What is Insurance Board of Sri Lanka?

The Insurance Board of Sri Lanka, the independent body set up by the Government to regulate the insurance sector in Sri Lanka, was established with effect from 1st March 2001 by promulgation of the Regulation of Insurance Industry Act, No. 43 of 2000 for the purpose of development, supervision and regulation of the Insurance Industry in Sri Lanka. The object and responsibility of the Board is to ensure that insurance business in Sri Lanka is transacted with integrity and in a professional and prudent manner with a view to safeguarding the interests of the policyholders and potential policyholders.

What are the entities and individuals regulated by the IBSL?

Insurance companies and Insurance Intermediaries (Agents and Insurance Broking companies) are regulated in Sri Lanka by the IBSL.

What is the law regulating the insurance industry and who is responsible for regulating the industry?

The Regulation of Insurance Industry Act, No. 43 of 2000 provides the relevant legal framework for the regulation of insurers and insurance intermediaries. The IBSL is mandated with the responsibility of regulating insurance industry in Sri Lanka.

How many insurers are authorized to operate in Sri Lanka and how are they distributed according to types of insurance business?

Eighteen (18) Insurance Companies (Insurers) registered with the Insurance Board of Sri Lanka (IBSL), are presently underwriting insurance business. Eleven (11) of them are composite companies transacting both Long Term Insurance and General Insurance business whilst five (05) of them engage in General Insurance business and two (02) companies engages only in Long Term Insurance business.

How many insurance brokers are there in Sri Lanka?

As at 15th February 2010, Forty Two (42) companies have been registered with the IBSL as insurance brokers and they engage in insurance broking business. The registrations of insurance brokers are renewed at the end of every year.

Who is an insurance agent and what is his/her role?

An individual registered as an insurance agent with an insurance company or insurance broker under the provisions of the Regulation of Insurance Industry Act, No.43 of 2000, and who in consideration of a commission solicits or procures insurance business for such insurance company or insurance broker, as the case may be.

The characteristics of an insurance agent are as follows:

• Individual who sells insurance on behalf of insurers or brokers.
• Subject to passing a pre-recruitment test conducted by Sri Lanka Insurance Institute.
• Duties include as professional/technical advisor to insured and to sell all the necessary information of a product of insurer.
• Appointed by the insurer or broker.
• Agent can represent only one insurer or broker at any one time.
• Income is earned through commissions.

Who is an Insurance Broker and what are its responsibilities?

An insurance broker is a company incorporated under the Companies Act, No. 07 of 2000 and registered under the provisions of the Regulation of Insurance Industry Act, No.43 of 2000 in order to carry out insurance broking business, and who functions as an intermediary for the placing of insurance business for or on behalf of an insurer, a policyholder or a proposer for insurance or reinsurance, with an insurance company or reinsurance company, in expectation of a payment by way of brokerage or a commission.

The characteristics of an insurance broker are as follows:

• Company incorporated under the Companies Act, No. 07 of 2000
• Company registered with the Insurance Board of Sri Lanka to transact insurance broking business.
• Paid up share capital – Not less than Rs.1,000,000.
• Act on behalf and fulfil many other functions/requirements of clients (insured).
• Source for competitive rates, advice, recommend necessary coverage/needs and administer and arrangement of insured’s insurance program.
• Act as intermediaries between insurer and insured.
• Collect premiums on behalf of insurer.
• Assist and advise in the event of a claim.
• Earn a brokerage for the businesses they place with the insurance companies.

How do I know if the Agent/Broker is authorized to sell insurance policies?

An insurance agent is appointed by an insurance company or an insurance broker. Identity Card issued by the insurer or the insurance broker is the proof that he/she is entitled to procure insurance business on behalf of the insurer or the insurance broker. If you are suspicious of the person concerned you could verify from the insurer or the insurance broker who appointed the agent.

Insurance brokers are registered with the IBSL and a Certificate of Registration is issued to them for each class of insurance business, which is valid for a specified period (not more than one year).

Is there a dispute handling mechanism in place for claims settlement?

If you are not satisfied with the manner in which your insurer has handled your claim or you have any other complaint relating to your insurance policy, you can contact Insurance Ombudsman.

Complaints on insurance may be lodged with Insurance Ombudsman
    143A, Vajira Road, Colombo 5.
    Telephone         : 011 4528671/2
    Fax                   : 011 4528670
    E-mail               : info@insuranceombudsman.lk
    Web                  : www.insuranceombudsman.lk and

If you have any further issues after consulting the Insurance Ombudsman, you can always contact the Insurance Board of Sri Lanka.

    Insurance Board of Sri Lanka
    Level 11, East Tower, World Trade Centre
    Echelon Square, Colombo 01.
    Telephone:  011 2396184-9, Fax:  011 2396190
    e-mail – info@ibsl.gov.lk
    Web site – www.ibsl.gov.lk

What is insurance?

The process of living requires the individuals and businesses having to face many forms of risks. Insurance is a risk transfer mechanism whereby a person can shift some of the uncertainties in life onto an insurance company in return for a known payment.

Why is insurance needed?

Insurance provides people with protection in the event of something unanticipated happening; like a car accident or house fire or death of a breadwinner of the family. Insurance provides people with peace of mind, knowing that they and their loved ones can maintain the quality of life that they had even after an unforeseen event.

How does one select an insurance company?

Following criteria may be considered when choosing an insurance company:

1. Financial stability of the company;
2. Fairness and promptness in processing claims;
3. Ability and willingness to provide service before and after a loss.

While price is an important factor, remember that you're buying a service as well as a product. An insurance policy is a promise made by the insurance company to the insured in return for a known payment, which is called the Premium. Therefore, the first thing to look at in choosing an insurance company is to be sure that the company is stable financially. Talk to several agents, broking companies and other policyholders to find out the levels of service that an insurance company provides. You may be able to decide the position of a particular company from information gathered from insurance agents or advice of your insurance broker or experiences of other policyholders. An insurance company should also be willing to listen to your requirements and if necessary "tailor" insurance covers to meet the needs of its clients. Learn as much as you can about the company relating to its promptness in claims settlement and reputation for providing service.

How to obtain an insurance policy?

Stage 1 - Discuss the type of insurance you require, the amount to be insured and the policy conditions with an insurance company representative or intermediary (agent or broker).

Stage 2 - Depending on the procedure of a particular insurance company, a proposal form would usually be given to you for completion before a quotation is provided.

Stage 3 - Receive a quotation which depicts brief description of cover with terms, conditions and exclusions including the premium thereon from the insurance company or insurance broking company.

Stage 4 - If you are agreeable to the quotation given to you for the insurance cover, you should indicate your acceptance to the insurance company or broker.

Stage 5 - Before you sign the application and pay for coverage, read all the sections about the basic policy, including items covered & exclusions, the amounts to be paid, and other conditions such as excesses/deductible etc., if any. Ensure to obtain clarifications from the insurance company or broker, wherever necessary.

Stage 6 - Make arrangement for payment of the premium and an insurance policy shall be issued to you shortly thereafter.
 
Stage 7 - Your insurance cover will begin from the agreed date outlined in your policy document or on the date specified by you and accepted by the insurance company.

How to obtain an insurance cover?

There are several ways to obtain or buy insurance policy.

1. You can go directly to an office of an insurance company
2. Some insurance companies have sales staff or agents who will come and visit you
3. You can contact an Insurance broking company who can also help you out in getting the insurance coverage you need

Who should I contact at the insurance company?

You may contact the underwriting, marketing or sales personnel at the insurance company.

Can I use a broker or agent to purchase an insurance policy?

Yes. A broker or agent will take you through all the necessary steps to get the insurance you need.

How to select an appropriate insurance cover?

Whether the insurance policy is deemed good or bad depends on the consumer understanding of his need for that particular insurance. A "good" insurance policy should be one that meets the consumer's needs without providing unnecessary insurance cover than is required.

Each stages of life will have different needs and therefore, different stage of life will focus on different category of policy. Consumers will purchase insurance according to their needs and at the same time based on the affordability in paying such premium. Generally, Life insurance should be purchased according to one’s financial needs. Some individuals with unusual property, such as expensive artwork, antiques or coin collections, need to alter the standard policy to tailor the coverage of insurance to meet their specific needs.

How to choose a proper amount in insurance?

Like choosing the proper policy, choosing the proper amount of insurance begins with knowledge of the need for insurance. The need for insurance is related to the severity and the probability of a potential loss. In life assurance, prior to deciding the sum to be assured, it is advised to analyse and compare the current and future financial needs of the dependents and their potential earnings, one’s capacity to save and invest and potential returns of the policy, if any. The value of the insurance policy that one decides to buy should fulfil the gap. In property insurance, the sum insured should ideally be the reinstatement/replacement value of that particular property at the time of taking the policy. Certain items such as motor vehicles, stocks and personal effects could be insured on a market value (2nd hand value)

Despite the difficulty in choosing the proper amount of insurance coverage, some common sense rules apply:

1. Insure first those exposures to loss most likely to cause the greatest amount of damage;
2. Never expose to losses more than you can afford to lose. In other words, try to avoid and minimise the losses ;
3. Never risk a great loss (a high percentage of your losses) in exchange for a small gain (saving the insurance premium).

What is ‘insurable interest’?

A person has an "insurable interest" in something when loss or damage to it or creation of liability would cause that person to suffer a financial loss or certain other kinds of losses. For example, if the house you own is damaged by fire, the value of your house has been reduced, and whether you pay to have the house rebuilt or sell it at a reduced price, you have suffered a financial loss resulting from the fire. By contrast, if your neighbour’s house, which you do not own, is damaged by fire, you may feel sympathy for your neighbour and you may be emotionally upset, but you have not suffered a financial loss from the fire. You have an insurable interest in your own house, but in this example you do not have an insurable interest in your neighbour’s house.

A basic requirement for all types of insurance is the person who buys a policy must have an insurable interest in the subject of the insurance at the time of taking out the policy, with the exception of Marine Insurance, where the insurable interest must be proved at the time of the claim. You have an insurable interest in any property you own or which is in your possession and responsible for its safety and wellbeing.

For purposes of life insurance, everyone is considered to have an insurable interest in their own lives as well as the lives of their spouses and dependents. For property and casualty insurance, the insurable interest must exist both at the time a loss as well.

What is Sum Insured?

The sum insured represents the total sum for which an insured item or property is insured and/or compensated against and it is on which, most commonly, the premium is charged.

What is Life Insurance?

Life Assurance is “a contract in which the insurance company agrees to pay a given sum on the happening of a particular event, contingent upon the duration of human life or pay the sum assured on maturity”.

Though human life cannot be valued, a monetary sum could be determined based on the following:

• Duration of the policy and/or Age
• Gender
• Individual Risks of the Life to be insured
• Loss of income in the future years
• A person’s ability to pay premium
• The purpose for which a policy is sought

Life insurance is to protect a person’s life over uncertainty that may occur to them at any point of time. The policyholder pays his/her premium regularly for an agreed amount of coverage and if the specified event such as death or an accident resulting in death or disability occurs, the amount of coverage will be paid to the policyholder or to the dependents as the case may be. If the policy has been obtained with participation in profits, the amount accrued up to the event or maturity will also be paid.

Why is Life Insurance needed?

a. Protection: It gives full protection against risk of death or disability. It provides financial support to you and your family when unexpected events occur.

b. Savings: Life Insurance can help you to save and plan for your future such as children’s education, invest for a better future, children’s marriage, protect your loved ones and retirement income.

Why is Life Insurance so important?

Life is precious, hence the need to insure it. Death comes unannounced and not all of us are prepared for the financial changes it brings in the lives of our loved ones. Life insurance gives an initial financial stability in this event. Life insurance is important because no other investment/savings option makes available a lump sum amount immediately following death which is guaranteed from the time the first premium is paid on an accepted life insurance proposal.

What types of life insurance policies are available?

The basic Life Assurance products are as follows:

• Pure Endowment product is one in which benefits are payable on a specified date if the life assured survives at that time. If the person whose life is assured died before that date, no benefits are payable under the policy.

• Term Assurance products provide fixed amount of money on death during the period of contract. This policy provides protection for a selected period or term. The sum assured is payable only if insured person dies during the period or term of contract, i.e. no payment will be made if the insured person survives the period of contract. Premiums are paid throughout the selected period.

• Decreasing Term Assurance policy is similar to the Term Assurance policy, except the fact that benefit decreases annually until it is extinguished at the end of selected period. This policy is suited for a temporary need, which is reducing, such as housing loans repayable in instalments. Premium may be paid in one lump sum or over the selected period.

• Convertible Term Assurance policy is a Term Assurance policy with the option to convert to another policy (such as an endowment or whole life) without the evidence of health.

• Endowment Assurance products provide a fixed amount of money either on death during the period of contract or at the expiry of contract if life assured survives. Should the insured survive the term, the policy is said to mature. Thus the insured amount becomes payable either at death or at maturity. Premium is payable throughout the period of contract.

• Whole life Assurance products provide a fixed amount of money on death whenever it occurs. Premium may be payable till death or may be limited to a selected period (say up to age of 60).

• Annuity/Pension policies provide series of monthly payment on stipulated dates that the life assured is alive on the stipulated dates.

Insurers modify these basic types of life assurance products and add “labels” for sales purposes.

Can I take a policy for my child?

Yes as a guardian for the benefit of the child. The purpose of considering insurance for your child, is to provide valuable financial protection if you are not there or, to provide for a fund for his/her future.
Therefore, you (the parent) will be the life assured, while naming your beloved child as the beneficiary of the policy.

How to nominate a beneficiary?

This is usually done at the time of commencement of the policy. Nomination of a beneficiary is a right conferred on the life assured, to appoint a person/s to receive policy proceeds in the event of a claim arising out of death of the life assured. A Beneficiary is the proposed recipient of the proceeds of a Life Insurance Policy. The Beneficiary does not get any other benefit except to receive the policy proceeds on the death of the Life Assured.

If you wish, you can also include new beneficiaries or remove your previous beneficiary during the currency of the life policy.

Can I include my Spouse in my life policy?

Yes. You can include a rider to your basic life policy to cover the life of your spouse.

Can I include my child/children in my life policy?

Yes as beneficiary/beneficiaries.

I am not married. Do I need life insurance?

Persons who are not married often think they don't need life insurance. However, there are many factors that determine your need for life insurance; marital status is just one.

First of all, do you have any dependents? If you provide support for a parent or grandparent, your death could create a serious financial hardship for these dependents. Life insurance can provide a continued stream of income for your loved ones if you die prematurely. It can also provide peace of mind for you, knowing that they will be taken care of when you're gone.

Do you have a mortgage or other loans that are jointly held with a co-signer? If so, your death would leave the co-signer responsible for the entire debt. You might want to consider purchasing at least enough life insurance to cover these debts in the event of your death. If you have debts for which you alone are responsible, your creditors can make a claim for payment against any assets in your estate.

Are you at risk for any serious medical conditions? If, for example, your family medical history includes certain genetic conditions (diabetes, certain types of cancer, etc.) it may make sense to purchase life insurance while you are young and healthy. Purchasing life insurance after you develop such a condition could be difficult, have to pay a larger premium or even impossible to purchase an insurance policy.

If you die tomorrow, would you leave enough to cover your funeral expenses? If not, who would be responsible for paying? For many families, even a relatively simple funeral can create a major financial burden. For this reason alone, you might consider purchasing a small life insurance policy, or even a basic ‘Funeral Expenses’ policy. As an alternative, you could invest the premiums you would spend on such a policy, and make sure your family knows this investment is earmarked for your final expenses, should the need arise.

Even if you determine that you don't need life insurance, make sure your other insurance needs are covered. You may not realize it, but disability insurance is just as important as life insurance. Statistically speaking, you are much more likely to become disabled than to die prematurely. Disability insurance can replace lost income if you are unable to work due to serious illness or injury.

Do I enjoy a grace period to pay the premiums?

Generally for the payment of insurance premium on life insurance policies, insurance companies provide a grace period of two weeks in respect of monthly premium and one month in respect other modes of payments. If your policy lapses or become a paid up policy for non-payment of premium, you could reinstate your policy at the discretion of the insurer by paying the outstanding premium with interest and also you may have to undergo a medical test depending on the sum assured, the lapsed period, etc.

When does a policy lapse?

If the policyholder fails to pay his/her premium within the days of grace provided after the due date, the policy lapses.

My policy has lapsed can I renew it?

Yes. You can revive/reinstate your policy. According to the reinstatement/revival concept, a lapsed policy can be made active under the circumstances given below:

• There is a time limit within which a Reinstatement may be demanded. The period is normally accepted as five years but it may vary depending on the policy conditions.
• This right normally applies to policies, which were lapsed due to non-payment of premium.
• The Reinstatement is subject to any of the following conditions.

            - Evidence of continued Insurability i.e. good Health
            - Payment of arrears of premiums, plus interest
            - Payment of Reinstatement/Revival fee.
            - Inclusion of further ‘suicide exclusion period’ from the date of reinstatement

• Special Revival – The period of policy-lapse is added to the term of the policy. This scheme can be availed only once during a policy term.

What happens to my policy if I am suddenly unable to pay my premiums?

If you have paid premium for 3 years, your policy acquires surrender value. The policy can now be surrendered for a cash sum, if you are unable to continue with payment of premiums. It is never a good idea to surrender a policy or to allow it to lapse.

Should I pay my premiums through the Agent?

Always it is advisable to obtain the receipt for your premium payment from the insurance company. Insurance agents are not allowed to issue receipts on behalf of the insurance company. Therefore you should endeavour to obtain a receipt issued by the insurer through the insurance agent for the premium payment you made to him. In the event, the premium due is not paid within the days of grace; your policy may lapse, depending on the condition laid down in the policy.

What is Surrender Value?

The surrender value of a policy is the amount payable to the policyholder at a particular point in time if the policyholder wishes to cancel the policy. If a policyholder maintains a life insurance policy for a minimum period of three years continuously, it acquires a cash value, known as a surrender value. This is the cash entitlement available for the policyholder if he/she decides to cancel his/her life policy before the maturity date. The amount one person obtains, as surrender value is a portion of the premiums paid less expenses, part of the premium that provided the life cover & premium paid in respect of rider benefits and not a portion of the sum assured.

What is a Paid-up policy?

If Premiums are not paid after the policy has acquired a surrender value, it becomes a ‘Paid Up Policy’. The Policy will continue to remain in force for a reduced sum assured, which is determined on the basis of the premium paid. It is proportionate to the premium already paid on a policy as against the total sum assured. The ‘Paid Up’ amount is payable either at maturity to the life assured or to the beneficiaries at an early death of the life assured. Paid Up value is available for Endowment or Whole Life type of policies only.

Should you allow your policy to become a ‘Paid-up Policy’?

NO. It is strongly advised that you should not allow your policy to become a paid-up policy.
The sum assured will be reduced to a very small figure that it cannot provide any cover to the policyholder or his/her dependants in the event of a claim when the policy becomes a paid-up policy. Besides, you should also consider the facts that

• The next time you obtain a policy, the terms and conditions will not be as advantageous as available earlier due to the fact that the cost of insurance goes up with age.
• The chances of insurability also diminish with the advancement of age despite the fact that insurance is needed more along with increasing age and growing responsibilities.
• The reinstatement of a policy once converted into a paid-up policy requires numerous cumbersome formalities to be completed.

Can I have more than one life insurance policy?

YES. You can have any number of insurance policies. In the event of a claim, the benefits will be paid on all of them. Contrary to the Principle of Indemnity, where a policyholder is prevented from making profit out of a claim situation, it is quite in order for a client to recover under more than one life policy, as these are non-indemnity policies and the life assured has unlimited insurable interest in his/her life. The limitation applies based on the ability to pay premiums and maintain the insurance policy.

What are the “additional/rider benefits” available along with the life cover?

• Additional Death Benefit
• Accidental Death Benefit
• Disablement Benefits
• Total Permanent Disability due to accident
• Partial Permanent Disability due to accident
• Total Permanent Disability due to sickness
• Critical illness benefit
• Spouse and children cover
• Waiver of Premiums
• Hospitalisation Benefit
• Other rider benefits such as Family income benefits, Funeral Expenses Cover, Family Health Care Benefit etc. 

What is an Annuity?

An Annuity is an investment you make, either in a single lump sum or through instalments paid over a certain number of years, in return for which you receive a specific sum every year, or every month either for life or a fixed number of years. Upon the death of the annuitant, or at the expiry of the period fixed for annuity payments, the invested annuity fund is refunded usually along with a small bonus.

Annuities differ from all other forms of life insurance in one fundamental way - They do not provide any insurance cover but offer a guaranteed income for a certain period or for life. Typically annuities are bought to generate income during one's retired life, which is why they are also called Pension Plans.

Annuities are an investment that offers you an income that you cannot outlive and provides a solution to the biggest financial insecurity of old age that you will outlive your income.

What is an “Assignment” in Life Insurance?

Life Insurance is an asset to the policyholder. Therefore the policy owner has the legal right to assign or transfer that asset to another. In the assignment process, a policy owner is the ‘assigner’ and the third party is the ‘assignee’. Change of assignment should be informed to the Insurer in writing. The assignment must not be for any illegal purpose. The amount payable to the assignee will be the sum assured along with bonus accrued, if any, at the time of death of the assigner. The proceeds of the policy may be restricted to payment of only a lump sum to the assignee. If the policyholder had more than one assignment to his policy, the benefit on the policy after the death of the policyholder, will accrue to the last assignee in the event the proceeds are not accrued on a percentage basis among the assignees.

How can I cancel my existing policy and replace it with another?

Generally canceling and obtaining a new policy is uneconomical since you will not be entitled to any refund unless your existing policy has acquired surrender value, which would be very much lower than the premium that you have already paid. Further, as the rate of premium payable under life insurance policy depends on the age at which you commenced the policy, you will have to pay higher premium on the new policy. As a general rule insurance companies do not always agree to issue a new policy by canceling the existing policy.

What should I do when the insurance policy has matured?

Usually, the insurance company will communicate with you in advance before the maturity date when your life insurance policies have a maturity date. In addition to filling certain discharge forms, you are required to tender the original policy and instruct the insurance company in what manner you wish to obtain the proceeds of the policy.

How does one deal with a claim under the life policy?

It is always better to keep an immediate family member apprised of your insurance policy so that he or she could initiate action to obtain the policy proceeds in the event of your sudden demise. It is always advisable to assign your policy in favour of a relation or nominate a person to receive the benefits under the policy which otherwise would result in the disbursement of death benefits through legal process. In all other cases, such as disability benefits due to sickness or accident, family income benefits, total permanent/partial disability, inform your insurance advisor (agent or broker) and the insurance company immediately to process the claim.

My car was badly damaged by a Natural Disaster. Can I claim from the insurance company?

You can recover the loss from the insurance company provided that you possess a policy that covers the loss from a natural disaster.

The Insurance Company deducted from the repair bill of my car on the ground that I had undervalued car. 

Under-insurance is used as a practice to obtain a reduced sum insured where the policyholders could pay a lower premium. Underinsurance happens when the insured, at his/her own risk, insures the property for an amount less than the value at risk. As we discussed in our second article, premiums are based upon certain factors such as the sum insured, benefits payable, expenses etc. The premium has to be adequate and equitable. It is the responsibility of the insured to decide adequacy of the sum insured, where he contributes to the common pool in an adequate and equitable manner. The insurance company receives only a proportion of the correct premium for the total value at risk, when there is under-insurance. A mechanism called ‘Average’ is used to penalise under-insurance where the claim will not be paid in full.

A lorry driven on the highway crashed into my shop and damaged it. It was found that the lorry has only a Third Party Insurance. Am I able to claim damage from the insurance company, which insured the lorry under Third party insurance?

For a claim to be payable under a third party section of the policy, the owner/driver of the vehicle must be proved in courts that the driver was negligent for the accident. The insurance company would look into the fact that there has to be prosecution/conviction of the negligent lorry driver who has third party insurance. Unless there is prosecution/conviction, the insurance company is not liable to pay.

What does it mean by Excess?

It is a ‘condition’ in an insurance policy. Excess is that portion of the claim amount, which is borne by the insured in the event of a claim. The claim is payable only if the loss exceeds the excess and no claim is paid up to the amount indicated as excess. This condition is applied on the policies to make the insured responsible for part of the loss, avoid minor claims and avoid high frequency claims.

What is meant by ‘10% with a minimum of Rs 10,000/- from the claim amount’, under excesses.

In the event of a claim the insurance company will deduct from the claim payment, 10% or Rs 10,000/-, whichever is higher. This amount is borne by the policyholder.

What is a deductible?

The term ‘deductible’ usually refers to very large excess. This is found in insurance policies relating to commercial purposes.

What is meant by ‘Exclusion’ under a policy?

It is a risk that is not covered under a basic policy or a particular extension/endorsement or clause. These exclusions may be included in the basic policy at an additional premium.

Will I get the full sum insured at the time of a claim?

It depends; if there is under insurance the insurance company will apply the concept of ‘average’ to penalise the under insurance. The Excess or deductible, if any, a percentage for depreciation and up-gradation will also be deducted from the claim amount.

How to differentiate between malicious damage and damage from Riot & Strike.

Malicious Damage - Damages done to your property by not more than 5 persons.
Damage from Riot & Strike - Damages done to your Property by more than 5 persons. There are other criteria to form riot damage apart from the number of persons, such as unauthorised assembly of people to execute an event, execution of that damage by the group of people, putting at least one person in public at fear etc.     

What are the risks covered under the basic Fire Policy?

- Fire by any cause unless otherwise excluded, and Lightning
- Policy further covers explosion of boilers used for domestic purposes & gas used for domestic purposes and Electrical fires by ‘short-circuiting’ (excluding the origin of Fire).

What are the risks, which are not covered under the basic Fire Policy?

- Loss by theft during or after a fire
- Loss by its own fermentation, natural heating, spontaneous combustion or undergoing heating or drying process
- Burning of property by public authority
- Subterranean Fire
- War and allied perils including riot, civil commotion and terrorism
- Ionising radiation or contamination and nuclear risks
- Earthquake, volcanic eruption and other convulsions of nature
- Cyclone, Storm, Tempest, Typhoon, Hurricane, Tornado and other atmospheric disturbances
- Explosions other than explosion of boilers/gas used for domestic purposes
- Damage caused by burning of forests, forests & bush fires and clearing of lands etc.
- Damage to electrical machines and apparatus by over heating, short-circuiting, arcing etc. including lightning

What are the other perils and extensions under a Fire Policy?

- Riot and Strike (Max. Rs. 1 billion through the Government Fund set up for same)
- Malicious Damage
- Explosion
- Terrorism (Max. Rs. 250 million through the Government Fund set up for same)
- Electrical Extra (To cover the origin of Fire)
- Impact Damage
- Aircraft Damage
- Cyclone/Storm/Tempest Damage
- Flood Damage
- Burst Pipes/Tanks etc.
- Spontaneous Combustion
- Earthquake Fire and Shock Damage
- Natural Perils
- Sprinkler Leakage

What are the Time limits in a Fire policy?

• Any loss/damage should be informed immediately to the insurance company.
• The details should be submitted within 15 days of the occurrence of loss/Damage.

If my electrical items get damaged from lightning, can I claim from the insurance company?

Yes, you can if you have extended your electrical items to cover Electrical Extra Clause and if those damaged items show visible fire marks. The basic Fire policy covers spreading fire through electrical short-circuiting, lighting etc but the Electrical Extra clause covers the origin of fire.

What are the types of policies available for various categories of vehicles?

• Private Car Policy
• Commercial Vehicle Policy
• Motor Cycle Policy
• Special Types Vehicles
• Motor Trade Plate

What are the types of Motor Insurance Covers available in Sri Lanka?

• Act Only Policy
• 3rd Party Only Policy 
• 3rd Party Fire and Theft Policy
• Comprehensive Policy

What is Act Only Cover?

This policy covers death and bodily injuries of third parties (the people on the road). This cover is the minimum requirement in Law (Motor Traffic Act No.14 of 1951) and is seldom issued by insurers unless the driver/owner has a very poor track record of claims.

What is the difference between a comprehensive motor insurance policy and a third party cover?

The comprehensive insurance policy covers the damages to your vehicle, liability towards third parties (death or bodily injury to the people on the road and damages to or loss of third party property) and medical expenses incurred due to bodily injury of the insured, authorised driver or passengers, whilst the third party insurance policy covers only death or bodily injury to the people on the road and damages to or loss of third party property.

What exactly does a Comprehensive Motor Insurance policy cover?

The comprehensive cover does not cover your vehicle from all perils. The perils covered under a basic comprehensive policy are

• Own Damage
• Damage to vehicle by collision, overturning
• Damage to vehicle by fire, external explosion, self-ignition, lightning, burglary, housebreaking, theft and other accidental cause
• Malicious acts
• In transit by road, rail or inland waterway, lift or elevator
• Reasonable cost of protection
• Liability to third parties

All sums including claimant’s costs and expenses, which the insured or authorised driver is legally liable to pay in the event of:

• Death or bodily injury to third parties
• Loss of or damage to third parties’ property
• Medical Expenses

Medical expenses incurred due to any bodily injury sustained by the insured or driver or any passenger of the motor vehicle as a direct result of an accident to the motor vehicle.

What are the other additional covers that I can take with a Comprehensive Motor insurance cover?

You can take any of the following additional covers by paying an additional premium, to ensure that your vehicle is further covered.

• Personal Accident Benefits
• Workmen's Compensation cover
• Strikes, riots and civil commotion cover
• Terrorism cover
• Duty Free Cover (when you insure your vehicle for duty free value)
• Specified natural Perils
• Learner driver cover
• Airbag cover
• Glass Breakage Cover
• Legal Liability to Passengers (Commercial Vehicles)
• Goods in Transit (Commercial Vehicles)
• Increased 3rd party property damage cover (Commercial Vehicles)
• Inclusion of specified items (Commercial Vehicles)

Who has an insurable interest in relation to motor insurance?

• Owner of the vehicle
• Anyone who is driving or using a vehicle (for the use of the vehicle)
• Anyone who borrows a vehicle
• A person renting a vehicle may be liable for loss or damage, by the terms and conditions of the rental agreement
• An employee using a vehicle supplied by his employer (if terms of use impose some responsibility)
• A hire purchase or lease company (to the extent of their continued ownership)

How to determine the sum insured for my car?

The market value of your car should be the basis for determining the sum insured. Market Value represents the cost of purchasing ‘a replacement car’ of the same model, make and usage at the time of a loss.

What should I do in the event of an accident involving my vehicle?

Report the accident immediately to the nearest police station since the Law requires making of a statement to the Police by the parties involved in the accident (Section 161 of Motor Traffic Act No.14 of 1951). At the same time, inform the insurance company upon occurrence of an incident, giving rise to a claim under the policy.

What are the main categories of Marine Insurance?

• Cargo and
• Hull Insurance.

Cargo insurance is more common in Sri Lanka
Marine Cargo Insurance encompasses insurance of cargo, where it is moved from one place to another, be it by sea, air, land transit, parcel post or courier sending, which can be insured against loss or damage during transit.
On the other hand, Marine Hull Insurance covers the ship owner against the physical loss or damage to the ship itself. The actual hull or the steel plates, the engines and auxiliary machinery that one would find on board a vessel are covered under Marine Hull Insurance.

What covers are available for Marine Cargo Insurance?

There are three main types of covers, which are internationally recognized, known as the Institute Cargo Clauses.

• Total Loss Only – Minimum cover available
• Institute Cargo Clause 'C' – Eight perils are covered. This provides a restricted cover
• Institute cargo Clause 'B' - Wider than the restricted cover in ICC ‘C’. Additional four perils are covered together with the perils mentioned under ICC ‘C’
• Institute Cargo Clause 'A' - All risk cover subject to general exclusions

What is covered under Marine Cargo Insurance?

• Imports
• Exports
• Inland Transit
• Goods in Transit
• Produce in Transit
• Stock Through-put : This cover is provided for manufacturers, where the raw materials could be covered from the time the cargo receives at the port and until the final product is placed on board the vessel, e.g. Garment Manufacturing. Similarly, a Tea Factory owner could insure from the time the tea is plucked, transported, processed and sent to auctions. The premiums are based on annual turnover and other sub-limits

What is Personal Accident Cover?

It covers death due to or permanent or partial disablement due to accidental visible and external means, as it can cause deterioration in health and may impact on the earning capacity or the quality of life of an individual.

What is the scope of Personal Accident Cover?

• Accidental Death – 100% benefits payable
• Permanent Disablement - Loss of one or more limbs/eyes. Percentage of benefits payable as specified in the policy.
• Permanent Total Disablement – 100% benefits payable after 52 weeks, for disability from continuing his/her occupation or profession
• Temporary Total Disablement - Weekly Benefits payable up to max. 52 weeks, not exceeding 1% of the sum insured or actual weekly income whichever is lower.
• Temporary Partial Disablement – Weekly benefits payable (not exceeding 40% of the TTD weekly benefits)

What does Permanent Total Disablement (PTD) mean?

Permanent Total Disablement entirely prevents a person (an insured person) from attending to their business or occupation, of any and every kind, or if they have no business or occupation from attending to their usual duties.

What does Temporary Partial Disablement (TPD) mean?
A person (an insured) is incapable of attending to a definite part of their normal duties due to an accident. A lower level of benefit is provided than temporary total disablement; however it is not sufficient merely to be feeling the effects of the accident.

Why should I need Fidelity Guarantee insurance cover as an Employer?

It provides protection to employers (effectively the insured) against the fraud and dishonesty of misappropriation of property belonging to their employees. The policy will cover losses, which can continue over a long period of time. The policy is one of indemnity and provides cover against loss of your property, which can include money, stock, work in progress, equipment and machinery following theft or fraud by the employee/s.

I am a professional person. Is there any insurance policy that I can cover my liabilities towards my clients?

Yes. Professional Indemnity Insurance protects the professional person against legal liability to pay damages to persons who have sustained financial loss arising from professional negligence or that of their employees in the conduct of the business. The policy offers indemnity strictly on a legal liability basis and moral liability is not covered. Additionally, the policy covers legal expenses in defending you.

Is there any cover that employers can purchase for the liabilities towards their employees in the event an employee suffers bodily injury or disease, which arises out of and in the course of their employment?

Yes. Workmen’s Compensation/Employer’s Liability Insurance covers the legal liability of an employer that relates to bodily injury or disease sustained by an employee, which arises out of and in the course of their employment. The policy covers common law liability which is unlimited if negligence of the employer could be proved and according to the law, Workmen’s Compensation Act, it provides various compensations based on the wages the worker is paid for death, injury or disablement.

What is Public Liability Insurance?

Public Liability Insurance protects the insured in respect of legal liability for bodily injury to third parties and any loss of or damage to third party property, in connection with the Insured’s business activities. Additionally, the policy covers legal expenses in defending you.

What is the scope of the Product Liability cover?

The scope of the Product Liability Insurance is to indemnify the insured in respect of legal liabilities arising out of bodily injury, illness or disease to any person or loss/damage caused by goods/products (or the containers thereof) supplied by the insured in connection with the business that he/she carries out.