Licentiate Examination - IC 11 - Practice of General Insurance Exam - Important Points
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Moral hazard - dishonesty or character defects in an individual that influence the frequency or severity of the loss. Misusing the facility of insurance. Example buying health insurance after onset of a major ailment.
Moral hazard can be reduced using the mechanisms of co-payment, deductible, sub-limits & offering incentives like no-claim bonus in health insurance
Subrogation: It is the process an insurance company uses to recover claim amounts paid to a policy holder from a negligent third party.
Subrogation can also be defined as surrender of rights by the insured to an insurance company that has paid a claim against the third party.
Subrogation - Where a third party can be shown to be at fault in causing the loss / claim, then under the insurance principle of subrogation, the insurer can take over the insured?s legal rights to recover the cost of the claim from the offending third party and / or their insurers.
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