Solved question paper for FI May-2019 (BCOM 4th)

Question paper 1

1. SECTION-A

   I. Explain the meaning and nature of insurance

   Answer:

   Insurance is a contract between two parties, here one party is the insured and another party e is the insurer. insurance provides various advantages to the various field. The elementary purpose of insurance is to provide protection against future risk, accident, uncertainty.

   Insurance is a contract between insurer and insured under which the insurer undertakes to compensate the insured for the loss arising from the risk insured against. On the other hand insurance is contract in which one party E for a consideration consumer a particular risk for the another party and promises to pay the other party or his beneficiary a certain or ascertainable sum of amount on the happening of specified against which the insurance is asked for.

   Definition:- Insurance is defined as a Cooperative device to spread the loss caused by a particular risk. Over the number of persons who are exposed to it and you agree to ensure themselves against the risk.

   Nature of Insurance:-

   1. By nature is a divorce of sharing risk by large number of people among few who are exposed to raise the bi on the other reason.

   2. The last number of subscribers to insurance a the purpose of compensation to few among them exposed to uncertain risk appear as a Cooperative look.

   3. Valuation of raised is a determined as per predefined term and condition of the insurance policies.

   4. Insurance provides facilities of financial help in case of contingency.

   5. However it depend on the value of insurance of for which payment is made in case of contingency. This provide basis of the amount to be paid.

   6. Insurance is a policy of a regulated under law and therefore the amount of insurance can never be paid as a gambling not as charity.

2. II. Discuss the nature of insurance contract.

   Answer:

   A contract of insurance is a contingent contract. The general principles of law of contract must be compiled weather for a contract of insurance to be valid. Contract of insurance comes into existence where there is an offer and underwriter for the insurance accept it by issuing the policy. The contract of insurance can be entered into only by person competent to contract.

   A contract of insurance other than life insurance contract is a contract of indemnity. The insurance undertake to indemnify the insured for lose or damage arising a result of risk specified. In case of life insurance if a person dies in the insurance company can only give a specified claim amount of compensation to the survivors it cannot indemnify the loss of loss of life since the person who is that cannot be brought back.

   Nature of contract:-The nature of contract is a fundamental principle of contract of insurance required for a valid contract. In essential element of valid contract are

   1. Agreement(Offer and acceptance)-Insurance is an agreement between insurance and insured proposal is made by one party and accepted by another party.

   2. Lawful Consideration-Premium is consideration for insurance of contract.

   3. Lawful Objects:- Object is insurance is a lawful add a not against to the public policy.

   4. Free Consent:- Consent of a party to contract should be free for example not by means of concern undue influence, fraud, misrepresentation etc.

   5. Competent Parties( Legal capacity of Parties):- Parties do an insurance contract should be complaint to contractor for example they should not be idiot, lunatic. Minor, installment etc.

   6. Consensus ad idem-parties:-Parties to contractor should understand the subject matter of insurance in some sense.

   7. Probability and certainty of performance etc.

3. III. Describe the various type of insurance.

   Answer:

   Type of Insurance

   These are explained below;-

   Life Insurance:- It is it different from other insurance in the sense that hair the subject matter of insurance is life of a human being. The insurance will pay the fixed amount of insurance at the time of death or at the expire of the certain period. At present Life Insurance enjoy maximum scope because life is most important property of an individual.

   General Insurance:- It include property insurance laboratory insurance and other form of insurance fire and marine insurance are strictly called property insurance. Motor, theft, first it and machine insurance include the extent of Liberty insurance to certain extent. The strictly form of Liberty insurance is insurance where by the insurance compensate The Lost to the insured when he is under the liability of payment to the third party.

   Property Insurance:-Under the property insurance the property of a person are include against a certain specified risk. The risk may be fire or marine theft of property or goods damage to the property at the accident.

   Marine Insurance:- Marine Insurance provide protection against loss of marine perils full stop the tamarind trees are with a rock on ship Attack by bye enemies fire and capture by etc. These prints cause damage destruction and disappearance of ship and cargo and non payment. The marines instruction insurers ship carge and freight.

   Fire Insurance:- Fire Insurance covers the risk of fire. In the absence of fire insurance the fire waste will increase not only the individuals but to the security as well. With the help of fire insurance the losses arises due to fire and company created and the society is not losing much.

   Liability Insurance:-the General Insurance also include laboratory insurance where by the insured is liable to pay the damage of property or compensate for the loss of person injury and death to stop the insurance is seen in the form of fidelity insurance, automobile insurance and machine insurance etc.

   Social Insurance:-the social insurance provide protection to weaker section of the society who is unable to pay the premium for the adequate insurance. Pension plan disability benefit unemployment benefit of Commerce sickness insurance and industrial insurance are form of social insurance.

   Personal Insurance:-It include Insurance of human life which may suffer at loss due to death accident or disease.

   Miscellaneous Insurance:- The property goods, machine, furniture, automobile, valuable article etc. Can be insured against the damage or destruction. Due to accident or disappearance due to theft.

   There are different form of insurances for each type of set property where by not only property insurance exist but liability in exists but liability insurance and personal injuries are also the insurers.

4. IV. What is the annuity policy? Describe its user and types.

   Answer:

   An annuity is a type of policy e issued by an insurance company designed to accept and Growth Fund, and upon and annuitization, create a stream of income for payment. The money you can either a lump sum or number of payment of, this contribution generally on a rate of return generally tax deferred.

   Uses of annuity policy:- Annuities are used mainly to supplyment most additional source of retirement income such as a social security and pension plan common feature include

   1. Tax-differed Growth:-You bill pay no income taxes on the earning from your duty investment until you begin making with draw receiving periodic payment.

   2. Unlimited contribution:-There is there no limit to amount of after tax money you can put into an annuity regardless of your income level or source of income.

   3. Choice of Investment options:-Fixed and duties offer started rate of return for specific period of time. Variable and duties include a variety of investment like stock, Bond or money market investment that flactuate with the market condition.

   4. NO Mandatory Edith drawls:- If your duty is not part of IR aur aap qualified retirement plan, you are not required to begin taking minimum distribution after Age 72.

   5. Death Benfit:-Payout method in general include insurance feature that guarantee payment to your design beneficial if you die before withdrawal begin in most cases this payment does not have to pass through probate.

   6. Lifetime income benefits:-Typically you will have server option for receiving and duty payment for the rest of your life including the choice of continuing payment to fisheries for a set of period of time.

   Types of Annuity

   There are two type of annuity in India based on period man and duty is paid deferred and immediate.

   1. Deferred annuity:- Under this type of annuity you pay a lump sum amount and the annuity pay out after a specified derivation this annuity are postponed for a certain date and the duration for which it is postponed is called the deferment period.

   2. Immediate Annuity:-Under immediate annuity pay lump sum money to by the annuity therefore and duty start immediately from the following month half year or a year you have to choose the annuity frequency and duty pay out would be paid on every subsequent frequency till your lifetime.

6. SECTION-B

   V. Trace the growth and development of Insurance sector in India.

   Answer:

   The insurance industry is critical for any countries income development a well-developed Insurance sector boost risk taking in the country as it provides some security in the event of an unforeseen loose causing incident. It also much needed support to family member in the case of Lost of Life for health for stop since the assist under management of insurance companies represent long term capital, they also act as pole in which the invest the long-term project such as infrastructure development.

   The insurance industry in India has also grown along with the countries economy. Serval insurance companies in country are expanding their operation across the both the public and private sector.

   Development in the public sector:-The last few years have seen a lot of activity in the sector. This is a Testament to a vibrancy e of the industry in India. Here are few example of different categories of deal and development.

   1. Strategic Deal:- HDFC ERGO general insurance Co. Is it ok to enquire Apollo Munich Health Insurance.

   2. Financial investors:- A consortium of private equity frame westbridge capital and medisom capital as well as a billionaire investor Rakesh Jhumjhunwala are any discussion to enquire over 90% stake in Star Health and allied insurance.

   3. Initiatives by non-sector players:-Indian eCommerce Gate Flipkart has tied up with Bajaj Alliance general insurance to provide customised insurance product for mobile phones sold on Flipkart.

   4. New product Offerings:- HDFC EGRO launched a new product caller secure a cyber insurance policy to protect individual and family from cyber attack.

   Future Outlook and Growth Drivers:- The insurance industry in India is expected to register health Li, consistent growth based on following drives.

   1. Law insurance penetration in India 3.69%(2017),compared to 6.3% globally (2016).

   2. Government programs to increase insurance cover Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana, Ayushman Bharat etc.

   3. Strong growth in the automotive industry is expected to boost motor insurance.

   4. Increasing interest in buying insurance risking interest usage hair contribute to the increasing interest.

   5. Innovative product like a unit linked insurance plan have contribute to the growth of insurance cover.

   6. New distribution channel such as bancassurance, online distribution and NBFCs are contributing to the growth in insurance cover.

7. VI. Explain the various life insurance policy of different insurance companies.

   Answer:

   Different life insurance policies

   1. Term life Insurance:- Term insurance plan are those plan that is purchased for a fixed period of time se 10 20 and 30 years all the policy don't carry any cash value there policy do not carry any maturity benefit hence their policy are are cheaper as compared to other policies. Their policies turn beneficial only on the accuracy of event.

   2. Endowment policy:- The only difference between the term insurance plan and the endorment policy is that endowment policy come with the extra benefit that the policyholder will receive a lump sum amount in cash if he survive until the date of maturity. Arrested detail of term policy are same and also applicable to to an endowment policy.

   3. Unit Linked Insurance Plan:- These plan offer policyholder to build wealth in addition to life security premium paid into this policy is bifurcated into two parts one for the purpose of life insurance and another for the purpose of building wealth for stop this plan of a two partially withdraw the amount.

   4. Money Back Policy:- This policy is a similar to endowment policy e, the only difference is that the policy provide many survival with are allocated proportionatedly over the period of the policy term.

   5. Whole Life Policy:- Unlike other policies which expired at the end of specific period of time this policy extend up to the whole life of the insured. This policy also provide the survival benefit to the insured.

   6. Pension Plan:- In this policy is the most collected in the form of premium is accumulated as a system and distributed to the policy holder in form of income by way of annuity and lump sum depending on the instruction of insured.

8. VII. Explain the role and unit linked life insurance product as a tool of financial planning.

   Answer:

   Unit linked insurance plan are an attractive option available for your retirement planning ULIPsprovide the benefit of both insurance as well as Mutual Fund. The nature of the products help you plan for a happy retired life.

   Characteristics That make ULIP an essential investment tool:-

   ULIP Ensures higher Returns:- Where invest your hand and money you think of two basic thing security of returns. U l i p provide both full stop the average returns in u l i p r considerable higher than other alternative salike bonds endorsement plan, FD, pension plan etc. The reason behind Sach superior return is that the fund are invest in the equality market. Here you are getting the benefit of equity market at a much lower risk compared to the actual equity market because of diversification and professional fund Management by expect.

   ULIP Gives Wide Rang of Option:-No to investor have the same risk appetite. U l i p understand that are provide a myriad of investment option to the investor. There are three basic categories of fund available

   1. Equity funds where major focus is given to investing the equity.

   2. Debit fund where focus is bonds, Government Security etc.

   3. Balanced fund where is a mixture of about 2.

   Under the three Basic option, there are number of wonder with almost endless number of variations.

   ULIP also gives Flexibility to Switch:- When we started investing in ULIPs when the stock market was giving excellent returns. Being informed investor, which rule and equity basis fund couple of years down the line the market is not doing well you prefer a more secure debit option of your money.

   Top up and riders: It we have supplies money to invest in a Fund with superior return you will provide you the option by top of a premium you can put the extra fund in your existing plan with relative Lee low cost. The charges for top up premium are generally 1% to 3% which is considerabley lower than obtaining any fresher policy.

   Director mint life is the one where you are stress free. Here you should not be worried about money for your daily activities. ULIPs take care of that and also provide enough indulge in certain luxries.

9. VIII. Discuss the power and functions of IRDA.

   Answer:

   Section 14 of IRDA 1999 Lays down the duty, power functions of IRDA.

   1. Tu Ishu to the applicant a certificate of registration, to renew modify, withdrawal suspend or cancel Sach registrations.

   2. To issue of licence intermediaries or agents.

   3. To protect the interest of the policy holder in matter concerning assigning of policy nomination by policyholders insurable interest, settlement of insurance claims rounders value of policy and other terms and condition of contract of insurance.

   4. To specify requisite qualification code of conduct and practical training for intermediate Re for insurance intermediaries and Agents.

   5. To specify the code of conduct for survivors and Los assisters.

   6. To promote efficiency in the conduct of insurance business.

   7. To promote and regulate professional organisation connected with the insurance and reinsurance business

   8. To levy fees and other charges for carrying out the proposers of this acth.

   9. To call information from undertake inspection of conduct enquiry and investigation including audit of the insurance intermediaries, insurance intermediaries and other organisations connected with the insurance business.

   10. Control and regulations of the rates advantages, term and condition that may be offered by insurers in respect of general insurance business not so controlled and regulated by the traffic advisory under section G4U for the insurance act 1938.

   11. To regulate investment of funds by insurance companies.

   12. To regulate maintenance of margin of solvency.

11. SECTION-C

    IX. Write the short note on any ten:-

    1. Insurable interest

    Answer:

    Insurable interest is defined as a reasonable concern of a person to obtain insurance for any individual or property against unforeseen event such as death, losses etc.

    A person or entity has insurable interest in an item, event or action when the damage or laws for another hardship. To have an insurable interest a person or entity would take out an insurance policy for texting the person item or event in question the insurance policy mitigates the risk of loss should something beset the asset.

12. 2. Risk appraisal

    Answer:

    Risk appraisal is the process of assessing the likelihood of a policyholder fitting a claim. Risk appraisal easy used to determine premium policy for individual applying for coverage. After the applicant risk is appraisal they are placed into a certain risk class by the insurance and ID are offered insurance option that are priced accordingly.

13. 3. Principle of contribution

    Answer:

    Principle of contribution is a enrollary of the principal of in solemnity . According to this principal, the insured can claim the the compensation only to the extent of actual less is there from all ensure or from any one insurer. If one insurance pay full compensation than that insurer can claim proportionate claim from the another insurers

    Essential condition of contribution

    1. All the insurance master related to same subject matter.

    2. The policies concerned must all cover the same interest of the same insured.

    3. The policies concerned must all cover the same peril which causes the loss.

14. 4. Insurance as security tool

    Answer:

    Insurance provides a wide range of benefits of people from different economic background. However the basic concept of life insurance still remain the same on Universal level first of the purpose of life insurance to provide for unforeseen contingencies such as the death or disability of the policyholder who made typically be are working or earning member of family. Essentially it actor as a social security tool.

16. 5. Health Insurance

    Answer:

    Health Insurance is a type of insurance coverage that pay for medical surgical sometime dental expenses insured bhai insurance, Health Insurance can the insured for or expenses incurred from illness or injury or pay provided directly. It is often include injury or pay the care provider directly. It is often include the employer benefit package as a mean of quality Employees with premium partially covered by the employer but often also so delicate from employer paychex. The cost of health insurance premium deductible is to the pair and the benefit received are tax free.

17. 6. Limitation of annuity

    Answer:

    Limitation of Annuity:-

    1. Annuity income Railway tax just like ordinary income so there is a chance that you tax rate could go up between you and the time you want your annuity to start paying out.

    2. Annuity main restricted to flexibility sensor early withdrawal of fund means paying a penality.

18. 7. Bank assurance

    Answer:

    Bank insurance is guarantee by Federal deposit Insurance Corporation of deposit in bank created a 1989 the bank insurance fund is the federal find used in insurance Bank deposit of national add State Bank that are member of the Federal reverse system full stop bank insurance helps to protect individuals for deposit their savings in bank against commercial bank insolvency.

19. 8. Whole life insurance

    Answer:

    Whole life plan is also called as a straight life ordinary life. It remains throughout the insured whole life time provide the premium are paid. A certain aforementioned amount is paid to the nominee in the event to insured dies. The policyholder at anytime withdraw the policy or borrow against it. The maturity age of the policy is hundred year. It is insured live past the maturity age the policy will become mature endorsement. The death benefit under this plan is tax free.

21. 9. Policy reinsurance

    Answer:

    Reinsurance occur when multiple insurance company share risk by purchasing insurance policies from one insure auto limit their own total loss in case of disaster. Described as insurance for insurance companies by reinsurance Association of America the idea is that no insurance company has too much exposed to a particularly large event or disaster.

22. 10. Endowment insurance

    Answer:

    Endowment plans are life insurance policies that not cover the individual life in case of any other unfortunate event but also offer a maturity benefit at the end of the term. After a specific period of time called maturity they are designed to pay a a lump sum amount. The insurance company will pay the assured sum to the endorsement policy holder nominee in as of holder death or to holder himself on a fixed date in the future.

23. 11. ULIP

    Answer:

    ULIP-unit linked insurance plan is a plan which is policyholder pay on annual or monthly premium where in the ULIPact as a life insurance product as well as an investment. It provides a life insurance cover to the policyholder along with investment option. A small amount of premium goes to secure the the life of the investor and the rest of the money is put into investment such as a stock bonds and mutual fund.

24. 12. Distribution channel in insurance.

    Answer:

    The aim of a distribution channel is to allow customer to assess and purchase products in the most efficient way for the business. We compare the various distribution channel and consider how insurance companies may use direct or indirect channels for combination of two to distribute their products.