introduction to insurance bgfgfgfgfgf.pptx

gfg

1. Insurance: An introduction

2. What is insurance? The system of spreading the risk of one onto the shoulders of many An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

3. Characteristics of insurance: Insurance is a financial compensation against the risk of human life and his property. Insurance is a joint system where there is a scope to spread the loss among those who are exposed to risk. The interest of the policy holder is to transfer the risk of life and property to another. The interest of insurer is to receive premium from policy holder after certain period of time or annuity or in a lump sum basis.

4. Insurance Contract: Two parties are involved in insurance contract. One party transfers the risk of his life and property to another and the other party gives assurance to bear the risk. To transfer risk, the insured pays premium to the insurer. That means, price of risk taking is called premium. Terms and conditions of the policy are enumerated in insurance contract.

5. Elements of Insurance Contract 1. General Contract Agreement (Offer and acceptance) Legal Consideration Competent to make contract Free consent Legal object 2. Insurable Interest 3. Utmost Good Faith Material Facts Full and True Disclosure Duty of Both the Parties Facts need not be disclosed by the insured

6. Elements of Insurance Contract 4. Principle of Indemnity To discourse over insurance To avoid an Anti-social Act To maintain the premium at Low-level 5. Doctrine of Subrogation Corollary to the principle of Indemnity Subrogation is the Substitution Subrogation only up to the amount of payment The Subrogation may be applied before payment Personal Insurance

7. Elements of Insurance Contract 6. Warranties 7. Proximate Cause 8. Assignment of Transfer of Interest 9. Return of Premium By Agreement in the policy For reasons of Equity Over-insurance by double insurance

8. Nature of Insurance 1. Sharing of risk 2. Co-operative Device 3. Value of risk 4. Payment at contingency 5. Amount of Payment 6. Large number of insured persons 7. Insurance is not a gambling

9. Parties Involved in Insurance There are two parties involved in insurance. Insured Insurer 1.Insured: Insured is a person or organization who seeks protection against a particular risk, called insured. 2. Insurer: Insurer is one who undertakes to protect the insured against a particular loss.

10. Importance of Insurance There are 3 use case for insurance. 1.Uses to an Individual 2.Uses to Business 3.Uses to Society

11. Uses to an Individual Insurance provides security and safety against the loss on a particular event. It also provides safety and security against the loss of earning at death or in older age, against the loss at fire, against the loss at damage, destruction or disappearance of property, goods, furniture, and machines etc. Insurance affords peace of mind. Insurance protects mortgaged property, the property which is taken over by the lender of money and the family will be deprived from the uses of the property. Insurance elements dependency. Life insurance provides profitable investment. Life insurance encourages saving. Life insurance fulfills the needs of a person.

12. Uses to Business: Uncertainty of business losses is reduced Business efficiency is increased with insurance Key man indemnification Enhancement of Credit Business Continuation

13. Uses to Society: a) Wealth of Society is protected: The loss of a particular wealth can be protected with the insurance. Life insurance provides loss of human wealth. Similarly, the loss of damage of properly at fire, accident etc., can be well indemnified by the properly insurance. b) Economic growth of the county: For the economic growth of the country, insurance provides strong hand and mind, protection against loss of property and adequate capital to produce more health. c) Reduction in Inflation: The insurance reduces the inflationary pressure in two ways:  by extracting money in supply to the amount of premium collected; by providing sufficient funds for production narrow down the inflationary gap.

14. Principles of Insurance 1. Disclosure of materials : There are two parties involved in insurance contract. Both of them should give all the relevant information to other parties and should not hide anything. This is also known as utmost good faith. 2. Insurable Interest : There should be something of value to insure. For example life, property, good etc. 3. Principle of Indemnity : Insurance will never allow making any profit but insurance will simply to make good the loss. Through this two factors: Over Insurance, and Under Insurance.

15. Difference between Insurance and Assurance: Insurance This term is used in case of indemnity This is related to property insurance like, Marine insurance, Fire insurance etc. Payment to indemnify is made to the insured if loss is occurred. Otherwise no payment is made by insurer. Insurance is largely applicable in all sectors of life and property. Assurance This term is used in case of indemnity of loss caused by a certain event. Assurance is related to life insurance. It is certain that payment for indemnification will be made. In case of whole life and term life policy, assurance is applicable.

16. Difference between Insurance and reinsurance: Insurance Insurer or insurance and Insured or policyholder. Direct relationship between insurer and insured. No relationship between insured and re-insurer. Policyholder gets financial protection from insurer. Main insurer has the authority to supervise the insured property. reinsurance Both parties are insurance company. One is first insurer and the other is called Reinsurer. Direct relationship between first insurer and re-insurer is established. Main insurer gets financial protection from re-insurer. As there is no direct relationship , re-insurer does not have the supervision power.

17. Difference between General contract and Insurance contract: Insurance contract Objective is to reduce the risk of human life and property. Only two parties are involved: Insurer and Insured or policyholder. One party is insurance company and the other is individual or organization. This is a contract of fiduciary relationship. This contract must be written and stamped document Insurer gets premium from insured. GENERAL CONTRACT Objective is to protect the interest of both parties of the contract. Two or more than two parties can be involved. This contract can be done between: Individuals or Organizations or Individual and organization. Fiduciary relationship may not exist between the parties. This contract may be verbal, or written, or written and registered. There is no premium.

18. Policies Offered by the Insurance companies: 1. General Insurance: Fire and Marine insurance 2. Life Insurance

19. Thank you