LIC AAO Insurance and Financial Market Awareness (Mains Specialist) Syllabus

What is 'insurable interest' and when must it exist in life and general insurance?

Insurable interest is a financial stake in the subject such that loss causes harm. In life insurance it must exist at the time of taking the policy; in general insurance it must exist both at inception and at the time of claim.

What is the principle of indemnity and which type of insurance is exempt from it?

Indemnity means the insured is compensated only for the actual loss, not to profit. Life insurance and personal accident policies are NOT contracts of indemnity, as human life cannot be valued.

What is the difference between subrogation and contribution in insurance?

Subrogation: after paying a claim, the insurer takes over the insured's right to recover from a third party. Contribution: when multiple insurers cover the same risk, each shares the loss proportionately.

What is the difference between a term insurance plan and an endowment plan?

A term plan provides only death benefit (pure protection, no maturity value if alive). An endowment plan combines insurance with savings, paying a sum assured on death OR a maturity benefit if the insured survives the term.

What is a ULIP (Unit Linked Insurance Plan)?

A ULIP combines life insurance with investment. Part of the premium provides life cover and the rest is invested in market-linked funds (equity/debt), with returns based on Net Asset Value (NAV).

What is a money-back policy in life insurance?

A money-back policy returns a percentage of the sum assured periodically during the policy term (survival benefits), while also paying the full sum assured plus bonus on death, even if survival benefits were already paid.

What is an annuity plan and what are its two main types?

An annuity plan provides a regular income stream, typically post-retirement. Types: Immediate annuity (payments begin at once after a lump sum) and Deferred annuity (payments start after an accumulation period).

What is the difference between a death claim and a maturity claim in life insurance?

A maturity claim is paid to the policyholder when the policy term ends and the insured is alive. A death claim is paid to the nominee/beneficiary when the insured dies during the policy term.

What is the free-look period in a life insurance policy?

The free-look period (15 days, or 30 days for electronic/distance-marketed policies) allows the policyholder to review and cancel the policy after receipt with a refund of premium, less proportionate charges.

What is the grace period and policy lapse in life insurance?

The grace period (15 days for monthly, 30 days otherwise) is extra time to pay a due premium without losing cover. If premium is unpaid beyond the grace period, the policy lapses and benefits cease until revived.

What is reinsurance and why do insurers use it?

Reinsurance is insurance for insurers - an insurer (cedant) transfers part of its risk to a reinsurer. It helps spread risk, increase underwriting capacity, stabilise results, and protect against catastrophic losses.

What is the difference between facultative and treaty reinsurance?

Facultative reinsurance covers a single specific risk negotiated individually. Treaty reinsurance is an agreement automatically covering a whole class/portfolio of risks over a period without case-by-case negotiation.

What is bancassurance?

Bancassurance is the partnership where a bank sells insurance products of an insurance company to its customers, using the bank's distribution network. It benefits insurers with wider reach and banks with fee income.

What is the national reinsurer of India?

General Insurance Corporation of India (GIC Re), the sole national reinsurer, which receives obligatory cessions from Indian insurers as mandated by IRDAI.

What is the IRDAI and when was it established?

The Insurance Regulatory and Development Authority of India (IRDAI) is the apex statutory body regulating and developing the insurance sector. It was constituted under the IRDA Act, 1999, and is headquartered in Hyderabad.

What are the main functions of the IRDAI?

Issuing/renewing/cancelling registration of insurers, protecting policyholders' interests, prescribing qualifications and code of conduct for intermediaries, regulating premium rates and investments, and promoting orderly growth of the insurance industry.

What is the composition of the IRDAI?

IRDAI is a ten-member body: a Chairperson, five whole-time members, and four part-time members, all appointed by the Government of India.

What is the Insurance Act, 1938 and its significance?

The Insurance Act, 1938 is the principal legislation governing the functioning of insurance business in India, covering registration, accounts, investments, licensing of agents, and policyholder protection. It is administered by IRDAI.

What key change did the Insurance Laws (Amendment) Act, 2015 introduce regarding FDI?

It raised the foreign direct investment (FDI) cap in Indian insurance companies from 26% to 49%. (Subsequently raised to 74% in 2021 via the Insurance Amendment Act, 2021.)

What is Section 45 of the Insurance Act regarding claim repudiation?

Section 45 states that a life insurance policy cannot be called into question on any ground after 3 years from the date of issuance/revival/rider addition, even on grounds of fraud or misstatement (the indisputability clause).

When was the LIC Act passed and what did it do?

The Life Insurance Corporation Act, 1956 nationalised life insurance in India by merging 245 private insurers and provident societies to create the Life Insurance Corporation of India (LIC) on 1 September 1956.

What was the major recent development for LIC in 2022?

LIC launched India's largest-ever IPO in May 2022, listing on stock exchanges. The LIC Act was amended (via Finance Act 2021) to allow public shareholding, reducing the mandated government stake over time.

What avenues does the IRDAI provide for insurance consumer grievance redressal?

Approach the insurer's Grievance Redressal Officer, then IRDAI's Bima Bharosa (formerly IGMS) portal/Grievance Call Centre, and finally the Insurance Ombudsman for unresolved complaints.

What is the Insurance Ombudsman and its monetary jurisdiction?

The Insurance Ombudsman is a body under the Insurance Ombudsman Rules, 2017 that resolves policyholder complaints free of cost. It can award compensation up to ₹30 lakh (raised from ₹20 lakh).

What does the Consumer Protection Act, 2019 add for consumers including insurance buyers?

It established the Central Consumer Protection Authority (CCPA), introduced e-filing of complaints, product liability, mediation, and revised pecuniary jurisdiction for District, State, and National consumer commissions.

Compare PMJJBY and PMSBY social security insurance schemes.

PMJJBY (Jeevan Jyoti Bima Yojana) is a life insurance scheme giving ₹2 lakh on death for an annual premium of ₹436, ages 18-50. PMSBY (Suraksha Bima Yojana) is accident insurance giving ₹2 lakh (death/full disability) for ₹20/year, ages 18-70.

What is the Atal Pension Yojana (APY)?

APY is a government-backed pension scheme for the unorganised sector (ages 18-40) providing a guaranteed monthly pension of ₹1,000 to ₹5,000 after age 60, based on contributions. It is administered by PFRDA.

What is the Economic Survey and who presents it?

The Economic Survey is the flagship annual document reviewing the economy's performance, prepared by the Chief Economic Adviser (CEA) in the Department of Economic Affairs, and tabled in Parliament by the Finance Minister a day before the Union Budget.

What is the difference between fiscal deficit and revenue deficit in the Union Budget?

Fiscal deficit is the excess of total expenditure over total receipts (excluding borrowings). Revenue deficit is the excess of revenue expenditure over revenue receipts, indicating dis-saving by the government.

What is the difference between GDP and GNP?

GDP (Gross Domestic Product) is the value of goods and services produced within a country's borders. GNP (Gross National Product) is GDP plus net factor income earned by residents from abroad.

What is the difference between CPI and WPI as measures of inflation in India?

CPI (Consumer Price Index) measures retail price changes faced by consumers and is the RBI's policy anchor (4% target). WPI (Wholesale Price Index) measures price changes at the wholesale/producer level and excludes services.

What is the primary mandate of the International Monetary Fund (IMF)?

The IMF (HQ Washington D.C.) promotes international monetary cooperation, exchange rate stability, and provides short-term financial assistance to member countries facing balance-of-payments problems. Its reserve asset is the SDR (Special Drawing Rights).

How does the World Bank differ from the IMF?

The World Bank focuses on long-term development and poverty reduction through project loans to developing nations (via IBRD and IDA). The IMF focuses on short-term monetary stability and balance-of-payments support.