Unit 2: Life, health & general insurance
Insurance Services Management notes · PTU syllabus (BCOP 522-18)
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Unit summary
Life, health and general insurance protect people and businesses in different ways. This unit covers the history and importance of life insurance, its products and claim types, private sector life insurers, health insurance determinants and intermediaries, the claim process and challenges, general and commercial insurance, and distribution channels.
After this unit you can
- Trace the history and importance of life insurance in India
- Explain life insurance products and types of claims
- Explain health insurance, its intermediaries and claim challenges
- Explain general and commercial insurance and distribution channels
PTU syllabus topics
- History and importance of life insurance
- products and claim types
- private sector companies
- health insurance determinants and intermediaries
- claim process and challenges
- general and commercial insurance
- distribution channels
Covers
Human life
Property, health, liability, motor
Term
Long term
Usually one year
Indemnity
Not a contract of indemnity
Contract of indemnity
Payout
Sum assured on death or maturity
Actual loss, up to the sum insured
Topic 1
History and importance of life insurance
- 1
1818
Oriental Life Insurance Company, Kolkata — first life insurer
- 2
1912
Indian Life Assurance Companies Act
- 3
1938
Insurance Act
- 4
1956
Nationalisation — 245 companies merged into LIC
- 5
1993
Malhotra Committee recommends opening the sector
- 6
1999
IRDA Act; private insurers allowed
- 7
2000 onwards
HDFC Life, ICICI Prudential, SBI Life and others enter
- 8
2015 / 2021 / 2025
FDI limit raised to 49%, 74%, and 100% announced (Budget 2025)
- Importance: protection of dependants, long-term savings, retirement income, tax planning (old regime), collateral for loans, mobilisation of funds for infrastructure.
Topic 2
Life insurance products and claims
| Product | Feature |
|---|---|
| Term plan | Pure risk cover, lowest premium; return-of-premium variant |
| Endowment | Savings + cover; maturity benefit |
| Whole life | Cover up to 99/100 years |
| Money-back | Periodic survival benefits |
| ULIP | Market-linked investment + cover; 5-year lock-in |
| Pension / annuity plans | Deferred or immediate annuity |
| Child plans | Premium waiver on parent's death |
| Group insurance | Employer covers employees (EDLI, group term) |
Types of claims
- Maturity claim: paid on survival till the end of the term.
- Survival benefit: periodic payments (money-back).
- Death claim: paid to the nominee; early death claim (within 3 years) investigated more closely; Section 45 of the Insurance Act — no policy can be called in question after 3 years on any ground.
- Rider claims: accidental death, critical illness, disability, waiver of premium.
- Surrender value on voluntary discontinuance.
- Settlement time: death claims within 15 days if no investigation (IRDAI master circular 2024); investigation completed within 45 days.
Topic 3
Private sector life insurers
- India has about 26 life insurers — LIC (public) and private players: SBI Life, HDFC Life, ICICI Prudential, Max Life (Axis Max Life), Bajaj Allianz (Bajaj Life), Kotak Life, Tata AIA, etc.
- LIC still holds the largest market share by premium (about 60% of new business premium among life insurers in recent years), but private insurers dominate ULIP and protection growth.
- Impact of privatisation: product innovation, better service, bancassurance, digital sales, increased penetration; concerns — mis-selling, high lapses.
Topic 4
Health insurance: determinants, intermediaries and claims
- Determinants of premium: age, family size, sum insured, medical history, lifestyle (smoking), city of residence, policy features (room rent limits, co-payment), add-ons.
- Standalone health insurers: Star Health, Niva Bupa, Care Health, Aditya Birla Health, ManipalCigna; general insurers also sell health products.
- Intermediaries: Third Party Administrators (TPAs) — process claims and cashless approvals; agents, brokers, web aggregators, bancassurance.
- 1Hospitalisation
- 2Cashless
Pre-authorisation through TPA/insurer at a network hospital; bill settled directly
- 3Reimbursement
Pay hospital, submit bills within the time limit, insurer reimburses
- 4Settlement
IRDAI: cashless authorisation within 1 hour, final discharge approval within 3 hours
Challenges
- Low awareness and penetration; out-of-pocket expenses high.
- Claim rejections — non-disclosure, waiting periods, exclusions, sub-limits.
- Fraud and inflated bills; lack of standard treatment costs.
- Ageing population and rising medical inflation.
- Disputes over room rent proportionate deductions.
- Remedies: standardised products (Arogya Sanjeevani), Insurance Ombudsman, National Health Claims Exchange, portability, mandatory coverage of pre-existing diseases after waiting periods (now max 3 years).
Topic 5
General and commercial insurance; distribution channels
- General insurance in India: public sector (New India Assurance, United India, Oriental, National Insurance), private insurers (ICICI Lombard, Bajaj Allianz General, HDFC ERGO, Tata AIG), specialised (Agriculture Insurance Company, ECGC).
Property
Fire and special perils (Bharat Sookshma/Laghu/Griha Raksha), burglary
Engineering
Contractor's all risk, machinery breakdown
Marine
Cargo, hull
Liability
Public liability (compulsory for hazardous industries), product liability, professional indemnity, directors' and officers' liability
Business interruption
Loss of profits after fire
Group covers
Group health, workmen's compensation
Specialty
Cyber, credit, surety bonds
Distribution channels
| Channel | Description |
|---|---|
| Individual agents | Largest channel for life insurance |
| Bancassurance | Banks as corporate agents — major for private insurers |
| Brokers | Represent the customer; dominate commercial insurance |
| Direct / online | Insurer's website and apps |
| Web aggregators | Comparison portals (PolicyBazaar) |
| POSP and common service centres | Rural and simple products |
| Micro insurance agents | NGOs, SHGs, MFIs |
| Insurance marketing firms | Multi-product distributors |
Key terms
- LIC
- Life Insurance Corporation of India, formed by nationalisation in 1956
- Death claim
- Benefit paid to the nominee on the insured's death
- TPA
- Third-party administrator processing health claims
- Cashless claim
- Hospital bill settled directly by the insurer
- Bancassurance
- Selling insurance through banks
Quick revision
- History: 1818 → 1938 Act → 1956 LIC → 1999 IRDA → private entry.
- Products: term, endowment, whole life, ULIP, pension.
- Claims: maturity, survival, death; Section 45 — 3 years.
- Health: TPAs, cashless/reimbursement; challenges and remedies.
- General insurance: fire, marine, motor, liability; channels — agents, banks, brokers, online.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.When was LIC formed?
- Q2.What is a ULIP?
- Q3.What is an early death claim?
- Q4.What is a TPA?
- Q5.Distinguish cashless and reimbursement claims.
- Q6.What is bancassurance?
Long-answer questions
- Q1.Trace the history of life insurance in India and its importance.
- Q2.Explain life insurance products and types of claims.
- Q3.Explain health insurance, its claim process and challenges.
- Q4.Explain general and commercial insurance products and distribution channels.
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