs.100 crores.
They desire to make reinsurance arrangements with the Reinsures for losses that
exceed 60% of the net retained premium.
This arrangement is to be done in addition to all the other reinsurance arrangement
made by them.
Supposing they make a quota share of 25% inclusive of commission, the net
retained premium of the insurer is 75 crores.
Since the 60% of net retained premium income is 45 crores, any loss exceeding 45
crores will be a heavy burden on the premium account as well as assets. Therefore,
they have to make reinsurance arrangement for losses in excess of 45 crores. It is
practice that the insurers will share as a coinsurer with reinsurer at certain
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percentage say 15% but such reinsurance arrangement will stop operating when
the loss exceeds a percentage of net retained income say 110 cores.
Therefore this reinsurance arrangement is known as STOP LOSS
EXCESS RATIO
Sharing of premium and claims account amount non proportional treaty Insurers
Premium is paid based on loss experience. Therefore there is a formula for
calculating the premium wherever there is a past record.
Say,
Incurred claims x
100
Gross Net Premium
The premium arrive on this formula is known as "Burning Cost Ratio". In addition
the Insurers increase the premium by a loading factor towards acquisition and
management cost.
Usually, it may be 100/70 or 100/80 or 100/85
Where the records of past experience are not available, the insurers may select the
payment or premium on a Flat Basis or a Fixed Percentage of the Gross net
premium income.
With regard to premium payment based on loss experience, the minimum and
maximum limit it agreed in the contract of reinsurance.
No. Commissions are payable under Non-proportional treaties Reinstatement of
sum insured
Based on the claim experience, the limit chosen by the reinsurer is reduced to the
extent of incurred claims and that sum can be reinstated by additional premium.
Claim Payment
The reinsurer will pay the claim upto his maximum limit once the loss reported to
exceed the deductible limit of the insurer. For major claims, then and there
settlement will be carried out that is called "Cash Loss Settlement" or otherwise
the net retained account will be submitted at the end of the year after adjusting the
deposits, if any.
Under non-proportional system, irrespective of the - claim, minimum premium
has to be paid.
CONCLUSIONS
For property Insurance, both proportional and non-proportional are favorable.
But it is ideal if the insurer chooses non-proportional reinsurance for catastrophe
risks and quota share treaty if he is a new insurer. Besides, the payment of premium
is very less in Loss as compared to other Proportional treaties.
337

Occupancy
Neighborhood
Type of construction
Period of cover
Perils covered
Sum Insured (Block wise)
Rate deductibles
Commission
Retention
Brokerage
Other Insurance
Inspection reports.
QUESTIONS
1.
2.
3.
Write 10 points on basis and functions of RI.
Reinsurance is insurance of insurance.
Transfer of risk from insurance company to Reinsurance Company.
Sharing of risk of insurance company.
Spread of risk internationally.
It provides capacity to underwrite more business by proportional

reinsurance.
It provides protection to net retention by XOL and Cat. XOL.
It stabilizes the results of insurance company by paying claim in bad

years.
Provides guidance and technical expertise to insurance companies.
Helps in maintaining solvency margin by providing capital indirectly.
Helps in getting global exposure.
Take care of aggregate loses with smaller policies.

What is facultative RI and describe advantages and disadvantages of
facultative.
Re Insurance of single risk.
Optional for insurance com. And reinsurance co. to offer the risk or not
and to accept the risk or reject.
The reinsurance may suggest modification in terms and conditions and

insurance company may accept or reject the modification.
The risks which are outside the treaty or exceeding treaty limit are
covered as facultative.
Hazardous and higher exposure risks are offered facultative.
Expertise and capacity of big reinsurance company is available.
Useful for hazardous risk.
Useful for very large risk.
Time taking process and high administrative cost.
Full disclosure of information of the risk to be made.
Negotiation at renewal.
No profit commission and very less re insurance commission.

List out contents of a facultative slip.
Name of the Insurance Co.
Name of the Insured.
Location.
Nature of business
Age of the company

338
4.
Write characteristics of surplus treaty
It is reinsurance treaty.
Proportional method of re insurance.
Premium and claims are shared in the same proportion.
It is obligatory and automatic capacity whenever there is surplus sum

insured it is compulsory to cede and accepted by re insurer.
Surplus treaty helpful growing business and accepting risks beyond

retention.
Maintain solvency margin.
Share catastrophe losses.
Can be arranged portfolio wise i.e. fire surplus treaty, marine hull treaty
etc.
High re insurance commission.
Provision for profit commission.
5.
List same clauses (treaty wording) of proportional treaties :
Scope of contract
Follow the fortune
Loss portfolio
Commission
Accounts
Cash losses
Inspection of records
Error and omission.
Commencement and termination
Disposal of balance
Arbitration.
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6.
7.
8.
What is retention?
Retention is an amount company would like to keep to its own account.
Two types of retention
Risk retention
Loss retention
Factors to decide retention
Share capital
Reserve
Net worth
Portfolio premium
Portfolio profitability
Management policy
Re insurance programme.
Describe the nature of reinsurance contract
It is a separate contract between insurance company and Reinsurance

Company.
Insurance contract must precede reinsurance contract.
It is contract of indemnity.
The requirement of contract such as offer, accept, consideration, legality

are also applicable.
Consideration is premium package by insurance company to

Reinsurance Company.
Utmost good faith as insurable interest is also equally applicable.
The contract may include clauses like follow the fortune error and
omission etc.
If cut through clause is included the primary insured may claim from
Reinsurance Company.
Characteristics of excess of loss treaties.
These are non proportional method of reinsurance.
Profits retention
Types of XOL treaties.
Risk XOL
Event XOL
Cat. XOL
Stop Loss
The insurance companies have to decide loss retention for each risk and
arrange risk XOL.
Similarly under event XOL the insurance company has to decide loss
retention under any event.
Catastrophic loss retention under cat. XOL.

340
If losses exceeds the loss retention claim are payable by reinsurance

company subject to upper limit.
Premium rating is also done on non proportional basis.
Claims recovery under proportional method of reinsurance.
Under facultative reinsurance a certain percentage of sum insured and

premium is transferred and claims are also recovered in the some
proportion.
Under quote share arrangement a fixed and pre determined percentage of

each and every policy is ceded and claims are recovered in the same
proportion.
Under surplus treaty the sum insured exceeding gross retention is ceded
and claims are recovered in the same proportion.
Claim notice has to be given.
Brokers may also be informed.
In case of big losses cash call may be made.
Cat. Loss also can be first recovered from the reinsurance company.
Records may be kept systematically for reinsurance companies' inspection.
REINSURANCE TRADE QUESTIONS

1.
What percentage of Sum Insured of any Policy underwritten in India will be

Re- insured with the Indian Re-Insurer (GIC) compulsorily in the name of
Obligatory Cession?
a. 20%
b. 15%
c. 25%
d. 10%
2.
As per IRDA regulations, the objective of Re--insurance is not to

a. Maximize retention within the Country
b. Develop adequate capacity
c. Secure protection of catastrophic Losses
d. Earn more profit.
3.
Which is not an objective under Re- insurance programme as per IRDA

(General Insurance Re-insurance) regulations 2000?
a. Simplify the administration of business
b. Maximize retention within the Country
c. Enhance Re-insurance on facultative basis
d. Secure the best possible protection for the Re-insurance costs incurred.
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4.
5.
6.
7.
Which of the following terms does not relate to Reinsurance?

a. Treaty.
b. First Loss.
c. Facultative
d. Stop Loss.
Self Insurance may NOT be advantageous in:
a. Predicting accurately.
b. Minimization of disputes.
c. Grouping of risks.
d. Saving transaction costs.
In Sliding scale of commission arrangement
a. Commission payable varies in proportion to the loss ratio
b. Commission payable varies inversely to the loss ratio
c. Commission payable is not related to the loss ratio
In the Reinsurance market, a Re-insurance contract is evidenced by
a. Policy
b. Stamped Slip
c. Endorsement
d. Cover note
8.
All General insurers in India --------- to GIC towards Re-insurance

a. Have to necessarily cede 15% of their business
b. Have to necessarily cede 25 of their business
c. Have an option to cede between 10 25% of their business
d. Are not bound to cede any business
9.
In India, the minimum entry capital for a reinsurance company is

a. Rs. 50 crore
b. Rs. 100 crore
c. Rs. 200 crore
d. Rs. 300 crore
10. Indian regulations prescribe a minimum credit rating of ________ in respect

of Re-insurers outside India.
a. AAA
b. AA
c. BBB
d. BB
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11. As pr IRDA regulation on reinsurance the percentage of commission payable

to ceding company for various classes of business is uniform
a. True
b. False
12. Each Indian insurer should obtain the approval of their Re-insurance
programme from IRDA
a. True
b. False
13. Reserve for unexpired risk is calculated on
a. premium received including reinsurance ceded but excluding reinsurance
received.
b. including reinsurance ceded and reinsurance received
c. excluding reinsurance ceded and including reinsurance received.
d. excluding reinsurance ceded and excluding reinsurance received.
14. Without approval of IRDA insurer independently cannot place Re-insurance
with Single Re-insurer more than
a.1% Re-insurance ceded outside India
b. 5%
c.10%
d. 25%
15. The statutory cession on each and every policy (subject to certain limits),
received by GIC is
a. 66.66%
b. 15%
c. 33.33%
d. 10%
16. Absence of direct relationship between Re- insurer and insured is an essence
of the Re-insurance concept. Which of the following clause is against this
concept?
a. Premium adjustment clause
b. Claims cooperation clause
c. Cut through clause
d. Follow the fortune clause
17. Which of the following is not relevant in facultative re insurance?
a. Sessions
b. Retrocession
c. Portfolio entry
d. Reinstatement
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18. In an XL form of Re-insurance the top and drop method is not relevant in
which of the following case?
a. When there is more than one layer
b. When the number & amount of reinstatement is restricted
c. When there is a single Re-insurer
24. When a reinsurer wishes to reduce its own liability on a particular risk, it does
so by arranging a
a. Cession.
b. Concession.
c. Retrocession.
d. Treaty.
19. Facultative Re-insurance is

a. A kind of obligatory Re-insurance
b. A Re-insurance arrangement administered by a faculty of insurance experts
c. A method of Re-insuring risks on individual basis without any obligation
for compulsory cession.
d. A method of Re-insuring risks where insurer is obliged to cede a fixed
percentage of premium for all risks written by him.
25. What amount would the reinsurer pay if the insurer has an excess of loss treaty
for Rs.10,000,000 excess of Rs.5,000,000 and as a result of a storm insurer
suffers a loss totaling Rs.7,000,000?
a. 2,000,000
b. 7,000,000
c. 5,000,000
d. No payment would be made
20. In reinsurance terminology a cession is the

a. Amount of insurance a reinsurer cedes to another Re-insurer
b. Amount of insurance an insurer keeps for its own account
c. Amount of insurance an insurer transfers to a Re-insurer
d. Maximum amount of insurance an insurer can write
21. The most common way of using reinsurance to minimize the effects of large
or catastrophic losses is by means of
a. Facultative Re-insurance
b. Quota Share Treaties
c. Surplus Treaties
d. Excess of Loss Treaties
22. An arrangement in which insurer and reinsurer agree that cessions will
always be a single fixed percentage of each reinsured risk can be referred to as
a. per event excess of loss Re-insurance.
b. per risk excess of loss Re-insurance.
c. quota share Re-insurance.
d. surplus Re-insurance.
23. In reinsurance parlance which of the following is only found in nonproportional treaty agreements?
a. Accounts and Statistics Clause
b. Attachment of Cessions Clause
c. Follow the Fortunes Clause
d. Ultimate Net Loss Clause
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26. In Re-insurance, a treaty designed to limit the loss of an insurer to a specified

percentage of its annual premium income for all business or a class of
business is called a
a. Catastrophe Excess of Loss Treaty.
b. Excess of Loss Treaty.
c. Stop loss Treaty.
d. Surplus Treaty.
27. Surplus Re-insurance is a form of
a. Proportional Re-insurance
b. Non-Proportional Re-insurance
c. May be either
d. All the above
28. A Re-insurance contract is
a. An extension of the original insurance contact
b. A guarantee for the original insurance contract
c. A separate and independent contract
29. The retention limit of the direct insurance is based upon
a. Capital
b. Risk profile of the portfolio
c. Regulatory considerations
d. All the above
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30. What is the amount of claim is payable under facultative Re-insurance

arrangement if the total sum insured is 20,000,00 and the cover is for Rs.
5,000,00 and claim is Rs. 4,000,00.
a. 4,000,00
b. 3,000,00
c. 2,000,00
d. 1,000,00
31. Under excess of loss if the cover is 10 crores in excess of 6 crores, then the 6
crores is known as
a. Cover limit
b. Deductible
c. Franchises
d. Ultimate net loss
32. Under excess of loss if the cover is for 20 crores in excess of 10 crores then the
cover limit is
a. 10 crores
b. 20 crores
c. 30 crores
33. The total sum insured of a property risk is Rs. 10 crores and retention is Rs.
One crore the treaty limit is Rs. 5 crores. If there is a claim of Rs. 50 lakhs the
Re-insurers will pay under surplus treaty
a. Rs.50 lakhs
b. Rs.40 lakhs
c. Rs.25 lakhs
d. Rs.10 lakhs
34. Insurance of an insured risk is called
a. Pooling of the risks
b. Co-insurnace
c. Re-insurance
d. Over-insurance
35. Which of the following contracts is not a contract of indemnity in the strict
sense?
a. Re-insurance
b. Property insurance
c. Life insurance
1) Only (a) above
2) Only (b) above
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3) Only (c) above

4) Both (a) and (b) above
5)Both (b) and c) above
36. In reinsurance parlance, a single event that causes multiple losses is called
a. Accumulation of losses
b. Catastrophe
c. Accident
d. Cyclone
37. Which of the following is not a function of Re-insurance ?
a. Increasing the capacity of a Re-Insurer.
b. Minimizing the effects of catastrophes
c. Stabilizing the performance
38. The contract where the distribution of the loss is based on the loss and not on
the amount insured is called
a. Proportional reinsurance
b. Non-proportional Re-insurance
c. Treaty Re-insurance
d. Facultative Re-insurance
39. Which of the following is / are not true with proportional facultative
reinsurance?
a. The Re-insurer shares a proportional part of the ceded insurance liability
b. All the losses are to be transferred to the Re-insurer by the cedent
c. The Re-insurer pays directly to the original insured
d. Both (b) and (c) above
40. Which of the following statement is /are true?
a. A cedent chooses facultative Re-insurance when it does not want to be
loaded with poor risk
b. Cedents normally choose facultative Re-insurance when there is not
automatic Treaty at their disposal
c. Under facultative Re-insurance both cedent and the Re-insurer have an
option to accept or reject.
d. All of the above.
41. What does the word treaty mean?
a. Single insurance policy
b. Bulk of insurance policies
c. An agreement between two parties
d. Reinsurance
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42. The contract under which a reinsured is obliged to cede a fixed percentage of
the risks falling within the scope of the policy is called
a. Quota Share Treaty
b. Surplus Share Treaty
c. Excess of Loss Treaty
d. Stop Loss Treaty
43. The kind of treaty where the cedent company retains the risks till a certain
limit and reinsures only the part that is above its net retention is
a. Quota share treaty
b. Surplus Treaty
c. Excess of Loss Treaty
d. Stop Loss Treaty
44. Which of the following is based on principles of both facultative and treaty?
a. Facultative cover
b. Quota share cover
c. Facultative obligatory cover
d. Partial cover
45. What does a 'premium bordereau' contain?
a. Detailed list of policies
b. Address of the original insured.
c. Termination date
d. all the above
46. Why is the concept of retention important to the underwriter?
a. Because it helps the underwriter to determine the amount of reinsurance
cover required.
b. It helps the underwriter to know about the accumulation of risks.
c. To ensure that the insurance company is not exposed to unacceptable level
of losses.
d. All the above
47. Why is it important for an underwriter to know about the risk environment
prevailing in other parts of the world ?
a. Because reinsurance is a business that goes beyond the boundaries
b. Because reinsurance companies have to balance the possible adverse
impact of one region by the better experience of another.
c. To thwart competition.
1) Only (a) above
2) Only (c) above
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4) Both (b) and (c) above

5) All of the above.
48. Which of the following statements is / re not true?
a. Large claims normally are repetitive and frequent
b. In most of the cases, the risks undertaken generate a great number of small
risks, a few medium sized risks and very small number of large risks which
can be very severe.
c. The higher layers come into picture only in case of very large claims.
1) Only (a) above
2) Only (b) above
3) Only (c) above
5) Both (b) and (c) above.
49. A computerized report that lists information for each and every claim is called
in reinsurance
a. Case reporting
b. Summary reporting
c. Bordereau reporting
d. Bulk reporting
50. Probable Maximum loss is an assessment by
a. The Cedent
b. The Reinsurer
c. The Surveyor
d. The Broker
51. Which of the following is not an advantage of the excess loss per occurrence
treaty?
a. It allows the companies to write some limits above the comfort level
b. It creates an extra capacity
c. It covers the entire loss
1) Only (a) above
2) Only (b) above
3) Only (c) above
52. Which of the following is / are true with regard to reinsurance underwriting?
a. It involves selecting the accounts
b. It involves defining conditions and rates
c, Only (a) above
349
d. Only (b)above
e. (a) and (b) above
53. As per IRDA regulation on reinsurance, each insurance company has to cede
20% (now 15%) of each and every policy as obligatory cession. These are: a. Quota share basis
b. Facultative basis
c. Surplus basis
d. Excess of Loss basis
54. Quota share basis can be :
a. Reciprocal
b. Non-reciprocal
c. NM reciprocal
d. Both the above
59. One of the following is non proportional method :of reinsurance

a. Stop loss
b. Quota Share
c. Surplus
d. Facultative
60. The automatic capacity of underwrite business beyond retention is arranged
through
a. Excess of Loss
b. Surplus Treaty
c. Stop loss
d. Facultative
61. A line is
a. Sum Insured under the policy
b. Risk retention to co's account
c. Cession to quota share
55. The Manager of Motor Insurance Third Party pool is from:

a. IRDA
b. GIC
c. New India
d. United India
56. The Manager of Re-insurance pool for terrorism risk is from
a. GIC
b. IRDA
c. General Insurance Council
57. The retention of an insurance company is protected by Reinsurance Treaty
such as:
a. Quota share
b. Surplus
c. Excess of loss
d. Facultative
58. One of the following is -proportional method of reinsurance :
a. Stop Loss
b. Excess of Loss
c. Catastrophic excess of Loss
d. Surplus
350
62. As per IRDA regulations, the obligatory cession on quota share basis to GIC
by all General Insurance Co. isa.10%
b.15%
c.20%
d.25%
63. Facultative Re-insurance is the
a. Portfolio risk
b. Single risk
c. Both the above
64. Profit commission is normally paid ina. Facultative RI
b. Excess of Loss
c. Stop Loss
d. Surplus Treaty
65. A major portion of mega risk, after ceding to surplus treaty is reinsured
through
a. Excess of Loss
b. Stop Loss
c. Facultative
d. Catastrophic Excess of Loss
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66. Stop loss is suitable for

a. Aviation risk
b. Mega risk
c. Hailstorm risk
d. Petrochemical risk
67. Following reinsurance companies are underwriting business in India:
a. Munich Re
b. Swiss Re
c. Axa Re
d. GIC Re
68. As per IRDA Regulations the share capital for Reinsurance Company is
a. 100 Cr
b. 200 Cr
c. 300 Cr.
69. As per IRDA regulations while placing the Re-insurance programme, not
more than ____ percentage of cover should not be placed with one insurance
reinsurance company.
a. 5%
b. 10%
c. 15%
d. 25%
KEY REINSURANCE TRADE QUESTIONS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
B
D
C
B
C
B
B
A
C
C
B
A
A
C
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
B
D
D
C
C
C
D
C
D
C
A
C
A
C
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
352
D
D
B
B
C
C
C
B
D
B
D
D
C
A
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
B
C
D
D
C
A
C
C
C
E
A
C
B
A
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
C
D
A
D
B
B
B
D
C
C
D
B
B
353
FINANCE
ACCOUNTS, INVESTMENT, AUDIT & RELATED REGULATIONS
TRADE QUESTIONS
FINANACE
354
1.
Compulsory investment by an insurer of its total assets, in Infrastructure and

social sector is
a. Not less than 10%
b. Not less than 7.5%
c. Not less than 5%
d. No such limit
2.
Mark the most unlikely for calculation of solvency margin. Asset of Insurance
Company includes
a. Agent's balance amount
b. Realizable sundry debtors
c. Realizable advance
d. Furniture, Fixture, Dead stock and stationery
3.
No risk to be assumed unless the Prem. Is received in advance the same has
been provided in
a. Section 41 of Insurance Act
b. Section 40 C of Insurance Act
c. Section 64 VB of Insurance Act
d. Section 64 UM of Insurance Act
4.
State which of the following may not be a liability of Insurance Company

a. Provision for dividend declared or recommended
b. Reserve for unexpired risk
c. Estimated liability in respect of outstanding claim
d. Reserve for bad and doubtful debts
5.
Solvency Ratio means

a. Available Solvency Margin Less required Solvency Margin
b. RSM less ASM
c. RSM/ASM
d. ASM/RSM
6.
Who of the following can be members of Investment Committee of an insurer

constituted under IRDA Regulation?
a. The principal officer of the Company
b. The appointed actuaries
c. The IRDA chief
355
d.
The CVO
i. a, b, c, d
ii. a, b and c
iii. a and c
iv. a and b
b.
c.
d.
7.
Incurred Claim Ratio for direct insurance business means

a. Paid Claim/Prem. during any policy period
b. 3 years avg. claim/3 years avg. prem.
c. Incurred claim/3 years avg. prem.
d. Incurred claim/ prem. during any policy period
8.
After formation of IRDA, Statutory Auditors of PSU Insurance Companies

are appointed by
a. IRDA
b. CVC
c. CAG
d. Board of Directors of respective Company.
9.
Which is correct pair?

a. Statutory Audit-Continuous Audit
b. Internal Audit-Periodical Audit
c. Government Audit-Continuous Audit
10. As per the Statutory Requirement the following may not be prepared for
Annual Financial Results by Insurance Company
a. Revenue Account
b. Trading Account
c. Profit and Loss account
d. Balance sheet
11. The auditors who are required to express their opinion on whether the balance
sheet gives a true and fair view of the insurers' affairs as at the end of the
financial year are
a. Internal Auditors
b. Statutory Auditors
c. Govt. Auditors
d. Auditor for Tax Audit
12. The auditors will verify that the financial statements are prepared in
accordance
a. The requirements of the Insurance Act, 1938
356
The requirements of the IRDA Act, 1999

The requirements of the Companies Act, 1956
All above
13. The Auditors shall verify that the investments in the Balance Sheet have been
valued in accordance with
a. The provisions of the IRDA Act, 1999
b. The provisions of the IRDA Act, 1999 and IRDA Reg. on Accounts and
Audit
c. The provisions of the Companies Act, 1956 and Accounting Standard
(AS) 13
d. Market Value
14. The auditors express opinion on the accounting policies to the effect that
a. The Accounting policies are appropriate and in compliance with
applicable Accounting Standards
b. The Accounting Policies are appropriate and in compliance with
applicable Accounting Standards and IRDA Regulations
c. The Accounting Policies are appropriate and in compliance with IRDA
regulations
d. The Accounting Policies are appropriate
15. The auditor shall express their opinion that the Revenue Account gives
a. A true and fair view of the surplus or the deficit for the financial period
b. A true and correct view of the surplus or deficit for the financial period
c. A fair view of the surplus or the deficit for the financial period
16. As per IRDA (Accounts and Audit) Regulation the auditors are required
a. To review the management report
b. To certify that they reviewed the management report
c. To certify that they have reviewed the management report and there is no
apparent mistake or material inconsistency with F S.
d. Not to certify or review the management report
17. As per IRDA (Accounts and Audit) Regulation, the auditor's report shall
specify that
a. The actuarial valuation of liabilities is duly certified by the appointed
actuary
b. The valuation of liabilities is based on the assumptions for such
valuations
c. Valuation in accordance with the guidelines and norms issued by ASI
d. Valuation is made in accordance with above all provisions
357
18. For claim audit the auditor should look into the following aspect(s)
a. Legal aspects
b. Technical aspects
c. Financial aspects
d. All Above
19. For corporate underwriting audit, the internal auditor shall examine
a. Underwriting Policy and practice
b. Risk Management Policy and Reinsurance Policy
c. Underwriting results
d. All above
20. For investment audit, the Auditors look into the following aspects
a. Verification and valuation of investments
b. Verification of Exposure Risks
c. Verification of performing and non-performing status of investments
d. All above
21. Accounts audit covers the following aspects
a. Verification of Financial Statements
b. Recognition of Premium Income
c. Valuation of Assets and Liabilities and Solvency Margins
d. All above
22. For motor TP claims audit, the auditors need not consider the following
aspects
a. The investigation Report and Income Statement
b. Charge Sheet, Post-mortem Report and Police report
c. Policy particulars and 64 VB compliance
d. Premium charged and claim ratio
23. To verify the admissibility of FLOP claims, auditor shall first look into:
a. The admissibility of Material damage claim in Fire Policy
b. Whether the claim under Fire policy is payable
c. The admissibility of FLOP policy claim with reference to its coverage,
exclusions, terms, conditions, clauses irrespective of the admissibility of
claim
c.
d.
Profitability of the company

All above
25. As per IRDA regulation each Indian insurer shall render its accounts in
respect of obligatory cessions to Indian reinsure on
a. Monthly basis
b. Quarterly basis
c. Half-yearly basis
d. Annual basis
26. IBNR stands for
a. Insured before now reported
b. Insured before not reported
c. Incurred but now reported
d. Incurred but not reported
27. Reserve for unexpired risk is calculated at 100% of the net premium in the
following class of business
a. Finance
b. Marine Hull
c. Misc.
d. Marine Cargo
28. Reserve for unexpired risk is calculated on
a. Premium received including reinsurance ceded but excluding
reinsurance received
b. Including reinsurance ceded and reinsurance received
c. Excluding reinsurance ceded and including reinsurance received
d. Excluding reinsurance ceded and excluding reinsurance received
29. Unearned premium refers to the following
a. 10% of the gross premium
b. 20% of the gross premium
c. 15% of the gross premium
24. The auditor will examine the receipts and payments accounts (cash flow
statement) to verify mainly:
a. Liquidity of the company
b. Solvency of the company
30. The IRDA Regulation that deal with Audit Requirements is called:
a. IRDA (Preparation of Financial Statements and Auditor's Report of
Insurance Companies) regulation, 2000.
b. IRDA (Preparation of Financial Statements and Auditor's Report of
General Insurance Companies) regulation, 2000.
c. IRDA (Preparation of Auditor's Report of Insurance Companies)
regulation, 2000.
358
359
d.
IRDA (Preparation of Auditor's Report of General Insurance Companies)

regulation, 2000.
31. The report of the Auditors on the Financial Statements of every insurance
company shall be inconformity with the requirements specified in schedule(s)
to the particular regulation thereof
a. Schedule A
b. Schedule B
c. Schedule C
d. All above
32. The Audit Committee in Insurance Company is constituted by one of the
following ways:
a. The specified provisions in the companies Act 1956 (As Amended)
b. The specified provisions in the Insurance Act, 1938 (As Amended)
c. The specified provisions in the IRDA Act, 1999 (As Amended)
d. The specified provisions in the specified IRDA Regulations
33. The Financial Statements of a general insurance company to be audited are:
a. The revenue account (Policyholder's Account)
b. The balance sheet and profit & loss account (Shareholders' Account)
c. The Receipts and Payments account (Cash Flow Statement)
d. All above
34. C & AG Audit of Government companies is carried out as per the provisions
a. The provisions Sec. 617 of the Companies Act 1956 (As Amended)
b. The provisions Sec. 618 of the Companies Act 1956 (As Amended)
c. The provisions Sec. 619 of the Companies Act 1956 (As Amended)
d. All above
35. For the purpose of PSU Audit Laws and regulations applicable are
a. The provisions of the Companies Act and the insurance act
b. The IRDA regulations and the Insurance principles
c. The Accounting Standards and the Auditing and Assurance Standards
issued by the Insurance Chartered Accountants of India
d. All above
36. The Audit Committee that oversees, reviews and evaluates the financial
results and their disclosures is constituted
a. Under the directives of the Controller & Auditor General of India
b. Under the provisions of the IRDA Act, 1999
c. Under the provisions of the Insurance Act
d. Under the provisions of Sec. 292A of the Companies Act, 1956 (As
amended)
360
37. The audit committee legally constituted is required to

a. Oversee, review and evaluate the financial results of the company
b. Examine the reporting process and disclosures of performance of the
company
c. Review the audit of all the offices of the company, discuss with the
statutory auditor and recommend the same to the Board.
d. All above
38. The Statutory Auditor of PSU Insurance Company is appointed by
a. The C&AG
b. Shareholders in AGM
c. The Board of Directors
d. The regulatory authority
39. The audited annual accounts of PSU Insurance Company is submitted to
a. The Lok Sabha of the Parliament U/S 619A & 619B of the Co's Act
b. The Rajya Sabha of the Parliament U/S 619A & 619B of the Co's Act
c. Both the Sabhas of the Parliament U/S 619A & 619B of the Co's Act
40. In the audit report the auditor is required to comment on valuation of liabilities
to the effect that;
a. The actuarial valuation is true and correct
b. The actuarial valuation is true and fair
c. The actuarial valuation is proper and justified
d. The actuarial valuation has been certified by the appointed actuary and
the said certificate has been relied upon for their opinion
41. In the audit report the auditor is required to comment on Management Report
to the effect that
a. There is no apparent mistake or material inconsistency with the financial
statements
b. There is no mistake or inconsistency with the financial statements
c. Management is true and correct
42. In the audit report the auditor is required to comment on Investment with:
a. Investments have been valued in accordance with the provisions of the
Insurance Act
b. Investments have been valued in accordance with the provisions of the
Insurance Act and the prescribed IRDA regulations
c. Investments have been valued in accordance with the prescribed IRDA
regulations
361
d.
None of the above
c.
d.
43. The Statutory Audit Report of PSU Company is required to address to:
a. The Members
b. The Government
c. The IRDA
d. The Board
44. The certification on company's compliance of Sec. 40 (c) of the Insurance
Act, 1938 in regard to debit of all management expenses to Revenue Account
is required to be done by:
a. The C&AG Auditor
b. The Internal Auditor
c. Statutory Auditor
d. Special Auditor
45. The Statutory Auditor comments on amortization of expenses on account of
Pension, Gratuity and Leave Encashment in accordance with the
requirements of;
a. Accounting Standard 15
b. Accounting Standard 22
c. Accounting Standard 18
46. Certificate to the effect that no part of the assets of Policyholders Funds has
been directly applied in the contravention of the Insurance Act, 1938 is given
by
a. The C&AG Auditor
b. The internal auditor
c. The Statutory auditor
d. The Special Auditor
47. The general insurers are required to invest and keep invested the following
minimum percentage of total assets in Govt. Securities and Guaranteed
Securities
a. 10%
b. 20%
c. 30%
d. 40%
48. For general insurer, investment in other than approved investment cannot
exceed
a. 10% of total assets
b. 15% of total assets
354
25% of total assets

50% of total assets
49. The minimum rating for investment in social sector and debt instrument
should be
a. AAA
b. AA
c. +A
d. A
50. When a listed equity instrument is traded in volume not below ten thousand
units in any session or trading value exceeds 10 lac in any session in past 12
months it is termed as
a. Actively traded instrument
b. Liquid traded instrument
c. Actively traded and liquid instrument
d. None
51. One of the exposure norms of IRDA sets the limit on investment as under
a. Limit per investor company
b. Limit per investee company
c. Limit per investor company & per investee company
d. None
52. In which of the following General insurance Companies in India invests
insurance funds:
a. Indian Central Govt. securities
b. Govt. securities issued by foreign countries
c. Shares issued by Private companies
d. Shares issued by public companies
53. General insurance companies are allowed to invest in Growth schemes of
mutual funds
a. True
b. False
54. Approved securities/investments for non-life insurance companies are
prescribed in
a. Section 27A of Insurance Act
b. Section 27B of Insurance Act
c. Section 27A & B of Insurance Act
355
55. Exposure norms for investment suggested for IRDA Regulations relating to
a. Investee company
b. Group Company
c. Sector
d. All of the above
56. The investment committee that reviews investment policy and supervises and
controls all investments activities is constituted by
a. Sec. 292A of the Companies Act, 1956 (As Amended)
b. The Insurance Act, 1938 (As Amended)
c. Sec. 9 of the IRDA (Investment) Regulation, 2000
57. The figure in financial statements are rounded off to the nearest
a. Rupee
b. Hundred rupees
c. Thousand rupees
d. Lac rupees
58. Accounting of claim costs does not include
a. Survey expenses on claim
b. Legal expenses on claim
c. Investigation expenses on claim
d. Management expenses on claim
59. For accounting 'Investment Property' means land or building held
a. For capital appreciation
b. For use in services
c. For administration purpose
d. All of the above
D. Shares issued by public companies

a. Only A
b. Only A & B
c. Only A & D
d. All of the above
62. General Insurance companies are allowed to invest in Growth schemes of
mutual funds
a. True
b. False
63. Approved securities/investments for non-life insurance companies are
prescribed in
a. Section 27A of Insurance Act
b. Section 27B of Insurance Act
c. Section 27A & B of Insurance Act
64. Exposure norms for investment suggested by IRDA Regulations relating to
a. Investee company
b. Group company
c. Sector
All of the above
ACCOUNTS MODEL QUESTIONS

1.
60. Short term Loan means loan repayable within

a. 1 month
b. 3 months
c. 6 months
d. 12 months
Accounting entry for Depreciation of Assets will be:

a. debiting depreciation crediting asset
b. debiting depreciation crediting P/L A/c
c. debiting depreciation crediting Accumulated depreciation
d. debiting depreciation crediting loss on asset
2.
61. In which of the following, the General Insurance companies in India invests
finds in:
A. Indian Central Govt. securities
B. Govt. securities issued by foreign countries
C. Shares issued by private companies
Service Tax on Reinsurance Premium sent to foreign reinsurer will be paid by:
a. foreign reinsurer
b. domestic cedent
c. both
d. none
3.
Expenses of management other than those charged to P/L A/C are apportioned
to revenue A/C on the basis of GDP plus Reinsurance accepted Premium
a. 75% marine business 100% fire and misc.
b. 50% marine 50% fire and misc.
356
357
c.
d.
4.
5.
6.
25% marine 75% fire and misc

100% marine 75% fire and misc.
Rate of service tax has been changed from 12% to 10% from
a. 1st February, 2009
b. 24th February, 2009
c. 20th February 2009
d. 1st April, 2009
Depreciation on fixed asset is charged on WDV at the rate prescribed laid
down in:
a. companies Act, 1956
b. IT Rules 1952
c. Both
d. Higher of the two
Terminal benefits paid are amortised over a period:
a. five years
b. three years
c. seven years
d. eight years
10. Gross Profit Ratio denotes:

a. Sales X 100 / GP
b. Net Profit X 100 /GP
c. Gross Profit X 100/ Sales
d. Gross profit X100 / Purchase
11. An Insurer shall prepare separate Revenue Account for:
a. Fire, Cargo, Hull and Misc.
b. Fire, Marine, Motor and Misc
c. Fire, Marine, Motor and Misc.
d. Fire, Marine and Misc.
12. Separate schedules shall not be prepared for:
a. Aviation
b. Personal Accident
c. Health
d. Rural
13. Premium for rent shall include only
a. Realized Rent
b. Notional Ret
c. Outstanding Rent
d. Prepaid Rent
14. Claims Paid shall not include:
a. IBNR
b. Survey Fees
c. Legal And Other expenses
d. Claims settlement cost
7.
For Assessment Year 2009-10 no income tax is to be levied for senior citizen
upto income of:
a. Rs. 3,50,000
b. Rs. 2,25,000
c. Rs. 1,25,000
d. Rs. 2,50,000
8.
Provision for gratuity, pension, leave encashment is made on actuarial

valuation 1n accordance with Accounting Standard:
a. AS 15
b. AS 3
c. AS 26
d. AS 10
15. Short term loans shall include those, which are repayable within:
a. 12 months
b. 24 months
c.
6 months
d.
3 months
9.
Statutory Auditor appointed by the C &AG under:

a. 619 ( 1 )
b. 619 ( 2 )
c. 619 (3)
d. 619 (4)
16. Earned Premium is:

a. Direct Premium
b. Direct Premium + Reinsurance Accepted
c. Direct Premium + Reinsurance Accepted Reinsurance Ceded
d. Direct Premium + Reinsurance Accepted Reinsurance
Ceded + Adjustment for change in reserve for unexpired risk
358
359
17. Cash flow statement shall be prepared according to:

a) AS 3
b) Company Act
c) IT act
d) Insurance Act
18. The term of office of CMD shall be for a period:
a. not exceeding five years from the date of appointment
b. not exceeding three years from the date of appointment
c. Until his retirement
19. Auditors in PSUs are appointed by:
a) CAG
b) Company Board
c) Head Office
d) Internal Audit Dept.
20. Combined Ratio is:
a) (Gross claims paid + expenses) *100/ Gross Premium
b) (Gross claims paid + expenses) *100/ Net Premium
c) (Net claims paid + expenses) *100/ Gross Premium
d) (Gross claims paid *100)/ Gross Premium
360
INVESTMENT
361
INVESTMENT MODEL QUESTIONS

Q.1. Insurance Regulatory and Development Authority (Investment) Regulation
came into force and became applicable in the year
1998
2000
2002
2004
Q. 2. Insurance Regulatory and Development Authority came into force in the
year
1997
1999
2000
2005
Q. 3. Which of the following is the last amendment to IRDA (Investment)
Regulation, 2000?
Fourth Amendment
Third Amendment
Second Amendment
First Amendment
Q. 4. When was IRDA (Investment) Regulation, 2000 last amended -
2000
2005
2007
2008
Q. 5. Regulation 4 of IRDA (Investment) Regulation, 2000 specifies ---
Pattern of Investment Assets of General Insurance Business
Pattern of Investment assets of Life Insurance Business
Pattern of Investment Assets of Pension and General Annuity Business
None
Q. 6. What minimum percentage of Investment Assets has to be maintained in
Mandated / Statutory Investment category prescribed by IRDA for General
Insurance Companies-?
60%
362
55%
45%
30%
Q.7. Regulation 5 of IRDA (Investment) Regulation, 2000 specifies
Exposure / Prudential Norms of Investment
Approved Investment
Other Investment
Returns of Investment
Q.8. What percentage of Investment Assets is subject to Exposure / Prudential
norms of Investment as prescribed by IRDA?
50%
60%
70%
55%
Q. 9. What minimum percentage of Investment Assets has to be maintained in
Infrastructure category as prescribed by IRDA for General Insurance
Companies?
5%
10%
30%
15%
Q.10. What minimum percentage of Investment Assets has to be maintained in
Housing category as prescribed by IRDA for General Insurance
Companies?
10%
15%
5%
20%
Q.11. What percentage of Investment Assets has to be maintained in Central
Government Securities as prescribed by IRDA for General Insurance
Companies?
20%
30%
10%
363
40%
Q.12. What percentage of Investment Assets has to be maintained in Government

Securities including State Government Securities as prescribed by IRDA for
General Insurance Companies?
20%
30%
40%
15%
Q.13. What is the maximum percentage allowed for Investment in Other
Investment category by IRDA for General Insurance Companies--
10%
20%
25%
30%
Q.14. What is the minimum Credit Rating required for Instruments for investment
to qualify for Approved Investment category
AA
AA
A+
AQ.15. What is the minimum Credit Rating required to consider an Instrument for
Investment by Insurance Companies?
AA
AA+
A+
AQ.16. Fair Value valuation applicable to --

Equity
Debenture
Preference
All of the above

Q.17. General Insurance Company's Exposure in equity, preference and
convertible debentures of a company allowed by IRDA is restricted to---
Lower of 10% of outstanding equity shares ( face value) or 10% of
364
Investment assets

Investment assets

Investment assets

Investment assets
Q.18. General Insurance Company's Exposure in Debt and Loans of a company
allowed by IRDA is restricted to---
Lower of 10% of Paid-up share capital, free reserves and debenture /
Bonds of the Investee company or 10% of Investment Assets



Q.19. General Insurance Company's GROUP Exposure in equity, preference and
convertible debentures of a company allowed by IRDA is subject to---
Maximum up to 15% of Investment Assets

Q.20. General Insurance Company's INDUSTRY Exposure in equity, preference
and convertible debentures of a company allowed by IRDA is subject to---
Shall not exceed 15% of its total investment exposure to the industry
sector as a whole
sector as a whole
sector as a whole

sector as a whole
Q.21. Regulation 6 of IRDA (Investment) Regulation, 2000 specifies
Investment Returns to be submitted by the Insurer
Pattern of Investment
365
Exposure Norms
Valuation of Investment
Q.22. Investment Returns to be filed with IRDA on --
Annual Basis
Half Yearly Basis
Quarterly Basis
Monthly Basis
Q.23. What is period within which the returns need to be submitted to IRDA
Within 55 days of the end of quarter
Within 30days of the end of quarter

Q.24. How many Investment Forms need to be filed with IRDA by General
Insurers--
12
11
10
13
Q.25. Every Insurer shall review the Investment Policy on
Yearly basis
Half Yearly basis
Monthly basis
Quarterly Basis
Q.26. Investment Policy of an Insurer needs to be approved by its--
Board of Directors
Investment Committee
Audit Committee
Management
Q.27. Schedule II of IRDA (Investment) Regulations, 2000 specifies--
List of Other Investments
List of Approved Investments
List of Money Market Instruments
All of the above

366
Q.28. The Classification of Industrial sectors has to be done in line with--

National Industry Classification (NIC)
CMMIE
Capital Market
CRISIL
Q.29. Regulation 2(cc) of IRDA (Investment) Regulations, 2008 specifies
List of Approved Investments
List of other Investments
List Money Market Investments
List of Infrastructure Investments

Q.30. Section 27B of Insurance Act, 1938 deals in--
Provisions regarding approved investments
Provisions regarding Other Investments
Provisions regarding Dividend
Provisions regarding pattern of investment

Q.31. Section 27C of Insurance Act, 1938 specifies
Provisions regarding Approved Investments
Prohibition for Investment of funds outside India
Prohibition of Investment in Pvt. Limited companies
All of the above

Q.32. 'Accretion of funds' means--
Investment Income, Gains on sale / redemption of the existing
investment and operating surplus
Investment assets at the end of the period
Investment income for the period
All of the above

Q.33. Investment Assets in the case of a General Insurer means--
Total Assets of the company
Total Operating surplus
Shareholders funds representing solvency margin and Policy holders'

funds at their carrying value as shown in its balance sheet as per IRDA.
Total Accretion during the period

367
INSURANCE LAW & REGULATORY FRAME WORK

MODEL QUESTIONS
1.
2.
IRDA can have following part times members in addition to whole time
members:
a. 4
b. 8
c. 6
Tenure of the Chairman IRDA is
a. 3 years
b. 5 years
c. 4 years
4.
Sec 40 C of Insurance Act stipulates about limits of expenses of

management. In case of violation:
a. IRDA can cancel the license of the insurer
b. Govt can cancel the license,
c. Govt can relax the provisions
6.
Section 64 VC of insurance act provides

a. No risk can be assumed without collection of Premium in advance
b. No insurer can open office at a new place without permission from the
authority
c. The controlling office has authority to waive advance collection of
premium
d. Insurers need not seek permission from any authority.
8.
Insurance Ombudsman has come into existence due to

a. IRDA Act
b. Redresses of Public Grievances rules 1998 under Insurance Act
c. Public Liability Insurance Act 1991
d. Consumer Protection Act
9.
Under Sec 64 UM, of Insurance act 1938 the controller of Insurance

reserves the rights to
1) To appoint a second surveyor to reassess the loss
2) Directs insurers to settle a claim at a figure less than or higher than that of
at which it was assessed originally
a. Both 1 & 2 are correct
b. Only 1 is correct
c. Only 2 is correct
d. Both are incorrect
10.
The minimum credit rating permitted of a re-insurer chosen by an Indian

insurance company should be
a. IAAA of Crisil
b. BBB of S & P
c. Any Registered Reinsurance company of repute
d. A+ of AM Best
11.
The powers of ombudsman

1) Non issuance of any insurance document to the customer after receipt of
premium
2) Any partial or total repudiation of claim by the insurer
3) Any dispute in regard to premium paid or payable in terms of policy
4) Only delay in settlement of claim
a. All are correct
b. Only 1 & 2 are correct
c. Only 4 is correct
d. Only 3 is correct
The Maximum number of whole time Members IRDA can have is

a. 4
b. 5
c. 7
3.
5.
7.
Social Sector business includes all except

a. Unorganized sector
b. Informal sector
c. Economically vulnerable & backward classes
d. Rural sector
The penalty for non-compliance of Social sector obligations, for the insurers
is
a. Rs 5 lac per defaulting year and continuous failures, cancellation of
license
b. Every year fine of Rs 5 Lacs
c. Warning letters to be issued
368
369
12.
Ombudsman can take up the disputes between

a. Insurer and Corporate clients
b. Insurer and co-operative societies
c. Insurer and individual clients
d. All of the above
13.
A TPA has been licensed to perform its functions from 1.1 2006. It has to
renew its license on
a. On or before 1st January 2009
b. On or before 30th November 2008
c. On or before 1st January 2010
d. On or before 1st January 2011
14.
While sending the policy to the insured, the insurer is obliged to send the
following
a. Claim Form
b. Name & Address of surveyor
c. Name and Address of Regional Office
d. Address of the Insurance Ombudsman
15. For calculation of solvency Ratio of a non life insurance Company, The
formula applied is
a. ASM is multiplied with RSM
b. ASM is divided by RSM
c. RSM is divided by ASM
d. RSM over net premium/ Net Claims which ever is higher
16.
17.
No General Insurer can open a new place of business or change the existing
place of business in India without the permission of
a. GIPSA
b. GIC
c. Govt. of India
d. IRDA
Which of the following relating to Direct Brokers License Fee is incorrect?
a. At the time of being Licensed shall pay a License fee of Rs.25, 000/b. 0.5% of the remuneration earned in the preceding financial year subject
to minimum of Rs.25, 000/- and a maximum of Rs.1, 00,000/- on every
renewal.
c. 0.5% of the remuneration received subject to a minimum of Rs.75,000/and Maximum of Rs.3,00,000/d. The prescribed License fee shall be paid within 15 days from the date of
receipt of intimation of acceptance of the application.
370
18.
To which of the following entities can not be issued Corporate Agency

License?
a. Private Limited Company the Memorandum /articles of Association is
silent about insurance business
b. A Municipal Corporation
c. A scheduled Commercial Bank
d. Primary Co operative Bank
19.
Which of the following relating limit of indemnity under Brokers

Professional indemnity Policy is incorrect?
a. 3 Times remuneration received at the end of every financial year subject
to a minimum limit of Rs.50 lacs for Direct Broker
b. 3 Times remuneration received at the end of every financial year subject
to a minimum limit of Rs.2.50 Crores for a Reinsurance Broker
c. 3 Times remuneration received at the end of every financial year subject
to a minimum limit of Rs.5 Crores for a Composite Broker
d. 3 Times remuneration received at the end of every financial year subject
to a minimum limit of Rs.10 Crores for Composite Broker
20.
As per the Insurance act the General Insurance Business has been classified
into
a. Fire, Motor, Miscellaneous, Marine
b. Fire, Marine, Motor, Engineering
c. Fire, Marine, Health, Miscellaneous
d. Fire, Marine, Miscellaneous
21.
As per the Insurance Act 1938 under Sec 40-C Companies have to operate at
Management Expenses ratio of
a. under 30%
b. under 25%
c. under 15%
d. under 20%
22.
GIBNA was introduced for making

a. General Insurance affordable to people
b. To help insurance grow in rural sector
c. To help Policy holders
d. To Nationalize the General Insurance sector to make it meaning full to the
masses
23.
Which one of the following is not correct for general insurance companies to
undertake in respect of social sector business, of the total gross premium?
a. 2% of the total gross premium in the first financial year.
371
b. 3% of the total gross premium in the 2nd financial year.

c. 5% of the total gross premium thereafter
d. 10% of the total gross premium every year.
24.
25.
26.
27.
28.
29.
c. Not more than four part-time members

d. All the above.
30.
What are the reasons by which the central government can remove any
Member of IRDA?
a. Physically or mentally incapable
b. Has been convicted any offence which involves moral turpitude
c. Any time adjudged as insolvent
d. All the above
31.
What is the full form IRDA?

a. INSURANCE REGISTRATION & DEVELOPMENT ACT
b. INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY.
c. INSURANCE RURAL AND DEVELOPMENT AGENCY
d. NONE OF THE ABOVE.
32.
CHAIRPERSON OF THE AUTHORITY CAN HOLD OFFICE UPTO

THE AGE?
a. 62 YEARS
b. 65 YEARS
c. 60 YEARS
d. NO AGE LIMIT.
33.
WHERE IS THE REGISTERED OFFICE OF IRDA LOCATED?

a. KOLKATA
b. BANGALORE
c. MUMBAI
d. HYDERABAD
34.
WHAT IS THE REQUIRED PAID-UP CAPITAL TO QUALIFY TO ACT

AS NON-LIFE INSURER IN INDIA?
a. Rs. 40 crore
b. Rs, 100 crore
c. Rs. 35 crore
d. Rs. 75 crore
35.
ACCORDING TO 'IRDA ACT' RURAL INSURANCE BUSINESS IN

NON-LIFE IS
a.2 % in first financial year
b.3 % in 2nd financial year
c.5% thereafter
d. all the above
Which one of the following is not incorrect minimum qualification for any
person to become an agent, where the population is less than 5000?
a 12th pass
b Degree from any recognized university
c 10th standard
d None of the above.
Which one of the following is not incorrect in case of approval for
appointment of Actuary in case of general insurance?
a. IRDA shall within 30 days approve or reject
b. IRDA shall within 60 days approve or reject.
c. IRDA shall within 15 days approve or reject.
Which of the following is correct in respect of reserve for unexpired risk?
a. Fire 50%, Misc 50%
b. Marine cargo 50 %, Hull 100%
c. a & b are correct
d. Only a is correct
Which one of the following is correct in respect of solvency margin?
a. Excess of value of liabilities over excess of value of assets.
b. excess of value of asset over liabilities;
c. Both the above are correct
Which one of the following is correct in case of cancellation of registration
of general insurance company which defaults repeatedly to adhere to the
code of conduct?
a. No cancellation of registration is permitted as per IRDA.
b. Penalty of suspension for a stated period, imposed by the IRDA.
c. Impose penalty of cancellation of certificate of Registration.
d. Penalty coupled with cancellation of certificate of registration, by the
IRDA
WHAT IS THE COMPOSITION OF IRDA?
a. A Chairperson
b. Not more that five Whole-time Members
372
373
36.
ACCORDING TO IRDA REGULATION, SOCIAL SECTOR BUSINESS

MINIMUM REQUIREMENT TO NON-LIFE IS AS UNDER EXCEPT
a. 5000 lives in the first year
b. 7500 lives in 2nd financial year
c. 10000 lives in 3rd financial year
d. 12000 lives in 4th financial year
37.
Who regulates Re-Insurance business in India?

a. IRDA
b. GIC
c. Reinsurance Corpn of India
d. Govt. of India.
38.
Which one is not the criterion for appointment of Actuaries under IRDA
ACT?
a. A fellow member of the Actuarial Society of India
b. Not over the age of 65 years
c. An appointed Actuary of another Insurer
d. A person who has not committed any breach of professional conduct
39.
40.
41.
42.
The required minimum Solvency Ratio as per IRDA Act is

a.1.00
b.1.20
c.1.50
d. none of the above
Function of Actuaries is
a. Certification of pricing
b. ensuring of solvency margin
c. ensuring the accuracy & completeness of data
d. all the above
Rural sector shall mean any place having population of
a. not more than 5000
b. Density not more than 400 per sq. km.
c. At least 75% of the main working population is engaged in agriculture
d. All the above
Social Sector excludes
a. un-organized sector
b. informal sector
c. economically vulnerable
d. formal sector
374
43.
Un-organized sector excludes

a. bidi workers
b. handloom and khadi workers
c. gents tailor
d. rickshaw puller
44.
Which one shall be considered as an advertisement as per IRDA

a. materials used by an insurance company within its own organization
b. communications with the policy holders other than materials urging them
to purchase, increase modify a policy
c. General announcement sent by a group policy holder to a member of the
eligible group
d. Materials used by an insurance company to distribute to the public.
45.
If any insurer fails to maintain the required Solvency Margin, then he shall
be liable to a penalty by IRDA
a. not exceeding Rs. 5 lac
b. not exceeding Rs.10 lacs
c. not exceeding Rs. 4 lacs
d. no such penalty
46.
An important regulation by IRDA that was made in 2005 in the area of

a. Macro insurance
b. Micro insurance
c. Motor insurance
d. Re-insurance
47.
Which is an un-approved investment as per IRDA

a. investment in secured loans
b. investment in secured debt instruments
c. investment in secured bonds
d. investment in short or long term loans with pvt. Ltd. companies.
48.
Which one of these is not under the powers of Ombudsman to consider:

a. Delay in settlement of claims.
b. Non-issuance of any insurance document to customers after receipt of
premium.
c. Any dispute with regard to premium paid in terms of the policy.
d. Repudiation of a claim of a commercial firm.
49.
Which of the following is not a disqualification for an individual to become

an insurance agent (Sec.42):
a. He is a minor.
375
b. He is of sound mind.
c. He is a known criminal.
d. His connivance in a fraud is proved
50.
51.
52.
53.
54.
55.
As per the IRDA guidelines one of the following is not mentioned as the
duty of an agent:
a. To sell the insurance policy to the public.
b. To pay the premium collected from the insured to the insurer.
c. To claim the remuneration from the insurer for the business procured from
the insured.
d. To disclose the material information about the insured to the insurer.
To work as a Fresh Individual General Insurance Agent, number of hours
training required is:
a. 150 hours.
b. 100 hours.
c. 50 hours.
d. 25 hours.
Who can cancel an agency license?
a. Branch Manager.
b. Divisional Manager.
c. Designated Person.
d. Authorized Person.
The insurance agent shall be obliged NOT to reveal the following:
a. Disclose his license fee to the prospect on demand.
b. Disclose the scale of commission.
c. Disclose his commission income.
d. Requisite information on insurance products.
Which of the following is correct as per IRDA regulations about minimum
capital requirement with reference to insurance brokers:
a. i. Direct Broker: Rs50 lakhs; ii.Reinsurance Broker: Rs.100 lakhs;
iii.Composite Broker: Rs.200 lakhs.
b. i. Direct Broker: Rs100 lakhs; ii.Reinsurance Broker: Rs.200 lakhs;
c. i. Direct Broker: Rs50 lakhs; ii.Reinsurance Broker: Rs.200 lakhs;
An Insurance Company can be wound up in the following ways as per the
376
Insurance Act.1938:
i.Voluntary; ii.By Court; iii.By Central Government; iv.By Shareholders
and Policyholders.
a. i., ii, and iii. only.
b. ii., iii., and iv. only.
c. All of the above.
56.
A Corporation can be granted license to act as a Broker if it has in it's

employment minimum:
a. One qualified person.
b. Two qualified persons.
c. 50% qualified persons.
d. 100% qualified persons.
57.
Unlike an agent the duty of the Broker includes:

a. Advising the insured on products.
b. Advising the insured on rates.
c. Assisting in negotiation of claims.
d. Assisting in filling the proposal.
58.
hich is relevant out of the following in connection with the Objective of

IRDA
a. to protect the interests of holders of insurance policies
b. ensure orderly growth of the insurance industry to regulate, promote and
for matters connected therewith or incidental thereto
1) Both a and b
2) Only a
59.
As per IRDA Act 1999 Internmediary or Insurance Intermediary means

a. Insurance and Re-insurance brokers, insurance consultants, surveyors
and loss assessors
b. Agents
c. Development Officers
4.Third Party Administrators.
60.
The composition of IRDA shall include

a. Finance Secretary
b. Chairman of GIPSA
c. Minimum of five whole-time members and a minimum of four part-time
members
d. Chairman of GIC
377
61.
62.
63.
As per IRDA ACT out of five whole time members at least ____ members
from Life and General Insurance or Actuarial Science
a. 2
b. 3
c. 4
d. 5
Maximum percentage of paid up equity capital by a foreign company in
Indian Insurance Company is
a. 51
b. 49
c. 26
d. 74
Minimum paid up equity capital for a Reinsurance Company in India is
a. Rs.100 crores
b. Rs.200 Crores
c. 20 Crores
64.
Every insurer shall, in respect of the General Insurance business carried on

by him in India should deposit
a. Rs. ten crores with GIPSA
b. Rs.20 Crores with GIC
c. Rs.10 Crores with Reserve Bank
d. Rs.20 crores with IRDA
65.
Which one of the following bodies are covered / governed by IRDA (

Insurance Advertisement and disclosures) Regulations 2000.
a. Insurer's
b. Intermediaries
c. a & b
d. None of a & b
66.
Which of the following statements is/are correct.

Statement A :All communications made to policy holders are covered under IRDA
(Insurance Advertisement and disclosures) Regulations 2000.
Statement B:Communications urging public to purchase Insurance policies only are
covered under IRDA (Insurance Advertisement and disclosures)
Regulations 2000.
a. A Only
378
b. B Only
c. Both A & B
d. None of A & B
67.
Composite Insurance Agent can sell

a. Health Insurance Products and Micro Insurance Products only.
b. Micro Insurance Products only
c. Heath Insurance Products only
d. Any Life and General Insurance Product
68.
Recently IRDA ( Licensing of Insurance Agents) Regulations 2000 has been

amended, the amendments is with respect to
a. Qualifications for Agents.
b. Practical Training for Agents.
c. Code of conduct of Agents
d. All of the above.
69.
Which one of the following statements is/are correct

Statement A
Available solvency margin means the excess of value of assets over the
value of liabilities
Statement B
Solvency Ratio means the ratio of the amount of available solvency margin
to the amount of required solvency margin
a. Statement A only
b. Statement B only
c. Statement A & B both
d. None of the A & B
70.
Which one of the following statement is/are correct

Statement A
A cooperative Society registered under relevant Law can promote an
insurance company in India
Statement B
A Company formed under the Company's Act 1956 can promote an
insurance company in India
a. Statement A only
b. Statement B only
c. Statement A & B both
d. None of the A & B
71.
Under IRDA regulation act 2000 Rural Sector shall not be any place
a. Population of not more than 5000
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b. Density of Population is not more than 400 per sq km

c. At least 75% of the male working population is engaged to agriculture
d. Place which is Hilly areas.
72.
73.
Social Sector does not include

a. Economically vulnerable or backward classes
b. Un organized and informal sector
c. Persons with disabilities
d. Senior citizens
Under IRDA ( Assets, Liabilities and Solvency Margin of insurers)
regulations ,2000, the value of Computer equipment including its Software,
is computed as under :a. 75% of its cost in the year of purchase.
b. 50 % of its cost in the 2nd year.
c. 25% of its cost in the3rd year
d. All the above.
74.
On receipt of any notice of loss arising under contract of insurance, the

General Insurer shall appoint a Surveyor
a. Within 7 days from the receipt of intimation
b. Within 7 hours from the receipt of intimation
c. Within 24 hours from the receipt of intimation
d. Within 72 hours from the receipt of intimation
75.
A general insurance policy need not state

a. Policy terms, conditions and warranties
b. Full description of the property or interest insured
c. Any franchise or deductible applicable
76.
Which is the most unlikely answer

a. Under special circumstances the Surveyor can seek an extension of time
from the Insurer for submission of his Report.
b. The Insurer may request the Surveyor to submit an additional Report.
c. There is a fixed time limit for an Insurer to offer settlement of claim to the
Insured.
d. IRDA has recently relaxed the norms for payment of Interest by an Insurer
in the event of delay beyond the stipulated period.
77.
Statement I: At least two Directors of TPA shall be qualified Medical

Doctors registered with the Medical Council of India.
Statement II: The minimum paid up capital of a Company in equity shares
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should be Rs. 1 crore , for the purpose of TPA license.

a. Both the statements are correct.
b. Only Statement I is correct.
c. Only Statement II is correct.
d. Both the statements are incorrect.
78.
As per IRDA (Appointed Actuary) Regulations 2000 of IRDA Act 1999, a

person shall not be eligible to be appointed as an appointed actuary for an
insurer if he/she is
a. Not a fellow member of the Actuarial Society of India
b. An appointed actuary of another Insurer
c. Over the age of 70 years
d. Not an employee of the insurer or a consulting actuary in case of general
insurance business.
79.
I - An appointed actuary shall have access to all the information or

documents in possession, or under control, of the insurer if such access is
necessary for the proper and effective performance of the functions and
duties of the appointed actuary.
II- An appointed actuary is entitled to attend all the meetings of the
management except the Board meetings of the insurers.
As per IRDA (Appointed Actuary) Regulations 2000 which of the above
statement/s is/are correct
a. Statement I is correct
b. Statement II is correct
c. Both statements are correct
d. Both statements are incorrect
80.
What is/are not the duties and obligations of an appointed actuary in

accordance to the IRDA (Appointed Actuary) Regulations 2000 of IRDA
Act 1999.
a. Rendering actuarial advice to the management of the insurer, in particular
in the areas of product design and pricing, insurance contract wording,
investment and reinsurance.
b. Complying with the provisions of the section 64VA of the act in regard to
maintenance of required solvency margin in the manner required under
the said sections
c. Informing the authority in writing of his or her opinion, within a
reasonable time whether the insurer has contravened the act or any other
act.
81.
What is not in code of conduct of an insurance agent appointed as per IRDA

(Licensing of Insurance Agents)Regulations 2000 of IRDA Act 1999.
a. Indicate the premium to be charged by the insurer for the insurance
381
product offered for sale

b. Render necessary assistance to the policyholders or claimants or
beneficiaries in complying with the requirements for settlement of
claims by the insurer.
c. Disclose the scales of commission in respect of the insurance product
offered for sale, if asked by the prospect.
82.
83.
84.
The provision that any Insurance Co-operative Society registered under Cooperative Societies Act can carry on General Insurance Business was
incorporated in the Insurance Act in the year
a. 1938
b. 2002
c. 1950
Any Insurance Co-operative Society can transact Insurance Business if its
paid-up capital is minimum of
a. Rs.50 crs
b. Rs.100 crs
c. Rs.150 crs
d. Rs.200 crs
The Paid-up Share Capital required for an Indian Insurer carrying on RI
Business is
a. Rs.100 crs.
b. Rs.10 crs
c. Rs.200 crs
d. Rs.50 crs
85.
Which is condition precedent to filing a product for approval with IRDA

under File and Use Procedure
a. Approval of the product by appointed actuary
b. Certification of the product by lawyer of the company
c. Approval of the underwriting policy of the company by the Board of the
company and its filing with IRDA
d. Filing copy of Policy and Endorsement wordings
86.
A product is required to be filed with IRDA under the signature of

a. General Manager Technical
b. Appointed Actuary
c. CEO or Designated authority
d. By any one of the above
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87.
A compliance officer under file and use requirement should be

b. Chief Underwriter of the company
c. Appointed Actuary of the company
d. A person who is not responsible for the underwriting function of the
company
88.
A moderator of the rates under file and use procedure of the IRDA can be
b. Chief Underwriter
c. CEO of the Company
d. The Financial Advisor of the Company
No Insurer shall accept the business at a premium rate below the rates
indicated without the approval of moderator of rates
a. 1.0 %0
b. 0.1%0
c. 0.5%0
d. 1.5%0
89.
90.
What is not permissible under File and Use procedure of IRDA

a. Underwriting business at a loss
b. Experience rated pricing
c. Exposure Rated pricing
d. Chief Underwriting Officer acting as Compliance Officer
91.
Statement A: An aggrieved claimant whose petition is pending before The

State Consumer redressal Commission can also approach The Insurance
Ombudsman for speedy redressal of his grievance.
Statement B: A citizen of India whose claim for Rs.15 Lacs was denied by a
Insurer can approach either Insurance Ombudsman or State Consumer
Grievance Redressal Commission for remedy
a. Only statement A is correct
b. Only statement B is correct
c. Both A and B are correct
d. Both A and B are incorrect
92.
While sending the policy to the insured, the insurer is obliged to send the
following
a. Claim Form
b. Name & Address of surveyor
c. Name and Address of Regional Office
d. Address of the Insurance Ombudsman
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93.
94.
For calculation of solvency Ratio of a non life insurance Company, The

formula applied is
a. ASM is Multiplied with RSM
b. ASM is divided by RSM
c. RSM is divided by ASM
d. RSM over net premium/ Net Claims which ever is higher
c. IRDA's site
d. GIPSA's site
99.
Till 1971 in total number of insurance companies operating in the insurance

market were;
a. 307
b. 207
c. 107
Which of the following statements is true?

Statement A: As per IRDA Regulations, there is a legal obligation on the part
of insurers to issue a renewal notice to the insured
Statement B: Issue of a renewal notice means that the policy is automatically
renewed, if the premium is paid.
a. Neither of the statements
b. Only Statement A
c. Only Statement B
d. Both Statements
100. Govt. took over the undertaking of all the companies in 1971 and brought
them under the Act called;
a. The Insurance Act, 1938 (as amended)
b. The General Insurance Business (Nationalization) Act, 1972
c. The General Insurance Business (Nationalization) Act, 1971
95.
While submitting a tender, a company insists for payment of Earnest Money

Deposited along with quotation
a. You will pay according to the terms of tender
b. You will have to seek permission from you corporate office before
depositing
c. You will not deposit as it is against the norms
d. Before depositing, you seek the permission of IRDA
101. The Act or IRDA regulation which removed the prohibition existing in the
GIBNA Act 1972 relating to formation of insurance companies other than
four PSU companies under GIC.
a. The IRDA Act, 1999
b. The Insurance (Amendment) Act,2002
c. The IRDA (insurance and reinsurance) Regulations,2000
96
Whose certificate is not mandatory while filing a general insurance product

with IRDA as per the file and use guidelines?
a. Certificate by the CEO of the company
b. Certificate by the CVO of the company
c. Certificate by the appointed actuary
d. Certificate by the company's lawyer
102. The players in the market are required to maintain required solvency margin
(RSM) based on
a. Gross Direct Premium
b. Gross Direct Claims
c. Net Premium and Net Claims
d. All above
97.
What is the minimum share capital for a company to be a corporate agent of

an insurance company?
a. Rs.1 Lakh
b. Rs.5 Lakhs
c. Rs.10 Lakhs
d. Rs.15 Lakhs
103. The Corporate Agents as per the IRDA (Licensing of insurance Agents)
Regulations could be;
a. Firms, Companies, Co-op. Society
b. Banks, Regl. Rural Banks, Co-op. banks,
c. Local authorities, NGOs
d. All above
98.
A dissatisfied customer will lodge his/her grievance through the company's

website by browsing
a. Company's own Grievance Redressal cell
b. Ombudsman
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104. As per code of conduct prescribed in the IRDA regulation an insurance

agent shall not to (Tick the right statement)
a. interfere with any proposal introduced by any other insurance agent
b. disclose his licence to the prospect on demand
385
c. disclose the scales of commission in respect of the insurance products

offered for sales
d. indicate the premium to be charged by the insurer for the insurance
product offered for sale
105. Regarding advertisement by Insurance intermediaries IRDA regulations
provide that
a. Only duly licensed intermediaries may advertise or solicit insurance
through advertisement
b. Agents or Intermediaries cannot advertise or solicit insurance through
advertisement
c. Only duly licensed intermediaries may advertise or solicit insurance
through advertisement if the insurer in writing approves it.
106. For the purpose of audit of financial statements, the auditor shall ensure that
a. Premium has been recognized as income over the contract period
b. Premium has been recognized as income over the period of risk
c. Premium has been recognized as income over the contract period or the
period of risk, whichever is applicable
d. Premium has been recognized as and when collected
107. The Auditor shall verify that real estate-investment property has been
measured
a. At historical cost
b. At historical cost less accumulated depreciation
c. At historical cost less accumulated depreciation and impairment loss
d. At market value
108. In General Insurance business the Actuarial advice is to ensure the
following
a. the rate is fair
b. the wage is fair.
c. the tariff is fair
d. the tax is fair
109. For the purpose of determination of solvency the following asset is placed
with zero value except
a. Sundry debt not realizable
b. Advances not realizable.
c. Pre paid expenses.
d. Furniture, fixtures, stationery.
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110. The following is not considered as asset for solvency except

a. Agents balance not realized in thirty days.
b. Agents balance not realized in sixty days
c. Agents balance not realized in ninety days
d. Agents premium not realized in fifteen days.
111. Which of the following persons cannot be appointed as an actuary
a. Fellow of Actuarial Society of India
b. A person against whom no disciplinary action is pending by Acturial
Society.
c. An employee of the insurer
d. A person aged 75 years.
112. The value of computer equipments and software in the year of purchase after
depreciation would be
a.100%
b.75%
c. 50%
d. 25%
113. Solvency Ratio means the ratio of
a. available solvency margin to premium base
b. required solvency margin to premium base
c. Available solvency margin to required solvency margin
d. required solvency margin to available solvency margin
114. Under protection of policy holder's interest on receipt of a claim
intimation the General Insurer will respond within
a. 24 hours
b. 48 hours
c. 72 hours
d. 100 hours
115. Under 'PPI' regulation the Surveyor has to submit his report ordinarily
within
a. 15 days
b. 30 days
c. 45 days
d. 60 days
116. The Laws which specifically regulate insurance business in India are :
a. The LIC Act 1956
b. The Insurance Act 1938
c. The GIB (Nationalistaion) Act 1972
387
d. The IRDA Act 1999

e. All of the above
117. The Indian Marine Insurance Act 1963 is based on
a. The Fatal Accidents Act 1885
b. The Workmens' Compensation Act 1923
c. The UK Marine Insurance Act 1906
d. None of these
118. Which of the following is not a stipulation in the IRDA Guidelines about
advertisement by Insurers?
a. Advertisement should disclose full particulars of the insurer
b. The name and address of the Chief Marketing Officer of the company
should be published in the advertisement.
c. Display the registration / licence numbers on their websites.
d. A copy of the advertisement should be filed with the IRDA
119. Which of the following is not a parameter specified by IRDA in defining
Rural Area ?
a. AT least 75% of the male working population is engaged in agriculture
b. Population of the area not to exceed 5000, according to the last census
c. Each household must own at least two heads of cattle.
d. The density of population must not exceed 400 per square km.
120. The institution of Insurance Ombudsmen came in to effect in the year
a. 1988
b. 1999
c. 1997
d. 2001
123. Insurance companies are registered under :

a. Insurance Act 1938
b. Marine Insurance Act 1963
c. Companies Act 1956
d. IRDA Act 1999
124. The 'Date of Notification' of General Insurance Business Amendment act is
a. 01.07.2001
b. 07.08.2002
c. 01.04.2002
d. 03.10.2001
125. Right to Information Act 2005 come in to force on
a. 01.04.2005
b. 15.11.2005
c. 02.10.2005
d. 12.10.2005
126. The first fully Indian Owned Insurance Company of India is
a. United India Insurance Company Ltd
b. The Oriental Insurance Company Ltd
c. National Insurance Co. Ltd
d. New India Assurance Co. Ltd
127. The R.T.I Act, 2005 does not extend to the following state
a. Nagaland
b. Arunachal Pradesh
c. Jammu & Kashmir
d. Uttaranchal
121. Insurance Ombudsman are appointed and administered directly by:

a. The Union Finance Ministry
b. The IRDA
c. The GIC and LIC of India together
d. The General Body of Insurance Councils
e. None of the above
128. As per IRDA regulations (without prejudice to section 27 % 27 (b) of the

Act), every insurer carrying General Insurance Business shall in must and at
all times keep invested his total assets in Central Govt. securities.
a. upto 5%
b. upto 12.50%
c. not less than 20%
d. upto 13.66 %
122. Institutions have accountability and responsibility to :

a. Its shareholders only
b. Its shareholders and stakeholders only
c. The Govt. Authorities only
d. Entire society
129. A person can apply for and be granted licence to act as an agent for
a. One general insurer only
b. One life insurer only
c. Either 1 or 2 above
d. Both 1 & 2 above
388
389
130. The minimum qualification to act as an agent residing in urban area is

a. 8th pass
b. 10th pass
c. 12th pass
d. Graduate
131. For renewal of Agency Licence the agent has to complete practical training
for a minimum of
a. 25 hours
b. 50 hours
c. 100 hours
d. 150 hours
132. As per IRDA norms a Corporate Agents portfolio should not have premium
from one person/organization/group of organization exceeding
a.10%
b.25%
c. 50%
d.75%
133. An Agent, whose licence has been cancelled, cannot apply for fresh licence
for
a. 1 year
b. 2 years
c. 3 years
d. 5 years
134. Required solvency margin in respect of premium income is _____ % of
gross adjusted premium or net premium whichever is higher.
a. 10%
b. 20%
c. 25%
d. 50%
135. Required solvency margin in respect of claim is _____ % adjusted gross
incurred claim or net incurred claim whichever is higher.
a. 10%
b. 20%
c. 30%
d. 40%
390
IFORMATION TECHNOLOGY TRADE QUESTIONS

1.
In computer hardware specification, we see a term like 1 GB RAM or 512 MB

RAM or something like this. What does RAM mean?
a. Read and manage
b. Randomly Arranged Memory
c. Random Access Memory
d. Read and Memorise
2.
You want to write a letter to be sent to your valued customers. What software
will you use for creating and editing the letter?
a. A word processor
b. A spreadsheet software
c. An internet browser
d. A COBOL compiler
3.
Which of the following device is an input device that can be used for inputting
data or instruction to the computer
a. Monitor
b. Keyboard
c. Printer
d. Speaker
4.
For preventing unauthorized usage of computing facilities, authorized users

are given unique user-id and password. A password should be
a. Simple and easy to remember
b. Complex and be made known to as many persons as possible to minimize
loss of time in case one forgets his password
c. Complex and be changed time to time
d. Same password should be given to all the users
5.
Which is the odd man out?

a. 80 GB
b. 512 MB
c. 1 GHz
d. 2 KB
6.
A computer with 160 GB HDD will be about two times faster than a computer
with 80 GB HDD in doing same set of operations, remaining configuration
remains same.
a. The statement is wrong
b. The statement is right
391
c. It depends on set of operations

d. It depends on volume of data being used
7.
Which of the following is the most common way of spreading a computer

virus
a. By installing a hardware in the network
b. Through attachments in e-mails containing malicious codes
c. Through application software having malicious codes
d. Through data files containing malicious data
8.
A spreadsheet software like Ms. Excel is normally used for

a. Editing photographs
b. Preparing presentations
c. Doing data analysis
d. Sending e-mail
9.
Bits per second (bps) is a common unit of

a. bandwidth
b. resolution of monitor
c. typing speed
10. Open source software is one which

a. doesn't require installation of source code
b. can work without any hardware
c. has no licensing policy
d. source codes are available to all for use and modifications.
11. When a file is saved
a. it is stored in RAM of the computer
b. it is stored in ROM of the computer
c. it is stored in the secondary storage device of the computer
d. it gets printed
12. Out of the following, which is an advantage of using a database management
system?
a. controlling redundancy
b. data isolation
c. data manipulation
d. none of this
13. If you don't like the name of the file what would you do?
a. Save it with different name
392
b. Can not do anything

c. Rename the file
d. Delete it and create it with the preferred name.
14. In data structure, stack is a list of data following
a. First in first out (FIFO)
b. Last in first out (LIFO)
c. In from one end and out from other end
d. None of these.
15. If n devices are to be connected in network using ring topology, what is the
number of cable links required?
a. n
b. n-1
c. n(n-1)
d. 2n
16. A file with the extension pps is used for
a. Creating an e-mail
b. Making presentations
c. Preparing graph
d. Storing large volume of data
17. Out of the following, which statement is correct
a. Same user-id can be used by different users by assigning different
passwords
b. Primary key value can be same for more than one record in a table
c. Arithmetic operations can be done with alphanumeric data
d. Data can be stored in ascending as well as descending order
18. If the premium collection in a branch in month 2 decreases by 20% compared
to month 1, and again goes up by 20% in the month 2, then
a. Month 1 premium collection is same as month 3 collection
b. Month 1 premium collection is less than month 3 collection
c. Month 1 premium collection is greater than month 3 collection
d. it depends on the premium amount
19. User acceptance testing should be done by
a. Those who are involved in programming
b. Likely users of the new systems
c. Software vendor
d. Third Party
393
20. For using an application software effectively a person should be trained on

a. Programming language in which software is developed
b. Features of the hardware on which the software is to be used
c. Functional features of the software
d. Soft skills
21. Business Intelligence Software are such software
a. That make human being intelligent
b. That enables the transactions to happen in faster way
c. That uses statistical techniques to show useful patterns in the data
d. That integrates various functional systems
22. Oracle is commonly understood as a
a. Database system
b. Programming language
c. ERP
d. Operating Sytem
23. Malware are software
a. Used by stock exchange
b. Developed to do harm to the computer or network
c. Used by cyberforensic experts to identify the cybercriminals
b. Bar chart
c. Pie chart
d. Line Graph
27. What is the importance of phone number 1551 in India?
a. It's a toll free number dedicated to farmers in India
b. It's a toll free number for getting medical assistance
c. It's a toll free number for getting Insurance related information
d. It has no significance
28. Data related to a variable having high level of uncertainty will have
a. High average
b. High variance
c. Low average
d. low variance
29. An Insurance company targets to double its premium collection in next two
years. But in the first year it could increase by only 25%. What is the %
increase required in the 2nd year to meet the initial target?
a. 25%
b. 75%
c. 100%
d. 60%
30. Out of following, which is not necessary for starting a corporate website?
a. Domain name
b. Web Space
c. Internet Connection
d. Web Pages
24. Firewall is
a. An antivirus software
b. is an internet browser
c. Both of the above
25. 1 KB is equal to
a. 1024 bytes
b. 1000 bytes
c. 100 bytes
31. As per the Information Technology Act 2000 in India, Network Service
Providers are fully liable for the data made available through that service
a. The above statement is wrong
b. The above statement is right
c. The IT Act 2000 doesn't have any section for network service providers
d. There is no Information Technology Act in India
26. You have data related to premium collection in various regions of your
organization in different months. You want to get relative idea about the rate
of increase/decrease in premium collection. What kind of report should be
preferred?
a. Tabular report
32. Any electronic record can be legally authenticated by

a. Putting the company logo in the document
b. Including the name of the directors in the document
c. Affixing digital signature
394
395
33. A data warehouse in an Insurance company should not be used for

a. Data analysis
b. Insurance Policy Administration
c. Data mining
d. None of these
34. The Disaster Recovery site for information system should be located
a. In the same premises to minimize time of recovery from disaster
b. In a nearby premises
c. In the DR manager's house
d. None of these
35. Data mining is not used for
a. Updating transaction records
b. Finding patterns in existing data
c. Associating new data with existing group
d. Clustering the existing data
36. In managing an IT implementation project, the project completion time is
mostly
a. Equal to the sum of all the activity times
b. Less than the sum of all the activity times
c. Greater than the sum of all the activity times
d. They are not related
37. While allocating resources in any project, we should give priority to activity
having
a. Highest activity time
b. Lowest activity time
c. Highest delayed time
d. Lowest float time
c. System testing
d. System implementation
40. For best results in information processing from a tabular report, the number of
columns should be
a. As many as can be accommodated in the report
b. About ten
c. About 5
d. At least 15
41. Out of the following, which biometric template will have largest size in terms
of computer memory required
a. Fingerprint
b. Retina
c. Signature
d. Voice
42. Out of following, which has lowest cost per storage unit
a. RAM
b. ROM
c. Hard disk
d. Magnetic tape cartridge
43. A branch collected half of its annual premium target at a rate of Rs. 1 crore per
month and remaining half at the rate of Rs. 50 Lakhs per month. What was the
annual target?
a. Rs. 9 crores
b. Rs. 8 crores
c. None of the above
d. Require more information to get it.
38. Which is more harmful to the information security in an organization

a. Giving multiple user-id to same person
b. Giving same user-id to many persons
c. Both are equally harmful
d. They have nothing to do with info security
44. A branch collected half of its annual premium target at a rate of Rs. 1 crore per
month and remaining half at the rate of Rs. 50 Lakhs per month. What is the
average premium collected per month?
a. Rs. 2/3 crores per month
b. Rs. 75 lakhsper month
c. None of the above
d. Require more information to get it
39. In a System Development Life Cycle, end users have least role to play during
a. System requirement determination
b. System development
45. Let h1, h2.h20 be heights of 20 persons and d1, d2....d15 be depth of water
at 15 points across the river bed. They have to cross the river by walking. The
decision maker computes the average of heights and water depth. He finds
396
397
that the average height of persons is more than the average depth of water. He
decides that group should cross the river. Did he use correct analysis for
decision-making? Choose the most appropriate answer from following
a. Yes
b. No
c. He should have collected depth of water data at more number of points
d. Flow of current is also important
46. While sending an e-mail if you write address of a person in Bcc (blind carbon
copy)
a. The person will not receive the mail
b. He will receive the mail but wouldn't get the attachment if any
c. He will not know about other recipients of the mail
d. Other recipients of the mail will not know about him
47. If you are sending a document file to your colleagues and want that they
should not be allowed to make changes in that, you will in normal
circumstances
a. Make it a read-only file
b. Make a PDF and send that
c. Both the above options will serve the purpose
d. None of the above options will serve the purpose
48. You have a file of about 5MB size which is requiring by many of your
colleagues. What option from following will be the best
a. Sending the file as attachment to all who need that
b. Storing in a folder and share that with all who need that
c. Storing in some free web space and inform them about the URL
d. Copying the file on machine of all who need that
49. Most significant advantage of OLAP implementation is that
a. IT department can generate the standard reports with greater convenience
b. Users can do analysis of data online
c. Business transaction becomes faster
d. Need of taking back up gets eliminated
50. Why should large files be compressed before attaching in an e-mail?
a. It makes the file secured
b. It will get automatically deleted after some pre-decided time
c. Compression makes the file virus free
d. It creates lesser load on communication infrastructure
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51. What are the links generally available, in a company's website:

a. Our office, our people, our work
b. About us, FAQ, home
c. First page, address, details
52. What do we understand by the term 'http'
a. Hypo test transmission programme
b. Hyper text transfer protocol
c. Higher text transfer provision
d. Hard text transport promotion
53. What stands for 'www' generally prefixed before a website address:
a. World wide workgroup
b. World wide web
c. World wide wan
d. World wide wall
54. Which programming language is used while designing a website:
a. Cobol
b. Fortran
c. Html
d. Http
55. In the Web Site of an Insurance Company which of the following normally is
not displayed?
a. Company profile
b. Annual reports
c. Product Profiles
d. Employee profile
56. The common language used in Web site architecture is:
a. XML
b. HTML
c. SQL
57. During business negotiation with a corporate client, the financial
performance of your company is requested by their finance director to be
presented authentically. The most impressive way to do it is
a. To take the relevant portion of your lap-top presentation
b. To ask for the office to show the last year's balance sheets
c. To show Brochures
d. To open company's web site
399
58. The ID of all the websites starts with 'www', what is the full form
a. World wide workgroup
b. World wide web
c. World wide wan
d. World wide wall
BULLET QUESTIONS
1.
Enumerate various functions covered by the Estate Department - Bullets
Lease or Purchase of Immovable property for Office
Lease or purchase of property for Residence of Employees
Renewal / Negotiation for Lease of premises
Maintenance and Repair of the properties
Renovation and Structural changes in the properties
Empanelling of Architects / Civil Contractors after following CVC

guidelines
Budgetary Control and maintenance of documents related to property
Dealing with Litigation matters / overstay / illegal occupation of

Company's properties
Appointment of Estate Officers / liaison with them for eviction of

unauthorized occupants
2.
INTERNAL AUDITING, ITS NEED AND ESSENTIALS DESIRED FOR

EFFICIENT AUDITING
A continuous, critical review of financial and operational activities,

conducted by a staff of auditors functioning as fulltime salaried
employees
An extension of internal check & control introduced by the management

to supervise the effectiveness of such int. control
Auditors to be conversant with rules and practices
To refrain from creating any fear psychosis in the mind of auditee
To report a constructive appraisal of operation and on protection of

business
To appraise and review the existing internal check & control system
To render specialist service especially when any operational Office is

concealing any unhealthy situation for fear of exposure
Critical examination of functions and activities within particular

department or any individual or a responsibility centre
To bring out effectiveness / success or shortcoming in the system and

operation in vogue
To report on remedial measures or on improvement of the system and

operation
To report without any fear or favour
3.
Discuss the technical aspects of Reinsurance Audits
Check RB/NRB Classification of some depts. of some D.O./R.O
Check sample cession derivations for Outward Treaties
Tally Dept. wise premium and claim figures from Tech Dept. to R/I with
TB figs.
59. PSU Insurance company websites do not have the following details for the
public
a. Right to information Act
b. Various Insurance policies
c. Registration number allocated by the IRDA
d. The promotion policy for the employees of the company
60. An employee of Public Sector Insurance company can view the promotion
results
a. By logging on to his Co's website using his/her ID and Password
b. By going to company's web site
c. By going to GIPSA's website
d. By going to NIA website
61. Which of the following areas does not come under obligation in the formation
of Company's website
a. Downloading system
b. Hindi Version of Contents
c. Contents of RTI Act
d. Contact Address
62. From the customer point of view which one is not the most inappropriate
information one should have in the Company's website
a. Product information
b. Financial health of a company
c. Number of hyperlinks provided in the Home page
d. Bilingual presentation
63. Which should be the most important feature for any Company's website
a. Scrolled information
b. Number of links
c. Time taken to access
d. Visitor's status
400
401

Check accounting of Outstanding Claims Provisions
See whether TP/OD claims out of one accident advised for XL recovery
and not accounted as NRB.
Check if 10% limit prescribed by IRDA exceeded
Check whether Net Retention schedule has yielded expected results
Check if documentation of all arrangements esp. facultative is available
Check balance of treaties net outgo or income?
Check declined / cancelled treaties if accepted later, reasons for same

4.
5.
Mention major kinds of Audits conducted in an insurance company.
Statutory Audit which is conducted by Chartered Accountants as per the

provisions Sec.224 to Sec. 233 of the Companies Act'1956 (as amended)
has to be carried out annually for reporting the maters specified in the
schedule C of the IRDA (Preparation of Financial Statements and
Auditor's Report of Insurance Companies) Regulation, 2000.
C&AG Audit is conducted by an auditor appointed by or reappointed by

the Controller and Auditor General of India under Sec.619 of the
Companies Act for the Govt. Company as defined by Sec.617 of the
Companies Act,1956
Regulatory Audit is an audit, checking, examination and verification of

books of accounts, investments of funds, margin of solvency, efficiency
in the conduct of business of insurance companies by the Regulatory for
the purpose of promoting, regulating and ensuring orderly growth of
insurance business as per provisions of sec.14 of the IRDA Act, 1999
Special Audit is an audit conducted by a Chartered accountant or

Company's Auditor under the directives of the Central Govt. as per
provisions of Sec.233A of the Companies(Amendment) Act 1960 in
certain cases where the affairs of any company are not being managed in
accordance with sound business principles.
Technical Audits are sometimes conducted by the company under

directives of the Regulator, who examine the technical audit reports
Internal Audit/ Management Audit is conduced by the company's internal

auditor or others in the following forms
s
Underwriting Audit
s
Claims Audit
s
Accounts Audit
s
System Audit
s
IT Audit
s
Investment Audit
Specify the major roles of Internal Audit;
Detective Role. Detection of errors, frauds and irregularities is the first

and foremost objective of internal audit and check system of an entity.
Preventive Role is the most important one which makes an internal

auditor to suggest ways and measures to improve the systems so that
errors and frauds don't recur.
402
Corrective Role enables the auditor to provide the measures to rectify the
already committed
Directive Role
Boundary Role
Recovery Role
6.
Discuss the major areas of Directive Roles of the internal auditor
To suggest the risk management methods and techniques of new and

critical risks
To suggest the measures for prompt and proper settlement of pending

claims
To suggest the methods and techniques of rating the risks right
To suggest the major considerations for adding a new line of business in

underwriting policy
To suggest the methods and techniques of analysis of risk exposure in

investment functions
Suggest the internal control and check system to avoid financial

irregularities.
Suggest the methods or techniques for the effective reinsurance

programming in view of the performance or result of last reinsurance
programme
Suggest the techniques in loss prevention measures in case of high

probability and high severity of risks.
7.
Discuss the principal steps in analysis of Solvency margins
Determination of Available Solvency margin I,e excess of value of

assets over the value of liabilities.
For this purpose total value of assets and the total value of liabilities are to
be ascertained as per guidelines prescribed by the Regulator.
Every insurer shall prepare a statement of the value of assets in the

prescribed form IRDA Assets AA specified in schedule 1.
The insurer shall prepare a statement of liabilities in accordance with the

schedule 11-B.
to determine the required solvency margin in view of the nature and

volume of business and the respective incurred claim as RSM-1 and
RSM-2
RSM = Higher of RSM-1 and RSM-2
RSM-1
= Based on Net Premium
RSM-2
= Based on Incurred Claims
Solvency Margin = ASM / RSM
8.
Discuss the major steps in Corporate underwriting audit:
Underwriting Audits are generally classified into two types- Audits for
403
Corporate Underwriting and Line Underwriting\
Line Underwriting audits are carried out at operational level while

Corporate Underwriting audit is carried out to review the performance of
Underwriting policy of the corporate management.
Corporate Underwriting also covers Solvency Margin Analysis and

Corporate Governance aspects as specified by IRDA
To Review the Underwriting Policy on acceptance of Small, Large and

Complicated risks
To review of risk management policy for acceptance of large and

complicated risks
To Review of Corporate Management decision on adding a new line of

business or deleting loss-oriented business.
To review the Reinsurance Programming and Methods
To review of Underwriting Results in respect of growth, profitability and

solvency
To review the risk-based fund management
To Regulatory Compliance
9.
Highlight the major Considerations of claim audit:
Claim Audit broadly covers Legal, Technical and Administrative

Aspects
Legal Aspects include considerations of the fundamental legal principles

of insurance such as Principle of Indemnity, Principle of Insurable
Interest, Principle of subrogation and Contribution.
The legal aspects in liability claims also include the provisions of the
Motor Vehicles Act 1988 for Motor TP Claims, PLI Act1991 for Public
Liability claims under Act policy, Companies Act. 1956 (as amended) for
D&O Claims and so on.
Legal aspects in liability claims further include careful considerations of

proper defenses in the court of law to avoid or reduce the third party legal
liability of the insured.
Technical Aspects include considerations of deductibles, warranties, SI

limit or Indemnity limits, Warranties, Proof for admissibility of claims
and supporting for assessment of claims such photographs, valuation
report, invoice etc
Technical aspects in legal liability include determination of the liability

of the insurer as per the terms, conditions and indemnity limits in the
liability policy
Liabilities in Liability policy are of two types- Liability of the Insured

and that of the insurer.
The liability of the insured is decided by the court of law where proper
legal defences are required to be taken as per terms of the policy Duty to
defend or Right to defend with reference to Common Law or the
Specific Statutes as the case may be.
404
The administrative aspects include proper authorization or approval as

per financial limits.
Consideration of internal control and check system in regard to

registration, processing and settlement of claims
10. Discuss the major provisions in the Companies Act in regard to C&AG Audit
Article 148 to Article 151 of the Constitution of India lays down the
Authority of the CAG of India to function as the Supreme Audit
Institution of the Country.
The Govt. Companies are audited by the C&AG under the provisions of
Sec 619 and 619 (a) of the Companies Act.
The Government Companies are defined under section 617 of the

Companies Act.
The nature of audit of the CAG may be classified as .Regularity Audit

(Financial), Regularity Audit (Compliance), The regularity audit
(Compliance) may be further sub-classified as Transaction Audit and
Performance Audit, Information Technology/Systems Audit
In Regulatory audit auditors should analyze the financial statements to

establish whether acceptable accounting
standards for financial
reporting and disclosure are complied with.
Performance audit to see that Government programmes have achieved

the desired objectives at lowest cost and given the intended benefits.
The Information Technology Audit is the audit of the Information System

under operation in the Entity.
The scrutiny of the Annual Accounts and the Audit Reports thereon is
done by the Parliament
Thus the audit Reports and Annual Accounts are referred to the Public
Accounts Committee of the parliament and the Committee on Public
Undertakings (COPU)
The reports of the CAG are deliberated upon by the Public Accounts
Committee and commercial reports are examined by the Committee on
Public Undertakings
11. Specify the matters that the report of the auditor in a general insurance
company shall deal with as per IRDA Regulation
The report of the auditors on the financial statements of every insurer

shall deal with the matters specified herein:
That they have obtained all the information and explanations, which, to
the best of their knowledge and belief were necessary for the purposes of
their audit.
Whether proper books of account have been maintained by the insurer so

far as it appears from an examination of those books;
Whether proper returns, audited or un-audited, from branches and other

offices have been received and whether they were adequate for the
purpose of audit;
405

Whether Balance Sheet, Revenue Account, Profit& Loss Account and
the Receipts & Payments Account are in agreement with the books of
account.
Whether the actuarial valuation of liabilities is duly certified by the

appointed actuary.
Whether the balance sheet gives a true and fair view of the insurer's
affairs as at the end of the financial year/ period;
Whether the revenue account gives a true and fair view of the surplus or
the deficit for the financial year/ period;
Whether the profit and loss account gives a true and fair view of the profit
and loss or the financial year/ period;
Whether the receipts and payments account gives a true and fair view of
the receipts and payments for the financial year/ period;
Whether financial statements rae prepared in accordance with the

requirements of the Insurance Act, 1938, the Insurance Regulatory and
development Act, 1999 and the Companies Act, 1956.
Investments have been valued in accordance with the provisions of the

Act and these Regulations.
12. INTERNAL AUDITING, ITS NEED AND ESSENTIALS DESIRED FOR
EFFICIENT AUDITING
A continuous, critical review of financial and operational activities,

conducted by a staff of auditors functioning as fulltime salaried
employees
An extension of internal check & control introduced by the management

to supervise the effectiveness of such int. control
Auditors to be conversant with rules and practices
To refrain from creating any fear psychosis in the mind of auditee
To report a constructive appraisal of operation and on protection of

business
To appraise and review the existing internal check & control system
To render specialist service especially when any operational Office is

concealing any unhealthy situation for fear of exposure
Critical examination of functions and activities within particular

department or any individual or a responsibility centre
To bring out effectiveness / success or shortcoming in the system and

operation in vogue
To report on remedial measures or on improvement of the system and

operation
To report without any fear or favour

13. The following forms are required to be filed with IRDA by General Insurers:
FORM 1 - Statement of investment assets

406
FORM 2 Statement of Downgraded Investments
FORM 3B Statement of Investment
FORM 4 Exposure and other norms quarterly compliance certificate
FOR 4A (Part A,B,C) Statement of Investment subject to Exposure

Norms - Investee company, Group and Industry
FORM 5 Statement of Investment Reconciliation
FORM 5 A Statement of Mutual Fund
FORM 6 Certificate under sections 28(2A), 28(2B) and 28B(3) of

Insurance Act, 1938
FORM 7 Confirmation of Investment Portfolio
FORM 7A Statement of Non-Performing Assets
1
2
3
4
5
6
7
8
9
10
11
12
13
A
D
C
D
D
D
D
C
D
B
B
D
B
KEY- ACCOUNTS TRADE QUESTIONS

14 B
27 B
40 D
15 A
28 A
41 A
16 C
29 D
42 B
17 D
30 A
43 A
18 D
31 C
44 C
19 D
32 A
45 A
20 D
33 D
46 C
21 D
34 C
47 C
22 D
35 D
48 C
23 A
36 D
49 C
24 A
37 D
50 C
25 B
38 A
51 C
26 D
39 C
52 C
53
54
55
56
57
58
59
60
61
62
63
64
B
B
D
C
C
D
A
D
C
B
B
D
KEY- ACCOUNTS MODEL QUESTIONS

1.
2.
3.
4.
C
B
A
B
5.
6.
7.
8.
D
A
B
A
9.
10.
11.
12.
B
C
D
D
13.
14.
15.
16.
A
A
A
B
17.
18.
19.
20.
A
A
A
A
29.
30.
31.
32.
33.
C
A
B
A
C
KEY- INVESTMENT MODEL QUESTIONS

1.
2.
3.
4.
5.
6.
7.
B
B
A
D
A
C
A
8.
9.
10.
11.
12.
13.
14.
C
B
C
A
B
C
A
15.
16.
17.
18.
19.
20.
21.
C
A
A
A
B
C
A
407
22.
23.
24.
25.
26.
27.
28.
C
B
C
B
A
B
A
KEY INSURANCE LAW AND REGUALTORY FRAMEWORK MODEL QUESTION

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
B
A
B
C
D
A
B
B
A
B
A
C
B
D
B
D
C
A
D
D
D
D
D
C
A
C
B
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
C
D
D
B
B
D
B
D
D
A
B
C
D
D
D
C
D
D
B
D
D
B
C
C
C
C
C
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
C
B
C
C
A
C
A
C
B
C
C
B
D
B
C
C
D
D
D
D
D
D
C
B
A
D
D
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
B
B
C
C
C
D
D
B
D
X
D
B
C
C
B
D
A
C
B
A
D
D
A
C
C
C
A
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
134.
135.
D
D
D
B
C
C
B
E
C
B
C
A
D
D
C
B
D
D
C
C
D
C
A
C
D
B
C
KEY INFORMATION TECHNOLOGY TRADE QUESTION

1
2
3
4
5
6
7
8
9
10
11
12
13
c
a
b
c
c
a
b
c
a
a
c
a
c
14
15
16
17
18
19
20
21
22
23
24
25
26
d
a
b
d
c
b
c
c
a
b
d
a
d
27
28
29
30
31
32
33
34
35
36
37
38
39
a
b
d
c
a
c
b
d
a
b
d
b
b
408
40
41
42
43
44
45
46
47
48
49
50
51
52
c
d
d
b
a
b
d
c
b
b
d
b
b
53
54
55
56
57
58
59
60
61
62
63
b
c
d
b
d
b
d
a
a
a
a
409
CORE BENEFITS AS PER SCHEME/S NOTIFIED

BY THE CENTRAL GOVERNMENT
PAY SCALES AND STAGNATION INCREMENTS OF CLASS
I EMPLOYEES
HR--PERSONNEL & VIGILANCE
PAY SCALES (BASIC PAY)

Scale VII Rs.52210-1400(2)-55010-1500(1)-56510-1640(1)-58150-1700(1)59850
Scale VI Rs.46610-1400(5)-53610
Scale V
Rs.41660-1200(3)-45260-1350(2)-47960
Scale IV Rs.34460-1200(7)-42860
Scale III Rs.28160-840(1)-29000-910(6)-34460-1200(4)-39260
Scale II
Rs.23120-840(7)-29000-910(6)-34460
Scale I
Rs.17240-840(14)-29000-910(4)-32640
STAGNATION INCREMENTS: AN ADDL. INCREMENT PAYABLE
TO AN OFFICER
who has reached the max. of his scale of pay
for every 3 completed years of service after reaching such maximum
equal to the last increment drawn by him
For scale IMaximum of 3 such increments
For scale II- Maximum of 5 such increments
For scale III- Maximum of 2 such increments
For scale IV- Maximum of 1 such increment

Stagnation increment is to be released subject to satisfactory performance and
vigilance clearance.
PAY SCALES AND STAGNATION INCREMENTS OF CLASS

II EMPLOYEES
Development Officer Grade I:
Development Officer Grade II:
420
Rs.12175-755(8)-18,215-780(9)-25,235820(2)-26,875-840(4)-30,235
Rs.8,280-540(3)-9,900-615(4)-12,360
421
HOUSE RENT ALLOWANCE:

(FOR ALL CLASSES OF EMPLOYEES)
STAGNATION INCREMENT: AN ADDL. INCREMENT IS PAYABLE

ONLY TO A DEVELOPMENT OFFICER GRADE I
- who has reached the maximum of his scale of pay,
- an amount equal to the last increment drawn by the employee
- Maximum three such increments can be paid every three years
PAY SCALES & STAGNATION INCREMENTS OF CLASS

III/IV EMPLOYEES
Sr.Asstt./Steno: Rs. 10,670-755(4)-13,690-840(15)-26290
Assistant:
Rs.7640-440(1)-8,080-480(2)-9,040-540(5)-11,740-625(2)12,990-760(3)-15,270-790(2)- 16,850-840(5)-21,050
Record Clerk: Rs.7085-305(2)-7695-325(5)-9320-350(1)-9670-390(2)10450- 430(3)-11740-480(5)-14140-530(9)-18910
Driver:
Rs.7085-305(2)-7695-315(14)-12105-350(2)-12805-390(9)16315
Sub-staff:
Rs.6180-250(5)-7430-265(8)-9550-315(1)-9865-325(2)10515-390(9)-14025
STAGNATION INCREMENT: AN ADDL. INCREMENT PAYABLE TO
AN EMPLOYEE
- who has reached the maximum of his scale of pay,
- an amount equal to the last increment drawn by the employee
For Sr.Asstt/Steno - Maximum of 6 such increments, every 3 years
For Asstts- Maximum of 7 such increments, every 2 years
Sl.
Place of posting
(1)
Rate per month (Cl I) Rate per month (Cl II) Rate per month (Cl III/IV)
(2)
(3)
(4)
1. Cities of Mumbai,
Navi Mumbai,
Kolkata, New
Delhi, Faridabad,
Ghaziabad,
N O I D A ,
G u r g a o n ,
C h e n n a i ,
Ahmedabad,
Hyderabad,
Bengalaru, Pune
10% of pay
subject to
maximum of
Rs.3,200/per
month
10% of pay
subject to
maximum of
Rs.3,200/per
month
10% of pay
subject to
minimum of
Rs.700/- &
maximum of
Rs.3,200/per
month
2. C i t i e s w i t h
population
exceeding 12 lacs
except the cities
mentioned at
serial number 1,
Gandhinagar and
all cities in the
State of Goa
8% of pay subject
to maximum of
Rs.2,700/- Per
month
8% of pay subject
to maximum of
Rs.2,700/- Per
month
8% of pay subject
to minimum of
Rs.600/-&
maximum of
Rs.2,700/- Per
month
3. All other places
7% of pay subject
to maximum of
Rs.2,600/- per
month
7% of pay subject
to maximum of
Rs.2,600/- per
month
7% of pay subject
to minimum of
Rs.570/- &
maximum of
Rs.2,600/- per
month
DEARNESS ALLOWANCE
Based on the All India Average Consumer Price Index for Industrial
Workers (In the series 1960 = 100 ) as published in the Indian Labor
Journal or the Gazette of India
Revision on quarterly basis for every four points rise or fall.
For every four points in the quarterly average over 2944 points- 0.15 % of
Basic Pay.
422
423
424
425
Note : The revised FPA as shown in Column 3 above, shall not qualify for any allowance or any benefit or terminal benefits.
However, increment portion of FPA as shown in column 4 above, shall rank for P.F and Pension. The said increment portion
along with the DA as on 1.11.1993, as shown in column 5 shall rank for calculation of Gratuity and Encashment of Earned
Leave.
9.80
100
Driver/Other Subordinate Staff
10.
390
12.74
130
Record Clerk
9.
530
18.68
230
Sr. Assistant/Steno/Assistant etc.
8.
840
12.74
130
Development Officer Gr. II
7.
615
18.68
230
Development Officer Gr. I
6.
840
5.80
230
Scale II/I
5.
910
6.30
250
Scale IV/III
4.
1200
6.30
250
Scale V
3.
1350
7.56
300
Scale VI
2.
1400
(5)
10.08
400
1700
2% of pay subject
to minimum of
Rs.125/- &
maximum of
Rs.510/- per
month
Scale VII
2% of pay subject
to maximum of
Rs.545/- per
month
1.
2% of pay subject
to maximum of
Rs.590/- per
month
(4)
population of 5
lacs and above but
not exceeding 12
lacs, State capitals
with population
not exceeding 12
lacs, Chandigarh,
M o h a l i ,
Panchkula,
Pondicherry, Port
Blair
(3)
2.5% of pay
subject to
minimum of
Rs.170/-&
maximum of
Rs.595/- Per
month
(2)
2.5% of pay
subject to
maximum of
Rs.625/- Per
month
(1)
2.5% of pay
subject to
maximum of
Rs.760/- Per
month
Increment portion of
pre-revised FPA (in Rs.)
population
exceeding 12 lacs,
except cities
mentioned in
serial number 1,
Gandhinagar and
all cities in the
State of Goa4
Revised F.P.A.
(in Rs.)
3% of pay subject
to minimum of
Rs.205/- &
maximum of
Rs.635/- per
month
Employee in the scale

of pay as on 1.11.1993
3% of pay subject
to a maximum of
Rs.675/- per
month
Sl.
No.
3% of pay subject
to a maximum of
Rs.800/- per
month
Transport Allowance (For Class I and Class III/IV):
Rate per month (Cl I) Rate per month (Cl II) Rate per month (Cl III/IV)
(3.1)
(3.2)
(3.3)
Rs.800/- per month for Class I & Rs.275/- per month for Class III/IV employees
Fixed Personal Allowance for various classes and cadres of employees:
Sl. Place of posting

(1)
No.
1. Cities of Mumbai,
Navi Mumbai,
Calcutta, New
Delhi, Faridabad,
Ghaziabad,
N O I D A ,
Gurgaon, and
C h e n n a i ,
Ahmedabad,
Hyderabad,
Bengaluru &
Pune
DA Portion of
FPA pre-revised (in Rs.)
CITY COMPENSATORY ALLOWANCE :

(FOR ALL CLASSES OF EMPLOYEES)
ALLOWANCE FOR TECHNICAL QUALIFICATIONS

FOR CLASS II & III/IV EMPLOYEES:
HILL STATION ALLOWANCE:

FOR CLASS I. II AND III/IV EMPLOYEES
Sl.
No.
(1)
Height of place of
posting
Rate for Class I
(Above Mean
(3)
Sea Level)
(2)
Rate for Class II

(4)
Rate for
Class III/IV
(5)
1. 1500 meters and 2.5% of pay 2.5% of pay 2.5% of pay

to
a
over.
subject
to
a subject
to
a subject
of
maximum
of maximum
of maximum
per
Rs.460/per Rs.370/per Rs.370/month
month
month
2. 1000 meters and
over but less than
1500 meters.
Mercara and
places which are
specifically
declared as Hill
Stations by the
Central and State
Governments for
their employees
2% of pay subject
to a maximum of
Rs.370/- per
month
3. Not less than 750

meters and
surrounded and
accessible only
through hills with
a height of 1000
meters and over
2% of pay subject
to a maximum of
Rs.370/- per
month
2% of pay subject
to a maximum of
Rs.290/- per
month
2% of pay subject
to a maximum of
Rs.290/- per
month
Sl.
No.
Examination
Allowance for Technical

Qualification per month
(in Rs.)
(1)
(2)
(3)
1.
i) LIII or LCII
ii) AIII or ACII
iii) FIII or FCII
180
490
820
2.
Institute of Actuaries:
On passing each subject
180
3.
Institute of Chartered Accountants or

Institute of Cost and Works Accountant:
on completion of
i) Intermediate Examination
ii) Final Group A or Group B
iii) Final Group A & Group B
4.
2% of pay subject
to a maximum of
Rs.290/- per
month
2% of pay subject
to a maximum of
Rs.290/- per
month
KIT ALLOWANCE:
PARADEEP PORT ALLOWANCE:

Rs 110/- per month shall be paid to confirmed employees of all classes and cadres,
as long as he/she is posted in the company's office in Paradeep port. This allowance
shall not be treated as Basic salary for any purpose.
426
820
(this is applicable only to
Class III & IV employees)
FUNCTIONAL ALLOWANCE PAYABLE

TO CLASS III/IV EMPLOYEES:
Sl.
No.
1.
Payable to Class I and III/IV employees if they are transferred to a hill station
where HSA is paid.
Rs 4,000/- (One time) for officers and Rs.1000/- for Class III/IV employees. The
Kit Allowance shall not payable for transfer from one hill station to another, to
Class III/IV employees, if the same was drawn any time during the preceding three
years.
On completion of MBA from a

recognized (by UGC)
University or Institution
(AICTE Approved course)
350
600
820
2.
3.
Cadre-Functions
Subordinate Staff engaged in either as Key Holder or

for carrying cash to or from Bank, as his regular and
main function, where the amount of cash carried during
a calendar month is ordinarily Rs.25,000/- or more
Other Subordinate Staff working as Liftmen, Machine
Operators, Head Peons, Jamadars, Daftaries, AC Plant
Operators and Heavy Vehicle Drivers, who were
assigned these functions before 1.1.2006
Assistant (Sr. Assistant in the event of non-availability
of Assistant) engaged in handling cash in an office, as
his regular and main function, where the amount of
cash transaction during a calendar month is ordinarily
Rs.25,000/- or more
427
Amount (in Rs.)

Payable as
Functional
Allowance
per month
375
165
800
Sl.
No.
4.
5.
6.
Cadre-Functions
Amount (in Rs.)

Payable as
Functional
Allowance
per month
Telex Operators, Punch Card Operators, Unit Record

Machine Operators and comptists, who were assigned
these functions before 1.1.2006
60
Stenographers to CMDs, Scale VII & VI and

equivalent positions
75
Employees performing the functions of Audit

Assistants
460
NON-CORE BENEFITS LEAVES:

12 days (can avail 5 full days of CL at a stretch & Half day
CL {1st half or 2nd half} can be availed max. 6 times in a
Casual Leave (CL) year). Further intervening holiday{s} & Saturdays/
Sundays falling between two CLs would not be counted as
CL.
2 days this can be selected by each employee from a list of
Restricted Holiday Restricted Holidays provided at the beginning of each
year.
33.2/11 days (on every 11 working days 1 day accrued)
Max.
accumulation 240 days. It cannot be clubbed with
Casual Leave (CL)
Casual Leave. It can be sanctioned for minimum 6 days
and maximum 120 days.
Earned Leave (EL) 30 days on half pay basis are accumulated at the end of
every year Maximum accumulation 240 days (h/p)
Sick Leave (SL)
180 days for each confinement On maximum 2 occasions

during entire service period may be allowed to female
employees, having less than 3 living children.
Maternity Leave
It is granted for the day of the examination irrespective of

the examination is in the forenoon or afternoon.
Examination Leave Cities of Mumbai, Navi Mumbai, Kolkata, New Delhi,

Faridabad, Ghaziabad, NOIDA, Gurgaon, Chennai,
(For I.I.I. exams)
Ahmedabad, Hyderabad, Bengalaru, Pune
Special Sick Leave 180 days (half pay basis) on major diseases
Adoption Leave
Maximum two months leave or till the adopted child

reaches the age of one year, whichever is earlier, may be
granted for adoption of a child through legal process, only
once during service career and for one child only
428
LEAVE ENCASHMENT (DURING SERVICE) :

Current block 2010-11(for all classes of employees)
Class I & II
Class III & IV
Basic Pay, Pre-revised Basic part of Basic Pay, Pre-revised Basic part of
FPA & all other allowances drawn by FPA, DA, HRA & CCA.
All other allowances are EXCLUDED
the employee
EXCLUDING officiating allowance,
transport allowance & entertainment
allowance
Encashment of EL maximum 15 days may be availed of in a block of two
calendar years.
No carry forward of block

Following components of salary are considered for this purpose
TA/DA ON TOUR :
a) AC II tier train fare, to & fro, for Scale I, II & III.
b) Scale IV & Above by Economy class Air fare
c) Actual Conveyance expenses residence to Airport, Railway/Bus
Station & back, both at Headquarters & place of tour.
d) Incidental charges If tour exceeds 12 hr., @ of Halting Allowance
applicable to 'C' Class cities for each journey i.e. outward & inward.
Hotel Charges
Scale I
Scale II & III
Scale IV & V
Scale VI & VII
Major cities
1000
1500
2500
4000
Area I
750
1000
1500
2000
Other Cities
500
800
1300
1750
HOTEL CHARGES:
(Standard Breakfast charges along with taxes thereon can be allowed during stay
in the same hotel. Taxes on hotel charges are allowed on actual basis over & above
such charges)
429
DAILY HALTING ALLOWANCE (W.E.F. 1.12.2010)

Sl. Category of the employee
No.
A Class
City(Rs.)
B Class
City(Rs.)
C Class
City(Rs.)
CLARIFICATIONS
A newly promoted AO who did not avail LTS in pre-promoted cadre can avail of
the same for un-availed block(s) up to the end of the block period as per his/her
previous entitlement. For example, a Cl. III employee who has been promoted to
Scale I in 2010 and has not availed LTS for 2008-09 and 2010-11, in the earlier
cadre may avail such Blocks till 31.12.11, as per previous entitlement. Thereafter,
the promotee would be eligible to avail LTS in AO cadre for 2011-12 and onwards.
(HO Pers. Dept. Circular dt. 8.6.2009)
Officers who are entitled to travel by air shall be entitled for

reimbursement of full air fare for 3000 kms.(economy class) of surface
distance each way for one block subject to the ceiling of twice the eligible
class standard air fare of Air India for Delhi-Trivandrum route. The
benchmark fare would stand revised as & when Air India revises its fare
for the said sector.
ii. For employees posted in North East: When an officer eligible to travel
by air undertakes journey by air in full or part LTS journey, the distance
covered by air journey shall be the aerial distance of the journey
undertaken by him. If he undertakes the balance journey by any other
mode, that part of journey shall be calculated as per the surface rail
distance and in such cases the actual amount incurred by him on fare will
be reimbursed provided such amount does not exceed this fare of the
entitled class by train.
iii. However, where the surface distance between the place of origin of
journey and the destination is within 3000 kms. but no direct flight is
available, the officer shall be allowed travel by the shortest air
connectivity available in that sector if in such cases aerial distance does
not exceed 3000 kms. This relaxation would apply only to officers who
are eligible for LTS by air.
(b) If an officer does not travel by air at all but travels by other modes viz, train,
bus, taxi, etc. then the reimbursement would be limited to train fare of eligible
class for 3000 kms. of surface distance or actual amount spent whichever is
less.
(c) Where an officer travel partly by other entitled modes of travel i.e.
railway/roadways, the reimbursement shall be made as under
(i) Full air fare for distance traveled within the permissible limit of 3000
kms. by air either onward and / or return journeys plus
(ii) Actual expenses limited to the fare for the entitled class by train for the
balance distance traveled.
(d) When travel by air is combined with travel in train by the entitled class, the
order of reimbursement would be first for the distance traveled by air
irrespective of the order of air travel i.e. whether it precedes or follows rail
travel. The reimbursement for the balance, if any, admissible is to be
calculated as per (c) above.
430
431
Class I (Scale IV, V, VI & VII)
1000*
800
700
Class I (Scale I, II & III)
800**
700
600
DO Gr. I/ Sr. Asstt./ Stenographer
500
375
300
DO Gr. II/ Asstt./Record Clerk
375
275
225
All Class IV employees
325
225
175
* Rs.1200 for Kolkata, Delhi, Chennai & Mumbai

**Rs.1000 for Kolkata, Delhi, Chennai & Mumbai
LTS (LEAVE TRAVEL SUBSIDY):

Current Block (Two calendar years)
For Class-I 2011-12
For Class -II & III/IV 2010-11
If not availed during one particular block, the same may be carried forward to the
immediate next block e.g. LTS for Block 2009-10 may be availed during 2011
12. Subsidy for two blocks together may also be availed of.
Individual employee, spouse & dependent children/parents are eligible to avail
LTS.
Train fare by AC II tier or by Rajdhani or Duronto Express up to 3000 km (wef
8th Dec., 2010) each way per individual for each block may be reimbursed.
Officers in the cadre of Scale IV & above are entitled to Air travel up to 3000 km
(wef 8th Dec., 2010) each way.
Scale V & above are entitled to AC 1st Class if they travel by train.
(a) i.
FOREIGN TRAVEL
For class III / IV, Development Officers, and Officers not entitled to
travel by Air:
All confirmed employees will be allowed Foreign LTS. For one block, the
entitlement per eligible person shall be two times the entitled class fare for
3000 kms or actual expenses incurred, whichever is less. The journey can be
made by any mode of travel. When the blocks are clubbed they will be entitled
for twice the permissible amount mentioned above.
reckoned for this purpose; irrespective of the season in which the journey is
undertaken. The increased limits will also be effective for LTS for un-availed
previous block years as well as for combining thereof with current block years'
LTS for journey undertaken on or after 8th December 2010.
TRANSFER BENEFITS FOR OFFICERS :

i)
ii)
For Officers entitled to Air travel :

The officials are allowed to undertake Foreign LTS. For one block, the
entitlement per eligible person shall be two times the economy class air fare
for 3000 kms. (on the basis of surface distance) by Air India on domestic route
i.e. Delhi-Trivandrum route. The journey can be made by any mode of travel.
When the blocks are clubbed they will be entitled for twice the permissible
amount mentioned above.
General Clarifications:
i.
ii.
iii.
iv.
v.
vi.
Foreign tour under LTS, as per prevalent Income Tax rules, may attract
Income Tax and in such cases, the tax liability shall be borne by the
employees themselves.
Travel to foreign destination should be by shortest route from the place of
posting and the fare will be limited to his eligibility in India as per this
rules or the actual fare whichever is lower.
In case of employees / officers availing themselves of either Single Block
or two blocks for Foreign LTS, only one trip to foreign country will be
allowed and the balance unexhausted amount of the rail fare / air fare, if
any, will lapse.
Foreign journeys performed by Ship are admissible within the overall
entitlement.
Passport / Visa charges are not payable.
Air port tax is payable within the overall ceiling on production of ticket
/ receipt.
To counter the problem arising from the phenomena of Seasonal Fares (Peak
Season Fare and Lean Season Fare) by the Railways, the Peak Season Fare may be
432
iii)
iv)
v)
vi)
vii)
One month's basic pay, as on date of taking charge on transfer plus

pre-revised basic part of monthly FPA, as transfer grant
Train/ Air Fare As per Tour entitlement (If transferred on promotion,
this would be as per entitlement in promoted cadre)
Baggage allowance charges for transporting up to 60 (for scale I, II
& III)/90(for scale IV & Above) quintals by Rail (Revised)
Packing charges Rs.1500/- for scale I to III Rs. 1800/- for Scale IV
& V and Rs.2500/-for Scale VI & VII
Forwarding chargesRs.500/-(at each end)
Joining Leave 6 days (can be taken in one or two installments)
Halting allowance during journey period as per tour rules
viii)2nd trip for shifting family/household effects within 6 months or start of

next academic session of children, whichever is later. GM(P) may
further allow extension for another 6 months on receiving such
request.
ix) Maximum 30 days halting allowance as per tour rules at the new
headquarters, if residential accommodation is sought but could not be
provided there within 30 days.
COMPANY ACCOMMODATION:
a) If Company flat is available, the same may be provided according to the
existing allotment procedure.
b) If Company flat is not available, the accommodation on Company lease
or Personal Lease (in rare cases) may be considered as per the officer's
entitlement shown in one of the following slides.
c) 6 months adjustable rent advance may be allowed in favor of the
Landlord
d) Deduction from salary : 1.20% of the Basic Pay at the minimum of the
scale of pay. HRA will not be paid
433
NA
NA
NA
The existing system of reimbursement of telephone expenses (land line) which is

linked with number of permissible calls, is replaced by a system of reimbursement
on declaration basis.
NA
In order to adopt to the new system, the existing system linked with the number of
permissible calls has been suitably amended to monetary limits as approved by
the Competent Authority as detailed under:
434
6855
Scale VII
6855
Scale VI
6095
Scale V
13000
5080
SDM
13000
5080
Scale III & IV
(other than
SDM)
12000
10500
3965
Branch
Manager
3965
10000
CATEGORY OF
OFFICERS
Scale I & II
(other than
Branch I/C)
Existing
Limit
NA
*
4825
*
6040
NA
NA
5750
4025
9500
5365
NA
4750
5750
3575
9500
4470
3400
4750
5300
3575
9000
4470
3305
4750
2950
8000
3490
3305
4200
3500
2500
3300
REVISION OF REIMBURSEMENT IN TELEPHONE EXPENSES
Revised
Limit
4500
Fixed annual limit to be quarterly

reimbursed on declaration basis as
per HO circular dt. 3.6.09.
2950
All other Entitled Officers

(CM/MGR/SDM/DM/
SBM/BM ETC.)
7500
3490
2500
Revised
Limit
Existing
Limit
Actual
Revised
Limit
CMD, GM & DGM/CRM
Existing
Limit
Revised
Limit
Limits
Existing
Limit
Category
In addition, non-entitled Officers in HO, ROs & DOs may be allowed residential
telephone facility for which quotas are as under:
HO-10, RO-4 each, DO 1 each.
Such non-entitled Officers, if extended the facility are reimbursed expenses on
declaration basis subject to stipulated limits (as provided in HO Personnel Dept.
circular dt. 3.6.2009 appended below:)
Cadre
B Class Cities
A Class Cities
Metros
REVISED RENT LIMITS FOR ELIGIBLE/ENTITLED OFFICERS W.E.F. 1.1.2009
C Class Cities
TELEPHONE FACILITY (AT RESIDENCE):
Scale-I & II AOs(D) &

AMs(D). *Applicable
only in cases where
telephone facility has
been provided in terms of
Para 6 page no. 181 of
Part II, Personnel
Manual.
Officer-In-Charge of
BO/DO (Scale, II, III &
IV)
TELEPHONE
FACILITY
BROAD MOBILE
(LAND LINE)
BAND PHONE
TOTAL
(per
( per
Amount(Rs)
Rs
No. of
per annum annum) annum)
calls
Rs.
Rs.
(Including
Per annum Rental )
*2750
*6600.00 3000.00
+ S.T.
+S.T.
6000.00 15600.00
+ S.T.
+S.T
2750
6600.00
+ S.T.
7200.00 16800.00
+ S.T
+S.T
435
3000.00
+ S.T.
Scale III & IV officers

with
marketing
assignment at RO/HO
*Applicable only in cases
where telephone facility
has been provided in
terms of Para 6 page no.
181 of Part II, Personnel
Manual.
REIMBURSEMENT FOR PURCHASE OF

BRIEFCASE/LEATHER BAG TO
*2750
Scale IV (Admn.)
2750
Scale-V excluding CRM
3150
Regional underwriters
posted at Regional Office
below the rank of Scale V
Other Officers
performing
special
duties (Non-entitled
officers) *Applicable
only in cases where
telephone facility has
been provided in terms of
Para 6 page no. 181 of
Part II, Personnel
Manual.
Nil
*6600.00 3000.00
+ S.T.
+S.T
6600.00
+S.T
7500.00
+ S.T.
Nil
7200.00 16800.00
+ S.T
+S.T
OFFICERS & DEVELOPMENT OFFICERS (OTHER THAN

ADMINISTRATION)
The limit of reimbursement and other conditions would be as under:
3000.00
9600.00
Nil
+ S.T.
+S.T
3000.00 12000.00 22500.00
+ S.T.
+ S.T.
+S.T
3000.00
+ S.T
7200.00 10200.00
+ S.T.
+S.T
1.
2.
*2750
*6600.00
+ S.T.
Nil
Nil
6600.00
+S.T
3.
4.
The new scheme shall be effective from 1st January 2009 and the reimbursement
shall be on quarterly basis i.e. on 1st July, 1st October, 1st January and 1st April in
respect of 1st quarter, 2nd quarter, 3rd quarter and 4th quarter of every financial year.
REIMBURSEMENT OF EXPENDITURE ON NEWSPAPER

& PERIODICALS FOR CLASS-I OFFICERS
The above expenses shall also be reimbursed on declaration basis for Class-I
officers (half yearly basis i.e. on 1st July and 1st January in respect of 1st and 2nd half
respectively of the calendar year)
i) For officers up to Scale III :
Rs. 200/- per month
ii) For officers in Scale IV &V :
Rs. 400/- per month and
iii) For officers in Scale VI and VII :
Rs. 500/- per month
iv) The new scheme shall be effective from 1st January 2009 on half yearly basis
i.e. on 1st July and 1st January in respect of 1st and 2nd half respectively of the
calendar year. The necessary implementation of the above revision be
effected against submission of requisite declaration as per prescribed formats.
436
Sl.No.
Cadre
Limit (in Rs.)
1.
Scale VI & Above
2500
2.
Scale IV & V
2150
3.
Scale II & III
1850
4.
Scale I
1500
5.
Development Officers
(other than Administration)
1500
Reimbursement may be allowed to all Class Iofficers, including promotees

and probationers and all confirmed Development Officers (other than
Administration)
The frequency of reimbursement will be once in three years from the date of
last reimbursement.
The limit of reimbursement shown above shall be inclusive of sales tax and
other Supplementary taxes, if any.
The above limits for Class I officers are effective from 1.11.2006 and that for
the Development officers (other than Administration) is w.e.f. 1.4.2009.
VEHICLE LOAN:
Two wheeler:
i) Rs. 50,000/- for Cl-I & Rs.25,000/- for CL-III & IV (maximum)
ii) No. of installments 60
iii) Minimum eligibility 3 yrs. & can be taken 3 time in Class-III cadre
& 3 times in Class-I cadre
iv) Reimbursement of Ins. premium by the Company during loan recovery
period.
v) Rate of interest 5% p.a. on reducing
balance
Four wheeler:
I) Non-entitled Scale III & IV are entitled to this facility up to Rs. 2.5 lacs
II) No. of repayment installment 120
III) Rate of interest 5% p.a. on reducing balance
437
IV) Reimbursement of Insurance premium by the Company during loan

recovery period.
Basic Pay
Eligible Sum Insured
Less than Rs. 22,730/-
Rs.70,000/-
DOMICILIARY MEDICAL BENEFIT:
Rs. 22,730/- to Rs. 29,000/-
Rs.1,00,000/-
Class III & IV:

Rs.4,000/- paid in July every year for the period
July of that year to June of following year.
Rs. 29,001/- & above
Rs.1,55,000/-
Service Tax to be charged on each share of premium as per prescribed rate.

d) Coverage available to self, spouse, dependent children, parents &
parents-in-law.
e) Additional coverage beyond the entitled sum insured up to
Rs.5,00,000/- per member/ individual may be opted but at own cost.
Class I:
Basic Salary as on 1 January
Entitlement (Amount in Rupees)
Benefit under the Scheme:
Up to Rs. 31,725/-
Rs.8,000/-
Above Rs. 31725/-
Rs.12,000/-
A ) Domiciliary Hospitalisation
Minimum period exceeding 3 days
Maximum period 60 days
Maximum payable amount 20% of the total Sum Insured
B) Maternity Benefit
Cover is automatic.
Admissible for normal delivery & caesarian cases
Admissible for first 2 children only
Maximum Sum Insured Rs.50,000/C) Hospitalisation Benefits
Minimum Period 24 Hrs.
Pre-hospitalization benefits 30 days.
Post hospitalization benefits 60 days or till declared fit, whichever is
earlier
st
Class II
Basic Salary as on 1 January
Entitlement (Amount in Rupees)
Rs. 25,235/- and above
Rs.8,000/-
Below Rs.25,235/-
Rs.5,000/-
st
Officers promoted from Class-III would be entitled to lump sum amount

applicable to Officers on a pro rata basis from the 1st day of the month following
their date of promotion. Similarly, recovery on pro rata basis from the lump sum
amount if already paid in Class-III cadre.
Lump sum domiciliary medical benefit, in a nut shell
For Officers :
Basic Up to Rs. 31,725/Rs. 8,000/Payable in December
Basic > Rs. 31,725/Rs. 12,000/Payable in December
For Dev. Officers:
Basic
Rs. 25,235/- & above Rs. 8,000/- Payable in December
Basic
< Rs. 25,235/- Rs. 5,000/Payable in December
For Clerical & Subordinate Staff :
Rs. 4,000/-
Payable in July
MEDICLAIM
a)
Coverage starts next month after confirmation, in case of new recruits.
b) Enrolment form for members to be covered is to be submitted to

concerned RO/HO, Personnel Departments. Company contributes a part
of premium (66.67% for Class-I & 75% for Class III & IV) up to the
under mentioned eligible sum insured as per following Basic Pay slabs:438
(This period is unlimited in respect of specified major diseases.)
GROUP PERSONAL ACCIDENT (GPA):

If any employee sustains injury causing death/disablement, the Company will
reimburse the following:a) Death
Capital Sum Insured
b) Loss of two limbs, two eyes or

one limb and one eye
Capital Sum Insured
c) Loss of one limb or one eye
50% of the capital Sum Insured
d) Permanent total Disablement from

injuries other than those named
above
Capital Sum Insured
e) Permanent Partial Disablement
Specified percentage of the Capital

Sum Insured depending on the
extent of Disablement.
439
Note: Capital Sum Insured is 36 times of the monthly basic salary of the employee
or Rs.3,00,000/- whichever is lower.
CONVEYANCE SCHEME FOR ELIGIBLE CLASS I

OFFICERS (CONVEYANCE SCHEME 2002)
HOUSING LOAN
The office will book the vehicle under this scheme
The vehicle will be purchased, owned and registered in the name of the
company
The User Officer will enter into an agreement as per prescribed standard
draft for the use of the vehicle
The limit of the cost of the vehicle would be as underL
Scheme Loan & Supplementary Loan are available are as under:

Cadre
Scheme Loan
(Int. @ 5% per annum)
Supplementary Loan
(Int. @ 7.5% per annum)
Scale I & II
3.25 lacs
3.75 lacs
scale III
3.65 lacs
4.35 lacs
Cadre of the Officer
Scale IV/V
4.00 lacs
4.50 lacs
Scale VII & VI
5 lacs
Scale VI
4.00 lacs
5.00 lacs
Scale V & IV
4 lacs
Scale VII & Above
4.00 lacs
6.00 lacs
Scale III, II & I
3 lacs
REFUNDABLE/NON-REFUNDABLE
LOANS FROM PROVIDENT FUND:
Limit in Rs.
Running expenses (Fuel limit) would be as under:

Category
Quarterly Limit
1) Refundable Loan :
CMD
No limit
Maximum 6 times of Basic Pay + DA + FPA (basic) + Special F.A.@ interest

1% more than the interest paid by Trust per annum on reducing balance.
Scale VII
375 Lts.
Scale VI/CRM
300 Lts.
Repayable in 48 installments (maximum) for marriage purpose.

For other purpose maximum 24 installments.
2) Non-refundable Loan :
i)
ii)
iii)
iv)
After 10 yrs. of service

Max. 2 times in service career
Up to 90% of own contribution
Only for housing purpose & not for 2nd property
Other Loans & Advances:
Festival-Interest free advance
Class I -1 month's Gross Salary Or Rs.13,000, whichever is less
Class II/ III/ IV 1 month's Gross Salary Or Rs.11,000, whichever is

less
Regular PTS - 1 month's Basic+ D A (on pro rata basis) Or Rs.5,500,

whichever is less
Flood etc.-Interest free advance Rs. 15,000 for affected areas

440
Scale V other than CRM
250 Lts.
Officers-in-charge of DOs/BOs,
Metro
250 Lts
Scale IV In-charge of RNTB &
A Class City
225 Lts.
Marketing Department at RO,
B Class City
180 Lts.
Officers-in-charge of DTC
C Class City
150 Lts.
The period of usage of car under this scheme will be 8 years.
After the car shall be transferred in the name of the Officer concerned by
recovering an amount equal to the written down (Depreciated) value of
the car determined as per rules in force from time to time
Cost of Tyres and tubes shall be borne by the company in full after 32,000
Kms. run of the vehicle. Reimbursement will be made subject to
production of bills/receipts.
If retreading of tyres is required, the cost of such retreading shall be borne

by the company after the car has run 16,000 Kms.
The cost of batteries shall be borne by the company in full after 18 months
of date of purchase of the vehicle and after every 18 months thereafter
subject to production of bills/receipts.
441
TERMINAL BENEFITS
Gratuity
Provident Fund
Pension
Group Term Insurance Scheme (GTIS)
Group Savings Linked Ins. Policy (GSLIP)
Encashment of Earned Leave
G RAT U I TY
Retirement
Gratuity as per
Act/Scheme
Under Act:
(Basic+DA+Prerevised FPA+DA on
FPA ) x 15/26 x No. of
yrs. of continuous
qualifying service,
subject to maximum
of Rs.10 lacs
(enhanced w.e.f.
24.05.2010)
As per scheme:
For Class I
For 15 years and
above: Last drawn
basic pay (including
Pre-revised FPA) X
15 + (50% of last
drawn basic pay X
no. of yrs. Of service
beyond 30 years)
Vol.
Retirement
Death
Resignation
Same as Retirement. Same as C a l c u l a t i o n i s

(Death certificate Retirement S a m e
a s
along with Gratuity
Retirement.
Nomination Form,
However, Gratuity
is reqd. to be sent. In
is payable after
absence of Gratuity
minimum of 5
nomination form,
years of service
s u c c e s s i o n
certificate would be
necessary for
settlement of
Gratuity.)
As per scheme:
1 to 11 yr. 50% of last
drawn basic pay X
no. of yrs. Of service.
12 yrs. 60% of last
drawn basic pay,
13 yrs. 70% of last
drawn basic pay and
14 yrs. 80% of basic
pay.
For service of 15 yrs.
and above, same as
retirement
442
Same as S a m e
a s
Retirement r e t i r e m e n t .
However, gratuity
is payable only on
completion of
minimum of 5 yrs.
service
Vol.
Retirement
Death
Retirement
Resignation
As per scheme:
For Class III & IV
For 15 years and
above:
Last drawn basic
pay (including Prerevised FPA) X 15
up to 15 years of
service.
Additional 1 month
basic pay for each
year of service
beyond 15 yrs.
subject to max of
total 20 months)
P E N S I O N
Vol.
Retirement
Retirement
Death
Pension Formula
50% of last 10
month's average
basic pay + Prerevised FPA (Basic
Part only) X No. of
yrs. of service /33
(full pension is
admissible on
completion of 33 yrs.
of service)
Same as retirement.
GTIS death claims
form, last six
month's pay slip
(Xerox), death
certificate, GTIS
original option form
to be sent to pension
cell and all other
relevant papers as
reqd. for retirement
cases.
Resignation
S a m e
a s Not eligible
for Pension.
Retirement
(Notional benefit
of service up to five
years (Maximum)
can be given to
those who had
total 33 or more
years of full
service)
GROUP TERM INSURANCE SCHEME

In case of death whilst in service, of an employee who had opted for pension,
the commutation of pension is not payable to the legal heirs. The above
Scheme was introduced to protect the commutation value of pension to
some extent, in case of death of a pension optee, by LIC. In the event of death
of the pension optee, a fixed amount, as per the basic pay of the employee, is
paid by LIC to the legal heirs, for which a monthly premium is deducted from
the employee's salary and deposited with LIC. The following chart would
show the basic paywise rate of monthly premium as well as the amount of
sum assured for individual employee:
443
CAT E G O RY
GI (CDA) RULES, 1975
(in Rs.)
Sum Assured Monthly Premium
I (Basic Pay Rs.49,411/- and above)
7.0 lacs
164
II (Basic Pay Rs.35,661/- to Rs.49,410-)
5.6 lacs
131
III (Basic Pay Rs.25,45/1- to Rs.35,660/-)
4.2 lacs
98
IV (Basic Pay Rs.13,691/- to Rs.25,450/-)
2.8 lacs
65
V (Basic Pay Rs.7,391/- to Rs.13,690/-)
2.0 lacs
47
VI (Basic Pay up to Rs.7,390/-)
1.1 lacs
26
Short title, Commencement and Application
These rules are called General Insurance (Conduct, Discipline and

Appeal) Rules 1975.
These are applicable to every person appointed to any post by the

Company including Part-timers on Company's roll.
GSLIP
In case of untimely death of employee, family members are protected by this
Scheme up to sum insured PLUS savings portion (75% of deposited amount)
with interest.
75% of the deposit along with interest is payable after Retirement / Vol.
Retirement & Resignation.
Basic Pay-wise category vis--vis sum insured and monthly deduction of
premium are shown in the following chart:
Category
I (Basic
Pay
Rs.49411
& above
SUM
Rs.7 lacs
INSURED
Monthly
deductions
II (Basic III (Basic IV (Basic V (Basic VI (Basic

Pay
Pay
Pay
Pay
Pay
Rs.35,661 Rs. 25,451 Rs.13.691 Rs.7,391
Below
to 49410) to 35,660 to 25,450) to 13,690) Rs.7,390)
5.6 lacs
4.2 lacs
2.8 lacs
2 lacs
1.1 lac
Savings
Rs. 492
393
294
195
141
78
Premium
Rs. 164
131
98
65
47
26
Total.
Rs. 656
524
392
260
188
104
ENCASHMENT OF EARNED LEAVE AT THE TIME OF EXIT

Retirement
Death
Basic+DA+PreSame+HRA+CCA
revised FPA (Basic
(excluding
portion only and
Transport &
DA payable on that Washing allowance)
basic part)
444
Vol.
Retirement
Resignation
Same as
Retirement
Not eligible
for
Encashment
General Rules
Every employee shall at all times

i) maintain absolute integrity
ii) maintain devotion to duty
iii) do nothing unbecoming of a public servant
iv) conform to all rules of the Company & obey all orders of superiors in
course of official duty.
Every employee shall ensure integrity & devotion to duty of all

employees under his control.
No employee shall in the performance of his official duties, act otherwise

than in his best judgement & when acting under superior's direction shall
obtain the direction in writing wherever practicable.
Misconducts (List is not exhaustive)
Theft, fraud, dishonesty in official matters
Bribery
Disproportionate assets
Furnishing false information about self which are germane to

employment.
Acting prejudicial to the interest of the Company.
Willful insubordination.
Absence without leave/overstayal of sanctioned leave beyond 4days
Habitual late attendance.
Neglect of work
Damage to Company's property.
Drunkenness/riotous behavior/gambling in Company's premises.
Sleeping at work place.
Criminal offence including moral turpitude.

445

Absence from work place without permission.
Attempt at any act which amounts to misconduct.

Prohibitions
Rule-5: The whole time of an employee shall be at the disposal of the

Company unless it is otherwise distinctly provided.
Rule-6: No employee to seek, solicit or accept any outside employment

even on honorary basis without Company's permission.
Rule-7: No employee shall undertake any outside part time work or

accept fees therefor without sanction of the Competent Authority.
Rule-8: Every employee during service or after resignation/ retirement is

obliged to maintain official secrecy.
Rule-9: No employee to give evidence in any enquiry without permission

of the Company. This is not applicable to any enquiry ordered by
Govt./Parliament/State legislature or any judicial/ Departmental
enquiry.
Rule-10: No employee can take part in election to any legislature or local

authority.
Rule-11: No employee to engage in any demonstration that involves

incitement to an offence nor abet any sort of strike.
Rule-12: No employee can conduct or participate in any activities

pertaining to press/radio/TV/newspaper without permission from the
Company.
Rule-13: No employee should accept or permit any member of his family

to accept any gift from any other person having official dealings with
him.
Rule-14: No employee shall without sanction of the Company engage

directly or indirectly in any trade, business or profession nor allow any
dependent member of the family to undertake any agency/ profession
having links with Company's business.
Rule-15: Speculation in any stock, share or investment is prohibited.
Rule-16: No employee save in ordinary course of business with a bank or

with a Public Limited Company shall himself or through any family
member lend or borrow money as a principal or as an agent.
Rule-18: No employee can absent from duties without having permission

of the Competent Authority.
Rule-19: No employee shall absent from his station overnight without

prior sanction of the Competent Authority.
Suspension (Rule-20)
The appropriate authority may place an employee under suspension

a) where a disciplinary proceeding is contemplated or is pending.
b) where a criminal offence against him is under investigation or trial.
c) where he is detained in custody, whether on a criminal charge or
otherwise, for a period exceeding 48 hours.
Subsistence Allowance during suspension

a) at the rate of 50% of gross salary (basic, DA, CCA, HRA, Hill
Station Allowance, qualification pay, special pay, personal pay etc.)
during first 6 months.
b) at the rate of 75% after 6 months if delay in proceedings is not
attributed to him.
c) at the rate of 25% after 6 month if period of suspension is prolonged
due to reasons attributed to him.
Treatment of period of suspension

a) if honorably acquitted, full pay which he was entitled to during
period of suspension less amount of subsistence allowance will be
released to him.
b) otherwise, such proportion of pay & allowances during the period of
suspension as may be allowed by the Competent Authority, will be
admissible with adjustment of subsistence allowance received.
c) if a case falls under (a) above, period of suspension will be treated as
spent on duty. Otherwise it will be treated as not spent on duty.
Rule-16A:
Submission of property returns in prescribed formats by all employees

on annual basis by 30th April each year for the period ending 31st March
immediately preceding.
Penalties
Minor Penalties
a) Censure
b) withholding of one or more increment for a specified period.
c) Recovery towards pecuniary loss caused to the Company.
d) withholding of one or more increments permanently.
e) Reduction to a lower service or post or to a lower time-scale or to a
lower stage in the time-scale.
f) Compulsory retirement.
g) Removal from service which shall not be a disqualification for
future employment.
h) Dismissal.
446
447
CHAIRMAN-CUMMANAGING
DIRECTOR
CHIEF MANAGER
(SCALE-V)
ASST. MANAGER
(SCALE-II)
MANAGER
(SCALE-IV)
SUB-STAFF
CHIEF
MANAGER
(SCALE-V)
DEPUTY
MANAGER
(SCALE-III)
MANAGER
(SCALE-IV)
ASSISTANT & EQUIV.
CADRES/
RECORD CLERK
CHAIRMAN-CUM
-MANAGING
DIRECTOR
CHAIRMAN-CUM
-MANAGING
DIRECTOR
D.G.M.
(SCALE-VI)
CHIEF
MANAGER
(SCALE V)
DEV. OFFICER /
SUPERINTENDENT /
SR. ASSISTANT & EQUIV.
CADRES
MANAGER
(SCALE-IV)
CHAIRMAN-CUM
-MANAGING
DIRECTOR
G.M.
(SCALE-VII)
D.G.M.
(SCALE-VI)
DY. MANAGER (SCALE-III) /
ASST.MANAGER (SCALE-II)/
ADMN. OFFICER (SCALE-I)
D.G.M.
(SCALE-VI)
PERSONNEL &
ADMINISTRATION
COMMITTEE
OF THE BOARD
C.M.D.
G.M (SCALE-VII)
CHIEF MANAGER (SCALE-V)
MANAGER (SCALE-IV)
G.M (SCALE-VII)
BOARD
PERSONNEL &
ADMINISTRATION
COMMITTEE
OF THE BOARD
CHAIRMAN-CUM
-MANAGING
DIRECTOR
GM (SCALE-VII) /
DGM (SCALE-VI)
CHAIRMAN-CUM
-MANAGING
DIRECTOR
MEMORIAL
AUTHORITY
UNDER RULE 40
APPELLATE
AUTHORITY
APPOINTING
AUTHORITY
CATEGORY OF
EMPLOYEES/
OFFICERS
SCHEDULE OF AUTHORITIES UNDER GI(CDA) RULES 1975
DISCIPLINARY
AUTHORITY
448
Procedure for imposing Major Penalties (Rule-25)

No order imposing any major penalty shall be made without holding formal
enquiry proceedings into allegations/charges.
Steps in holding major penalty proceedings

a) framing of charge sheet by the disciplinary authority & its service on the
delinquent employee.
b) on receipt of written statement from the employee, appointment of
IO/PO by the disciplinary authority. On total admission of charges in the
written statement, no formal enquiry through IO/PO will be necessary.
c) holding of preliminary proceedings, inspection of documents by the
employee, submission of a list of defense assistant, defense witnesses,
additional documents if any to be submitted by the employee.
d) holding of enquiry proceedings by way of examination/crossexamination of management/defense witnesses,
recording of
oral/documentary evidences.
e) submission of brief by PO to IO on conclusion of enquiry.
Finalization of Enquiry Report by IO & its submission to Disciplinary
Authority, containing the following
a) gist of charges.
b) gist of defense taken by the employee.
c) assessment of evidence.
d) findings on each charge with specific conclusions.
A copy of the enquiry report is forwarded to the employee by the disciplinary
Authority inviting his representation, if any, before taking action on the
enquiry report.
Action on Enquiry Report

a) if not satisfied, the disciplinary authority may remit the case for further
enquiry recording reasons therefor.
b) if convinced with the enquiry report, disciplinary authority may pass an
order imposing penalty commensurate with gravity of the charges
established. If charges are not established, the disciplinary authority may
pass an order exonerating the employee.
Procedure for imposing Minor Penalty (Rule-27)
The employee shall be informed in writing of the alleged misconduct & given
an opportunity to submit written statement within 15 days. The defense
statement vis--vis alleged misconduct shall be taken into consideration
before passing of any order by the disciplinary authority.
449
Communication of orders (Rule-28)

to be served personally on the employee if he is attending Office
otherwise by registered post with A/D & under Certificate of Posting in his
last known residential address in the office record.
otherwise to be affixed on the notice Board of the Office where the employee
is posted.
Appeal (Rule-31 to 37)
Every delinquent employee has a right to appeal against any penalty order
served on him within a period of 3 months from the date of receipt of the order
by him.
Every person submitting an appeal shall do so separately & in his own name.
Appeal should be addressed to whom it lies & shall contain material statement
& arguments. Appeal is to be submitted through the authority who made the
order appealed against. A copy of the appeal may be directly submitted to the
appellate authority.
In case of an appeal against any penalty order the appellate authority
considers
a) whether the procedures of enquiry have been complied with
b) whether findings of IO are justified
c) whether penalty imposed is excessive, adequate or inadequate & may
pass orders confirming, reducing or enhancing the
p e n a l t y .
Enhancement of penalty can only be made after giving an opportunity to
the employee.
PROMOTION POLICY FOR OFFICERS- 2006
Memorial (Rule-40)
An employee whose appeal has been rejected by an appellate authority who is
subordinate to CMD, may address a memorial to CMD in respect of the
relevant matter within a period of 6 months from the date of receipt of the
order of the appellate authority by him.
Canvassing or outside influence (Rule-41)
No employee shall bring any political or outside influence for any matter
pertaining to his service.
Interpretation (Rule-42)
Any question relating to interpretation of these rules shall be referred to the Board
whose decision shall be final.
450
Promotion Policy for Officers was first introduced in 1990

The 1990 Policy was in place till 2006 Promotion Exercise
2006 Policy replaced the 1990 Policy
The Policy is applicable for promotion to all cadres up to and including
Scale VII (GM)
Promotions from Scale V to VI and from Scale VI to VII are held within 4
GIPSA member cos. And GIC taken together, based on a common
seniority list for Scale V & VI officers for all the five companies
Other promotions within the company up to Scale V are based on all
India Seniority lists of officers in Scale I, II, III & IV cadres.
Vacancies are determined on the basis of norms/guidelines adopted by
the companies from time to time based on organizational needs.
While promotion to Scale VI & VII is based on the sole criterion of Merit,
the other promotions are held based on the various criteria for measuring
merits and seniority.
To become eligible for promotion to Scale VI & VII minimum 2 years
service is required.
However, the committee of CMDs may decide the actual zone of
consideration for promotion by restricting the No. of eligible officers to
certain multiple of vacancies and/or up to a particular batch to which they
belong.
To become eligible for promotion to other cadres, minimum 3 years
service is required
However, the zone of consideration for promotion would be as follows :
5 times the No. of Vac. For prom to Scale V
4 times the No. of Vac. For prom to Scale IV &
3 times the No. of Vac. For prom to Scale II & III
Provided all eligible officers belonging to same batch have to be included in the
zone consideration, even if the total No. exceeds the above proportion
The officers included for promotion to Scale VI & VII are required to
appear before a screening committee of 4/5 outside experts in different
fields, which would submit their assessment/ recommendation to the
Promotion Committee for final consideration.
The other officers empanelled for promotion to various cadres up to scale
V, have to write a test conducted by a professional examining authority
(like NIA) and pass such test (qualifying marks 50) before being included
in the further process of selection.
451
AMENDMENTS IN PROMOTION POLICY FOR OFFICERS
(d) An Officer eligible to participate in the Fast Track Channel of Promotions and
desirous of the same shall have to apply for it against a Notice to be published
14A. Fast Track Promotions:-
by the Company for this purpose.
Notwithstanding anything contained in this policy, starting from the Promotional

Exercise for the year 2011-12, for promotion of Officers upto Scale IV in the
Company, there shall be, in addition to the already existing channel (to be referred
to as the Normal Channel) of promotions under this policy, another channel of
promotions, to be known as Fast Track Channel, with the following provisions:(a) 20% (fraction of 0.5 and above being taken as 1) of vacancies as determined
under para 6 of the Policy for a financial year for promotion to Scale II, Scale
III and Scale IV in the Company shall be earmarked for being filled up
through Fast Track Channel, the remaining vacancies being available for the
Normal Channel.
(e) An Officer applying for the Fast Track Channel of Promotions shall be
required to appear in the Written Test held under the provisions of para 9.2.1
of this Policy and secure a minimum of 60 (54 for SC/ST Officers) or more
marks before being included in further process of selection under this
paragraph.
(f) In case the number of officers qualifying the Written Test for promotion to any
cadre under this Channel is less than 02 times the number of vacancies
available for that cadre, the number of vacancies so available shall be suitably
reduced so as to ensure that the officers available after qualifying the written
test are not less than 02 times the number of such reduced vacancies and the
(b) Taking out 20% of the total vacancies for Fast Track Channel shall, however,
vacancies so released, as also any vacancy remaining unfilled under this
not affect the constitution of the zone of consideration for Normal Channel
Channel, shall be added to the vacancies available under Normal Channel for
under para 8.2 of the Policy and the same shall continue to be related to the
that particular cadre.
total vacancies (i.e. including these 20% taken out for Fast Track Channel).
(g) Officers qualifying the Written Test under the Fast Track Channel as per (e)
(c) To be eligible to participate in the Fast Track Channel, an Officer should have
above, shall be subjected to assessment under the parameters of Qualification,
completed minimum three years of continuous service from the date of
Work Record, Score in the Written Test and Interview carrying the following
st
selection to the existing cadre, as on 31 March of the year prescribed for the
scheme of weightage:-
purpose of para 8.2 from time to time, besides possessing the qualification of,
(i) Associate of Insurance Institute of India or equivalent for promotion to
Scale II or Scale III, and
(ii) Fellow of Insurance Institute of India or equivalent for promotion to
Scale IV:
Provided however, for the Promotional Exercises for the years 2011-12 and 201213, to be eligible to participate in the Fast Track Channel, an Officer should have
completed minimum four years of continuous service from the date of selection to
the existing cadre, as on 31st March of the year prescribed for the purpose of para
Parameters
Scale I to II
Scale II to III
Scale III to IV
Written Test
40
40
40
Qualification
Nil
Work Record
40
40
40
Interview
15
15
20
Total
100
100
100
(h) Within the Scheme of Weightage as indicated in (g) above, allocation of

marks under various parameters shall be as follows:-
8.2 from time to time, irrespective of his possessing the qualifications specified in
(i) Written Test:- For every mark scored in the Written Test, a score of 0.40 in
(i) and (ii) above.
the scheme of weightage shall be allotted. For example, for a score of 60

452
453
in the Written Test, the Officer shall be allotted 24 marks out of 40 in the
or exaggerated remarks, as may be observed from the confidential reports /
above scheme of weightage.
work records of the officers concerned. Thereafter, the total marks shall be
(ii) Qualification:- Scale I & Scale II Officers possessing the qualification of

Fellow of Insurance Institute of India or equivalent shall be allotted 5
marks for the same while no other marks shall be allotted in the scheme of
weightage.
suitably moderated and recorded by the Committee, taking into account the
marks secured in interviews.
(k) The Committee shall thereafter rank the Officers in descending order of total
marks obtained under the reckoning parameters and from the top of the said
Work Record:- The work record shall be assessed through the annual
confidential reports as per the annual performance appraisal system in
force, after applying an appropriate factor so as to translate the score from
list a number equivalent to the number of vacancies available under the Fast
Track Channel shall be taken out to constitute the Promotion List under this
Channel.
the Normal Channel level of weightage to the Fast Track level of
(l) The Committee shall then forward the Promotion List so prepared under this
weightage. (For example, for promotion to Scale II, the weightage for
Channel to the Appointing Authority. Such selection of officers for promotion
Work Record under Normal Channel is 30 and under Fast Track Channel
by the Committee shall be final.
40. In such a case, the score of Work Record assessed under Normal
Channel as per the annual performance appraisal system in force shall be
multiplied by a factor of 40/30 to arrive at the score of Work Record under
Fast Track Channel.)
(m) The Appointing Authority for promotion shall cause simultaneous

publication of the Promotion Lists both under the Normal Channel and the
Fast Track Channel so as to ensure maintenance of inter-se seniority of the
Promotees under the 02 Channels in the promoted cadre.
(iii) Interview:- Interview Committee(s) each comprising of one GM as

Chairman, 2 DGMs and one SC/ST representative, to be constituted by
the Chairman-cum-Managing Director of the Company, shall interview
candidates and allot appropriate marks, the maximum being 20 for
promotion to Scale IV and 15 for promotion to Scale II / III.
(I) The Promotion Committee and Appointing Authority for promotions under
Fast Track Channel shall be the same as that for promotions under the Normal
Channel for the respective cadre indicated in para 12 & para 16 respectively.
(j) The Chairman of the Interview Committee shall submit the details of the
marks allotted to various candidates in the Interview to the Promotion
Committee (herein after called 'the Committee'), which shall thereafter
examine the information about the officers who have qualified the Written
Test under the reckoning parameters contained in the summary sheets and
also give suitable weightage either plus or minus for the inconsistencies and /
454
(n) Only 2 attempts shall be allowed for promotion to a particular cadre under the
Fast Track channel, which shall be counted within the overall 03 attempts
(including those availed under the Normal Channel) for the purpose of
determining supercession within the meaning of the paragraph 17 of the
Promotion Policy.
(o) Instance of an Officer refusing promotion under Fast Track Channel shall
result in counting of his participation in the Fast Track Channel of promotions
as an attempt within the limits of 03 attempts for the purpose of determining
supercession within the meaning of para 17, notwithstanding his having
qualified in the Written Test.
(p) Officers eligible under the Normal Channel of promotion and applying
for the Fast Track Channel of promotions, if selected for promotion under
both the Channels, shall be retained only in the Promotion List for the Normal
Channel of promotions.
455
Criteria for promotion up to Scale V and

scheme of weightage to various parameters
Sl. No.
Parameter
Scale I
to II
Scale II Scale III Scale IV

to III
to IV
to V
1.
Written Test
30
30
30
25
2.
Insurance Qualification
3.
Work Record
30
35
45
45
4.
Seniority
35
30
25
15
5.
Interview
15
6.
Total
100
100
100
100
Inter-se seniority : 0.01 mark is added in the ascending order starting with 0.00 for
the last officer in the list of a particular batch, if there is more than one batch in the
zone of consideration. This is to ensure weightage on seniority within the batch
Interview : For promotion to Scale V, the Promotion Committee compulsorily
interviews all the candidates. Maximum marks for interview is 15.
Promotion Committee :Promotion committees for various promotion would be as
under :
Promotion Committee :Promotion committees for various promotion

would be as under :
Promotion to Scale
Written Test: weightage given for promotion

up to Scale IV - 30%
& to Scale V - 25%
of total marks scored in the test
VI & VII
V
Insurance Qualifications: Marks are allotted only for promotion to Scale II & III,
as under:
II, III & IV
AIII or ACII 2 & FIII or FCII 5
No marks are allotted for LIII
Work Record: Marks are allotted on the three parts of Annual CR as under,
for different cadres and mean of total marks allotted for last three years' CRs
are taken as marks on work record.III.
Part of CR
Trait
Scale I to II
Scale II to III Scale III to IV Scale IV to V
10
10
10
10
Performance
12.5
12.5
17.5
17.5
Growth Potential
7.5
12.5
17.5
17.5
Total
30
35
45
45
Seniority: For the first three completed years of service, no marks are allotted For
each completed year of service in the existing scale, beyond first three years, the
marks on seniority are allotted as per following table:
Scale
Marks for each completed yr. of service

beyond first 3 years
Maximum
Marks
I to II
35
II to III
30
III to IV
25
Iv to V
15
456
Committee Members
CMDs of GIPSA Companies and GIC, besides
one Govt. of India Nominee
CMD of the company, one Director on the
Board of the Company, General Manager (Pers.),
one SC/ST Representative & one outside expert.
CMD of the co., two GMs of the co. {including
GM(Pers.)}and one SC/ST Representative
Promotion to Scale VI & VII :

Empanelled officers after being screened by the Screening Committee appear
before the Promotion Committee for a personal interview.
The committee, after taking into account
i) the assessment/recommendations of the Screening Committee,
ii) overall merit, suitability, Growth Potential, length of service, qualifications,
service experience in various functional areas as may be assessed from
appraisal records and
iii) performance in the personal interview, would draw a list of officers selected
for promotion, equal to the no. of vacancies
Such list is published in order of inter-se seniority in the existing cadre and
this list would be final.
Promotion to Scale II, III, IV & V
Promotion committee takes into consideration the marks secured in various
criteria (including the weightage on marks of Written Test) by the empanelled
officers, who succeed in the Written Examination and draw a list in descending
order of aggregate marks to the extent of 75% of the total no. of vacancies for
selection for promotion.
457
Thereafter, the remaining officers are re-ranked in descending order of total

marks, excluding the marks obtained in Written Test and from the top of the
list, no of officers equal to the balance 25% of the vacancies are taken to
constitute the 2nd part of the promotion list.
Both the lists are then amalgamated and the final select list against 100%
vacancies is published in order of inter-se seniority in the existing cadre.
Special Provision for SC/ST
Probation on Promotion : Officers promoted to the cadre of Scale V and above

shall be on probation for a period of one year.
Seniority in promoted cadre : Seniority in the promoted cadre is reckoned
from the date of selection maintaining the inter-se seniority in the prepromoted cadre, regardless of the date of taking charge, provided, however,
the officer joins the higher post before 31st March of the promotion year.
Promotion, however, takes effect from the actual date of taking charge in
the higher cadre at the stipulated place of posting.
In accordance with the instructions received from time to time from OPT,
Govt. of India regarding this matter, the provisions are implemented.
PROMOTION POLICY FOR SUPERVISORY,

CLERICAL AND SUBORDINATE STAFF, 2008
No reservation is as yet made for Class I Promotion.
The Promotion Policy for SCS Staff was first introduced in 1978 and then it was
revised in 1990-91
Thereafter, a few amendments were made in the policy.
However, the previous policy appeared to fall short of the expectations of the
organization and in the changing scenario, it was felt that a new policy should be
introduced which would be able to take care of the career prospects of the
employees and would also address the changing requirements of the company.
Against the above backdrop the new policy has been introduced in 2008 replacing
the previous one.
From the date of introduction of this new policy, there has been promotion to only
3 cadres i.e. AO (Scale I), Sr. Assistant & Assistant.
While AO and Assistant, are considered as entry-cum-promotional cadre, Sr.
Assistant is exclusively a promotional cadre.
Appointing Authority for Promotion:

Cadre
Appointing Authority
Scale VI & VII
CMD
Scale IV & V
GM
Scale II & III
DGM
Effect of CDA/Vigilance cases on promotion

In case any action under CDA Rules is pending against any employee at the time of
considering his promotion, his case would be dealt with in terms Sealed Cover
Guidelines, which are issued by DOPT from time to time.
Where, however, any case is concluded and any penalty has been imposed, the
promoting authority would examine various aspects of the case, such as gravity of
the offence, penalty imposed, period elapsed etc. and would take a decision, as to
whether the employee should be considered for promotion.
Effect of Supersession : Officers superseded in three consecutive promotional

exercises, shall not be included in the zone of consideration in in two
immediately succeeding promotional exercises.
Effect of Non-acceptance : When an officer declines to accept promotion,
such refusal shall be recorded and taken into account while considering
his/her case for subsequent 2 yrs.
458
For promotion to various cadres, the country has been divided into various
geographical zones, as under:
Name of Prom Zone
for Sr. Asstt.
State(s)/UT covered
Northern Zone I
J&K, HP, Punjab and Chandigarh
Northern Zone II
Haryana and Delhi
Northern Zone III
UP & Uttarakhand
Northern Zone IV
Rajasthan
Eastern Zone I
Bihar & Jharkhand
Eastern Zone II
W.B & Sikkim

459
Name of Prom Zone

for Sr. Asstt.
Eastern Zone III
Orissa
Eastern Zone IV
Assam, Tripura, Nagaland, Mizoram,

Manipur, Meghalaya, Arunachal Pradesh
Southern Zone I
Andhra Pradesh
Southern Zone II
Tamilnadu & Puducherry
Southern Zone III
Karnataka
Southern Zone IV
Western Zone I & II
Kerala
MP & Chattisgarh
Western Zone IV
Gujarat, Dadra & Nagar Haveli ,

Daman & Diu
Name of the
Prom. Zone for AO
Eastern Zone
For
promotion to
States & Uts covered

J&K, HP, UP, Punjab, Haryana,
Uttarakhand, Rajasthan, Chandigarh
and Delhi
Bihar, Jharkhand, WB. Sikkim, Orissa,
Assam, Tripura, Manipur, Mizoram,
Nagaland, Meghalaya & Arunachal Pradesh
Southern Zone
Andhra Pradesh, Tamilnadu, Karnataka,

Kerala and Puducherry
Western Zone
Maharastra, Gujarat, Goa,

Madhya Pradesh, Chattisgarh, Dadra
& Nagar Haveli and Daman & Diu
For promotion to Assistant :

1) Prom. Zone will be RO Area
2) If any RO covers more than one state, Promotion zone will be
State; and
3) If there is more than one RO situated in one centre, all such ROs
would be clubbed to form a Promotion Zone.
460
Promoting Authority
Promotion Committee
AO
(Scale I)
An Officer not below the An officer not below the rank of

rank of Scale VI (DGM), Scale V to act as Chairman and two
to be nominated by CMD other officers not below the rank of
Scale IV
Sr.
Assistant
An officer not below the

rank of Scale V to be
nominated by the O-I-C of
the HO Pers. Dept.
An officer not below the rank of

scale IV to act as Chairman and two
other officers not below the rank of
Scale III, as members.
Assistant
An officer not below the

rank of Scale IV to be
nominated by the
Regional In-charge
An officer not below the rank of

scale III to act as Chairman and two
other officers not below the rank of
Scale II, as members.
To be carved out by CMD comprising

offices in Maharashtra and Goa
Western Zone III
Northern Zone
PROMOTING AUTHORITIES AND

PROMOTION COMMITTEES
State(s)/UT covered
N o t e:
One member of the Promotion Committee shall be from Personnel
Department and one member shall be an officer from SC/ST Community
Promotion Committee shall be the Interview Committee, wherever interview
is prescribed.
Declaration of Vacancies:
Norms shall be adopted from time to time for determination of vacancies for
promotion to different cadres, based on organizational needs.
Preparation of Panels:
5 times the no. of vacancies, based on the total marks on seniority and
qualifications, as allotted in terms of promotion policy, provided all employees are
included in the panel who secure identical total marks at the cut off point,
regardless of increase in the size of the panel beyond five times.
Impact of Below Average Rating in CR
If any applicant for promotion is found to have received Below Average Rating in
any of the last three years' CRs, the promoting authority would examine overall
aspect of the report and arrive at a decision whether the employee would be
considered for promotion or not in that particular year.
Impact of Actions under CDA Rules/Vigilance Cases:
In case any action under CDA Rules is pending against any employee at the time of
considering his promotion, his case would be dealt with in terms Sealed Cover
Guidelines, which are issued by DOPT from time to time.
461
Where, however, any case is concluded and any penalty has been imposed, the
promoting authority would examine various aspects of the case, such as gravity of
the offence, penalty imposed, period elapsed etc. and would take a decision, as to
whether the employee should be considered for promotion.
SCHEME OF WEIGHTAGE FOR VARIOUS CRITERIA:

Criteria
For Prom to
AO(Scale I)
For prom to
Sr. Assistant
For Prom to
Assistant
Seniority
30
40
50
PROMOTION TO AO (SCALE I):
Qualifications
30
30
30
Departmental Channel:
Only Sr. Assistants & Stenos are eligible to apply. Eligibility criteria are based on
period of service rendered in the present cadre & the Insurance &/or professional
qualifications acquired.
Selection is based on seniority, qualification (academic and
insurance/professional), work record and interview.
Work Record
25
30
20
Interview
15
Total
100
100
100
Competitive Channel:
All employees with 50% marks in Graduation/Post-graduation (40% for SC/ST)
or FIII (AIII for SC/ST) ACA, ACWA, MCA, MBA etc. are eligible to write the
competitive examination not more than four occasions in the entire service career.
Qualifying marks in the competitive examination is 60 % (50% for SC/ST) for
being considered in the further process of selection.
Marks on seniority:
Two marks for each completed year of service (in the cadre, for prom. to AO under
para 13.1 and Sr. Asstt. & in the company for promotion to AO under para 13.2.
and Assistant) as on 31st December of the year preceding the year of promotion are
allotted.
Period of 6 months and more is considered as one year and less than 6 months
period is ignored.
MARKS ON QUALIFICATIONS:
Selection under this channel is based on seniority, qualification (academic and

insurance/ professional), work record, interview and the marks in the competitive
examination.
Promotion to Senior Assistant:
All employees in the scale of Assistant who are FIII or who have completed at least
7 years in the cadre or who have reached the ceiling of the scale are eligible for this
promotion.
Employees with LIII or AIII qualifications, are considered only after putting in at
least 5 years and 3 years service in the cadre, respectively.
Selection is based on seniority, qualifications (academic and insurance) and work
record
Promotion to Assistant:
Record Clerks and Class IV full time employees are eligible for this promotion,
provided they have requisite academic qualifications for direct recruitment of
Assistant in the company or they pass the departmental test with 50% marks (40%
for SC/ST) and also pass the computer literacy test
Record clerks with at least 5 years service and Subordinate Staff with 10 years
service and who have qualified at least VIII std. examination are eligible to write
the departmental examination
462
ACADEMIC QUALIFICATIONS:
Below SSCE
SSCE
HSC/Intermediate
Graduate
12
Post/double Graduate
15
TECHNICAL QUALIFICATIONS:
LIII or one subject of Institute of Actuaries or PG
Diploma (one yr. duration) in Computer
Applications or Business Administration
AIII or ACII or three subjects of Ins. of Actuaries
10
FIII or FCII or 5 subjects of Ins. of Actuaries or

MBA or MCA or PGDBM (two yr. duration)
15
463
Marks on work record:
Posting from the Ranking List:
Past three years CRs are to be rated by the Promotion Committee as per the scheme
of rating and 3 years average shall be taken as marks on work record.
The employees who are included in the Ranking List are offered promotion by the
Promoting Authority by means of a promotion letter.
Posting of the employee can be made at any office of the company commensurate
with his designation and the organizational requirement, irrespective of the period
of stay of the employee at his/her present place of posting.
However, such posting shall always be within the boundary of the respective
promotion zone.
Marks in Interview:
Promotion Committee shall give marks to the candidates for promotion to AO on
the basis of their performance in the personal interview before the committee.
None shall be included in the Ranking list without appearing in the Interview.
Effect of non-acceptance of Promotion:
Selection and Ranking:

Ranking of the candidates shall be made in the descending order of total marks
secured on various criteria as per the scheme of weightage and selection of No. of
candidates for promotion, shall be equal to the no. of vacancies, from top of the list,
so ranked.
To be included in the ranking list a candidate has to secure at least 40 marks in the
aggregate of all criteria (30 marks for SC/ST). This proviso would, however, not
apply to promotion to AO under paragraph 13.2
Special provision for SC/ST and persons with disability:
15% and 7-1/2% vacancies are reserved for SCs and STs for various promotions
under this policy. Rosters for reservation of vacancies are maintained promotion
zone-wise for each promotion.
3% reservation is also made for persons with disability.
In addition, under paragraph 13.2 and 15, certain relaxations are provided to the
SC/ST employees in eligibility criteria, No. of chances to appear in the
Competitive Examination (Under paragraph 13.2 )and qualifying marks in the
written tests.
Publication of Ranking List:
No employee has a right to reject the offer of a promotion involving transfer. If an

employee is unable to accept the offer due to involvement of transfer, he/she has to
make a representation in writing within 7 days from the date of receipt of the offer.
Promoting Authority may allow the employee to forego the promotion and his
name would be deleted from the Ranking list. Further he would not be considered
for promotion in the next two promotional exercises.
Against this decision the employee may appeal before GM(P), which may be
considered by him depending on the merit of the case and dispose it of in
appropriate manner.
Seniority in the Promoted Cadre:
Promotion shall take effect from the date of taking charge in the promoted cadre at
the place of posting stated in the offer letter, from which date all benefits in the
higher cadre, including fixation of pay would be admissible to the employee.
However, such date will not affect his seniority, which shall be counted from the
date of publication of the ranking list.
Fixation of Pay on promotion:
On promotion, basic pay shall be initially fixed at one stage above the stage in the
higher scale, which is next above his basic pay in the lower scale.
Provided, however, where his basic pay is a stage in the higher scale, the fixation
shall be made in the next higher stage in higher scale.
On receipt of the recommendation of the Promotion Committee, the Promoting

Authority would cause the publication of the Ranking List showing the No. of
vacancies declared and the names of those candidates with other details necessary
for proper identification, who have been selected for promotion against such
declared vacancies.
Provided further that basic pay shall be fixed at the bottom of the higher scale,
where such fixation results in an increase in the basic pay equal to at least one
grade increment at the minimum of the higher scale.
464
465
Note: The employee can opt any date for fixation ranging between the dates of his
taking charge in the higher cadre and the date of his next annual increment in the
lower scale.
Assured career progression scheme (ACPS)
Record Clerks, Drivers & Sub-staff who fail to qualify for promotion, would be
placed in the respective higher scale of pay, on completion of continuous 12
months service from the date of their reaching the maximum (ceiling) of their
present scale, subject to vigilance clearance.
While the employee would continue in the existing cadre, he/she would draw
salary in the higher scale, till superannuation.
Except monthly salary, no other facility/benefits which may be applicable to the
higher cadre, would be admissible to such employees on placement in the higher
scale under ACPS.
This facility is available to an employee only once in entire service career,
One promotion in life time for Assistants
Assistants not below the age of 55 yrs. and who have completed at least 25 yrs. Of
service in the company without receiving any promotion are eligible for
promotion to Sr. Assistant, under this clause.
The promotion is subject to vigilance clearance and would be based on the marks
on the criteria of Seniority, qualifications and Work Record, provided the
employee not found unfit for promotion. Weightage on seniority is given @ 3
marks per year, over and above 25 years.
Past service of the ex-servicemen, before joining the Co. is counted up to
maximum of 5 years, for determining the eligibility for promotion which is
minimum of 25 years of service as Assistant
Power to clarify, modify and relax any provision of the policy
CMD is the competent authority to modify or relax any provision of the policy in
any individual cases, by recording the reasons therefor and to issue any
clarifications, in case of any doubt in any matter under this policy.
466
TRANSFER AND MOBILITY POLICY - CLASS I
Objectives
To ensure balanced manpower distribution for Client servicing
To groom up Officers
To provide opportunity for self-development & improvement in

competency.
To attain overall Organizational goals.
Applicability
It came into existence since 17/10/2002.
Applicable to all officials up to the rank of Scale IV
Not applicable to officials on deputation to other Organizations & to

local transfers.
NORMAL PERIOD OF POSTING (NPP) AT A CENTRE IS 5 YRS.
ON COMPLETION OF NPP, TRANSFER FROM THE EXISTING PLACE

FOR SCALE I & II, WITHIN TAC ZONES/ADJOINING STATES.
FOR OTHERS, ANYWHERE IN INDIA .
TRANSFER EVEN BEFORE COMPLETION OF NPP BY THE

MANAGEMENT ON OFFICE EXIGENCIES.
POWER OF CMD TO PHASE OUT SUCH SHIFTINGS FROM A CENTRE

ON LENGTH OF POSTING BASIS WHERE NO. IS HIGH.
REVOLVING PLAN
ONCE TRANSFERRED TO A PLACE, OTHER THAN ON REQUEST

MAY BE ELIGIBLE FOR TRANSFER TO ONE OF THE 3 PLACES
OF CHOICE AFTER 4 YRS., SUBJECT TO AVAILABILITY OF
VACANCY & REPLACEMENT
SENSITIVE ASSIGNMENT
ROTATION FROM SUCH ASSIGNMENT AFTER 3 YRS.
SHIFTING TO ADMN. SIDE ON COMPLETION OF CONTINUOUS

10 YRS. AS DO/BO INCHARGES. ONCE SHIFTED, AGAIN ELIGIBLE
FOR POSTING AS INCHARGES AFTER 3 YRS. ON ADMN. SIDE
REQUEST TRANSFER
NO REQUEST ORDINARILY CONSIDERED BEFORE COMPLETING

3 YRS. IN ONE CENTRE. HOWEVER, BOARD/PERSONNEL. &
ADMN.COMMITTEE OF THE BOARD MAY CONSIDER
EXTREME HARDSHIP CASES BEFORE 3 YRS.
MAX. NO. OF REQUEST TRANSFERS = 3 ( TO BE COUNTED FROM

01.03.1990 )
467
REQUEST CONSIDERED AFTER 5 YRS. IN ONE PLACE TREATED AS
COMPANY TRANSFER.
CASES OF SPOUSE JOINING, PHYSICALLY HANDICAPPED &

DIFFICULT AREAS MAY BE GIVEN PREFERENTIAL/SYMPATHETIC
CONSIDERATION
OFFICERS DUE FOR RETIREMENT WITHIN 2 YRS.
CONSIDERATION OF REQUESTS FOR TRANSFER TO THEIR

DECLARED HOMETOWNS/PLACE OF CHOICE
TRANSFER BENEFITS
FOR OUTSATION TRANSFER, AS PER GUIDELINES TIME TO TIME.
FOR LOCAL TRANSFERS, NO BENEFIT
FOR REQUEST TRANSFERS under TMP BEFORE 3 YRS., NO

BENEFIT
JOINING TIME FOR TRANSFER

1) NORMALLY 30 DAYS OR THE DATE SPECIFIED
2) FURTHER MAX. EXTENSION FOR 30 DAYS MAY BE ALLOWED
O N M E R I T O F T H E G R O U N D S TAT E D I N T H E
REPRESENTATION.
POWER TO MODIFY/RELAX THE PROVISIONS
WITH BOARD OR PERS. & ADMN. COMMITTEE OF THE BOARD
COMPETENT AUTHORITIES FOR TRANSFER
1) FOR CHIEF MANAGERS & ABOVE CMD
2) UPTO SCALE IV LEVEL WITH
DEV. FUNCTION
GM(P) + GM(MKTG)
+ OVERSEEING EXEC.
3) UPTO SCALE IV LEVEL ON

ADMN.SIDE WITHIN HO
GM(P)+CONCERNED
GM/DGM OF THE HO
DEPTT.
4) UPTO SCALE IV INTER

REGION, ON ADMN.SIDE
UPTO SCALE IV WITHIN RO,
GM(P) + CONCERNED
OVERSEEING EXEC.
GM(P) + O/S Executives concern
TRANSFER DUE TO CDA/VIG. CASES

NOT RESTRICTED BY ANY OF THE ABOVE PROVISIONS
REMOVAL OF DOUBTS & CLARIFICATIONS
BY CMD
468
TRANSFER AND JOB ROTATION POLICY

SUPERVISORY, CLERICAL AND SUBORDINATE STAFF
Employees retiring in 3 years / Physically handicapped / suffering from major
diseases (including family members) not to be transferred but liable for job
rotation
All employees on promotion to be transferred (within promotion zone) from

one office / station to another irrespective of period of stay.
JOB ROTATION
After three years of continuous working in a particular Department, an

employee is liable to undergo job rotation and he/she can be posted in another
department within the same office
After five years of continuous working in one office, an employee is liable to

undergo job rotation and in this situation he can be posted in another office
within the same station.
Number of job rotation cases shall not exceed 25% of the strength of
employees in that office
Minimum one transfer from each office on account of job rotation is to be

made
TRANSFER AND MOBILITY
CMD is empowered to determine requirement in offices at various stations
Requirement to be fulfilled through judicious deployment of work-force by

making necessary transfers
After 10 years of continuous stay in one station, an employee is liable for

transfer to another station.
Discretion to limit transfers to 25% of total class-wise strength
Distance shall be ordinarily restricted to a radius of 150 kms. from present

place of posting. However, such distance may be increased up to 250 Kms.
also, with the approval of CMD
May be transferred to earlier or choice station after stay of at least three years
Entitled to all transfer benefits as per rules, on such transfer

PROCEDURE
Department-wise, Office-wise & Center-wise lists in descending order of

period of posting for each Department / Office / Station.
Transfers from top of such lists
Allowances linked to functions to be withdrawn on rotation
No special provision for Office Bearers of Unions / Associations

469
BULLET QUESTIONS
1.
MWs on the questions put by the PO. Management side will thereafter,
will be over.
The misconduct of an Employee was investigated by Company's

Vigilance Dept. and misconduct is established. What are the subsequent
procedures to be followed/ steps to be taken-
Defense case will commence when the DWs will be examined by the
DA and cross -examined by the PO. DWs can also be re-examined by the
DA/cross examined (on re-examination) by the PO.
A charge-sheet will be framed leveling the charges and the same will be
issued by the Competent Authority to the Delinquent Employee along
with memorandum, Article of charges, Imputation of Charges, List of
Management Witnesses and List of Documents. In the same charge sheet, the charged Employee will be advised to send his representation
within 30 days of receipt of the charge-memo.
Finally, Inquiry proceedings will be concluded and the I O will advise P

O to submit his Written brief within 30 days time.
On receipt of P O's Written Brief, a copy of the same will be sent to the
CE with an advise to submit the Defense Brief within 30 days time.
IO, thereafter, will submit his report to the CA on the strength of the
depositions of the witnesses/documents. Stating therein whether the
Charges have been proved or not.
Not being satisfied with the representation of the Charged Employee, the
CA will, thereafter decide to initiate Inquiry proceedings and
accordingly will appoint Inquiring Authority and the Presenting Officer.
After fixing the date of the Preliminary Hearing, the Inquiring Authority
will issue summon to the Charged Employee and the Presenting Officer.
In the Preliminary hearing, the CE will be allowed to go for inspection of

the listed documents. If the CE wants copies of all listed documents, the
same will have to be provided to the Charged Employee by the
Presenting Officer.
The IO will ask the PO as well as the Charged Employee to

introduce/bring any additional document/defense documents/witnesses
respectively, if yes, the name of the Document to be spelt out specifying
therein how the documents are related with the Specific Charges as well
as the other names and details.
If IO satisfies about relevancy of additional document/defense

documents, he will allow the same. The IO will put question to CE
whether he admits the charges or deny.
The IO will advise CE to give name and other details of the Defense
Assistant who will defend the defense case.
If the CE denies the charges, the regular hearings would be commenced

and the IO will issue summon to PO, CE with an advise to appear in the
RH's with Management Witness/es as well as Defense Witness/Defense
Assistant.
In the regular hearing, listed documents exhibited by the PO will be

marked. Similarly, the defense documents submitted by the defense side
will also be marked. Management Witnesses will be examined by the PO
and cross- examined by the DA of the CE. IO may allow the PO to reexamine the MWs. After re-examination, the DA will cross examine the
470
The CA will finally will issue order to the CE imposing Penalty what he
will think appropriate.
2.
Suggest Measures To Minimise Workplace Negativity
Every organization has some negative Neds and Nellies who do not like
their jobs, bosses, company and even think customers as worthless.
The best way to combat negativity is to keep it from occurring in the first
place by providing opportunities to people to make decisions about and
/or influence their own job
Make opportunities available for people to express their opinion about

work place policies and procedures.
Treat people as adults with fairness and consistency by developing and

publishing workplace policies and procedures that organize work
effectively
Do not create rules for all employees when just a few people are violating
norms.
Help people feel like members of the in crowd with quick effective and
constant communication and providing the context for decisions.
Afford people the opportunity to grow and develop through training.

Lateral moves, promotion etc.
Provide appropriate leadership and strategic framework including

mission, vision, values and goals.
Provide appropriate rewards and recognition to make people feel that

their contribution is valued.
Hardcore. Persistent, baseless and unwarranted negativity may be dealt

with by disciplinary actions
471
3.
Employees performance depends upon how well they are motivated.

Explain.
Training and retraining be promoted and recognized as an intervention
for overall development
Let us always think they are good people
Honesty is never a bad policy
Their opinions and views are welcomed and properly accommodated
They are publicly praised for every good work done
5.
They are conveyed that they are the cause and source of ,in achieving
the Organizational goals and objectives
First focus on reasons which lead to opposition to any change
They are made to feel that they form part of the important decisions in
the Organization
There is no gainsaying the fact that every individual has his own way of
looking at an issue
They are encouraged for their free and candid suggestions
The moment any body comes out with any new idea or procedure it is,
more often than not, met with a degree of confrontation
They are conveyed every policy and strategic decisions taken at

Corporate level
Out right criticism of an existing system or mind set of people will

definitely hurt the sentiments of the officials concerned and will only
aggravate the situation
The Organization has a feeling for care and concern for them
Employees are encouraged in their career development and

advancement
At the initial stage there should be appreciation of the positives of the

existing system and the efforts put in by the officials
Superiors periodically should coach and counsel for their overall

development
4.
We can then tell them that considering their competence and efficiency,
new systems can be taken up as a challenge and thereby motivate them
HR interventions are needed for a dynamic and vibrant organization
Training should be imparted to some officials, wherever felt necessary,

so that confidence level goes up
An organization is judged and rated by the index of the quality of

people it has
We, as In-charge, have also to work diligently with the officials so that the
spirit of team-work and camaraderie becomes discernible
An Organization becomes vibrant and dynamic through prudent and

well defined HR policies
We, as In-charge, should not only have a participative approach but

should also be considerate vis--vis colleagues and sub ordinates
A comprehensive HR policy fulfilling their basic needs to self

actualization
Finally when objectives start getting met due credit ought to be given to
the entire team so that they continue their concerted efforts in the
direction of change with renewed vigor.
Motivate the people to a stage what they can do for the organization
An objective performance appraisal system with open assessment be

brought in
A proud feeling of association with the organization be promoted

amongst the employees
Career development
appreciated
opportunities are made available and
Continuous succession planning be periodically reviewed
Right person at a right place Philosophy should be the buzz word and
belief
A transparent job description and profile is need of the hour

472
You have been transferred and posted as the in charge of an office where
office staff are not inclined to accept any changes in the existing system
and are difficult to work with. How will you tackle the situation?
6.
Abuses of Job Rotation Policy
Before 2000 the GIPSA companies allowed individuals to retire in one

line and one location
The individuals developed vested interests overriding organizational

interest
In order to prevent this Job rotation policy was introduced
However, without succession planning the individuals continue to be

indispensable
473

Moreover, the present policy defines only stationed tenure and not
Region or Zone tenure
Mgt.
They are responsible for tactical decisions
Thus the favored were accommodated within 30 kilometers and others

shunted 300 Kms.
Lower level management ensures that the decisions and plans taken by
other two levels are carried out
In the absence of rotation in line Management exposure and experience is

limited stunting individual and organizational growth.
Job rotation pre supposes identification of talent, Job profiling and

succession planning
It should also be based on station, regional and zonal tenure
This would help right distribution of Manpower and its optimal

utilization
Lower level manager's decisions are generally short term ones.

9.
Key functions of Human Resource Management
Recruitment Strategy Planning
Hiring processes
Performance Evaluation and Management
Promotions
7.
MANY SOURCES OF AUTHORITY FOR MASTERING OTHER

PEOPLE AT YOUR WORKPLACE.
Redundancy
HIERARCHICAL: Power derived from position in management or

organization structure.
Record Keeping of all personal data
INFORMATION: Information or Knowledge other does not posses.
Compensations, pensions etc in liaison with payroll
EXPERTISE: possessing a particular skill set or range of experience.
Confidential advise to internal customers in relation to problem at work
REPUTATION: The power you acquire from your track record and past
performance.
Employees organizations relationship
CHARISMA: The so called magic ingredients personality, voice,

appearance, energy, warmth, presence etc.
Industrial & Employees Relations
10. Influencing factors on Employee engagement in productivity
Employee perceptions of job importance.
POSITIONAL: Unique nature of role. Key position in a critical

communication network.
Employee clarity of job expectations
COERCIVE: Power to punish and impose sanctions on others.
Career advancement/improvement opportunities
Regular feedback and dialogue with superiors.
8. Different Levels of Management & Functions
Top Level, Middle Level & Lower Management
Top-level managers require an extensive knowledge of management

roles & skills
Quality of working relationships with peers
Quality of working relationships with superiors
Quality of working relationships with subordinates.
They have to be aware of external factors such as markets
Perceptions of the ethos and values of the organization.
They are responsible for strategic decisions
Effective Internal Employee Communications
Their decisions are generally of long-term nature
Mid-level mangers have a specialized understanding of certain

managerial tasks
They are responsible for and carrying out the decisions made by top-level
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11. Areas of Workforce Management
Payroll & Benefits
H R Administration
475

Time & Attendance
Career & Succession Planning
Situational Harasser
14. Bureaucratic Organisation is governed by the following principles
Talent Management
Official business is conducted on a continuous basis
Applicant Tracking
Official business is conducted with strict accordance to the rules
The duty of each official to do certain types of work is delimited in terms

of impersonal criteria
Learning Management
Training Management
The official is given the authority necessary to carry out his assigned
functions
Performance Management
Forecasting & Scheduling
The means of coercion at his disposal are strictly limited and conditions
of their use strictly defined
12 Job rotation in Senior Management & Lower Management Levels
An individual is moved through a schedule of assignments
Designed to give him or her breadth of exposure to the entire operation.
Senior management levels, job rotation - frequently referred to as

management rotation
Tightly linked with Succession Planning
Developing a pool of people capable of stepping into an existing job
Goal is to provide learning experiences
Facilitate changes in thinking
Perspective equivalent to the "horizon" of the level of the succession

planning.
Lower management levels job rotation has normally promotability
Otherwise for skill enhancement

13. Sexual Harassment Types of Harassment
Power-player
Every official's responsibilities and authority are part of a vertical

hierarchy of authority, with respective rights of supervision and appeal
Officials do not own the resources necessary for the performance of their
assigned functions but are accountable for their use of these resources
Official and private business and income are strictly separated
Offices cannot be appropriated by their incumbents (inherited, sold, etc.)
Official business is conducted on the basis of written documents

15. Consciences Decision Making Process - Structure
a. Discussion of the item
b. Formation of a proposal
c. Call for consensus
d. Identification of concerns
e. Addressing of concerns
f. Modification of the proposal
g. Arrive at consensus
16. All the PSU insurers have specific H R policies and these are brought to
the notice of the employees in the form of circulars/manuals. Some of the
areas covered in these manuals are
Mother/Father Figure
One-of-the-Gang
Formation of the organization
Serial Harasser
Acts governing the Organization
Opportunist
Organization Structure and functions
Pest
Recruitment procedures for various classes of employees
Bully
Pay & allowances of employees
Great Gallant
Working Hours and leave rules
Confidante
476
477

Employees Benefits
Explain
An organization is judged and rated by the index of the quality of people

it has
An Organization becomes vibrant and dynamic through prudent and

well defined HR policies
A comprehensive HR policy fulfilling their basic needs to self

actualization
Motivate the people to a stage what they can do for the organization
An objective performance appraisal system with open assessment be

brought in
A proud feeling of association with the organization be promoted

amongst the employees
Career development opportunities are made available and appreciated
Continuous succession planning be periodically reviewed
Right person at a right place Philosophy should be the buzz word and
belief
A transparent job description and profile is need of the hour
Training and retraining be promoted and recognized as an intervention

for overall development
Honesty is never a bad policy
Employees welfare provisions
Employees career planning policies
Performance Appraisal System

17. Performance Appraisal Methods & Uses
Performance Appraisal is inevitable , universal & structured system is

used to judge the work performance
Modern Appraisal System helps to determine reward outcomes and also

poor performers
Ideal system may not be possible, near perfection possible
Setting up key performance areas and proposed achievement at the

beginning of the period
Review of the areas of Key performance at the end of the period
Reasons for achievement /short fall analyzed
Motivation & Satisfaction ,if the system is transparent
Training and Development system improves
Recognition of skills and redeployment of employees

18. Cordial work environment, if appraiser and appraisee have common
goals and target achievements. Employee's performance depends upon
how well they are motivated-Explain?
Let us always think they are good people
Superiors periodically should coach and counsel for their overall

development
BULLET UNANSWERED QUESTIONS
1.
They are conveyed that they are the cause and source of ,in achieving the
Organizational goals and objectives
If the Unions of a company join hands and give notice of Work to Rule on
various issues pending for management's attention, discuss the best possible
solution for this crisis and the immediate steps to be taken to diffuse the crisis.
2.
What steps would you suggest to improve the working atmosphere at office?
They are made to feel that they form part of the important decisions in the
Organization
3.
Why is it necessary for public sector general insurance companies to be

subjected to the following audits
CAG Audit
Statutory Audit
Internal Audit
Employees are encouraged in their career development and advancement
4.
Discuss the role of the vigilance in Public sector general insurance companies
19. HR interventions are needed for a dynamic and vibrant organization.
5.
If the unions of a company join hands and give notice of work of rule on
Their opinions and views are welcomed and properly accommodated
They are publicly praised for every good work done
They are encouraged for their free and candid suggestions
They are conveyed every policy and strategic decisions taken at

Corporate level
The Organization has a feeling for care and concern for them
478
479
6.
various issues pending for management's attention , discuss the best possible
solution for this crisis and the immediate steps to be taken to diffuse the crisis.
What steps would you suggest to improve the working atmosphere at office
7.
What steps should the company take to adopt a contemporary HRM

framework to mange its workforce more efficiently
8.
What are the areas for skill mapping or creating a resourceful skill inventory
9.
Elucidate the key parameters for performance measuring
HRD / VIGILANCE MODEL QUESTIONS SET A

1.
As per Leave Rules, two types of leave from amongst the following cannot
be availed in conjunction
a. Earned leave with Casual leave
b. Earned leave with Sick leave
c. Casual leave with Sick leave
d. Quarantine leave with Sick leave
2.
As per LTS rules for officers in Scale IV, where the entitlement is by air and
the employee has traveled partly by air and partly by rail in AC Ist class total
travel not exceeding 1900 kms, what will be the basis of reimbursement
a. Full reimbursement by air for 1900 Kms
b. Full reimbursement by rail AC II tier fare for 1900 Kms
c. Full reimbursement by rail AC Ist Class fare for 1900 Kms
d. Prorata reimbursement by air on actuals and balance on AC II tier basis
for rail journey.
3.
If the services of a person who has opted for pension, is terminated by way of
imposing a major penalty, which of the following benefits are not payable?
a. Provident Fund
b. Voluntary Provident Fund
c. Pension
4.
Qualification pay is granted for the following qualifications in case of

supervisory and clerical staff
a. A.I.I.I.
b. F.I.I.I.
c. M.B.A
d. All of the above
5.
Hill Station Allowance is payable for the cities having mean sea level above
a. 1000 mts
b. 1200 mts
c. 1500 mts
d. 2000 mts
6.
In Encashment of earned leave, which of the following allowance is not paid

a. Basic Pay
b. Dearness Allowance
c. HRA
d. Conveyance Allowance
10. Detail the necessary steps for collaboration, team work and relationship
building in the working environment
11. Elucidate how to enhance verbal and non-verbal communication at work
12. Define steps for a middle level line manager for internal crisis management
13. Types of skill enhancement training that could be given to junior and senior
managers for role development in our industry
14. Give salient points on workforce planning for a general insurance company
15. How do we map the workforce for effective succession and career planning
16. Mention strategic importance of rewards and incentives to achieve corporate
goals
17. Ideal leadership qualities of a senior manager in the present work
environment
18. Give 10 types of authorized absence of duty ( special causes)
19. Name at least 10 types of allowances payable to employees ( all classes)
20. Give exclusions to the Medical Benefit Scheme for employees
21. List the payable benefits under the different tables of the Group Mediclaim
policy
480
481
7.
Which of the following does not constitute misconduct under CDA rules?
a. Sleeping in office during office hours
b. Taking bribes
c. Accepting gifts valued Rs. 250/- at a time.
d. Accepting a watch valued at Rs. 1000/-
8.
Which of the following does not constitute a major penalty under CDA rules?
a. Termination from service
b. Withholding of one increment permanently
c. Withholding of one increment for 2 years
d. Compulsory Retirement
9.
Which one of the following is not a minor penalty under CDA rules?
a. Censure
b. Withholding one increment for 6 months
c. Reduction in time scale
d. Recovery of pecuniary loss caused to company from salary
10. Dismissal from services order can be issued by

a. Officer in charge
b. Competent Authority for imposing major penalty
c. Appellate Authority
d. The Appointing Authority
11. Leased Accommodation for a Scale III officer in Metro cities is allowed
upto
a. 2000
b. 3000
c. 4000
d. (Answer to be filled)
12. An employee under suspension is entitled to
a. Living allowance
b. Subsistence Allowance
c. Dearness Allowance
d. Family Allowance
13. Briefcase allowance is made for officers once after a period of
a. 2 years
b. 3 years
c. 4 years
d. 5 years
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14. Uniform is provided to

a. Sweeper and sub staff
b. Clerical employees
c. Part-time sweepers
d. Casual Labourers
15. Which of the following does not constitute misconduct under CDA rules?
a. Habitual late or irregular attendance
b. Absence from employee's appointed place of work without permission or
sufficient cause.
c. Commission of any act amounting to criminal offence involving moral
turpitude
d. Absence from duty for one day without permission.
16. General Insurance (conduct, discipline & appeal) rules were frame in which
year.
a. 1973
b. 1975
c. 1976
d. 1978
17. CDA Rules are not applicable to
a. Class I officers
b. Class III & IV Employees
c. Class I Officers on deputation from Govt. Sector
d. P.T.S.
18. Which of the following Act of Omission & Commission shall not be treated as
misconduct?
a. Taking/ Giving bribes
b. Sleeping on duty
c. Gambling within office
d. Occasional late attendance
19. An employee may be suspended under the following circumstances except
a. Contemplating Disciplinary Proceeding
b. Criminal offence under investigation/ ___
c. Detained in custody for more than 48 hours
d. Smoking in office premises
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20. The following are treated as Minor Penalties except

a. Suspension from duty
b. Censure
c. Withholding one or more increments for a specified period
d. Recovery from pay the pecuniary loss to the company
27. LTS for Class I Officers can be granted for a block of two years on
a. Even to odd years
b. Odd to even years
c. Both are correct
21. Leave rules permit leave on following grounds, except one

a. C.L.
b. E.L.
c. S.L.
d. Paternity leave
28. LTS for Class III & IV employees can be granted for a block of two years on
a. Even to odd years
c. Both are correct
22. Special leave is

a. Home Guard duties
b. Appearing in Ins. Institute Exams
c. Trade Union Activities
d. All three above
29. Encashment of E.L. for officers can be granted for 15 days once in a block of
two years
a. Even to add years
c. Both are correct
23. Casual Leave admissibility per Annum is

a. 15 days
b. 22 days
c. 12 days
d. 10 days
30. D.H.A. permissible under T.E. rules for a period less than six hours is
a. 30%
b. 40%
c. 60%
d. 20%
24. Accrual of one day Earned Leave is based on duties spent on

a. 10 days
b. 15 days
c. 11 days
d. 14 days
31. C.V.C. guidelines stipulate Bids for acquiring office premises on lease/
purchase as under:
a. Technical Bid
b. Financial Bid
c. Preliminary Scrutiny
d. Both (a) & (b)
25. Types of leave which can't be given in conjunction with

a. C.L. & Exam
b. E.L. & S.L.
c. E.L. & Quarantine
d. C.L. & S.L.
26. Leave Travel Subsidy can be availed for a block of
a. One year
b. Three years
c. Four year
d. Two years
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32. Carpet area prescribed for Divisional office is

a. 3000 sq. ft. + 10%
b. 2500 sq. ft. + 10%
c. 3500 sq. ft. + 10%
d. 2000 sq. ft. + 10%
33. Carpet area prescribed for Branch office is
a. 1000 sq. ft. + 10% Addl
b. 1500 sq. ft. + 10%
c. 850 sq. ft. + 10%
d. 1200 sq. ft. + 10%
485
34. Regional office premises committee constitution requires the following

minimum members to complete the quorum
a. Officer from Estate Dept., officer from A/cs Dept., officer from
Technical Dept.
b. Officer from Estate Dept., officer from IA & ID Dept., officer from
Technical Dept.
c. Officer from A/cs Dept., officer from Technical Dept., officer from
Personnel Dept.
d. All the above three options
SELF ASSESMENT QUESTIONS

1. Source and Designation of CVOS in PSU Insurance Companies are
a) From Ministry and equivalent to DGM
b) From LIC and equivalent to GM
c) From other PSU Insurance Companies and equivalent to DGM
d) From the same company
35. For a work/ purchase valued at more Rs. 2 lacs can be done by calling
a. 5 quotations
b. 3 quotations
c. Sealed tenders
d. Open tenders
2. Vigilance department works in close * with

a) Institute of Chartered Accountants of India
b) Central Vigilance Commission
c) Central Bureau of Investigation
d) Ministry of Finance and Economic Affairs
36. Officers on transfer are permitted to have residential accommodation except

a. Company owned accommodation
b. Company leased accommodation
c. Self leased accommodation
d. Employee's own property on self leasing
3. CDA Rules of General Insurance stands for

a) Central Department of Appraisal Rules
b) Character Discipline * Rules
c) Conduct Discipline Approval Rules
d) Confidential Departmental * Rules
37. Purchase of briefcase to officers is reimbursed on the expiry of

a. 2 years
b. 3 years
c. 4 years
d. 5 years
38. In the following sequence for acquiring company property, tick the odd
choice
a. Agreement for sale
b. Sale deed
c. Mutation
d. Registration of property
39. Domestic enquiry under vigilance comprises of all except one
a. Preliminary learning
b. Regular learning
c. Defense proceedings
d. Enquiry by C
486
4. Officer depending on behalf of the company in department enquiry is

a) Presiding officer
b) Enquiry officer
c) Defending officer
d) Defaulting officer
5. In departmental enquiry and after major penalty is imposed, the defaulting
officer may go for memorial to
a) TG overseeing GM
b) CVO
c) CMD of the company
d) President of India
6.
A suspended employee is eligible for * allow maximum up to what percentage

of his salary
a) 25%
b) 50%
487
c)
d)
75%
100%
b)
c)
d)
7. Casual leaves cannot be tagged up with

a) Holidays
b) Privileged Leaves
c) Sick Leaves
d) Examination Leaves
8. Maximum how may days CLs can be taken at a time.
a) 4
b) 5
c) 6
d) 7
Misappropriation
Wrongful loss to
All of the above
13. Perquisite Tax is not applicable in

a) Reimbursement of fuel for the use of vehicle on company's loan
b) on a leased accommodation
c) Subsidized housing loans
d) Leave travel subsidy
9. Who is not free from CDA rules in our company

a) CMD
b) GM
c) Non Executive Director
d)
14. If one employee received a gift item, above what price of the gift he is required
to intimate company
a) Rs. 500/b) Rs. 1500/c) Rs. 2500/d) Rs. 5000/15. On promotion to which cadre one officer will be on probation
a) AM
b) Dy. Manager
c) Manager
d) CMD
10. For which benefit it is * to take leave

a) Leave travel subsidy
b) Leave encashment
c) Transfer benefit
d) Hospitalization Expenses Reimbursement
16. In which cadre delegation of formal authority is not required

a) Manager
b) Dy. Manager
c) AM
d) Vigilance Officer
11. If one employee is having only 25 days of PL in his account. Maximum how
many days leave encashment he can avail
a) 20
b) 15
c) 10
d) Nil
17. For suspending an employee which condition is to be fulfilled

a) He is charge sheeted by company
b) He is arrested by police
c) He is under * for more than 48 hours
d) He is convicted by a Court
12. Under Preventing Corruption Act, a servant can be prosecuted for

a) Wrongful gain
488
18. Which cadre is outside the purview of Transfer of Morbidity Policy

a) AM
b) Dy. Manager
489
c)
d)
Manager
CM
19. For entitlement to avail retirement pension minimum how many years service
has to be completed
a) 10 years
b) 15 years
c) 20 years
d) 25 years
20. For entitlement of benefit of Gratuity minimum how many years of service
has to be completed
a) 10 years
b) 15 years
c) 20 years
d) 30 years
21. Maximum how many days PL can be encashed at the time of retirement
a) 6 months
b) 8 months
c) 10 months
d) No limit
22. Notional extension of service for compensation of pension for VRS optees
under Pension Schemes
a) 5 years
b) Maximum 5 years
c) Maximum 7 years
d) 10 years
23. Which of there is not a minor penalty
a) Sensor
b) With holding one or more increment for a specified period
c) With holding one or more increment permanently
d) Recovering from pay or the amount as may be due to him of the while or
part of precautionary loss caused.
490
24. Which one of the following cities, does not fall under the category A for travel
rules
a) Mumbai
b) New Delhi
c) Bangalore
d) Patna
25. Which * is not a dependent on the employee for the consideration of Leave
Travel Subsidy
a) Son below 18 years
b) Father above 60 years earns below Rs. 1000/c) Daughter unmarried
d) Widowed sister
HR PERSONNEL AND VIGILANCE TRADE QUESTIONS SET B
1.
Which is correct sequence as per CDA Rules?

a. Investigation-Domestic Enquiry-Charge Sheet-Office order
b. Investigation- Charge Sheet-Domestic Enquiry-order
c. Domestic Enquiry- Investigation- order-Charge Sheet
d. Domestic Enquiry-Charge Sheet- Investigation-order
2.
Penalties for leakage of confidential electronic data of clients without the

knowledge of the insured (by employees or otherwise) can be made a subject
matter of insurance under
a. Electronic Equipments policy
b. Errors and omissions policy
c. Cyber liability insurance policy
d. Directors and officers liability policy
3.
What action is appropriate in respect of an employee going abroad with

sanctioned EL for 90 days, thereafter staying there itself, and not returned?
a. To wait till his arrival, take leave application and ratify the leave
b. To recall him by issuing letters, telegram to his last known address.
c. To issue him show cause notice to his last known address and wait for
reply
d. Issue show cause notice, initiate enquiry proceeding as per CDA rules
and terminate him from the services.
491
4.
5.
6.
7.
8.
What procedure is to be followed for acquiring office premises on rent as per

CVC Guidelines?
a. Advertisement in the news paper
b. Placing the advertisement on the website of the company
c. Putting the advertisement on the notice board of the company
d. All the above
An employee placed under suspension will not get subsistence allowance as
mentioned below, under any circumstances
a. 25%
b. 50%
c. 75%
What is not taken into consideration while calculating the subsistence
allowance?
a. CCA
b. HRA
c. Hill Station Allowance
Statement I Major penalty may be imposed on an employee against whom a
major penalty charge sheet has been issued.
Statement II Minor penalty may be imposed on an employee against whom a
minor penalty charge sheet has been issued.
Statement III Minor penalty may be imposed on an employee against whom
a major penalty charge sheet has been issued
Statement IV Major penalty may be imposed on an employee against whom
a minor penalty charge sheet has been issued
Encircle the most appropriate option
a. Only statements I,II,III are correct
b. Only statements I & II are correct
c. Only statements II, III, IV are correct
d. All statements are correct
An assistant can be placed under suspension by
a. Head of the department
b. Disciplinary Authority
492
9.
c.
Appointing Authority
d.
All the above
The authority competent to impose the penalty of reduction to a lower

service
a.
Will always be competent to impose the penalty of removal from

service
b.
Will always be competent to impose the penalty of Dismissal
c.
Both a & b
d.
Neither A nor B
10. Statement I In case a domestic enquiry is instituted against an employee, the

competent authority may himself conduct the inquiry proceedings
Statement II In case a domestic enquiry is instituted against an employee,
the Inquiry officer may conduct the enquiry proceedings
a.
Only statement I is correct
b.
Only statement II is correct
c.
Both the statements are correct
d.
Both the statements are incorrect
11. Which is the most appropriate in respect of cases pertaining to public sector
general insurance companies?
a.
Only an officer of the insurance company can conduct domestic enquiry

proceedings
b.
A public servant may conduct domestic enquiry proceedings
c.
Only a Central Government Officer can conduct domestic enquiry

proceedings
d.
None of the above
12. As per general insurance employees' pension scheme, no departmental

proceedings, if not initiated while the employee was in service, shall be
instituted in respect of a cause of action which arose or in respect of an event
which took place more than ___________ before such institution
a.
One year
b.
Two years
c.
Three years
d.
Four years
493
13. In case CBI seeks sanction for prosecution of an employee of a public sector
general insurance company and the competent authority does not intend to
accord sanction, which would be the most appropriate option
a. CBI would initiate action against the Competent Authority
b. The CVO of the company will resolve the dispute between the CBI and
the Competent Authority by taking final decision regarding the course of
action
c. The matter will be reported to CVC and the competent authority will take
further action after considering CVC's advice
14. Chief Technical Examiner's Organization functions under the administrative
control of
a. CPWD
b. GIPSA
c. IRDA
d. CVC
15. Human Resource Management does not include
a. Job analysis
b. Planning labor needs and recruiting suitable candidates
c. orienting and training new employees
d. managing wages and salaries
3.
4.
mentoring programs
career workshops
a. only 1 & 2
b. Only 3&4
c. All are wrong
d. All are correct
18. Pick out the right statement

1. HR Manager are generally staff managers
2. The managers for production and sales are generally line managers
3. HR managers have no authority and responsibility for advising the
production managers in areas such as recruiting, hiring and
compensation
4. Managers may move from line to staff positions and back over the course
of their careers
a. All are correct
b. Only 3 are incorrect
c. All are incorrect
d. Only 1 & 4 are correct
19. Which one of the following is inappropriate for any big, progressive, growing
HR proactive organization?
a. People and product oriented systems
b. Organization creating value for shareholders
c. Organization creating wealth for Board of Directors
d. Designations/Job title based on Hierarchy rather than function of
position
16. HR Management practices are followed by managers because they don't want
1. To hire the wrong person for the job
2. To experience high turnover on costing
3. To find employees not doing their best
4. To allow lack of training to undermine the Organization's effectiveness
a. Only 1 & 2
b. Only 3&4
c. All are wrong
d. All are correct
20. Which of the following is not a characteristic feature of an effective manager

in a MNC
a. Courage, Solid nerves and capacity to handle stress
b. Ability to learn, open mindedness
c. National experience and understanding of markets
d. The way the organization treats its employees
17. Many successful organizations do use HR practices to help employees

become more productive. These practices include:
1. leadership training
2. technical training
21. Which of the following is appropriate response for secret of success of a

business organization?
a. The profit made by the organization
b. Efficiency and Effectiveness with which business is being run
494
495
c.
d.
SAMPLE BULLET QUESTIONS
The way recruitment is carried out in an organization

The way the organization treats its employees
22. Executive turn over is increasing at a higher rate than the sales turn over.
Which one of the following is not a relevant reasons
a. Better prospects
b. Bad Boss
c. Organization Climate
d. Health grounds
23. Choose the type of leave not available to PSU General Insurance employees
a. Restricted Holiday
b. Half day casual leave
c. Trekking leave
d. Study leave
24. Which one of the following is correct in respect of special sick leave due to
major sickness
a. 90 days in the entire period of service
b. 120 days in the entire period of service
c. 240 days in the entire period of service
A
D
C
D
A
D
C
C
9.
10.
11.
12.
13.
14.
15.
16.
C
D
D
B
B
A
D
B
17.
18.
19.
20.
21.
22.
23.
24.
C
D
D
A
D
D
C
C
25.
26.
27.
28.
29.
30.
31.
32.
D
D
B
A
A
A
D
D
33.
34.
35.
36.
37.
38.
39.
A
B
C
D
B
C
D
KEY - HR PERSONNEL AND VIGILANCE TRADE QUESTIONS SET B

1
2
3
4
5
B
C
D
D
D
6
7
8
9
10
D
A
D
D
C
11
12
13
14
15
B
D
C
D
C
496
16
17
18
19
20
D
D
B
C
D
Make Regulatory and Institutional frameworks transparent for all to

acknowledge how these support or hinder collaboration.
Identify and propogate the skills necessary for collaborative environment,
eg.negotiation/ interpersonal skills.
Be patient, since it takes time to develop trust and relationships.
Q 2. Identify 5 advantages and 5 Pitfalls in Auto-Tieups.
ADVANTAGES ;
One point purchase and single window service for the customer
Huge premiums available for Insurers from a single source
Opportunity for cross-selling of other products
Cashless service at dealerpoints throughout the Country
KEY HR & VIGILANCE MODEL QUESTIONS SET A

1.
2.
3.
4.
5.
6.
7.
8.
Q1. Suggest ways to change Conflict into Collaboration.

Try hard to understand the other persons points of view
Listen reflectively to what they are saying
Look for common ground or vision
Acknowledge their expertise
Focus on interests rather than positions
Separate the people from the problem
Look for solutions that take into account needs of all parties
Appreciate that there will be differences
21 D
22 D
23 B
24 D
Standardisation of various processes of delivery of Insurance services, and

maintainance of Quality.
PITFALLS :
Sometimes the greater payouts to dealers at the cost of policyholders is seen
as a bane.
Tieups appear to be more beneficial to dealer than customer
Repair costs are fixed and often on higher sideless room for negotiation
Conflicts in interpretation of policy conditions may create dispute affecting
customer
Cover is often seen as a maintenance cover by customer.
Q 3. What is Multitasking and how is it relevant to our Industry ?
Multitasking refers to doing more than one thing at a time. It is a word
coined to denote various functions that a system/computer can perform.
497
Multitasking has become necessary in view of costly manpower and system

driven packages
In insurance, too, recruitment is limited and existing personnel are called
upon to do different tasks
Multitasking helps to reduce dependence on specific personnel, specialy in
our Public Sectors where leaves are abundant.
An officer who can do underwriting, claims as well as customer relations is
an asset
Multitasking skills allow an organization to downsize manpower
requirements.
In our industry, cadres like Dev Officer and RCs are run-off cadres and
requires existing personnel to fill the gaps of their roles.
It is necessary to impart regular training as well as motivation for persons to
be adept at various functions.
Insurers are aware of the compulsions and are providing thrust to training
requirements of it's employees
Overall objective is to bring seamless delivery services available to
customers
Informal communication often helps to spread information quickly and

may help in reducing stress and anxiety. But such 'grapevine' should be
effectively managed to ensure that the wrong message is not spread.
Q 4.
Q 6.
Business Process Reengineering includes establishment of Central

Claim Processing Hubs. State some positive and negative points for
such an initiative.
Better and more optimum utilization of Human resources
Focussed responsibilities and specialization
Single window service for customers
Uniformity in approach, as opposed to different systems in different
operating offices
More effective utilization of surveyors
Elimination of multiple hierarchy in claim settlement
Greater perceived objectivity in claim settlement
Hubs are hampered if proper Infrastructure is not provided
Systems need to be upgraded so that time lag in transactions between
Operating Offices and Hub is minimized.
Though there is uniformity, sometimes the extra emphasis required for very
important clients is not forthcoming, as would be in operating offices.
Q 5. Role and types of Communication within an Organisation.
498
Communication is the sharing of information for a variety of purposes

including informing, persuading, motivating or influencing.
Communication can be 'Formal' and 'Informal'
Formal communication is organized and managed information that is
shared with relevant individuals to secure coordinated action.
Formal Communication channels are dependent on individuals role in the
organization.
Typically formal communication flows downward in the form of
'instuctions or directives' and Upward in the form of feedback and
reports, usually in set formats.
Formal Communication is well established and planned, and needs to clear
for them to be actionable by the implementers.
Informal Communication, on the other hand, caters to satisfy social and
emotional needs within the Work environment
These are not necessarily based on one's 'position ' in the Organisation.
Discuss the types of Insurance frauds and suggest some measures to

tackle them.
Any deliberate deception perpetrated against or by Insurances Cos to make
unwarranted financial gain, can be termed as an Insurance fraud.
Deliberate attempt to 'stage' or invent an accident ,injury, theft, arson etc, to
claim under policies is termed a Hard Fraud, whereas Soft Frauds , often
called Opportunity Fraud, is where genuine claims are exaggerated, or even
when false declarations are given whilst taking the cover.
We can take measures like :
Improving underwriting processes by online record keeping of proposals
Improving claim settlement procedures to make it system based
Strict laws to tackle Insurance Frauds
Recording all crimes with NCRB
Sharing of information amongst all insurers about incidence and claim
ratios
Maintaining detailed customer profiles viz KYCs, their businesses,
products etc.
Implementing policies of disclosure and transparency
Encouraging proper Audit and internal checks and controls
499
Q 7.
Assume that your organization is considering Lateral Entry of

personnel. How will this impact the Co, and what precautions should
Management take for smooth implementation ?
All organizations go through the phases of life cycle such as infancy,
growth, maturity and decay.
In order to keep he organization vibrant the Management needs to
constantly innovate, reinvent and reposition itself to remain relevant to
changing environment
Similarly, the organization needs to develop new ideas with talent within
the industry and also from collateral industries
Lateral entry will enable infusion of new blood into the organization, which
could lead to 'Out of the Box' thoughts and ideas.
New entrants can supplement the in-house talent of professionals within,
by bringing in their experience from respective fields.
It could also result in planning and implementing new strategies without
carrying the biased insurance perspective
Existing employees will be disgruntled and thus have to be nurtured, and
the need for lateral entry has to be communicated properly, since it is a very
delicate issue.
Promotions within the existing ranks should be more rapid , so that the
sense of alienation is not felt.
Lateral entry should be strictly need-based and restricted to very specific
professionals with wide experience, and whose skills can be employed in
specialized areas of Insurance.
Lateral entrants should be assigned to tasks that are not being currently
done by existing personnel, more as a support structure in the day to-day
working.
Q 8.
discretion, and exercise caution for decisions

Perception of customer rather than actual value of services delivered is
important, and the Act serves to reinforce this.
Insurers have to be wary, however that immaterial information which is
often sought for by the complainant is tactfully or through Act provisions,
declined to them
Some examples of using RTI to get desired services :
Duty to provide proposal as part of policy document
Duty to settle claims within a specified period of receipt of documents
Identifying common set of papers required for processing claims, in one go.
Buden of paying interest above market rate for delayed claim settlements
Q9. It is often said that, for the customer, the Insurance Ombudsman is a
better platform to handle grievances than a Consumer Court. Discuss.
All Public service organizations now have the Ombudsman as a system of
grievance redressal.
The Ombudsman negates the necessity of going to Court
There is no requirement of advocates or Court fees
It is not necessary to follow the strict law of evidence or legal procedure
Only one hearing can be sufficient to adjudicate the case, so the time lag is
not there.
Decision of Ombudsman is binding on Insurer,
It is not binding on the Claimant who has recourse to other Forums
The Ombudsman is usually one who is acquainted with the Industry
Practices and therefore has a better understanding of both points of view.
It is seen to be a more acceptable forum to the insurers, who are then likely
to take a more sympathetic view of the issue in dispute
Ombudsman often gives both the insurer and claimant reasonable time to
sort out the issue, leading to a more amicable settlement of the dispute.
Discuss the RTI Act as one of the means of improving Insurance

Services. Give some examples
The RTI Act is designed to promote transparency in governance and
administration and to keep discretion in check
Over the years Insurers have taken unilateral decisions of various sub
processes of insurance delivery, viz claim amount, proposals, requirements
for claim etc.
Through RTI, policyholders are empowered to seek information for
processes, which can lead to standardization and uniformity in delivery.
The fear also induces insurers to maintain records of deviations and
Are you aware of the settlement discussions held with the repairer? :
Yes/No
Was the surveyor courteous in his behaviour ? : Very/ Moderately so/ Not
500
501
Q 10. You are designing a Feedback-cum-Performance Appraisal Form for

Motor surveyors. List out 5 points you wish the insured to complete,
and 5 for the Dept.
Insureds questions :
Did the surveyor inform you before proceeding to the workshop ? :Yes/No
curteous
Did the surveyor bring to your notice all the formalities required for
assessment at one go? : Yes/No
Any other information you would like to place for improvement
Deptt observations :
Was survey carried out in time after information by the Co : Yes, within
___(hours). / No, after ___ (days)
Did the surveyor give his preliminary assessment within 24 hours?: Yes /
No
No of days taken for submission of report : ____ days
Quality of assessment : Excellent / Good /Fair / Poor
Whether all relevant documents were attached with report : Yes / No, but
reasons provided / No.
Q 11. Utilisation of In-House surveyors for losses below 20000/- has yielded
mixed responses and experience for the Organisation. Discuss some of
them.
In house surveys were mostly done for small motor losses and property
claims eg Householders Policy
By and large, the concept was based on the premise that greater care would
be taken for keeping Cos interest in mind
Also the large pool of Human resources was being put to alternative use
Experience shows that claims assessments were curtailed and amicably so.
Expense on Survey fees was a major saving for the Organisation
However, not all In-House surveyors are technically qualifiedselection
issues remain
Sometimes personal interest clashes were evident
Absence from office during working hours created a problem
Adjusting time for surveys often created delays, much to the insured's
dissatisfaction
Conveyance paid to In-House surveyors created heartburn amongst other
colleagues , in view of quantum of work given to In-house personnel
502

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LEARNING MATERIAL

NATIONAL CENTRE FOR INSURANCE LEARNING

2. BUSINESS INTERUPTION (LOP)

3. INDUSTRIAL ALL RISK

10. FINANCE TESTS

11. HUMAN RESOURCE

This book is for private circulation amongst NICians only.

STANDARD FIRE POLICY PROVISIONS

By Agreed Bank Clause;

Goods held in trust; etc.

Utmost Good Faith

Plant and machinery

Furniture, fixtures and fittings

Stocks of raw materials and finished goods

Those who are having insurable interest in the property

Financial institutions that have advanced loans against the property.

Fire- Excl. inherent vice, undergoing heating & drying, burning of

Explosion/ Implosion excl. to pressure vessels by own explosion/

Riot, Strike& Malicious Damage

Storm including hailstorm, cyclone, typhoon, tempest, hurricane,

Impact damage- rail/road vehicles or animals not belonging to the

Subsidence & landslide/ rockslide.

Bursting, overflowing of water tanks, apparatus & pipes.

Missile testing operations.

Leakage from automatic sprinklers.

Bush fire- excl. forest fire.

charges of the Fire Extinguishers used to fight fire, etc. covered.

Excess- Applicable to all risks except dwellings with individual owners

Damage by smoke, sparks, water etc. consequent on ignition of other

Fire must be accidental and fortuitous.

Pollution, contamination unless caused by insured perils.

Curios, documents etc. >10,000Rs., Goods held in trust or on commission

Change of temp. (Stocks in cold storage)

Pure electrical fires.

Architects etc. fees (beyond 3% of claim amount) & Removal of debris

Spoilage due to cessation of process.

Theft- during/ after loss.

Architects, surveyors and consulting engineers' fees in excess of 3% of

Removal of Debris in excess of 1% of claim amount.

DOS in cold storage due to power failure/ change of temperature due to

Impact Damage- Own vehicles.

Omission to insure additions, alterations & extensions.

Earthquake (fire & shock).

Spoilage (material damage) covers.

Leakage & Contamination cover.

Temporary removal of stocks.

Additional rent for alternative premises.

Escalation (upto 25%)

GENERAL CONDITIONS OF FIRE AND SPECIAL PERILS POLICY:

Misrepresentation, non-discloser of material facts by the insured makes

of insured property on expiry of 7 days

Buildings, plant & machinery, furniture, fixtures and fittings can be

5% additional premium to be paid at inception.

Within 30 days of expiry of policy all such additions, etc. to be declared

Up to 10% of stocks in process can be covered whilst lying at un specified

10% extra premium to be paid in advance.

Stocks in excess of 10% of sum insured to be covered specifically.

For building, plant & machinery, electric installations, F/F/F only.

Sum Insured to represent Reinstatement value of the property insured.

In the event of loss payment for Reinstatement Value of property of same

Depreciation not to be deducted.

Average clause is still applicable

Reinstatement possible at other site provided liability of the insurers is