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Insurance Insurance Presentation Transcript

  • Insurance
  • Definition
    • “ A social device providing financial compensation for the effects of misfortune, the payments being made from the accumulated contribution of all parties participating in the scheme.”
    • “ Insurance is a device for the transfer of individuals entities to an insurer , who agrees for a consideration , to assume to a specified extent losses suffered by the insured.”
  • Essential features for insurance
    • There must be a large numbers of similar risks.
    • The loss caused by the risk must be definite
    • The occurrence of the loss must be accidental
    • The potential loss must be large enough to cause hardship
    • The cause of insuring must be economically feasible
    • It must be possible to calculate the chance of loss
    • There must be an insurable interest to protect
    • It must be consistent with public policy
    • Reinsurance
    • It is an agreement between two or more insurance companies by which the risk of loss is proportioned i.e. the risk of loss is spread and as disproportionately large loss under a single policy does not fall on the shoulder of one company.
  • Double insurance
    • It implies that the same subject matter of insurance has been insured twice either with two different companies or with same company under two policy.
  • Fundamental principle of insurance
    • Utmost good faith
    • Insurable interest
    • Indeminity
    • Mitigation of loss
    • Attachment of risk
    • subrogation
  • Utmost good faith
    • It means each party to a proposed contract is legally obliged to reveal to the other party all information which would influences the other’s decision to enter the contract , whether such information is required or not.
    • Material facts are of two types
    • Those facts which affects the nature or incidence of risk
    • Those facts which affects the character of the insured.
    • There are many facts concerning any proposed insurance contract which are not of vital consideration to the insurer and insured
    • Facts of public, Common or professional knowledge .
    • Facts which results in reducing the risk
    • Facts embodied in the policy itself
  • Insurable interest
    • It means that the insured stands in such a relation to the subject matter of insurance that he suffers loss by its destruction or damage and is benefited by its safety or existence
    • It must satisfy some conditions like:
    • There must be a physical object
    • There must be potential liability
    • There must be legally recognized relationship with the subject matter.
  • indemnity
    • Indemnity restores the insured to the same financial position after a loss as he enjoyed immediately prior to the loss.
    • Under the principle of indemnity, therefore , no profit can be made out of the insurance contract.
    • Methods of providing an indemnity
    • Cash
    • Replacement
    • Repair
    • Reinstatement
  • Mitigation of loss
    • The principle places a duty on the insured to make every effort and to take all such steps , in the event of some mishap to the insured property, to mitigate or minimize the loss, as would have been taken by an uninsured person.
  • Attachment of risk
    • Under this principle a contract can be enforced only if the risk has attached.
  • subrogation
    • It is defined as the right to which one person has to stand in the place of another and avail himself of all rights and remedies of that other.