Introduction personal accident insurance

Personal Accident Insurance

EXECUTIVE SUMMARY

1


2


INTRODUCTION

Personal Accident Policy is a cover meant for compensation

in case of an accident causing injury/ death to person/ persons by

violent external means. Insurers pay compensation for death,

permanent total disablement, permanent partial disablement (like

loss of finger, etc.) and temporary total disablement (like fractures).

A personal accident policy gives financial relief to insured people if

they sustain any injury/ death due to accidents. Frost bites and snake

- bites are also treated as accidents.

A wide variety of PA policies are available in the market.

Many banks offer personal accident covers to their depositors and

credit card holders. Public transporters and the Railways insure

passengers for any accidents during the journey. More restricted

covers in the form of JPA (Janata Personal Accident) and Gramin

personal accident, PA extension under motor policies, policies for

school children, accident, cash, etc are also available. In its basic

form, there are some exclusions and conditions attached to personal

accident policies that remain the same for all insurers. However,

insurers differentiate their products in the form of various fringe

benefits and add-ons.

3


The purpose of personal accident insurance is to pay fixed

compensation for death or disablement resulting from accidental

bodily injury. With effect from 1.04.1994 this insurance became a

non-tariff class of business. However, the policy forms and rating

system, used by the companies, though not uniform, follow more or

less similar approach with minor variations. The policy fom1s,

rating, underwriting etc. dealt with in this chapter are based on the

general approach.

4


BASIC PRINCIPLES

1. Utmost Good Faith

The principle of utmost good faith applies to P.A. and Mediclaim

Policies in the same manner and with the same force as it applies

to other classes of insurance. No special comments. In this behalf

are therefore necessary except that onus on the insured of

disclosing all relevant facts is stricter in this class of insurance as

compared to other classes.

The details regarding the condition of health of the proposer are

known best to him only and may not be known to or inferred by

the insurers even after a detailed scrutiny of the proposal form.

The duty of utmost good faith is all the more important because

medical examination of the proposer is required only in limited

cases. The wording of the declaration in the different proposal

form must be carefully noted.

The duty of disclosure also arises during the currency of the

policy. For example, personal accident policies include a

condition whereby the Insured shall give immediate notice of any

change in his occupation. Similarly, annual frequent traveler’s

policy (overseas medical) provides that the Insured shall advice

the company any material change in his health condition.

5


2. Indemnity

The policies issued in this class of insurance are not contracts of

indemnity. This is so because life is invaluable and no amount of

money can compensate the death or disablement of a human

being. However on practical consideration a measure of

indemnity does come into play. When policies are issued to

employer to reimburse under service conditions the amounts of

compensation paid by them to their employees or their

dependents on the disablement or the death of their employees

i.e. the insured are indemnified with the exact amount of

compensation paid by them.

A majority of policies issued in this class are, however issued

“benefit” policies as distinct from policies of indemnity. This

means that in the event of happening of an insured event a

specified sum of money is payable irrespective of the amount of

pecuniary loss actually suffered by the insured or dependents,

which in any case can not be measured.

This should not lead one to believe that by taking policies of this

class for larger amounts, it is easy for the insured to make profit

because the insurers seek to ensure that even under these policies

the principle of indemnity is not lost sight of. For example, if a

person earning Rs. 1000 per month were to approach an insurer

with a personal accident insurance proposal for Rs. 100000, there

is no likelihood of the proposal being accepted for that amount.

Although it is difficult to specify the exact amount for which the

6


cover could be granted. (Since the practice differs with insurers),

it may be indicated that the cover is granted for, say an amount

equivalent to 60 to 72 months earnings of the insured.

Linking the capital sum insured to the earnings of the person also

ensures that the weekly benefits provided to the insured in the

event of temporary disablement would not be disproportionate to

his weekly earnings.

This formula is sometimes not strictly applied if the policy is

taken for Capital Sums only.

The medical expenses extension cover however unlike the basic

Personal Accident Insurance cover, is subject to strict principle of

indemnity in all circumstances, since this relates to

reimbursement of expenses actually incurred subject to limits in

the policy.

3. Contribution

Contribution does not apply where the contract is not one of

indemnity. An insured person may hold several personal accident

policies and is entitled to the full benefits of each.

However the weekly compensation payable as temporary total

disablement benefit is limited to Rs. 3000 per week overall

irrespective of the total sum insured. If policies are issued by

different companies and the total sum insured exceeds Rs. 3 lacs

in respect of T.T.D. benefit liability of each company would, be

proportionate to the respective sum insured.

In respect of medical expenses extension too there could . arise

7


co-sharing of liability among the insurance policies issued by

different companies. This would happen when the expenses

incurred are for an amount less than the total cover available.

When the expenses incurred are more each policy will bear to the

extent of its own limit of liability.

Although the insured can have more than one policy, insurers

place restrictions on additional insurances to prevent over

insurance. There is a question in the proposal form seeking

information about any other existing P.A. policies. A condition

may also be incorporated in the policy to ensure that additional

policies are not taken without the consent of the insurer.

4. Subrogation

Subrogation like contribution does not apply to

contracts, which are not of strict indemnity. However it can

apply under certain circumstances. For example, there is a

specific condition in Videsh Sanchar Yatra Mitra. Policy, which

provides that in a event of payment of claim for total loss of

baggage, any recovery from the airline in terms of Warsaw

convention shall become the property of insurers. It will be

observed that this particular section of policy covers property (i.e.

baggage) and hence the strict principle of indemnity.

5. Insurable interest

8


A person is deemed to have an unlimited interest in his own life

and as such, this principle does not pose any problem in personal

accident insurance policies.

Since a husband has an insurable interest in the life of his wife

and vice versa it is in order for a husband to take a personal

accident insurance policy on the life of his wife and vice versa.

Insurable interest also arises for a creditor in his debtor’s life to

the extent of the debt due to the creditor.

The employers are deemed to have an insurable interest in the

lives of their employees in so far as they would suffer in a

pecuniary sense by the death or disablement of their employees.

Very often, group policies are taken by employer on the lives of

their employees, although there is no provision for such benefits

in their service conditions, but as a welfare measure. In such

cases claims paid to the insured employers, are passed on by

them, to the concerned employees or their dependants as the

cases may be.

BASIC COVERAGE

9


If at any time during the currency of this policy, insured shall

sustain any bodily injury resulting solely and directly from accident

caused by external violent and visible means, then the company

Shall pay to the insured or his legal personal representative(s), as the

case may be, the sum or sums set, forth, in the policy, if resulting in

specified contingencies such as death, permanent disablement etc.

Analysis of terms

1. Bodily Injury:

The use of this term excludes disease from natural causes, but

disease proximately caused by accident, is bodily injury (unless

specifically excluded by the policy). Mental shock, fright or grief,

unless causing some physical injury or disease, does not come

within the scope of bodily injury, but the modern tendency towards

the inclusion of any disablement caused by shock.

2. Solely and Directly:

The effect of this phrase is to require that the bodily injury

shall have been caused solely and directly by an accident; in turn,

the bodily injury must directly and independently of any other cause

result in death or disablement; hence if any other cause contributes

to the result, the insured event has not occurred.

An accident may set up a disease and result in death, but death

may still be the direct result of the accident, namely, where there is

no break in the chain of causation, e.g. a man is thrown from his

horse while hunting and so injured that he cannot walk, he lies on

10


the wet ground until he is picked up, he thus catches chill which

turns to pneumonia, and dies.

However if a man breaks a leg and taken to hospital where he

contracts an infectious disease from another patient, with fatal

results, the death is not the sole and direct result of the accident; the

infectious disease constitutes a break in the chain of causation.

3. Accident:

An accident is an event, which is wholly unexpected, not

intended or designed. It does not include the' cumulative result of a

series of small incidents. Thus, a bent hand, the result of using a

pneumatic drill, is not caused by accident.

Certain voluntary acts, which result in bodily injury, are

included, where the insured’s act is the result of a chain of events

stemming from an accident. For example, an insured who is injured

whilst jumping from an upper storey of a burning building, sustains

injury by accident.

Questions often arise whether events like suicide, murder,

frostbite, snakebite; drowning etc. can be regarded as accident.

Applying the various tests, it can be stated that whilst suicide and

murder or homicide following grave provocation are not accidents,

homicide or murder without provocation, frostbite, snakebite and

drowning are accidents.

4. External, Violent and Visible means:

11


The cause of accident i.e. the means must be within the

definition as a whole, but the result may not be external. For

example, injury may be internal i.e. inside the body. However the

result must be death or disablement as specified in the policy. In

other words, the means or cause of accident must be within the

definition, but the result or effect need not be external or visible, so

long as it is bodily injury.

5. Disablement:

When a person is prevented by an accidental bodily injury

from engaging in any occupation or business, he is said to be

disabled, and his inability to attend to any occupation or business is

called disablement. What is referred to here is the physical inability

of the person to attend to occupation /business, and not his earning

capacity. A special note may be taken of the fact that, although there

may not be any loss of earning capacity, there still can be

disablement under the policy.

12


Disablement

When a person is prevented by an accidental bodily injury

from engaging in any occupation or business, he is said to be

disabled, and his inability to attend to any occupation or business is

called disablement. What is referred to here is the physical inability

of the person to attend to occupation /business, and not his earning

capacity. A special note may be taken of the fact that, although there

may not be any loss of earning capacity, there still can be

disablement under the policy.

Types of Disablement

The following are the types of disablement covered under the

policy

(i) Permanent total disablement;

(ii) Permanent partial disablement; and

(iii) Temporary total disablement;

(i) Permanent total disablement:

Disablement is of permanent and irrecoverable nature and is

absolutely total in the sense that the insured person is prevented

from engaging in gainful employment of any kind. (Example:

Paralysis). It must be noted that loss of sight of both eyes or the

actual loss by physical separation of the two entire hands or two

entire feet or one entire hand and one entire foot or loss of sight of

one eye and such loss of one entire hand / foot are deemed as

equivalent to permanent total disablement.

13


The exact meaning of the phrases 'loss of sight’ and `loss of

limbs' should be understood. The loss of sight has to be total and

irrecoverable; Claims are admissible if vision has become so

impaired that it is impossible to recognise object although the

difference between darkness and light can be distinguished.

"Loss of Limbs" means loss of hand and/or foot, than is physical

separation of the hand and/or foot at or above the ankle. Loss of use

of limbs concerned, and not the limbs themselves, is also deemed to

be 'loss of limbs'.

(ii) Permanent partial disablement:

This is similar to permanent total disablement with the

difference that, the disablement is not total but is only partial. An

example is the loss of a toe or a finger. The applicable percentage of

compensation for various losses is shown in the policy by a table.

This percentage of capital sum insured will become payable. For

permanent partial disablement not specified in the table, doctor’s

assessment would be the basis.

For example, the table specifies that for loss of little finger,

compensation is 4% of capital sum insured, loss of four fingers 35%,

and loss of hearing both ears 75% and so on.

(iii) Temporary total disablement:

As the name implies, this is a disablement, which is total (i.e.

the insured person is prevented from engaging in any occupation or

business) but for a temporary period only. This temporary period

may be days, weeks, months or even years. The position of the

14


person in supervisory capacity who can sign business documents.

Although confined to bed, is not easy to define, but the signing of

papers only does not usually invalidate a claim for total disablement.

15


Benefit Chart

Contingency Amount of Compensation

payable

a) Death Rs. 1,00,000 (i.e. 100% of capital sum

insured)

b) Loss of two limbs

or both eyes or one

limb and one eye.

Rs. 1,00,000 (i.e. 100% of capital sum

Insured)

c) Loss of one limb

or one eye.

Rs. 50,000 (i.e. 50% of capital sum

insured)

d) Permanent total

disablement other than

the above (e.g.

Paralysis due to an

accident)

100% of capital sum insured.

e) Permanent partial

disablement

Percentage as shown in the table in the

policy

f) Temporary total

disablement

Weekly payment of Rs. 1000/- (i.e. One

percent of the capital sum insured)

subject to a maximum of 100 weeks.

The amount of weekly payment is

restricted to a maximum sum of

Rs.3000/- whatever be the capital sum

insured. This limit applies to ail

16


policies held by the insured

The benefits (a), (b), (c), (d) and (e) above are referred to as capital

benefits, and benefit (f) as weekly benefit.

A specimen table of benefits showing the amounts of

Compensation payable in the event of the happening of various

Contingencies is given below for clear understanding. It is assumed

that the capital sum insured by the policy is Rs.1 00000/-. (This

amount is selected for the purpose of illustration only. the proposer

is free to choose any capital sum insured subject to the same being

commensurate with his income through gainful Occupation.).

Additional Benefits at no Extra Premium

1. Carriage of dead body

Expenses incurred for carriage of dead body of insured (death

due to accident only) to place of residence are reimbursed subject to

2% percent of Capital Sum Insured or Rs. 2500/- whichever is less.

2. Education Fund

In the event of death or permanent total disablement of the

insured person, the policy provides for Education Fund for the

dependent children, in addition to Capital Sum Insured and is

applicable to Personal Accident Individual Policy only.

17


3. Compensation is provided as follows:

If the insured person has one dependent child below the age of

25 years, l0% of the Capital Sum insured subject to maximum

of Rs.5000/-

If the insured person has more than 1 dependent child below 25

years, 10% of the Capital Sum Insured subject to maximum of

Rs. 10,000/-

The benefit is available only on Capital Sum Insured and not on

Cumulative Bonus. If there are existing insurances on the same

life then the total compensation payable shall be limited to

maximum of Rs.5000/- for one child and Rs.10000/- for more

than one child.

4. Cumulative Bonus

Compensation payable for death, loss of limb(s) or sight and

Permanent Total Disablement arising out of accidental injuries

shall be increased by 5% thereof in respect of each completed

year, during which the policy shal1 have been in force, prior to

the occurrence of an accident for which capital sum becomes

payable but amount of such increase shall not exceed 50% of

the capital sum insured.

This clause shal1 not in any way alter the annual character of

the Insurance nor the right of the Company to decline to renew

or to cancel this Policy.

The earned Cumulative Bonus will not be lost if the policy is

renewed within 30 days after its expiry.

18


Provisos

The following appear as provisos in the policy. The insurer is

not liable for

(a) Compensation under more than one of the sub-clauses (a to f of

benefit chart above) in respect of the same period of disablement.

Comprehensive policy provides for payment of compensation for

several contingencies like death, loss of limbs/eyes, permanent

partial disability etc. It may so happen that the insured may initially

appear as only partially disabled, but this disablement may later lead

to total disablement, loss of limbs / eyes or death.

Without restriction as stated above it may be construed that the

insured can claim under several items for the same accident It is

therefore clarified that payment can be only under one item for

the same period of disablement.

(b) Any payment after a claim under sub clauses (a), (b), (c) or (d)

of the policy has been admitted and settled. Once a claim is

settled under one of the sub-clauses referred to above the policy

becomes inoperative. No further claim can be admitted under the

policy.

(c) Any payment in case of more than one claim under the policy by

which maximum liability of the company would exceed sum

payable under sub-clause (a) (the capital sum insured) The object

of this exclusion is to clarify beyond any doubt that the

company's liability under the policy is limited to the amount of

the capital sum insured (+ cumulative bonus, if applicable).

19


(d) Payment of weekly compensation until the total amount shall

have been ascertained and agreed.

Although, the benefit is known as weekly compensation the

payment is generally made in one lump sum after the quantum of

liability is agreed. It is felt that periodical part payments may

encourage a claimant to malinger. In genuine hardship cases

however 'on account' payment is made which is then adjusted

against the final payment due.

Exclusions

The exclusions commonly found in Personal Accident

policies are as follows:

Payment of compensation in respect of death, injury or disablement

of the insured

a. From intentional self-injury, suicide or attempted suicide.

b. Whilst under the influence of intoxicating liquor or drugs.

c. Whilst engaging in Aviation or Ballooning whilst mounting

into, dismounting from or traveling in any balloon or aircraft

other than as passenger (fare paying or otherwise) in any duly

licensed standard type of aircraft anywhere in the world.

d. Directly or indirectly caused by venereal diseases or insanity.

e. Arising or resulting from the insured committing any breach of

law with criminal intent.

f. From service in the armed forces.

g. Resulting directly or indirectly from childbirth or pregnancy.

h. War and kindred peril and nuclear risks.

20


Notes:

1. Suicide is not an accident. Besides it is an offence under the

Indian Penal Code and the insured is not allowed to benefit from

his own criminal act. But when the circumstances are such that

the evidence is equally consistent with either suicide or accident,

then the presumption of law against suicide applies and accident

will be presumed.

2. Claims arising out of liquor or drugs, venereal diseases, breach of

law with criminal intent are not payable on grounds of public

policy. The word 'criminal intent' are important. Technical

breaches of law are not excluded (e.g. Traffic offence)

3. Aviation or ballooning present abnormal risks. (Cover may be

arranged at extra premium on merits of each case).

Policy Conditions

Notice and proof of claims

Written notice of claims with full particulars must be give to the

Company immediately

In case of death written notice must, unless reasonable cause is

shown, be so given before internment or cremation, and in any

case, within one calendar month after the death,

In the event of loss of sight or amputation of limbs, written

notice thereof must be given within one calendar month after

such loss of sight or amputation.

Proof of claim satisfactory to the Company shall be furnished.

21


Any medical or other agent of the company shall be allowed to

examine the person of the Insured on the occasion of any

alleged injury or disablement and as may reasonably be

required.

In the event of the death, to make a post rnortem examination of

the body of the insured.

A post mortem examination report, if necessary, be furnished

within the space of fourteen days after demand in writing.

In the event of a loss of sight the Insured shall undergo at the

Insured's expense such operation or treatment as the company

may reasonably deem desirable.

No sum payable under this policy shall carry interest.

No claims is payable if the claim is fraudulent or supported by

fraudulent statement.

Material Alterations

The insured shall give immediate notice to the company of any

change in his business or occupation.

The insured shall on tendering any premium of the renewal of

this policy give notice in writing to the company of any disease,

physical defect or infirmity with which he has become affected

since the payment of last preceding premium.

Change of occupation may materially alter the risk and attract a

higher rate of premium. Similarly, any disease (e.g. diabetes) or

physical infirmity may also alter the risk. The insurers may take

22


appropriate underwriting decisions such as loading of premium,

restricted cover etc.

Renewal

This policy may be renewed by mutual consent every year and

in such event, the renewal premium shall be paid to the Company on

or before the date of expiry of the Policy or of the subsequent

renewal thereof. The Company shall not, however, be bound to give

notice that such renewal premium is due.

Cancellation

The Company may at any time, by notice in writing, terminate

this policy and the Company shall return to the Insured a pro-rata

part of the premium. Such notice shall be deemed sufficiently given

if posted and addressed to the insured and shall be deemed to have

been received by the Insured at the time when the same would be

delivered in the ordinary course of post.

The policy may be cancelled at any time by the Insured by a

notice in writing under a Certificate of posting or a Regd. A.D. Such

notice shall be deemed to be effective from the date of despatch of

the same by the insured.

Refund of premium at short period scale is made subject to

there being no claim under the policy.

Assignment

The Company' shall not be bound to take notice or be affected

by any notice of any trust, charge, lien, assignment or other dealing

23


with or relating to this policy but the receipt of the Insured or his

legal personal representatives shall in all cases be an effective

discharge to the Company.

The Company treats the insured as the absolute owner of the

policy. Receipt of the insured or his legal personal representatives

that is, those with a Succession Certificate, etc granted by a court of

law will be an effective discharge to the Company.

Although the assignment of the policy is not permissible

under the Insurance Act, these policies can be assigned under the

Transfer of Property Act. It should be remembered that when these

policies are assigned, it is only the policy amount that is assigned

and not the subject matter of the policy. In other words, the

assignment involves a new creditor for the insurers and not a new

insured. This alteration has obviously no effect on the rating or

underwriting of the risk. If the assignment is effected on the policy

document itself, no stamp duty is payable. If however, it is affected

on separate paper, it attracts a stamp duty of Rs.15/-

Arbitration and Disclaimer

The following points must be noted.

(a) Differences regarding amount of loss (not question of liability)

are to be referred to arbitration.

(b) The award of arbitration is a precedent to suit in Court of Law.

(c) If the insurers disclaim liability the insured has to file a suit in a

Court of Law within 12 month from the date of such disclaimer.

24


Special Features of P.A. Policy

The cover is for 24 hours and on a worldwide basis.

Travel as a passenger in a licensed standard type of aircraft is

automatically covered

Rating

The basic principle of fixing rates of Premium in any class of

insurance is that rates of premium should be commensurate with the

hazard involved. Thus, in fire insurance rates of premium vary

according to the type of construction, the type of occupancy, the

type of goods stored etc.

In personal accident insurance, the main factor used is the

occupation. General1y speaking exposure to personal accidents at

home, on the street etc. is the same for all persons. But the risks

associated with profession or occupations vary according to the

nature of work performed. For example, an office manager is less

exposed to risk at work than a civil engineer working at a site where

a building is being constructed.

It is not practicable to fix a rate for each profession or

occupation. Hence, occupations are classified into groups, each

group reflecting, more or less, similar risk exposure. The system of

classification is simple and found to be workable in practice.

25


Classification of Risk

Risk Group I:

Accountants, Doctors, Lawyers, Architects, Consulting

Engineers, Teachers, Bankers, Persons engaged in administration

functions. Persons primarily engaged in occupations of similar

hazards.

Risk Group II:

Builders, Contractors and Engineers engaged in

superintending functions only, Veterinary Doctors, Paid drivers of

motor cars and light motor vehicles and persons engaged in

occupation of similar hazards and not engaged in manual labour,

All persons engaged in manual labour (Except those falling under

Group III), Cash Carrying Employees, Garage and Motor

Mechanics, Machine Operators, Drivers of trucks or lorries and

other heavy vehicles, Professional Athletes, and Sportsmen,

Woodworking Machinists and Persons engaged in occupations of

similar hazards.

Risk Group III:

Persons working in underground mines, explosives,

magazines, workers involved in electrical installation with high-

tension supply, Jockeys, Circus Personnel, Persons engaged in

activities like racing on wheels or horseback, big game hunting,

mountaineering, winter sports, skiing, ice hockey, ballooning, hang

gliding, river rafting, polo and persons engaged in occupations /

activities of similar hazard.

26


Age Limits

The minimum age limit is 5 years and maximum 70.

In case of persons who already have a cover, policies may be

renewed after they complete 70 years but up to the age of 80

subject to a loading 5% of the renewal premium.

In case of fresh proposals from persons above 70 years but

below 80 years cover may be granted at normal rates plus

loading of 10%.

No medical examination is required for renewal or fresh

cover.

27


POLICIES OF PERSONAL ACCIDENT INSURANCE

1. Family Package Cover

2. War and allied risks

3. Flight Insurance Coupons

4. Janta Personal Accident Insurance

5. Gramin Personal Accident Insurance

6. Student Safety Insurance

7. Group Personal Accident Policies

8. New Schemes

Raj Rajeshwari Mahila Kalyan Yojna

Bhagyashree Child Welfare Policy

28


Family Package Cover

A Family package covers the all the members of the family to

protect from any accident occurs in the future. Family Package cover

may be granted on the following pattern:

(a) Earning Member

(Persons Insured) and

Spouse, if earning

100% of the Capital Sum

Insured for each.

(b) Spouse (if not earning

member)


Insured or Rs.l1akh whichever

is lower.

(c) Children (between the

age of 5 years and 25

years)


Insured or RS. 50000/-

whichever is lower per child.

Notes:

1. For children the cover is limited to Death and Permanent

Disablement (total or partial)

2. Premium payable for husband and wife will be on the tota1 sum

insured for husband and wife.

3. A discount of 5% may be granted on the gross premium.

29


Extensions of the policy

Medical Expenses

A personal accident policy can be extended by endorsement,

on payment of extra premium to cover medical expenses incurred by

the insured in connection with the accidental bodily injury. These

benefits are in addition to the other benefits under the policies.

War and allied risks

War and allied policy of personal accident insurance is

provided to the Indian individual / experts working in foreign

countries. In short War risk cover can be granted to Indian personnel

/ experts working in foreign countries on civilian duties at the

following additional premium.

(a) P.A. Policies issued during

peace time normal period

50% extra over the normal

rate (i.e. 150% of the normal

rate.)

(b) P.A. Policies during abnor-

mal/apprehensive period (i.e.

during the period when

warlike conditions have alre-

ady occurred or are imminent

in foreign country / ies where

the Indian Personnel are

150 % extra over the normal

rate (i.e. 250% of the normal

rate)

30


working on civilian duties)

The Proposal Form

The form elicits information on the following

1) Personal details

2) Physical condition

3) Habits and pastimes

4) Other or previous insurances

5) Previous accidents or illness

6) Selection of benefits and sum insured

7) Declaration

Personal details relate to, inter alia, age, height and weight, full

description of occupation and average monthly income.

Age will show whether the proposer is within the limits of age

for entrants for the policy desired. Weight and height should be

compared with a table of average weight for sex, height and age

and further investigation would be made if the proposer is 15

percent or more over or under the average.

Physical condition details relate to any physical infirmity or de-

fect, chronic diseases etc.

Proposers who have lost a limb or the sight of any eye may only

be accepted on special terms in approved cases. They constitute

abnormal risks because they are "less able to avoid certain types

of accidents and in view of the fact that if the remaining arm or

leg is injured or the sight or the remaining eye is affected, the

degree and length of disablement is likely to be much greater

than normal.

31


Diabetes may retard recovery as the wound may not heal

quickly and the disablement may be unduly prolonged. The

medical history of the proposer must be examined in order to

determine whether and to what extent injuries or illnesses may

affect the future accident risks. There are many complaints of

such an obviously serious nature as to make the risk

uninsurable, e.g. valvular disease of the heart.

Hazardous pastimes like mountaineering, polo, motor racing,

aerobatics etc, require extra premium.

Sum Insured

The sum insured is selected by the insured but insurers exercise

some control. The sum insured is compared with the average

monthly income of the insured. A policy for Rs.1lac may not be

granted to a person earning Rs. 1000/- per month, because in

the event of temporary disablement, his benefit per week is Rs.

1000/-, (Rs. 4000/-) per month) which is disproportionate to his

monthly salary. The sum insured could be up to 24 months

income.

Although it is difficult to specify the exact amount for which

the cover could be granted (since the practice differs with

insurers), where no weekly benefit cover is allowed it mav be

indicated that the cover may be granted for say an amount

equivalent to 60 to 72 months' earning of the insured. This

restriction is not very strictly applied if the policy is for Capital

Sum only.

32


While giving cover to persons who are not gainfully employed

e.g. housewives, students etc. the insurers make sure that they

provide for capital benefits only and that no weekly

compensation is provided for.

Flight Insurance Coupons

Passenger fight Coupon provides cover for accidental bodily

injury (as defined in the personal accident policy), whilst in or

entering into or descending from any aircraft owned and/ or operated

by a regular airline over a scheduled route by which the insured is

travelling as a passenger during the flight specified.

The benefit chart is as under:

Contingency Benefit

Death Capital Sum Insured

(100%)

Loss of two limbs -,,-

Loss of one limb and one

eye

-,,-

Loss of two eyes -,,-

Loss of one limb or one

eye

50 % of Capital Sum

Insured

Temporary total

disablement

1 % of Capital Sum

Insured per week

33


Up to 104 weeks Not to exceed Rs.3000/-

The rate of premium is Rs. One per Rs. 10000/- capital sum

insured for flight not exceeding 24 hours duration.

There are two methods of issuing these covers (a) The cover may

be issued for specific flight(s) only or (b) The cover may be

issued for a certain specific period of time and the company will

be on risk in respect of all the flights undertaken by the insured

within that period.

Under (a) flat premium is charged based on the sum insured and

the duration of flight(s). Under (b) a deposit premium is collected

from the insured, equal to number of flights, expected to be

undertaken during the policy period. At the end of the policy

period the insured is expected to declare all the flights actually

undertaken by him. On the basis of this information the premium

earned is calculated and the deposit premium is adjusted.

These declaration policies can be given not only to individuals

but also to companies in respect of their employees, who travel

by air frequently.

Arranging covers on specific flights basis is time consuming and

cumbersome for both the insurer as well as the insured. The

insurer has to issue a document each time a flight is undertaken.

Often people may have to fly at short notice and may not have

sufficient time to obtain a flight insurance coupon. Declaration

34


policies are therefore popular. Since however, the insurer is fully

dependent upon the insured for accounting of each and every

flight undertaken (basis for calculating premium) moral hazard of

the proposer should be beyond reproach. Such covers are

therefore given only to reputed concerns and clients of long

standing.

Janta Personal Accident Insurance

The salient features of the revised market agreement for Janta

Personal Accident policy effective 1-11-1999 are as follows:

Any person, irrespective of sex and occupation in the age

group 10 to 70 years may be covered.

The minimum sum insured is Rs.25,000/- and maximum Rs,

1,00,000/- per person per annum. The rate of premium is

Rs.15/- per sum insured of Rs.25,000/- which can be

increased in multiplies of Rs.25,000/- and rate applicable

accordingly

The insurance pays specified benefits if the insurance sustains

bodily injury resulting solely and directly from accident

caused by outward violent, and visible means and such bodily

injury within 12 calender months of its occurrence be the sole

and direct cause or specified contingencies.

The contingencies are:

35


Contingencies Sum Insured Payable

1. Death 100% of Sum Insured

2. Total and irrevocable loss of sight

of both eyes or losses of use of two

hands or feet or loss of sight of one

eye and loss of use of one hand or

foot.

50% of Sum Insured

3. Total and irrevocable loss of sight

of one eye or loss of use of one

hand or foot.

50% of Sum Insured

4. Permanent total disablement due to

accident

100% of Sum Insured

Group Discount

Group Size Discount (%)

101 to 1,000 5

1,001 to 10,000 7.5

10,001 to 50,000 10

50,001 to 1,00,000 12.5

1,00,001 to 2,00,000 15

2,00,001 to 5,00,000 20

5,00,001 to 10,00,000 25

Above 10,00,000 30

36


Group insurance policy should be issued only in respect of the

named Groups. For the purpose of availing of Group Discount and

other benefits the proposed "Group" should fall clearly under anyone

of the following categories:

Employer-employee relationship including dependents of the

employee.

Pre identified segments / groups where the premium is to be paid

by the State / Central Governments.

Members of a registered co-operative society.

Members of Registered Service Clubs.

Holders of credit card of Banks / Diners / Master / Visa.

Holders of Deposit Certificates issued by Banks / NBFC's.

Shareholders of Banks / Public Limited Companies.

In case of proposals relating to any further category different

from the seven notified categories, they may be deliberated and

decided upon by a Central Committee comprising a nominated

HO Technical Manager each from the Companies and GIC.

No Group Discount can be offered on the 'anticipated' group size.

Group Discount is to be considered and worked out only on the

actual number of members registered in the 'Group' at the time of

taking out the policy.

Claims under such policies cannot be paid to anyone other than

the individual insured.

Wherever group policies for higher Sum Insured are needed, the

same shall be covered under Personal accident policy.

37


Long Term Discount

Term of the Policy

(years)

Discount

(%)

1 Nil

2 5

3 10

4 15

5 20

The exclusions are the same as under individual personal

accident policy.

Underwriting instructions

a) The policy in respect of individual or Group JPA should be

issued for a maximum period of 3-5 years.

b) In case of long-term policy, the premium is to be collected in one

lump sum amount in advance.

c) No refund of premium will be allowed even if the claim arises in

the earlier years under long-term policy.

d) No renewal of group policy should be encouraged where loss

ratio is 60% and above.

e) PTD should be covered as per existing JPA policy and only

Death cover should not be given.

38


Claims Procedure

a) Immediate notice to be given to the policy issuing office.

b) Claim Form to be submitted with medical certificate and bills.

c) For death claim, Nominees should submit:

(i) Death Certificate

(ii) Original Policy

(iii) Claim Form

(iv) Postmortem Report

(v) Police Report if complaint is loaded.

d) Claims of person presumed to be dead due to drowning, may be

settled after two years of the submission of the following

documents:

(i) Police report and final investigation report.

(ii) Report of findings by Customs / Port Authorities.

(iii)Affidavit duly notarised.

f) Subject to above, claims of persons of a fishing vessel which is

missing or a total loss will be presumed dead and claim settled

accordingly.

39


Gramin Personal Accident Insurance

The Gramin Personal Accident Insurance was introduced to

provide security against risk to the people who are living in rural

areas. The cover is mainly for the benefit of the people living in the

rural areas of the country.

The sum insured is fixed at Rs. 10,000 @ a premium of Rs. 5

only. The following benefits are covered :

Contingencies Benefits

Death Rs. 10,000

Loss of both eyes or Loss of two

limbs or Loss of one limb or one eye

Rs. 10,000

Loss of one limb Rs. 5,000

Permanent total disability Rs. 10,000

The other features of the scheme are:

1. Age limits are minimum 10 years and maximum 70 years.

2. A policy-cum-proposal form is devised.

3. Claims procedure is simplified. There is a provision for nomina-

tion so that death claims are settled expeditiously. Post mortem

report is not insisted upon where evidence of accident is clearly

available.

4. Group discounts and long-term discounts are available.

40


Student Safety Insurance

This insurance is available to schools, colleges or other

educational institutions. The policy provides personal accident

benefits to registered students. The benefits are:

Rs.

1) Death 10000

2) Loss of two limbs / eyes 10000

3) Loss of one limb/eye 5000

4) Permanent total disablement

other than under (ii) above

10000

5) Permanent Partial Disablement Percentage of Capital Sum

Insured

Medical expenses incurred by the student for treatment in a

hospital/ nursing home as inpatient for injuries sustained in an

accident. Limit up to Rs. 500/- (any one student, any one year)

Compensation limits under the policy

a) Per student Rs. 10,000

b) Per Accident Rs. 5,00,000

c) Per Policy Period Rs. 10,00,000

(Note: Limits under (b) & (c) can be amended to suit the

requirement of the insured institution at suitable extra premium)

41


Premium is charged as a percentage on the limit any one year

plus a per capital charge on the number of students. Rate is reduced

if the number of students covered is large.

Features of the scheme

a) Policy is issued in the name of the Institution. The students are

insured persons.

b) Claim amount is payable to the Parent/ Guardian as recorded in

the School Register.

c) Claim papers are to be routed through the institution for proper

processing.

d) Maintenance of Attendance Register and declaration from

institution to that effect.

e) A1l Students are to be covered.

f) Additional students are covered during policy period at extra

premium. But no deletions are allowed.

Claims

Claim form

The onus of substantiating a claim under the policy rests on

the insured. It is also necessary for him to comply with the condition

of the policy concerning claim procedure. The usual relevant

conditions are:

(a) That notice of the occurrence be given immediately, to be

followed by full details.

(b) That the insured shall furnish satisfactory proof of all matters

upon which a claim is based.

42


In practice, insurers have found it best to supply claimants

with a printed claim form.

The essential features of an accident claim form are:

(a) Personal details, such as age and occupation, so that these may

be checked against the policy records.

(b) Number of the policy and date of issue.

(c) Details of the accident (date and time, where and how) for the

purposes of proof and to test whether the occurrence comes

within, the definition of

(d) "Accident" in the policy.

(e) The nature of the injuries, nature and extent of disability (capital

sum or weekly benefit). This is necessary for assessment of

amount of loss.

(f) Whether a similar injury has been sustained before, in order to

check the proposal form or previous advices.

(g)Other insurances, to see whether they have been disclosed

previously or have been effected subsequently in order to keep in

mind the principle of indemnity.

(h)Name and address of the attending doctor. (To consult him, if

necessary).

(i) Time at which and place where the insurers' doctor could visit the

claimant. This visit may not be necessary in all cases but it is

desirable to have this information ready. Besides, this could

prove as a deterrent to a claimant who is inclined to malinger.

(j) The declaration, whereby the insured warrants that all his answer

is true.

43


(k)A medical certificate (sometimes issued as a separate form) in

order to obtain a doctor's opinion of the injuries and of the

alleged disability.

Processing of claims also involves considerations relating to

change of risk.

Occupation

The insurance is based on the insured following a certain

occupation. The insurance does not apply because of the

express basic condition of the policy that only a certain

occupation is followed and the insured has to give notice of

change.

A1though legally claim can be repudiated on grounds of

change of occupation, it is not done unless the accident

occurred during the course of following the changed

occupation. The insurers need not admit the claim, but where

it is clear that the omission is due to a genuine oversight, the

claim is usually paid, provided the new occupation is one,

which the insurers would have accepted, had they known of it.

Where the new occupation is an acceptab1c 0ne, but require a

higher rate of premium than that charged, the position is

usually met by a payment, usua1ly a percentage of the other

wise admissible claim amount against a comp1ete discharge

from the insured.

44


Physical Defects

Non-disclosure of any such defect means that the claim can be

repudiated, whether or not the defect concerns the injury for,

which the claim is being made. It is unlikely, however, that

any reputable insurers would take advantage of such a

technicality, but that is the law.

If the physical defect brought to light by the claim is one,

which would have rendered the risk unacceptable had it been

known at the time of acceptance or last renewal, then the

claim is refused. If, notwithstanding the physical defect, the

risk would still have been acceptable, although on different

terms, the claim may be settled ex-gratia on the basis of the

terms, which would have applied.

Proximate Cause

The doctrine of proximate cause is also relevant to processing of

claims. The following are illustrations based on case law.

(a) An accident and a disease may be in operation both at the same

time and it has to be decided whether the result is caused by

disease. If the disease is present before the accident and the

accident causes a condition which is in no way contributed to

by the disease, then the condition is proximately caused by the

accident, e.g. if a sufferer from asthma is able to travel to and

from his business and in the course of a journey falls into a

street excavation and breaks his leg, this is an accidental injury.

45


(b) If either accident or disease could have produced the result,

then a claim for the accident cannot be admitted unless there is

proof of the accident being the proximate cause of death. e.g. a

man with a heart disease was thrown from a cart and found

dead nobody could tell what was the cause of death; it might

have been the disease or it might have been the accident.

(c) The disease, which produces the ultimate result, follows the

accident and was not there beforehand. In such case, the

accident remains the proximate cause so long as the events,

which follow it, are the natural ones in such circumstances. e.g.

the sequence may be accident, shock, weakness, chill, which in

weakened condition leads to pneumonia and death. Death is

caused by accident. On the other hand, a person, who is

hospitalised for accidental injuries, contracts on infectious;

disease in the hospital and dies, the disease, which is a new

intervening cause, is regarded as the proximate cause.

(d) The disease promotes the accident but the injuries are due to the

accident. For example, fit - fall into river drowned - death.

Here, the disease is the remote cause and the accident the

proximate cause.

46


Documents

The following documents are necessary:

(a) Claim form: to supply particulars of the occurrence.

(b) Medical Certificate: to obtain medical opinion on the cause or

extent of incapacity or progress towards recovery.

(c) Medical examiner's Report: To corroborate medical certificate in

doubtful cases, or if other causes are in operations.

(d) Receipt /Discharge form: to acknowledge the money and to

confirm the finality of the settlement.

(e) Death Certificate: To give the date and cause of death. Post

mortem reports where a post-mortem has been done.

(f) Probate or letters of administration - the legal document to prove

the title of an executor or an administrator (i.e. if no assignment

is made)

For disablement claims the documents, interalia required are:

- Medical certificate, diagnostic reports etc.

- Prescription bills and receipts.

- Leave of absence certificate from the employer.

- Medical fitness certificate.

47


Group Personal Accident Policies

Group policies have become popular because progressive

employers have appreciated the importance of welfare benefit for

their employees. These policies are also available to associations,

clubs etc who find it administratively convenient to arrange a group

policy to cover their members. The essential requisites for a group

policy are: Some common relationship among the persons to be

insured and a central point for administration of the policy scheme.

Under the group policy, the term 'insured' is applied to the

employer, association, etc. and the term 'insured persons' to those for

whose benefit the insurance is effected.

Claims are payable to the insured, the employer, association

etc. whose discharge shall be complete to the insurers and no insured

person has an independent right of action against the insurers.

Types of Policies

A. The Employer and Employee Relationship

These policies are granted to firms, association etc. to cover

(i) Named employees

(ii) Unnamed employees

48


B. No Employer – Employee Relationship

These policies are granted to Associations, Societies, Clubs, etc., to

cover

(i) Named members

(ii) Members not identified by name

(Note: Employees may be covered separately)

Coverage

The coverage is the same as under individual policy except

that cumulative bonus and education grant do not apply. Medical

expenses and war risk extensions are available.

Sum Insured

The sum insured may be fixed separately for each insured

person or it may be linked to emoluments payable to the insured

person. In the latter case, the following endorsement in incorporated

in the policy.

The premium for this insurance is calculated on the wages or

salaries paid by the employer to the insured persons during the

period of insurance and employer shall keep an accurate record of all

such payments and shall at all times allow the Company to inspect

such record. The employer shall within one month of the expiry of

each period of insurance furnish to the Company a statement of the

payments, and the premium for such policy shall thereupon be

adjusted by a further payment to or refund by the Company as the

case may be.

49


Premium

Rates of premium are applicable to named employees as per

the classification of risks and the benefits selected. Thus rates will

vary according to the occupation of persons covered. For example,

the same rate will apply to well-defined groups of employee all of

whom, broadly speaking follow the same type of occupation.

In respect of unnamed employees the employer is required to

declare the number of employees in each classification based on

authentic records maintained by him. Rates of premium for named

member of an Association, Clubs etc. apply according to the

classification of risk.

Where the membership is of a general nature not restricted to

a particular occupation, Underwriters use their discretion in applying

the rates.

On Duty Covers

If P.A. cover is required only for the restricted hours of duty

(and not for all the 24 hours of the day), a reduced premium

equivalent to 75% of the appropriate premium is charged. The cover

applies to accident to the employees arising out of and in the course

of employment only.

Off Duty Covers

If cover is required only for the restricted hours, when the

employee is not at work and / or not on official duty, the reduced

premium of 50% of the appropriate premium can be charged.

50


Exclusion of Death Cover

It is possible to issue Group P.A. policies excluding the Death

benefit, subject to following conditions:

a) A group life policy covering Death benefit for the same group of

persons is in existence.

b) A discount in the premium applicable to death cover is allowed

from the total premium.

Proposal Form

It is customary to dispense with forms for completion by the

members and to have one document only, completed by the insured.

He is required to make a declaration that no member suffers from a

physical infirmity or defect, which would render his participation

unacceptable. Sometimes even this precaution is waived, it being

understood and / or made clear by endorsement that disability prior

to the commencement of cover and also any cumulative effect as a

result of such disability stand excluded.

51


New Schemes

Raj Rajeshwari Mahila Kalyan Yojna

This is a personal accident insurance scheme designed for

women in the age group of 10-75 years irrespective of their income,

occupation or vocation.

Coverage

The Insurance cover would be available on 24 hour risk basis.

If the insured shall sustain any bodily injury resulting solely and

directly from Accident caused by outward, violent and visible

means, and if such injury shall within 6 calendar months (unless

otherwise specified) of its occurrence lead to disablement, then the

company shall pay to the Insured the sum specified below:

a) Permanent Total Disablement Rs. 25,000/-

b) Loss of one limb and one eye or loss

of both eyes and / or loss of both limbs Rs. 25,000/-

c) Loss of one limb / sight in one eye Rs.12,500/-

Death due to accident as defined is also covered. In the case

of unmarried woman the compensation of Rs.25,000/- is payable to

the nominee or legal heir.

In the case of married woman, compensation of Rs.25,000/- in

the event of the insured's husband's death due to accident, is payable

to the wife only. In the event of wife pre-deceasing the husband \ or

52


simultaneous death of both husband and insured wife, no

Compensation shall arise under this extension.

Definition / Explanation

Permanent Total Disablement means such disablement of a

permanent nature as incapacitates an insured for all work, which she

was capable of performing at the time of the accident resulting in

such disablement.

Death or disability by accident caused by external, violent and

visible means would include Death and or Permanent total

Disablement arising out of or traceable to slipping and / or falling

from the mountainous terrain, biting by insects, snakes and / or

animals; drowning, washing away in floods, landslides, rock slides,

earthquake, cyclone and other convulsions of nature and / or

calamities, murder and terrorist activities.

In the case of woman it also includes Death and Permanent

Total Disablement caused by surgical operations such as

sterilisation, cesarean, hysterectomy, i.e. removal of uterus and

removal of breasts due to cancer operations, death at the time of

child birth provided that such deaths occur during the surgical

operation in hospital/nursing home or whilst being in the hospital /

nursing home after such surgery convalescence, however not beyond

a period of seven days from the date of surgical operations.

53


Extended Coverage

On payment of additional premium, the policy is extended to

cover the following:

Sr. Risk Covered Compensation

Payable

i. Temporary total disablement arising out of an

accident defined here above and· resulting in

hospitalisation as an in patient resulting in

total disability to engage in any occupation or

work or employment

Rs.500/- per

month subject to

max. of

Rs.l,500/-

ii. Legal Divorce: Actual legal expenses

necessarily incurred for legal divorce

proceedings initiated during the currency of

the policy and incurred during the currency of

the policy or during renewal of the policy but

once in lifetime of the insured and provided

the expenses shall be reimbursed only on

obtaining divorce decree.

Actuals not

Exceeding

Rs.2,000/-

iii. Loss and or damage to household goods /

personal effects whilst contained in house /

dwelling arising out of fire, lightning, riots,

terrorism, storm, typhoon, flood, cyclone and

earthquake.

Rs. 2,000/-

The exclusions and policy conditions are more or less the

same as under individual personal accident policy. However there is

a special condition, which provides that if a similar policy is taken

54


with one or more insurers, the maximum liability of insurers is

limited to a sum of Rs. 25,000/- only.

Premium

Basic cover - Rs.15/- per woman per year.

Basic cover with extended cover - Rs.23/- per woman per year.

Group Discount

This discount is allowed on the basis of number of persons

covered under the policy.

Long Term Discounts

Term Of The Policy

(Years)

Discount

(%)

1

2

3

4

5

Nil

5

10

15

20

Proposal Form

The form elicits details such as name, address, age,

occupation, name and age of husband, if married, nomination etc.

The form includes a declaration that the answers are true and the

proposer does not suffer from any disablement or incapacity.

55


Bhagyashree Child Welfare Policy

This scheme is applicable to girl children in the age group 0 to

18 years, whose parents' age does not exceed 60 years. The scheme

is intended to provide insurance cover to ONE girl child in a family

who loses either the father or the mother due to accidental death.

Coverage

The Insurance cover would be available on 24 hour risk basis.

In case of death of either or both parents resulting solely and directly

from Accident caused by outward, violent and visible means, and if

such accident shall within 6 calendar months (unless otherwise

specified) of is occurrence lead to death then the company shall

deposit a sum of Rs.25,000/- in the name of the gir1 child mentioned

in the schedule of the policy with a financial institution named in the

schedule.

The financial institution shall make following disbursements

from Corpus created out of the deposit amount for the benefit of the

girl child to the living parent or to the nominated guardian or the girl

child as the case may be, in the following manner.

56


Age of the

Girl

Child

Amount of

Compensation

Payable to

1 – 5 years Rs. 1,200 P.A Surviving parent or guardian

for looking after the needs of

the child.

6 – 11

years

Rs. 1,200 P.A Surviving parent or guardian

provided the girl child is

admitted in a school and

expenditure is incurred on her

education.

12 – 17

years

Rs. 2,400 P.A Surviving parent or guardian

provided the girl child is

admitted in a school and

expenditure is incurred on her

education.

18 years Balance amount to

the credit of the girl

child

To the girl child.

In case of discontinuation of studies by the child the

scholarship will not be paid but on completion of 18 years balance

amount to her credit will be paid as a lump sum.

In case of death of the girl child before attaining the age of 18

years balance amount standing to the credit of the girl child would

be paid to the surviving parent or guardian.

57


The definition / explanation of death by accident, exclusions,

policy conditions are more or less the same as under Raj Rageshwari

Mahila Kalyan Yojana.

Premium

The premium is Rs.15/- per girl child Per Year. Group

discount is provided as follows:

No. Of Persons Discount (in %)

250 - 1,000

1,001 - 10,000

10,001 - 1 LAC

ABOVE 1 LAC - 2.5 LACS

ABOVE 2.5 LACS - 5 LACS

ABOVE 5 LACS - 10 LACS

ABOVE 10 LACS

5

10

15

30

35

40

45

Proposal Form

The form elicits details of name, date of birth and address of

the girl child to be insured and the parents and name and address of

the nominated guardian, etc.

Claims Procedure

A uniform claims procedure has been prescribed.

According to this procedure the functions of the policy issuing office

are to:

58


(a) Process claims and send intimation of approval of claim to the

insured girl / surviving parent/ guardian.

(b) Submit monthly summary statement of all claims approved with

supporting documents along with a consolidated amount for all

claims @ Rs.25, 000/- per claim, to the GIC Asset Management

Co. Ltd.

(c) Enrol the insured girl child as a member of the GIC Bhagyashree

Child Welfare Plan, which managed by the GICAMC on behalf

of GIC Mutual Fund.

(d) Confirm schooling details of the insured girl child and make

disbursements to the concerned party on receipt of periodic

payments from ‘GICAMC’

(e) Monitor each claim account and advice GICAMC of changes, if

any.

The functions of the GICAMC are to ensure that, within 30

days of the receipt of the monthly summary statement, that

membership advice is mailed to the beneficiary and to the policy

issuing office and to issue payment warrants to the policy issuing

office.

59


Conclusion

60

Economy & Finance

Introduction personal accident insurance