This document discusses insurance and capital markets in India. It defines insurance as a contract where one party agrees to compensate the other for potential losses in exchange for premium payments. Key terms and characteristics of insurance are described, including the principles of indemnity, subrogation, and insurable interest. The functions and relevance of insurance to individuals, businesses, and society are explained. Capital markets are introduced as markets for long-term securities like stocks and bonds. Risk is defined and the causes, types, and management principles and techniques are outlined.

2. TOPIC
Insurance & capital markets in India:
Application and Management concept in
the field of insurance.

3. CONTENTS
 Insurance
 Important terms used
 Characteristics
 Principle
 Function
 Relevance
 Capital market
 Purpose of capital market
 Risk
 Causes of Risk
 Types of Risk
 Principles of Risk Management
 Steps in Risk Management
 Risk Management Techniques
 Reason for Risk or Risk Management practices

4. INSURANCE
Insurance is defined as a form of contract between two
parties whereby one party(insurer) agrees to compensate
the other party (insured) against a loss which may or
may arise against a payment of a consideration
(premium).

5. IMPORTANT TERMS
 Insured
 Insurer
 Premium
 Compensation
 Insurance policy
 Insured amount
 Risk
 Contingency
 Peril

6. CHARACTERISTICS
 Contract
 Consideration
 Sharing of financial risk
 Co-operative device
 Risk evaluation in advance
 Good faith
 Contract of indemnity
 Amount of payment
 Insurance is not a gambling
 Insurance is not a charity

7. PRINCIPLES
 Principle of indemnity
 Doctrine of subrogation
 Principle of causa proxima
 Principle of insurable interest
 Principle of utmost good faith

8. FUNCTIONS
Primary Functions
Secondary Functions
Other Functions

9. Primary Functions
 Provides certainity
 Provides protection
 Risk-sharing
 Provides security

10. Secondary function
 Prevention of loss
 Provides capital
 Improves efficiency
 Economic progress

11. Other functions
 Encourages savings
 Feeling of Self confidence & goodwill
 Credit facility

12. RELEVANCE OF INSURANCE
Relevance to an Individual
Relevance to Business
Relevance to Society

13. Relevance to an Individual
 Insurance provides security & safety
 Life insurance encourage savings
 Life insurance provides profitable investment
 Life insurance fulfils the need of a person

14. Relevance to Business
 Uncertainty of business losses is reduced
 Business efficiency is increased
 enhancement of credit
 Businesses continuation
 Welfare of employees

15. Relevance to Society
 Wealth of the society is protected
 Economic growth of the country
 Reduction in inflation

16. Capital market
Capital market is a market for long term securities
(equity & debt).
Capital market is a place where buyer & sellers
engaged In trade of financial securities like bond ,stock
etc

17. Purpose of Capital Market
 Mobilize long term saving to finance long term
investment
 Provide risk capital in the form of equity
 Encourage broader ownership of productive assets
 Lower the cost of transaction & information
 Provide liquidity with a mechanism enabling the
investor to sell financial assets

18. RISK
By risk we mean 'uncertainty'.In other words,it refers to
'possiblity ' or change of meeting a danger or suffering or
change of exposure to adversity or danger.

19. CAUSES OF RISK
Natural Causes
Unnatural Changes

20. Natural Causes
 Seasonal Changes
 Geographical Changes
 Natural Changes

21. Unnatural Causes
Human forces
Economic causes
Government policy
Other causes: the above list is illustrative ,not
exhaustive. Therfore , in addition to the above
mentioned natural and unnatural causes , sometimes
causes like inefficient management lower quality of
product ,etc.

22. Type of risks
 Financial and non-financial risks
 Pure and speculative risks
 Dynamic risks and static risks
 Fundamental and particular risks

23. Principles of risk management
 Control of speculative risks
 Control of pure risk

24. Steps in risk management
 Identification of source of risk
 Measurement of risk
 Treatment of risk
 Selecting suitable method of risk handling
 Implementing the selected method
 Evaluation

25. Risk handling techniques
 Avoiding risk
 Risk reduction
 Assumption of risk
 Transfer of risks
 Insurance

26. Reason for risk or risk management
practices
 Industries and business have grown in size,
diversification ,process and strategic alliances
 Increase in business relations with suppliers,
consumers, employees and government.
 Business operations face many contingency due to
tough competition between enterprises.