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CMA Final · Risk Management in Banking and Insurance

Concept and Types of Health Insurance Policies for CMA Final

Health insurance is a contract where an insurer pays or reimburses defined medical costs in return for a premium. For exams, learn the concept, the main policy types, the terms, coverage and exclusions, and the Insurance Act, 1938 rules on benefits, expenses, councils and motor third party business. Then apply them to cases.

What this chapter covers

This chapter builds the base of health insurance in Paper 20B. It starts with what health insurance is and why it behaves differently from other insurance. It then covers the policy types you must tell apart, and the terms, coverage and exclusions that decide whether a claim is payable.

The last part is legal. The Insurance Act, 1938 sets out how far an insurer must go on policy benefits, how management expenses are controlled, what the Life and General Insurance Councils are, and what duty an insurer has for motor third party risks and for rural and backward sections. These are short provisions. You should know their exact wording.

The chapter links to the rest of the paper. Later chapters on underwriting, pricing, claims and risk management in insurance all use the policy types and terms you learn here. If these are weak, the case-based questions later will feel harder than they are.

Section A has 15 multiple choice questions, and Paper 20B can place a case scenario there with 5 MCQs. This chapter gives you easy, definition-based marks, because a policy type or an Act provision is either right or wrong. In the written section, a short case on a claim or a policy feature rewards you if you apply the terms, coverage and exclusions step by step. The Act provisions are brief, so a few hours of exact learning can secure marks that many students lose through loose wording.

Concept and Types of Health Insurance Policies: topics in the order to study them

  1. 1Concept and Nature of Health InsuranceStart here. Every later topic uses these basic ideas of risk, premium and indemnity or benefit.
  2. 2Types of Health Insurance PoliciesOnce the concept is clear, learn how policies differ, so you can classify any product in a case.
  3. 3Health Insurance Policy Terms, Coverage and ExclusionsTerms and exclusions only make sense after you know the policy types they sit inside.
  4. 4Insurance Act 1938: Limits on Benefits and Management ExpensesMove to the law after the product is clear. Sections 4, 40B and 40C are short and need exact reading.
  5. 5Insurance Councils and Third Party ObligationsStudy this last. It covers Sections 64C, 64M, 32C and 32D, which are separate small provisions best revised together.

How to prepare Concept and Types of Health Insurance Policies

Treat this chapter as two blocks: product knowledge, which you apply, and law, which you recall exactly.

  1. Read the concept topic once and write a three-line definition of health insurance in your own words.
  2. Make a one-page comparison of policy types: who is covered, what is paid, and how the claim works.
  3. For terms, coverage and exclusions, list each term with a one-line meaning and a small example in rupees, such as a claim reduced by a deductible or co-payment.
  4. Read the Act sections slowly. Note who the section binds, what it requires, and whether the detail is left to regulations.
  5. Make a short table-free list of the sections: 4, 32C, 32D, 40B, 40C, 64C and 64M, each with one line of what it says.
  6. Practise MCQs and short case questions. For each case, name the policy type, check coverage, then check exclusions before you conclude.
  7. Revise the page twice in the last week and recite the Act points without looking.

Common mistakes in Concept and Types of Health Insurance Policies

  • Mixing up Section 40B and Section 40C.

    Fix: Remember that 40B limits life insurance expenses by a regulation amount. 40C, as now worded, requires every insurer to report expense details.

  • Saying Section 4 forbids paid-up policies or surrender values.

    Fix: Learn the proviso: the insurer may still convert a policy to paid-up or pay a surrender value of any amount.

  • Treating the Section 32D exemption as applying to every insurer.

    Fix: State that the Authority may exempt by regulations only an insurer primarily engaged in health, re-insurance, agriculture or export credit guarantee.

  • Declaring a claim payable without checking exclusions.

    Fix: Follow a fixed order in every case: policy type, coverage, terms such as waiting period or co-payment, then exclusions.

  • Claiming Section 64M allows immediate penalty for an expense breach.

    Fix: Write the steps: hearing, warning, and action only when two warnings are disregarded.

  • Giving fixed figures where the Act leaves limits to regulations.

    Fix: Say the limit or percentage is as specified by the regulations, and do not invent a figure.

Last-day revision: Concept and Types of Health Insurance Policies

  • Health insurance pays or reimburses defined medical costs against a premium.
  • Always classify a policy type first when you read a case.
  • Check coverage first, then exclusions, before deciding if a claim is payable.
  • Section 4: the insurer pays a minimum annuity and other benefits as set by regulations, excluding profit or bonus.
  • Section 4 does not stop an insurer from converting a policy into a paid-up policy or paying any surrender value.
  • Section 40B: a life insurer cannot spend on management expenses in a financial year more than the amount specified by regulations.
  • Section 40C: every insurer must give the Authority details of management expenses in the manner and form set by regulations.
  • Section 64C: the Life Insurance Council and General Insurance Council are deemed constituted as the councils under the Act.
  • Section 64M: after contravention of Section 40C, the Authority may warn after hearing the insurer; action follows only if two warnings are disregarded.
  • Section 32C: insurers must serve rural, unorganised sector and backward classes, and the policies include crop insurance.
  • Section 32D: a general insurer must underwrite the minimum percentage of motor third party business set by regulations.
  • Under Section 32D, the Authority may exempt insurers mainly in health, re-insurance, agriculture or export credit guarantee.

Concept and Types of Health Insurance Policies practice questions

Concept and Types of Health Insurance Policies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Concept and Types of Health Insurance Policies: frequently asked questions

What is the main focus of this chapter in Paper 20B?

It covers what health insurance is, the types of policies, their terms, coverage and exclusions, and the related provisions of the Insurance Act, 1938. Expect both definition-based MCQs and application to short cases.

Do I need to memorise section numbers of the Insurance Act, 1938?

Yes, for the sections in this chapter, such as 4, 32C, 32D, 40B, 40C, 64C and 64M. Learn what each says in plain words. Use the number along with the rule, not alone.

Are the expense limits fixed in the Act itself?

No. Section 40B refers to an amount specified by the regulations. Section 40C requires insurers to furnish details of expenses in the manner set by regulations. So do not quote a fixed limit from the Act.

How do I approach a case question on a health claim?

Identify the policy type, then check what is covered, then apply terms like waiting period or co-payment, and finally check the exclusions. State a clear conclusion on what is payable and why.