Life Insurance for CMA Final Risk Management Paper

What this chapter covers

Life Insurance: topics in the order to study them

1. 1Life Insurance: Concept, Principles and ContractEverything else rests on the contract and its principles, such as insurable interest and utmost good faith, so start here.
2. 2Types of Life Insurance PlansOnce you know the contract, you can see how term, endowment, whole life and other plans differ in benefit and purpose.
3. 3Policy Conditions, Premium and Policy DocumentsPremium rules, policy conditions and documents make sense after you know the plans, and they link to Section 64VB on advance premium.
4. 4Underwriting, Risk Selection and Actuarial ValuationThis explains how the insurer decides who to accept and at what price, using the premium ideas you just learned.
5. 5Claims Settlement in Life InsuranceClaims are the end of the policy cycle, so study them after contract, conditions and underwriting are clear.
6. 6Life Insurance Council under Section 64CMove to the legal framework next, starting with how the Council is deemed to be constituted under the Act.
7. 7Authorities of the Life Insurance Council under Section 64EFinish with the Council's authority, the Executive Committee, which builds on Section 64C and connects to Sections 64F and 64R.

How to prepare Life Insurance

1. Read the contract and principles topic and write each principle in one line with a small example of your own.
2. Make a one-page comparison of the plan types: what is paid, when, and who it suits.
3. Learn the premium rules. Note that under Section 64VB an insurer assumes risk only when premium is received, guaranteed in the prescribed way, or a prescribed deposit is made in advance.
4. Trace one policy from proposal to underwriting to valuation to claim, and note what can go wrong at each step.
5. Memorise the Act provisions in plain words: Section 64C (existing Councils deemed constituted), Section 64E (authority is the Executive Committee), Section 64F (composition), Section 64R (powers), Section 41 (rebates) and Section 52 (dividing principle).
6. Practise 15 MCQs on the chapter, then write two short case answers that name the principle or section and apply it to the facts.

Common mistakes in Life Insurance

• Confusing the Life Insurance Council with the General Insurance Council

  Fix: Note that the Life Council represents life insurers, while the General Council represents general, health and reinsurance insurers. Read the question for which one it names.

• Saying risk can be assumed any time after the proposal

  Fix: State the rule: no risk until premium is received, guaranteed as prescribed, or deposit made in advance, with the stated exceptions by rules.

• Treating all bonuses as banned under Section 52

  Fix: Add the proviso: bonuses allocated to life policyholders from a periodic actuarial valuation are permitted.

• Stating the rebate rule without its exception

  Fix: Include that rebates allowed under the insurer's published prospectuses or tables are not barred, and note the penalty limit.

• Listing principles without applying them to the case

  Fix: Name the principle, quote the fact that triggers it, then give the conclusion.

• Ignoring the Executive Committee when discussing Council authority

  Fix: Remember that the Council's authority is the Executive Committee, and learn its composition and Chairperson rule.

Last-day revision: Life Insurance

• ✓Life insurance is a contract: insurer pays on death or maturity, policyholder pays premium.
• ✓Know the core principles: insurable interest, utmost good faith and the others in your material.
• ✓Term plans give protection; endowment plans combine protection with maturity benefit.
• ✓Section 64VB: no risk assumed until premium is received, guaranteed as prescribed, or deposit made in advance.
• ✓Section 64VB(4): an agent must deposit collected premium in full, without deducting commission, within twenty-four hours, excluding bank and postal holidays.
• ✓Section 64VB(3): refunds go directly to the insured, never credited to the agent's account.
• ✓Section 41: no rebate of commission or premium, except as allowed by the insurer's published prospectuses or tables; penalty may extend to ten lakh rupees.
• ✓Section 52: no business on the dividing principle; bonuses from periodic actuarial valuation are allowed.
• ✓Section 64C: the existing Life Insurance Council and General Insurance Council are deemed constituted under the Act.
• ✓Section 64E: the authority of each Council is the Executive Committee.
• ✓Section 64F: each Executive Committee has four elected member representatives, and one of them is elected Chairperson.
• ✓Underwriting selects and prices risk; claims settlement ends the policy cycle.

Life Insurance practice questions

• Under the Insurance Act, 1938, in the winding up of an insurance company that also carries on other classes of business, how are the assets …
• Under the Insurance Act, 1938 as reproduced, which body is deemed to be constituted as the representative body of insurers carrying on life …
• Under the Insurance Act, 1938, as set out in the provided text, which body is described as the representative body of insurers who carry on …
• Under Section 64F of the Insurance Act, 1938 as provided, the Life Insurance Council's Executive Committee fails to get one of its members e…
• Under the Insurance Act, 1938, the Executive Committee of the Life Insurance Council includes four representatives of members elected in the…
• Under Section 64R of the Insurance Act, 1938, which of the following can the Life Insurance Council do by making bye-laws?
• Under Section 64R of the Insurance Act, 1938 as provided, which of the following can the Life Insurance Council do through bye-laws?
• Under Section 64F of the Insurance Act, 1938, how is the Chairperson of the Executive Committee of the Life Insurance Council chosen?

Life Insurance in other exams

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

• NISM CertificationsLife Insurance Products
• CS ProfessionalConcept of Insurance
• Actuarial Core Principles (IAI)Key assurance and annuity contracts
• CMA IntermediateTreatment of Joint Life Policy