ch . 3 Introduction to Insurance INSURANCE.pptx

INSURANCE

1. Module -2 Insurance and Risk Introduction to Insurance

2. Content Introduction to Insurance Insurable Risk Types of Insurance Social & economic benefit of Insurance Government Controlling Authorities Principal of Insurance

3. Introduction to Insurance Insurance is Practice or arrangement by which company or Government agency Provides a guarantee of Compensation for Specified Loss, Damage, illness or death in return for a Payment of a Premium. In some sense , it’s a thing Providing Protection against a Possible eventuality

4. Definition.... A Contract in which an individual or entity receives financial Protection or reimbursement against losses from an Company. The Company Pools Clients’ risks to make Payments More affordable for the insured.

5. Importance of Insurance Provides Protection against occurrence of uncertain events . Co-operative method of spreading risks Facilitates international trade. Serves as an agency of Capital formation Financial Support Medical Support Source Of employment

6. When we talk of Insurance, We are referring to risks in all forms. Hence , having for an insurance Policy is just a way of sharing our risks with other People with similar risks….

7. Insurable Risk Insurable risks are the type of risks in which the insurer makes Provision for or insures against because it is Possible to collect, Calculate and estimate the likely future losses. Insurable risks have Pervious Statistics which used as a basis for estimating the premium. it holds out the Prospect of Loss but not Gain The risk can be forecast and measured For Example : Motor insurance, marine insurance, Life Insurance.

8. Example : 1 The Probability ( or Chance ) that a certain vehicle will be involved in an accident in year 2011 ( Out of the total Vehicle insured that year 2011 ) can be determined from the number of vehicles that were involved in accidents in each of some previous years ( Out of the total vehicle insured those years ).

9. Example -2 The Probability ( Or Chance ) that a man ( or woman) of a certain age will die in the ensuring year can be estimated by the fraction of people of that age that died in each of some Pervious year.

10. Social and economic Benefit of Insurance Insurance provides safety and security Insurance makes financial resources Insurance increases savings Insurance spreads risk Insurance gives medical support to society Insurance provides increasing employment in economy

11. Insurance provides increasing GDP Insurance effects to economic growth positively Insurance effects stability of financial system positively Insurance effects to balance of payments positively Insurance provides prosperity of people

12. Government and Controlling Authorities

13. Insurance Contract Govern by Indian Contract Act, 1872 Insurance Act ,1938

14. Legal Aspect of Insurance Insurance is Contract where by one party I.E Insurer agrees to pay agrees to pay a specified some amount of happening of an event and the other Party that is insured agrees to pay In consideration thereof , a sum which is called Premium Therefore there are two parties to an insurance Contract 1.Insurer : Who undertake responsibility to indemnify 2.Insured : whose risk is undertaken

15. Characteristic of an Insurance Contract The Indian Contract Act 1872 as well as the Insurance Act , 1938 , governs the Insurance contract . The Provision of the Indian contract Act, 1872 refers to the general characteristics of an Insurance Contract Whereas Insurance Act , 1938 refers to the special characteristics

16. General Characteristics According to section 2(h) Section 10 of the Indian Contract act, a valid contract must have the followings. 1.Agreement 2.competence of the parties 3.Free consent 4.Legal Consideration 5.Lawful object

17. essentials of insurance contracts 1.Agreement 2.Free Consent 3.Componates of the Contract 4.Incerase self Respect 5.Legal Consideration 6.Compliance with legal Formalities 7.Competent of Contract 8 Certainty 9.Insurable Interest 10. Encourage Saving 11.Writing and registration 12.Warranties

18. Principles of insurance 1. Principal of Utmost Good Faith Both parties, insurer and insured should enter into contract in good faith. Insured should provide all the information that impacts the subject matter Insurer should provide all the details regarding insurance contract For example  - John took a health insurance policy. At the time of taking policy, he was a smoker and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John didn't reveal the important facts.

19. 2) Principle of Insurable Interest Insured must have the insurable interest on the subject matter In case of life insurance spouse and dependents have insurable interest in the life of a person. Corporations also have insurable interests in the life of it's employees In case of life or marine insurance, insured must be the owner both at the time of entering of entering into the insurance contract and at the time of accident.

20. 3) Principle of Indemnity Insured can't make any profit from the insurance contract. Insurance contract is meant for coverage of losses only Indemnity means a guarantee to put the insured in the position as he was before accident This principle doesn't apply to life insurance contracts

21. 4) Principle of Contribution In case the insured took more than one insurance policy for same subject matter, he/she can't make profit by making claim for same loss more than once For example  - Raj has a property worth Rs.5,00,000. He took insurance from Company A worth Rs.3,00,000 and from Company B - Rs.1,00,000. In case of accident, he incurred a loss of Rs.3,00,000 to the property. Raj can claim Rs. Rs.3,00,000 from A but after that he can't make profit by making a claim from Company B. Now Company A can make a claim from Company B to for proportional loss claim value.

22. 5) Principle of Subrogation After the insured gets the claim money, the insurer steps into the shoes of insured. After making the payment insurance claim, the insurer becomes the owner of subject matter. For example  :- Ram took a insurance policy for his Car. In an accident his car totally damaged. Insurer paid the full policy value to insured. Now Ram can't sell the scrap remained after the scrap.   

23. 6) Principle of Loss Minimisation This principle states that the insured must take all the necessary steps to minimize the losses to inured assets. For example  - Ram took insurance policy fo his house. In an cylinder blast, his house burnt. He should have called nearest fire station so that the loss could be minimised .

24. 7) Principle of Cause Proxima Word "Cause Proxima " means "Nearest Cause" An accident may be caused by more than one cause. In case property insured for only one cause. In such case nearest cause of the accident is found out.  Insurer pays the claim money only if the nearest cause is insured.

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