Page 370 - IC38 GENERAL INSURANCE

Information

i. Co-payment

When an insured event occurs, many health policies require the insured to share
a part of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay
amount is 10% in the policy, then insured pays INR 2000.

ii. Sub-limits

The insurer may impose a limit on the total payout separately each for room
expenses, surgical procedures or doctor fees to check the inflated bills.

iii. Deductible

Also called as excess, it is the fixed amount of money the insured is required to
pay initially before the claim is paid by insurer, for e.g. if the deductible in a
policy is INR 10000,the insured pays first INR 1000 in each insured loss claimed
for.

Where the moral hazard of the insured is suspected, the agent should not
entertain or bring such proposals to the insurance company. She should also
bring such issues before the insurance company officials.

5. Short period scales

Normally, premium rates are quoted for a period of twelve months. If a policy is
taken for a shorter period, the premium is charged according to a special scale,
known as short period scale.

It may be observed that according to the scale, the premium chargeable for
short period insurance is not on proportionate basis.

Need for short period scales

a) These rates are applied because the expenses involved in the issue of
the policy whether for a 12 months period or a shorter period, are
almost the same.

b) Further, an annual policy requires renewal procedure only once during a
year whereas short period insurances involve more frequent renewals. If
a proportionate premium is allowed, there would be a tendency on the
part of the insured to go on taking short period policies and thereby, in
effect, pay premiums in instalments.

c) Besides, some insurance are seasonal in character and the risk is greater
during that season. Insurances are sometimes taken during such period
when the risk is greatest and thereby selection takes place against the
insurers. Short period scales are evolved to prevent such selection

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