Insurance provides protection by spreading risk over many individuals and helping to provide certainty for losses. The main functions of insurance are to provide protection from financial loss, allow for collective risk bearing by pooling premiums from many insured individuals, and to evaluate risks to determine fair premium rates. Insurance also works to prevent losses by encouraging safety and allows larger businesses and industries to operate by covering larger risks with smaller capital investments through premiums.

1. Function's oF
insurance….
By
aFtaB Mulla.

2. WHAT IS INSURANCE?
The definition of insurance can be made from
two points:
 Functional definition.
 Contractual definition.
FUNCTIONAL DEFINITION
 Insurance is a co-operative device to spread the
loss caused by a particular risk over a number of
persons who are exposed to it and who agree to
insure themselves against the risk.

3. Contractual Definition
In the words of Justice Tindall, “Insurance is a
contract in which a sum of money is paid to the
assured as consideration of insurer’s incurring
the risk of paying a large sum upon a given
contingency.”

4. BASIC FUNCTIONS OF
INSURANCE
 1.Primary Functions
 2.Secondary Functions
 3.Other Functions
4

5. PRIMARY FUNCTIONS OF
INSURANCE
 Providing protection – The elementary purpose of insurance is to allow
security against future risk, accidents and uncertainty. Insurance cannot
arrest the risk from taking place, but can for sure allow for the losses arising
with the risk. Insurance is in reality a protective cover against economic loss,
by apportioning the risk with others.
 Collective risk bearing – Insurance is an instrument to share the financial
loss. It is a medium through which few losses are divided among larger
number of people. All the insured add the premiums towards a fund and out
of which the persons facing a specific risk is paid.
 Evaluating risk – Insurance fixes the likely volume of risk by assessing
diverse factors that give rise to risk. Risk is the basis for ascertaining the
premium rate as well.
 Provide Certainty – Insurance is a device, which assists in changing
uncertainty to certainty. 5

6. SECONDARY FUNCTIONS OF
INSURANCE
 Preventing losses – Insurance warns individuals and
businessmen to embrace appropriate device to prevent
unfortunate aftermaths of risk by observing safety
instructions; installation of automatic sparkler or alarm
systems, etc.
 Covering larger risks with small capital – Insurance
assuages the businessmen from security investments.
This is done by paying small amount of premium against
larger risks and dubiety.
 Helps in the development of larger industries –
Insurance provides an opportunity to develop to those
larger industries which have more risks in their setting
up.
6

7. OTHER FUNCTIONS OF
INSURANCE
 Is a savings and investment tool – Insurance is the best savings
and investment option, restricting unnecessary expenses by the
insured. Also to take the benefit of income tax exemptions, people
take up insurance as a good investment option.
 Medium of earning foreign exchange – Being an international
business, any country can earn foreign exchange by way of issue of
marine insurance policies and a different other ways.
 Risk Free trade – Insurance boosts exports insurance, making
foreign trade risk free with the help of different types of policies
under marine insurance cover.
 Insurance provides indemnity, or reimbursement, in the
event of an unanticipated loss or disaster. There are different types
of insurance policies under the sun cover almost anything that one
might think of. There are loads of companies who are providing
such customized insurance policies.
7

8. WORKING OF INSURANCE

9. MARKET SHARE
5%
1%
21%
28%
4%
12%
4%
9%
5%
2%
3% 4% 2%
MAX NEW YORK
SHIRAM LIFE
BAJAJALLINZ
ICICI PRUDENTIAL
RELIANCE
SBI LIFE
TATA AIG
HDFC SLIC
BIRLA SUNLIFE
ING VYSYA
KOTAKMAHINDRA
AVIVA
METLIFE

10. CURRENT SCENARIO
•Growing at the rate of 15-20% annually
•75% population has no insurance
• Adds 7% to country’s GDP
•LIC market share come down to 75% and private insurers
increased over 24%
•Annuity or pension product have over 33% of market
•Unity linked insurance scheme have monopoly

11. MAJOR PLAYERS

12.  Thank you…
12