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Financial Institutions and Services

Notes
contingent risks to the outsourcing agents alone since their skin will also be in the game,"
said Mr Sengupta.
As mentioned earlier, many of the non-core functions are already getting outsourced to
third party players.

On the flip side, core activities such as claims processing, IT support and policy servicing
are generally outsourced to back office companies by firms in the US and UK. In India, a
small sub-section within claims processing - namely, data entry work related to procurement
and lodging of insurance claims - is outsourced. Settlement of insurance claims is still very
much done in-house by the insurer. "Majority of the functions prescribed by the IRDA as
core are generally outsourced in the Western World. Since these cannot be outsourced by
Indian insurers, it is a dampener in terms of the future revenue outlook for back office
firms," a senior industry watcher said.
Forming Joint Venture

Some companies, like the Mumbai-based Datamatics, feel that clients who still want to
outsource some of the core functions could do so by forming a joint venture with a back
office company. "This ensures that the core functions are still dealt with by the insurer...We
are having some conversations on similar lines with prospective customers," said Mr
Rahul Kanodia, Vice-Chairman and Chief Executive, Datamatics.

Source: http://www.thehindubusinessline.in
8.3 Terminology Used

Though the space does not provide the liberty to discuss each and every term used in the
insurance sector, yet the most important of them all are being discussed in an alphabetical order
as under:
Contract of Insurance: A contract of insurance is a contract of utmost good faith technically
known as uberrima fides. The doctrine of disclosing all material facts is embodied in this
important principle, which applies to all forms of insurance.
At the time of taking a policy, policyholder should ensure that all questions in the proposal
form are correctly answered. Any misrepresentation, non-disclosure or fraud in any document
leading to the acceptance of the risk would render the insurance contract null and void.
Cover note: Document evidencing issuance of an insurance policy and gives a summary of the
information given in a certificate of insurance.
Excess: A secondary insurance policy covering a loss in excess of that covered under a primary
policy; may be referred to as excess policy.
Hazard: Insurance that covers property damage caused by fire, wind, storms, and other similar
risks. Sometimes earthquakes and floods are also covered, while other times they are not.

Indemnity: Indemnity insurance compensates the beneficiaries of the policies for their actual
economic losses, up to the limiting amount of the insurance policy. It generally requires the
insured to prove the amount of its loss before it can recover. Recovery is limited to the amount
of the provable loss even if the face amount of the policy is higher.
Insurable Interest: Insurable interest is defined as legal interest in another person's life or in the
protection of property from injury, loss, destruction or pecuniary damage.
Insured: A person whose interests are protected by an insurance policy; a person who contracts
for an insurance policy that indemnifies him against loss of property or life or health etc.

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