IRDAI IC38 (Insurance Agent) Introduction to Insurance and Risk Management Syllabus

Introduction to Insurance and Risk Management syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Introduction to Insurance and Risk Management in IRDAI IC38 (Insurance Agent), not a summary of it.

1. 1

   Concept and History of Insurance

   4 topics

   • What insurance means and how it works
     • Insurance as a mechanism of risk transfer
     • Pooling of risks across a community of policyholders
     • Difference between insurance and gambling
   • Evolution of insurance globally and in India
     • Early forms: bottomry, marine and Lloyd's of London
     • Origins of life insurance and the Oriental Life Insurance Company
     • Nationalisation: formation of LIC (1956) and GIC (1972)
   • How insurance benefits individuals and society
     • Social security and protection of family
     • Mobilisation of savings for nation building
     • Promotion of trade and credit
   • Insurance as a financial instrument vs. other savings options
2. 2

   Risk and the Risk Management Process

   4 topics

   • Meaning of risk, peril and hazard
     • Physical hazard and moral hazard
     • Pure risk vs. speculative risk
     • Particular risk vs. fundamental risk
   • Methods of handling risk
     • Risk avoidance, retention and reduction
     • Risk transfer through insurance
   • Insurable vs. non-insurable risks
   • Role of insurance in the risk management framework
3. 3

   How Insurance Functions Economically

   5 topics

   • Sharing of losses among the many
   • Law of large numbers and probability
   • Premium as the price of risk transfer
   • Role of reserves and the time value of money
   • Reinsurance: spreading risk further

Introduction to Insurance and Risk Management flashcards for IRDAI IC38 (Insurance Agent)

18 of 49 cards from the Introduction to Insurance and Risk Management deck — real questions with worked answers.

1. What is the basic definition of insurance?

   A contract (policy) in which an insurer agrees to compensate the insured for a specified loss in exchange for a premium, transferring the financial risk of an uncertain event from the individual to the insurer.

2. In simple terms, how does the mechanism of insurance work?

   Many people exposed to a similar risk each contribute a small premium into a common pool; the losses of the unfortunate few are paid out of this pool, spreading the cost of loss across the whole group.

3. What does the phrase 'community of risk' or 'pooling of risk' mean in insurance?

   Bringing together a large group of people facing similar risks so that the few who suffer losses are compensated from the contributions of the many, making each person's burden small and predictable.

4. What are the two fundamental functions performed by insurance?

   Risk transfer (shifting the financial consequence of risk from the individual to the insurer) and risk pooling/sharing (distributing losses of the few among the many).

5. Where and when did the earliest forms of insurance-like practices originate globally?

   Among ancient traders such as the Babylonians (Code of Hammurabi, c. 1750 BC) and later Mediterranean sea traders, who used 'bottomry' loans and general average to share losses of goods at sea.

6. What is 'general average', an early marine practice that influenced insurance?

   A principle where a loss voluntarily incurred to save a sea voyage (e.g., jettisoning cargo) is shared proportionally among all parties whose property was saved.

7. Which London institution is famous as the birthplace of modern marine insurance?

   Lloyd's of London, which grew out of Edward Lloyd's coffee house in the late 17th century where ship owners and underwriters met to insure marine ventures.

8. Which Indian company is regarded as the first life insurance company in India?

   The Oriental Life Insurance Company, established in Calcutta in 1818.

9. Which was the first Indian-owned life insurance company that insured Indian lives on normal terms?

   Bombay Mutual Life Assurance Society, established in 1870.

10. In what year and through which Act was life insurance nationalised in India, creating LIC?

    In 1956, through the Life Insurance Corporation Act, which formed the Life Insurance Corporation of India (LIC) by merging over 240 insurers.

11. When was general (non-life) insurance nationalised in India, and what body was formed?

    In 1972, through the General Insurance Business (Nationalisation) Act, forming the General Insurance Corporation of India (GIC) with its four subsidiaries.

12. Which committee's recommendations led to the reopening of India's insurance sector to private players?

    The Malhotra Committee (1993), whose recommendations led to the establishment of the IRDA and liberalisation of the sector in 2000.

13. In what year was the IRDA Act passed, and what regulator did it create?

    The IRDA Act was passed in 1999, establishing the Insurance Regulatory and Development Authority (now IRDAI) which began operating in 2000.

14. List the main benefits of insurance to an individual.

    Provides financial security/peace of mind, enables risk transfer, encourages savings (in life policies), helps obtain credit/loans, and provides tax benefits.

15. How does insurance benefit society as a whole?

    It maintains family/business stability after losses, mobilises savings into long-term investments and capital formation, supports trade and commerce, generates employment, and reduces the burden on the state.

16. How does insurance act as an aid to trade and commerce?

    By covering business risks, it gives entrepreneurs confidence to invest, allows goods to move with marine/transit cover, and is often required as collateral security for loans and credit.

17. How does insurance contribute to capital formation in the economy?

    Insurers collect premiums and reserves and invest these large funds in government securities, infrastructure and industry, channelling savings into productive long-term investment.

18. Compare insurance with ordinary savings as a financial tool.

    Savings build a fund gradually and only provide what has been accumulated; life insurance provides the full sum assured immediately even if death occurs after one premium, combining protection with savings.

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