LIC ADO INTERVIEW QUESTIONS & ANSWERS

• Tell me about yourself. HR Q
• What do you know about Life Insurance?
  A life insurance policy is essentially a contract between an individual and an insurance provider, where the company promises to pay a specified amount of money to the family or beneficiary of the individual, in return for regular payments over a period of time.
• Why have you applied for LIC ADO? HR Q
• Where is Corporate Office/Head Quarter of LIC located?
  Life Insurance Corporation of India (LIC) is an Indian public sector life insurance company headquartered in Mumbai.
• Can you tell some of the objectives of LIC?
  Objectives of LIC –

It aims to conduct business economically while taking into consideration that the money belongs to the policyholders.

It aims to maximize the mobility of people's savings through attractive insurance-linked savings.

• Who is the person who buys the insurance?
  Policyholder – the person who buys the insurance; also called the "insured."
• Who are the people who purchase insurance policies generally considered to be?
  An entity which provides insurance is known as an insurer, insurance company, insurance carrier. An individual or company that purchases insurance is known as an insured person or a policyholder.
• Can you explain why to buy a policy?
  -To provide financial protection if sued, such as if a visitor should sue for negligence after injuring themselves on your property.
  -To fulfill long-term and short-term financial planning goals in the event of death or terminal illness.
  -To help pay for illness and health maintenance.
• Do you know the role of LIC ADO/AAO?
  Job Responsibilities: LIC AAO's responsibilities include policy issuance, customer service, financial planning, and administrative tasks, while
  LIC ADO's responsibilities include selling insurance policies, recruiting agents, and meeting sales targets.
• How many types of insurance companies are there?
  Different types of general insurance include motor insurance, health insurance, travel insurance, and home insurance.
• Tell something about General Insurance Companies.
  General insurance is an agreement between a policyholder and insurer wherein the insurance company protects your valuable assets from fire, theft, burglary, or any other unfortunate accident. Often, general insurance is confused with life insurance.
• What do you know about Life Insurance Company? People also ask What do you know about life insurance?
  Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period.
• How would you improve upon our product/company?
  -Product improvement is making changes to a product to make it more effective or efficient. It can involve changing a product's design, materials, manufacturing process, or packaging. This process usually aims to increase sales by making the product more appealing to consumers.
  -Improve the capacity of Human Resources.
  -Develop KPI for all staff.
  -Develop Individual Accountability Plan.
  -Set Business strategic plan.
  -Maximize profit.
  -Leadership development.
• Why are you the best person for this position? HR Q
• Why is it important to get Life Insurance?

Life insurance is important because it provides financial security to the family in case of the unfortunate death of the policyholder. Life insurance can enable the family of the policyholder to stay financially independent so                 that   they do not have to compromise their lifestyle.

• Why do you mean by word Insurance?
  Insurance is a legal agreement between two parties – the insurer and the insured, also known as insurance coverage or insurance policy. The insurer provides financial coverage for the losses of the insured that s/he may bear under certain circumstances
• What are the major types of Insurance?
  The different types of insurance plans available today may be grouped into two groups :
  Life Insurance
  • General Insurance

  1. General Insurance
  Some of the kinds of general insurance offered in India are as follows :

  • Health Care Coverage

  • Automobile Insurance

  • Homeowners' Insurance

  • Insurance against fire

  • Insurance for Travel

  2. Life Insurance

  Life insurance comes in a variety of forms. The most prevalent types of life insurance policies offered in India are as follows :

  • Term Life Insurance

  • Unit-Linked Insurance Plans

  • Whole Life Insurance

  • Endowment Plans

  • Child Plans for Educations

  • Retirement Plans

• How many types of Insurance Companies are there? Ans as above
• What is the role of Development Officer? As above
• What is the difference between Life Insurance and Life Assurance?
  Both are forms of protection designed to pay out after the policyholder passes away – but they don't work the same way. The key difference is that life insurance is designed to cover the policyholder for a specific term, while life assurance usually covers the policyholder for their entire life.
  
  • Name some different categories of life insurance products.
  Here are the different types of life insurance plans and their features and benefits, so you can pick the most suitable one:
• Term Insurance Plans. ...
• ULIPs – Unit Linked Insurance Plans. ...
• Endowment Insurance Plans. ...
• Money Back Insurance Plans. ...
• Whole Life Insurance Plans. ...
• Child Insurance Plans. ...
• Retirement Insurance Plans.
• Tell about Term Insurance Policies. Term insurance is a type of life insurance policy that provides coverage for a certain period of time or a specified “term” of years. If the insured dies during the time period specified in a term policy and the policy is active, then a death benefit will be paid.
• What do you know about Endowment Policies?
  An endowment plan is a life insurance plan that offers a life cover^*and helps you grow your money. It provides returns that are fixed at the time of the purchase of the policy. It can be used to save for various goals like buying a house, your child's education or marriage, starting a new venture and more.
• What are money-back policies?
  Money back policies are low-risk policies that are not market-linked. They provide you with assured returns at regular intervals during the policy term. The returns are fixed at the time of the purchase of the policy.
• Which are the policies similar to mutual funds?
  Similar to Mutual Funds, another lucrative investment option available in the market is the Unit Linked Insurance Plan (ULIP). ULIPs are investment cum insurance product, which offers the combined benefit of life insurance coverage along with the benefit of investment returns.
• Comment on Pension Policies.
  LIC Pension Plans are designed to secure the financial future of an individual after retirement. There are four different pension schemes offered by LIC that provide a steady flow of income to the individual in their golden years.
• Name the Different Penson Schemes of LIC:
  LIC's Jeevan Akshay - VII ,
  LIC's New Jeevan Shanti,
  LIC's Saral Pension
• When did the LIC of India come into existence?
  The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost.

  • What is the Foreign Direct Investment (FDI) limit in Insurance Sector?
  For insurance intermediaries, like brokerages and others, who bring together customers and insurance firms, 100% foreign investmentis allowed.18-Jul-2022 In the latest move, the government has allowed 100% FDI in insurance intermediaries, a decision that is expected to drive growth and development in the Indian insurance sector.01-Mar-2023

• What are the duties, powers and functions of IRDA? Functions of IRDA:

Protecting the interests of the policyholder in matters concerning the grant of policies, settlement of claims, nomination by policyholders, insurable interest, surrender value of the policy and other terms and conditions of the policy. (01-Mar-2023)

Duties, powers and functions of IRDAI - Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDAI.

Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.

Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include, -

Certify insurance companies

Protect interest of the policy holders

Adjudication of disputes

Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;

protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;

specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents

specifying the code of conduct for surveyors and loss assessors;

Promotion and Regulation:

Promoting efficiency in the conduct of insurance business;

Promoting and regulating professional organisations connected with the insurance and re-insurance business;

Levying fees and other charges for carrying out the purposes of this Act;

Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business;

Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);

Specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;

Regulating investment of funds by insurance companies;

Regulating maintenance of margin of solvency;

Other duties:

Adjudication of disputes between insurers and intermediaries or insurance intermediaries;

Supervising the functioning of the Tariff Advisory Committee;

Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f);

Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and

Exercising such other powers as may be prescribed

• Who is the chairman of LIC?
  The government on Friday appointed Siddhartha Mohantyas the Chairperson of the Life Insurance Corporation of India (LIC) till June 29, 2024. After that, he will be the Managing Director and Chief Executive Officer until June 7, 2025, LIC said in a release(.29-Apr-2023)
• Who is the chairman of IRDA?
  Debashish Panda, chairman of IRDAI (The Insurance Regulatory and Development Authority of India) said the country will expect development in the insurance sector from ChatGPT and Web 3.0 innovations.24-Feb-2023
• What is the difference between marketing and sales?
  Marketing focuses on moving the product from the company to the market (through product launches and awareness campaigns), while sales focuses on moving the product from the market to the customer. Sales focuses on the needs of the company, while marketing focuses on the needs of the market.04-Mar-2023 Sales is an activity between two or more parties the buyer receives product, service, or assets in exchange for money. Typically, sales are between seller and buyer, in which goods or assets are exchanged for money or other assets. Every organization has a sales team, which is broken into different teams.
• What is your perception of Development Officer as a Career?
  LIC ADO, or Life Insurance Corporation of India Apprentice Development Officer, is a job role that involves selling life insurance policies and recruiting new agents.
  Some of the pros of this job include a steady income, opportunities for career growth, and the potential to earn commissions on top of your salary.
  However, some cons of the job include the pressure to meet sales targets, the need to constantly network and find new clients, and the potential for long working hours.If you are unable to complete the sales target for a long period of time, it may affect your job security and potential for career growth within the company.
  However, it is important to communicate openly with your superiors and ask for support or guidance in meeting your targets. It is also possible to explore alternative career paths within the company if the sales aspect of the job is not a good fit for you.
• How is your field experience useful in performing this job? As above
  • Tell us your educational qualifications? Give your Educational Qualification
  • What do you know about Development Officer job? As above
  • How these qualifications are helpful to you in discharging the duties of Development Officer? Qualification to be used as strength vis a vis the Job role.

  • Why do you want to join in LIC as ADO? HR Q

  • What is the difference between with profit and without profit plans?
  Life insurance companies from time to time declare bonus (profit share) on their plans. An insurance plan in which this bonus/profit share is passed on to the policyholders is called a 'with profit' plan. But in a 'without profit' plan this bonus is not passed on to the policyholders.

  • What is Keyman Insurance?
  Keyman insurance is defined as an insurance policy where the proposer as well as the premium payer is the employer, the life to be insured is that of the employee and the benefit, in case of a claim, goes to the employer.

Advantages Of Key Man Insurance

As a company, we put a lot of our time and effort in not only growing talent but also making a substantial investment in each of our employees. In such a scenario, it is only good sense to insure the position of an employee that is invaluable to the unhindered running of the company.

And this is where keyman insurance comes into play. Keyman insurance is defined as an insurance policy where the proposer as well as the premium payer is the employer, the life to be insured is that of the employee and the benefit, in case of a claim, goes to the employer. The `keyman’ or ‘key person’ would be any person employed by a company having a special skill set or substantial responsibilities and who contributes significantly to the profits of that organization.

The death of the employee can incur two types of losses to the company:

(a) Loss arising from profit reduction for the company

(b) Costs for the company in replacing the keyman

In case the company has keyman insurance, on the death of the employee, the sum assured is paid to the company. This sum assured is generally quite large and sufficient to not only tide over any business downturn, but also hire a new senior executive. If the insured person survives the term of the insurance then no money is paid to the company.

Who can be a Keyman?

Anybody with specialized skills, whose loss can cause a financial strain to the company, is eligible for Keyman Insurance. For example, they could be: Directors of a Company, key sales people, key project managers, people with specific skills etc.

How can keyman insurance be used?

Basically, it is a pure term plan that can be bought by a company to cover the life of an important employee. But, the policy has many uses. The amount that can be claimed with such a policy allows you to not only recruit and train key personnel, but also secure and settle loans, offer salary continuation arrangements to the spouse of the deceased and fund executive compensation plans.

What are the advantages of keyman insurance?

Be it a small business or a large company, keyman insurance provides quite a few advantages:

• In case of death of the employee, the company receives the sum assured to cope with the loss and also ensures business continuity without any hiccups.
• The policy contributes to the company’s tax planning* - Premium allowed as business expense under section 37(1) of Income Tax Act, 1961, subject to satisfaction of the assessing officer.
• Options such as recruiting and training capable employee replacements, handling debt and liquidation of the company, or even successfully selling the company are all within reach when a business is covered by keyman insurance.

Keyman insurance is important, particularly for family businesses that are highly dependent upon a few individuals. It helps ensure that the business can absorb the financial strain of an early death and continue sustainably. The low cost and ease of securing a keyman insurance policy makes this very important business decision a simple one.

• What is IRDA?
  IRDA or Insurance Regulatory and Development Authority of India is the apex body that supervises and regulates the insurance sector in India. The primary purpose of IRDA is to safeguard the interest of the policyholders and ensure the growth of insurance in the country. When it comes to regulating the insurance industry, IRDA not only looks over the life insurance, but also general insurance companies operating within the country.

  • What are the functions of IRDA?
  The primary objective of the Insurance Regulatory and Development Authority of India is to ensure the implementation of provisions as mentioned in the Insurance Act. This can be further understood by its mission statement which is as follows-

• To safeguard the policyholder’s interest while ensuring a fair and just treatment.
• To have a fair regulation of the insurance industry while ensuring financial soundness of the applicable laws and regulations.
• To frame regulations periodically so that there is no ambiguity in the insurance industry.

HR Q
• Why should we hire you?

• What are your strengths and weaknesses?

• What is the difference between confidence and overconfidence? Confidence is a positive and healthy behavior based on knowledge, skills, experience, and ability. Whereas Overconfidence is an unrealistic and excessive belief in one's ability that shows negative behavior.

• Difference between hard work and smart work?

Details	Hard Work	Smart Work
Meaning	Hard work is putting in long, arduous hours to complete a task or tasks.	Smart work is defined as the ability to execute one or more activities effectively and efficiently while controlling both time and quality.
Approach	Using the traditional method to complete any task without looking for more creative ways to do so.	Examines efficient methods for completing tasks, such as prioritising, delegating, or smartly organising the working process.
Process	In order to finish a specific quantity of work in a specific period of time, a direct method is employed together with a streamlined procedure.	In order to accomplish the goals, a flexible process is chosen with a crucial focus on planning, work delegation, team organisation, and timetable prioritisation.
Orientatiion	Quantity Oriented	Quality and Goal-oriented
Goal Accomplishments	Hard labour may not always be the best strategy to reach a target when time is of the essence.	Smart work may accomplish end goals within the deadline and without sacrificing quality since it seeks to manage time wisely.

 Hard Work vs Smart Work Examples

The following table shows some examples to better grasp the difference between smart work and hard effort-

Working Hard	Working Smart
You merely carry out a mission.	You do your work quickly and effectively.
Work diligently yet without noticeable results.	Results can be seen even with little input.
Before focusing on the strategy, begin the work.	You assess, plan, and then go about your business.
Physical stress is greater.	Less physical strain results from the greater use of mental approaches.
Stick to just one method when working.	Find several approaches to accomplish the objective.

• Are you willing to relocate or travel?

  • Can you work under pressure?

  • What motivates you for this job?

  • What are your outside interests?

  • How do you feel about working nights and weekends?

  • What was the toughest decision you ever had to make?

  • Where do you see yourself in 5 years from now?

  • According to your definition of success, how successful have you been so far?

  • Why you want job in a Government Bank when you can get better salary in Private Jobs?

  • What do you mean by Insurance Coverage?
  It is the sum that provides financial protection to the insured, or their family in case of adversities, such as death, accident, illness or disability. That said, insurance coverage sets the limit of the financial cover one can avail.

• What is a premium?
  The amount you pay for your health insurance every month. In addition to your premium, you usually have to pay other costs for your health care, including a deductible, copayments, and coinsurance.
• What do you mean by terms-insurer and insured?
  Insured is the person who is covered against risk.On the other hand, the insurer is the company that is providing coverage. It is a service that an insurer provides under a particular insurance policy against a premium paid by the policyholder.
• Who is the beneficiary?
  A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit. You can name: One person. Two or more people. The trustee of a trust you've set up.
• What is the contestable period’ in insurance policy?
  A "contestable period" is a contractual provision that is often found in a life insurance policy. The contestable period usually covers a period of one or two years from the effective date the insurance policy, depending on the terms actually written on the policy.

The contestability period is a clause in a life insurance policy according to which if the policyholder expires within two years of purchasing the policy, the insurance company can contest or question the claim raised by his/her beneficiaries.

• What is the difference between “revocable beneficiary” and “irrevocable beneficiary”?
Revocable means that you can change who your beneficiary is anytime without getting their consent. Irrevocable, on the other hand, means that if you want to change your beneficiary you actually need their consent to do so.

• What is no-claim bonus?
No-claim bonus (NCB) is a discount in premium offered by insurance companies if a vehicle owner has not made a single claim during the term of the motor insurance policy. Description: The no-claim bonus is a reward to the vehicle owner for prudent use of the vehicle.

• What is ‘declaration page’ in insurance policy?
An insurance declaration page also known as a “dec page” summarizes the insurance coverage provided by the policy. The declaration page is usually the first page of your policy, and you should receive a new declaration page for each renewal period.

• What do you mean by ‘Loss Payee’?
The loss payee is the party to whom the claim from a loss is to be paid. A loss payee can mean several different things; in the insurance industry, the insured, or the party entitled to payment, is the loss payee. The insured can expect reimbursement from the insurance carrier in the event of a loss.

• What do you mean by ‘Deductible’?
The insurance deductible refers to the amount of money you will be paying in an insurance claim prior to the insurance coverage kicking in, and the company begins to pay you. When you have a deductible, you need to get the amount of money for your deductible before a claim gets paid out

• What is Co-insurance?
Co-insurance is part of a covered expense that is paid for by an insured person. It is expressed in percentage. A "30% coinsurance" policy implies that you are responsible for paying 30% of any medical bills that you incur and the remaining 70% is paid by your health insurance policy.

• What do you mean by term “Annuity”?
An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments.

• What is the Surrender Value?
Surrender Value in Insurance is the amount which insurance company will pay you, as a policyholder, when you decide to terminate the policy before the maturity

• What is Paid Value?
A paid-up value is the value of your sum assured after you stop paying your premiums. The sum assured decided at the start of the policy is reduced if you do not pay all the premiums. This reduced sum assured is known as Paid-up Value.

Note that the paid-up value is the amount you will receive when the policy matures or the money the nominee receives if you were die. The surrender value factor is zero for the first three years and keeps rising from third year onwards. It differs from company to company and depends on various factors

• Is it advisable to replace the policy with another policy? It is possible to transfer your life insurance plan to another company in India. However, few rules and regulations should be abided by to make such type of transfer possible. A policyholder replacing a policy while it is still within the surrender period has to pay the fee to transfer the cash value from one policy to another

• How to claim the policy?
Fill your claim form and attach the relevant documents

Once intimated, the insurance company will send you a claim form. You can also log in to the insurer's website and download the form. Make sure you fill it with utmost accuracy. You need to attach certain documents along with the claim form.

• What happens if you fail to make required premium payments?
  when the insurance holder fails to pay their insurance premiums on due time and then in the grace period, their insurance policy will terminate

  • Is it safe to pay the premium through Insurance Agent? Try to pay it directly unless the Agent is well known to you

  • Is it possible to get the full payment on cancelling the new policy in free look period?
  During the free look period, the contract holder can decide whether or not to keep the insurance policy. If they are not satisfied and wish to cancel, they can receive a full refund of their premium.

• What is the difference between the participating and non-participating policy?
  A participating policy enables you, as a policyholder, to share the profits of the insurance company. These profits are shared in the form of bonuses or dividends. It is also known as a with-profit policy. In non-participating policies, the profits are not shared and no dividends are paid to the policyholders

  • What is ‘schedule of loss’ in home insurance?
  A schedule of loss in home insurance is what your provider will reimburse you on a claim for something on which you've purchased additional coverage—called a schedule. A schedule is just insurance-speak for a list, usually of add-ons, clarifications, or exclusions to your policy.08

  • What is the difference between the ‘All perils’ and ‘Specified perils’ coverage in home insurance coverage?
  All perils is for all risks, unless specified.Named or specified perils only includes the perils listed in the policy.

• What is a ‘PLPD’ insurance stand for?
  PLPD insurance stands for personal liability and property damage insurance. Liability insurance is another, more common name for PLPD insurance. PLPD car insurance pays for medical bills and repair costs for other drivers if you're responsible for an accident.

  • What is ‘collision coverage’ and ‘comprehensive coverage’ in Auto insurance?
  They differ in the types of incidents they cover. Collision insurance helps cover repairs if you collide with another vehicle or object.Comprehensive covers repairs that do not result from collisions – for instance, theft, vandalism, animal damage, fires, and more.

• What is the difference between the ‘single limit liability’ coverage and ‘split liability coverage’? Difference between split-limit coverage vs. combined single-limit policy. A split-limit policy breaks your bodily injury and property damage coverage limits into three separate components, while a combined single-limit policy merges them so you have one limit for both bodily injury and property damage.
• What is ‘gap insurance’?
  Gap insurance is a type of auto insurancethat car owners can purchase to protect themselves against losses that can arise when the amount of compensation received from a total loss does not fully cover the amount the insured owes on the vehicle's financingor lease agreement. This situation arises when the balance owed on a car loan is greater than the book value of the vehicle.
• What is Personal Accident cover?
  Personal accident insurance is designed to provide a lump-sum pay-out if you suffer a serious injury or death as the result of an accident. It can protect you and your family against loss of income and help them with bills and other expenses.
• Does beneficiary have to pay tax on the proceeds of life insurance policy?
  Section 10(10)D of the Income Tax Act, 1961 As per Section 10(10D) of the Income Tax Act, 1961 the amount of sum assured plus any bonus (i.e. the policy proceeds) paid on maturity or surrender of policy or on death of the insured are completely tax free for the receiver subject to certain conditions.
• What is ‘group life’ insurance?
  Group life insurance is a type of term life insurance plan purchased by an employer or organization to cover an entire group of people. Often, this insurance is offered as an employment benefit or membership perk at little or no cost to insured individuals.

  • What is an ‘Endowment Policy’?
  Endowment plans are life insurance plans that offer life cover along with a fixed lump sum or income benefit, to the policyholder. An endowment policy can be used to build a risk-free savings corpus, while providing financial protection for family in case of an unfortunate event.

• What is Elimination period in insurance?
  An elimination period is the amount of time an insurance policyholder must wait between when an illness or disability begins and when they can begin receiving their benefits. An elimination period is also referred to as the waiting or qualifying period. The purpose of an elimination period is to give you the opportunity to get treatment and see how your illness or injury responds. You may be able to return to work using only paid leave or short-term disability.

For instance, if you were in a car accident, left unable to work and filed a claim 30 days after the accident, the elimination period would begin the day of the accident. Sometimes, your first disability check won't arrive until 30 days after the elimination period has ended.

• What do you mean by term ‘cash value’?
Cash value is the portion of your policy that earns interest and may be available for you to withdraw or borrow against in case of an emergency.¹ The following types of permanent life insurance policies may include a cash value feature: Whole life insurance. Universal life insurance. Variable universal life insurance.

• What happens to the cash value after the policy is fully paid up?
  Once the policy is paid-up, it's guaranteed to remain in effect for the rest of the insured's life. The life insurance company will evaluate the policy's current cash value and calculate the death benefit amount supported by that current cash value amount.
• What is subrogation?
  Subrogation allows your insurer to recoup costs (medical payments, repairs, etc.), including your deductible, from the at-fault driver's insurance company, if the accident wasn't your fault. A successful subrogation means a refund for you and your insurer.
• What do you mean by term ‘Double Indemnity’?
  Double indemnity refers to payment by a life insurance policy of two times the face value when death results from an accident (e.g., an auto accident) as opposed to a health problem (e.g., cardiac arrest).
• What does ‘Indemnity’ term means?
  Indemnity is a comprehensive form of insurance compensation for damages or loss. In a legal sense, it may also refer to an exemption from liability for damages. The insurer promises to make the insured party whole again for any covered loss in exchange for premiums the policyholder pays.
• What does General Insurance Policy cover?
  Insurance contracts that do not come under the ambit of life insuranceare called general insurance. The different forms of general insurance are fire, marine, motor, accident and other miscellaneous non-life insurance.

  • What is the difference between the participating and non-participating policy?
  A participating policy enables you, as a policyholder, to share the profits of the insurance company. These profits are shared in the form of bonuses or dividends. It is also known as a with-profit policy. In non-participating policies, the profits are not shared and no dividends are paid to the policyholders

  • Can beneficiary claim the policy if the insured person is missing or disappeared for several years? As per section 108 of the Indian Evidence Act, death presumption can be filed only after seven years of filing the missing First Information Report (FIR) of a person. So, as a family member of a missing person, you have to wait for seven years before filing the claim against his/her term insurance policy

  • What do you mean by ‘Additional insured’?
  An additional insured extends liability insurance coverage beyond the named insured to include other individuals or groups. An additional insured endorsement protects the additional insured under the named insurer's policy allowing them to file a claim if sued.

A named insured is entitled to 100% of the benefits and coverage provided by the policy. An additional insured is someone who is not the owner of the policy but who, under certain circumstances, may be entitled to some of             the benefits and a certain amount of coverage under the policy.

• What is the Impact of Budget 2023 on Insurance Sector:

Life Insurance And Budget Amendments

• According to the Union Budget proposal, an individual will be required to pay tax on the maturity amount of life insurance plans when the total yearly premium surpasses ₹5 lakh.
• According to the Budget plan, any life insurance policies with maturity proceeds issued after April 1, 2023, have an annual premium of more than ₹5 Lakh (apart from unit-linked insurance policies, or ULIPs) henceforth be subject to taxation.
• The annuity income received from a pension plan will be taxed at the marginal tax rate in accordance with the new tax regulations by the Union Budget on insurance.

Policies That Remain Unaffected

A few policies and sectors remained unchanged while others underwent significant change. Several of the same-old policies are as follows

• One of the policies that remain unaffected in the Union Budget insurance is the term insurance, which means that the policyholder can continue to avail of the policy’s benefits and the premium paid without any new updates or changes.
• ULIPs also remained unaffected in the Union Budget 2023, and the policyholders can continue to enjoy the benefits of life insurance and investment opportunities.
• ULIPs are investment-oriented insurance policies that offer both life insurance coverage and investment opportunities. The premium paid in ULIPs is invested in equity, debt, or a combination of both.
• The emphasis on Term and ULIP policies in the Union Budget on life insurance is significant as these policies have been gaining popularity in recent years.
• These policies are considered a cost-effective and efficient way to secure an individual’s financial future and family.
• Death benefit will not be taxable and will continue as it is now.

Conclusion

The Union Budget 2023 has proposed several changes to the policies related to insurance premiums and maturity amounts, as well as tax rules on these. The changes aim to increase tax savings for individuals and make it easier for them to receive a higher amount of maturity proceeds and death benefits. However, the new tax rules on annuity income received from a pension plan are expected to impact the total tax liability of individuals.

 

What are the recent trends and growth of insurance industry in India?

The life insurance industry is expected to increase at a CAGR of 5.3% between 2019 and 2023. India's insurance penetration was pegged at 4.2% in FY21, with life insurance penetration at 3.2% and non-life insurance penetration at 1.0%. In terms of insurance density, India's overall density stood at US$ 78 in FY21.

 

What are the three different phases of development of the insurance sector in India?

Evolution of insurance industry has undergone three phases, Pre-Nationalisation, Nationalisation and Privatisation. The Insurance industry was nationalised only after passing Life Insurance Corporation Act of 1956.

Indian Insurance Sector – Recent Changes And Key Implications

17 April 2023 by Karam Daulet-Singh , Yashasvi Mohanram , Vaishnavi Sankar and Achint Jain

This article co-authored by Karam Daulet-Singh, Managing Partner, Yashasvi Mohanram, Partner, and Associates Vaishnavi Sankar and Achint Jain, explores the recent regulatory changes in the Indian insurance sector with specific focus on the key implications from the perspective of financial and overseas investors.

Background

The years 2021 and 2022 saw a series of changes in the regulatory regime governing Indian insurance companies, several of which were aimed at relaxing the investment restrictions in the sector. The most recent of these changes were made in November and December 2022, which included the notification by the Insurance Regulatory and Development Authority of India (IRDAI) of the IRDAI (Registration of Indian Insurance Companies) Regulations, 2022 (the 2022 Registration Regulations) and the IRDAI (Other Forms of Capital) Regulations, 2022 (the Other Capital Regulations). In addition to these notifications, the Ministry of Finance released certain proposed amendments to the Insurance Act, 1938 and Insurance Regulatory and Development Authority Act, 1999 for public comments.

We set out below the key implications of these changes and proposals, specifically from the perspective of financial and overseas investors in the context of investments in Indian insurance companies.

Investor-Promoter distinction now more in sync with other Indian legislations

Every shareholder in an Indian insurance company is classified as either an "investor" or a "promoter". Unlike in most other sectors, apart from certain enhanced lock-in requirements in specified scenarios, classification as a "promoter" of an insurer results in the shareholder being obliged to infuse additional capital from time to time to ensure the insurer's compliance with regulatory solvency requirements.

Previously, under the IRDAI (Registration of Indian Insurance Companies) Regulations, 2000, financial investors were subject to an individual limit of 10% and a collective limit of 25% in connection with their investments in any insurance company. The individual 10% threshold was clearly at odds with both the Indian Companies Act, 2013 which employs a 25% shareholding threshold to determine blocking rights for special resolutions and the takeover regime for listed companies prescribed by the Securities and Exchange Board of India (SEBI) which employs a 25% threshold for mandatory open offer triggers. The 2022 Registration Regulations have put an end to this inconsistency by capping the individual investor limit at below 25% (and the aggregate investors' limit at below 50%). So, going forward, financial investors can invest up to 24.9% in an insurance company without being classified as a promoter, though any such investor will need to be careful to ensure that it does not "control" the insurer through other means such as voting arrangements or governance rights in relation to the insurer. However, the 2022 Registration Regulations expressly provide the right for a financial investor to nominate a director on the board of an insurer if its investment exceeds 10%.

It is relevant to note that the new sub-25% limit will be available only if an investor proposes to invest in a single insurer. As a default rule, if an investor proposes to invest in multiple insurers, its stake in each insurer will continue to be capped at 10%. Even previously, this rule was implemented by the IRDAI as a matter of practice. A prominent example in this regard was Fairfax Financial Holdings, which was required to reduce its shareholding in ICICI Lombard to below 10% in 2017 as a condition to the IRDAI's approval for a separate general insurance venture in which Fairfax had invested. An exception has now been carved out under the 2022 Registration Regulations for investments between 10% and 25% in up to two insurers in each class of insurance business (i.e., life, general, health and reinsurance). In practice, given the 10% cap for investments by foreign portfolio investors (FPIs) and financial investors being unlikely to make significant investments in two insurers of the same class, this exception for investments between 10% to 25% in up to two insurers in each class may well be more relevant for domestic financial investors.

Interestingly, this "twilight zone" between 10% and 25% is also a feature under the merger control regulations of the Competition Commission of India (CCI) as well as the promoter classification rules of SEBI. Under the merger control regulations, investors holding between 10% and 25% do not automatically qualify for the exemption on the basis of being "solely as an investment" but would instead be reliant on establishing that they do not otherwise have "control" over the target company. Similarly, while the definition of "promoter" under the SEBI regulations is linked to having "control" over the target company (which, in practice, is pegged at the mandatory open offer trigger threshold of 25%), a shareholder who is already classified as a promoter can be declassified (i.e., as a public shareholder) only if it were to bring down its shareholding to 10% or below.

While the term "promoter" is specific to the regulation of insurers in the Indian context, the analogous concept of "control" and threshold for triggering regulatory approvals are consistent with the practice across major overseas jurisdictions. It is worth noting that with the 2022 Registration Regulations, the quantitative threshold of 25% for qualifying a shareholder as being in "control" of an Indian insurer is higher compared to other jurisdictions such as the US, UK and the EU (where the triggering threshold is 10%) and Singapore (where the threshold is 20%).

Separately, it is important to note that under the 2022 Registration Regulations, the minimum shareholding of the promoters of an insurer is required to be collectively maintained at above 50% of the paid-up equity capital of the insurer. Promoters of listed insurance companies with a track record of having maintained adequate solvency ratio for the preceding five years are partially exempted from this requirement and can dilute their stake in the insurer below 50% percent but will need to remain above 26%.

Relaxation of Approval Thresholds

Both under the IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015 (the Old Transfer Regulations) and the 2022 Registration Regulations, in respect of any transfer or fresh issuance of shares, the requirement to seek IRDAI's prior approval is triggered if either the nominal value of shares involved exceeds 1% of the insurer or the investor's shareholding following the transfer / issuance exceeds 5%. So, an investor acquiring stakes of more than 1% in multiple tranches would end up having to approach the IRDAI for approval at each stage. The draft amendments to the Insurance Act proposed by the Ministry of Finance seek to address this anomaly by increasing the first threshold from 1% to 5% of the insurer. This proposal is also meant to align the approval threshold for share transfers in insurers with the corresponding threshold specified by the Reserve Bank of India for investments in banks.

In the context of listed insurers, as before, the 2022 Registration Regulations provide for a deemed approval pursuant to a self-certification in respect of share transfers between 1% and 5% but provide for prior IRDAI approval for any transfers / acquisitions above 5%. However, the 2022 Regulations also specify a look through test where if the acquisition or aggregate holding is proposed to be less than 5% but if the concerned insurer suspects that "dubious" methods have been adopted to get over the ceiling, the insurer will be required to refer the matter to the IRDAI.

Separately, the Other Capital Regulations now enable insurers to issue preference shares and subordinated debt to both Indian and foreign investors without having to seek the prior approval of IRDAI in the normal course. However, several restrictions in connection with the issuance of preference shares and subordinated debt - no security, non-convertibility into equity shares, long maturity period of 7 to 10 years etc. - mean that plain vanilla equity shares may continue to be the predominant instrument for routing investments into Indian insurance companies.

Enhanced Structuring Flexibility for PE Funds

Prior to 2017, there were no regulations specifically catering to private equity funds (PE Funds), who were considered on par with other investors for the purpose of investment. However, in 2017, with an increase in the appetite for PE Funds to acquire significant stakes in insurance companies, the IRDAI notified the IRDAI (Investment by Private Equity in Indian Insurance Companies) Guidelines, 2017 (2017 PE Guidelines) to regulate investments by PE Funds in unlisted insurance companies. The 2022 Registration Regulations have introduced certain changes to the investment requirements for PE Funds under the 2017 PE Guidelines. Interestingly, unlike the 2017 PE Guidelines, the 2022 Registration Regulations are not restricted only to unlisted insurers, so it is possible that the amended regime may apply to listed insurance companies as well.

The definition of "PE Fund" under the 2017 PE Guidelines was an inclusive definition but only specifically called out domestic alternative investment funds (AIFs) registered with SEBI. The 2022 Registration Regulations have expanded the definition to also expressly include funds (or their managers) registered with any financial sector regulator in a FATF compliant jurisdiction. Although the definition does not expressly include sovereign wealth funds and pension funds, there have been previous instances where the IRDAI has given approval for investments by sovereign wealth funds in Indian insurance companies. It is also interesting that the amended definition refers only to funds "registered" with an overseas financial sector regulator, given that several overseas funds may be "regulated" by, but not necessarily "registered" with, a regulator. In such cases, the relevant funds could potentially rely on the respective managers having obtained the necessary registration, though we believe this is a missed opportunity to clarify that funds and managers need to be only appropriately regulated and not necessarily registered.

Under the 2017 PE Guidelines, if a PE Fund wanted to be considered as a promoter, it was required to set up a special purpose vehicle (an SPV) in India, which SPV in several cases would have had to be registered with SEBI as an AIF. While the 2022 Registration Regulations have done away with this requirement, a PE Fund will now need to meet the following criteria in order to be able to invest directly in an insurer in the capacity of promoter: (i) the manager of the PE Fund or its parent fund should have completed 10 years of operations; (ii) the funds raised by the PE Fund and its group should be USD 500 million or more; (iii) the investible funds available with the PE Fund should not be less than USD 100 million; and (iv) the manager of the PE Fund should have invested in the financial sector in India or the other jurisdictions. While these requirements should be relatively straightforward for large overseas funds, it remains to be seen if the Indian insurance market is attractive enough to lure such funds to either acquire controlling stakes in existing insurers or set up green field insurance ventures themselves.

Foreign Investment Restrictions - Glass still Half Full

While the permissible foreign direct investment (FDI) limit in Indian insurance companies (excluding insurance intermediaries in which 100% foreign investment is permitted) was raised from 49% to 74% in 2021, all insurers with foreign investment are still required to ensure that the majority of the board of directors and key management personnel are Indian citizens. In cases where FDI exceeds 49%, there is an additional restriction on dividend repatriation and an obligation to appoint additional independent directors.

Unlike in other sectors, the manner of calculation of indirect foreign investment in Indian insurers continues to be based on the proportionate stake held through an Indian promoter or an Indian investor (i.e., a 30% equity stake held by a foreign investor in an Indian holding company which in turn holds 10% in an Indian insurer would amount to a 3% foreign investment for FDI purposes). Interestingly, any holding in convertible instruments in an Indian holding company does not count for the purposes of calculating the FDI interest but would need to be taken into account as and when the instruments are actually converted into equity. This point was recently in focus in the context of Fairfax's CCPS holding in the holding company of Go Digit, with the IRDAI refusing to permit the conversion of the CCPS into equity (i.e., as that would have resulted in Fairfax acquiring a 74% shareholding in the holding company and consequently the unlisted holding company becoming a "subsidiary", which is not permitted by the IRDAI in the context of promoters of insurers). This appears to be another instance of the IRDAI disincentivizing foreign shareholders using convertible instruments to structure their investments in Indian insurers.

In relation to compliance with Press Note 3 of 2020 (i.e., the rule issued by Government of India in April 2020, which restricts direct and indirect investments by entities based in countries which share a land border with India), apart from the usual declarations which are sought by authorised dealer banks at the time of the actual overseas investment, foreign investors proposing to invest in Indian insurance companies are expected to upfront provide broad declarations in relation to regulatory compliance at the time of seeking IRDAI's approval. While most authorised dealer banks are amenable to overseas investors having less than 10% beneficial ownership from border country investors, it is unclear if the IRDAI will adopt the same approach. In 2022, Paytm Insuretech's attempt to acquire an existing general insurer, RahejaQBE, was rejected by the IRDAI. While the IRDAI's reasons for rejection were not officially disclosed, it was reported that a potential interest held by Chinese investors in Paytm was the likely reason. Given that the interest in question was an indirect holding, it appears that investment proposals in Indian insurance companies even by non-border country GPs (but with border country LPs) cannot take for granted that the test applied by the IRDAI will be the simplistic sub-10% that has been applied by authorised dealer banks in non-regulated sectors.

Concluding Thoughts

The recent amendments in the regulatory regime for Indian insurers, especially the increase in the investor limit from 10% to 25% and the increased structuring flexibility provided to PE Funds, are welcome changes and in keeping with the IRDAI's objective of facilitating the entry of more players in the insurance market. While investors continue to be mainly limited to investing in equity shares (as opposed to convertible instruments) of insurance companies, the other changes should hopefully serve as an impetus for increased investments in the insurance sector, both from domestic banks and financial sector incumbents as well as overseas insurers and PE Funds.

https://www.mondaq.com/india/insurance-laws-and-products/1305202/indian-insurance-sector--recent-changes-and-key-implications

Source: https://gdpi.hitbullseye.com/PO/LIC-ADO-Interview-Questions.php

https://www.kotaklife.com/insurance-guide/savingstax/union-budget-impact-on-life-insurance#:~:text=The%20Union%20Budget%202023%20has,maturity%20proceeds%20and%20death%20benefits