This document discusses key concepts and principles of insurance. It explains that insurance works by transferring risk from individuals to a group, where losses are shared equitably among members. Premium contributions are calculated based on past loss experience to determine expected losses. Insurance companies collect premiums in advance from a large number of policyholders to compensate the few who suffer losses, using statistical data and probability theory to set accurate premium rates. The document defines insurance and outlines its nature as a risk-sharing cooperative device where payments are made contingent on specified events.
Chapter 01 concepts and principles of insuranceiipmff2
The document defines insurance as a social device where individuals transfer risk to an insurer who pools losses to make statistical predictions and provide payments from premium contributions. Legally, it is a contract where an insurer provides security to an insured against specified events in exchange for a premium proportionate to the risk. Key elements are risk transfer from insured to insurer, insurance as a business to meet costs and make profit, and an insurance contract as a legally enforceable agreement. Fundamental principles include utmost good faith, indemnity, subrogation, contribution, and proximate cause. There are various types of insurance and governing laws regulate the insurance sector in India.
Insurance is a mechanism for mitigating risk whereby individuals and entities protect themselves from financial loss by transferring their risks to an insurance company in exchange for a fee called a premium. It involves spreading risk among many individuals or entities to help offset the cost of unexpected losses or disasters. The key parties involved are the insured or assured who takes out the policy, the insurer or assurer who underwrites the risk, and the subject matter which is being insured such as a person's life or property.
This document provides an overview of the nature of insurance. It defines insurance as an agreement where individuals facing similar risks can share losses through transferring risks to an insurer. The insurer collects premiums from many policyholders and uses these funds to pay losses of the unlucky few. This allows for losses to be shared across all policyholders rather than borne solely by those who experience losses. It also discusses key concepts like insurable risks, premium calculation, functions of insurance, and differences between life and other forms of insurance.
The document discusses the meaning and characteristics of insurance. It outlines some key points:
1. Insurance involves pooling losses from many individuals so average losses can be substituted for actual losses of a few. It provides payment for unexpected, accidental losses.
2. Risk is transferred from the insured to the insurer, who is in a stronger position to pay losses. Indemnification means restoring the insured to their pre-loss position.
3. For a risk to be insurable, losses must be measurable, large numbers must be exposed, losses cannot be catastrophic, and the chance of loss must be calculable so premiums can be affordable.
Life insurance Claims and Settlement by Dr. Amitabh MishraAmitabh Mishra
An insurance claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or event. There are three main types of claims in life insurance: survival benefit claims, maturity benefit claims, and death benefit claims. The insurance company validates claims and, once approved, issues payment to the insured or beneficiary. The key documents required for claims processing include proof of identity, policy documents, claim forms, and documents proving cause of death or entitlement to the funds. The overall claims process involves intimation, documentation, submission, processing, and settlement.
1-The Basics Parts of an Insurance Contract
Declarations
Definitions
Insuring Agreement
Exclusions
Conditions
Deductibles
Miscellaneous Provisions
Insured
Rider And Endorsement
2-COINSURANCE
A coinsurance formula is used to determine the
amount paid for a covered loss. The coinsurance for-
mula is as follows:
(Amount of insurance carried/Amount of insurance required) * Loss = Amount of recovery
This document provides an introduction to insurance, including its history and evolution. It discusses how insurance works by pooling risks and premiums to compensate losses. It outlines some key risk management techniques like risk avoidance, retention, reduction and financing. Specifically, it explains how insurance transfers risk by having many policyholders pay premiums into a common fund that is then used to pay claims of those who suffer losses from insured events. The document provides examples of early insurance practices throughout history and the development of the insurance industry in India.
Insurance is a form of risk management where one party agrees to pay an agreed amount of money to another party in the event of a loss or damage. The key aspects of insurance include risk transfer through premium payments, hedging against contingent losses, and regulatory requirements to protect policyholders. Reforms since the 1990s have opened India's insurance sector to private companies and increased competition, leading to greater access and customer choice. Further reforms aim to strengthen regulation and increase insurance coverage, especially for health, life and small businesses. A developed insurance sector supports the economy through risk protection, long-term funding, and financial stability.
Chapter 01 concepts and principles of insuranceiipmff2
The document defines insurance as a social device where individuals transfer risk to an insurer who pools losses to make statistical predictions and provide payments from premium contributions. Legally, it is a contract where an insurer provides security to an insured against specified events in exchange for a premium proportionate to the risk. Key elements are risk transfer from insured to insurer, insurance as a business to meet costs and make profit, and an insurance contract as a legally enforceable agreement. Fundamental principles include utmost good faith, indemnity, subrogation, contribution, and proximate cause. There are various types of insurance and governing laws regulate the insurance sector in India.
Insurance is a mechanism for mitigating risk whereby individuals and entities protect themselves from financial loss by transferring their risks to an insurance company in exchange for a fee called a premium. It involves spreading risk among many individuals or entities to help offset the cost of unexpected losses or disasters. The key parties involved are the insured or assured who takes out the policy, the insurer or assurer who underwrites the risk, and the subject matter which is being insured such as a person's life or property.
This document provides an overview of the nature of insurance. It defines insurance as an agreement where individuals facing similar risks can share losses through transferring risks to an insurer. The insurer collects premiums from many policyholders and uses these funds to pay losses of the unlucky few. This allows for losses to be shared across all policyholders rather than borne solely by those who experience losses. It also discusses key concepts like insurable risks, premium calculation, functions of insurance, and differences between life and other forms of insurance.
The document discusses the meaning and characteristics of insurance. It outlines some key points:
1. Insurance involves pooling losses from many individuals so average losses can be substituted for actual losses of a few. It provides payment for unexpected, accidental losses.
2. Risk is transferred from the insured to the insurer, who is in a stronger position to pay losses. Indemnification means restoring the insured to their pre-loss position.
3. For a risk to be insurable, losses must be measurable, large numbers must be exposed, losses cannot be catastrophic, and the chance of loss must be calculable so premiums can be affordable.
Life insurance Claims and Settlement by Dr. Amitabh MishraAmitabh Mishra
An insurance claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or event. There are three main types of claims in life insurance: survival benefit claims, maturity benefit claims, and death benefit claims. The insurance company validates claims and, once approved, issues payment to the insured or beneficiary. The key documents required for claims processing include proof of identity, policy documents, claim forms, and documents proving cause of death or entitlement to the funds. The overall claims process involves intimation, documentation, submission, processing, and settlement.
1-The Basics Parts of an Insurance Contract
Declarations
Definitions
Insuring Agreement
Exclusions
Conditions
Deductibles
Miscellaneous Provisions
Insured
Rider And Endorsement
2-COINSURANCE
A coinsurance formula is used to determine the
amount paid for a covered loss. The coinsurance for-
mula is as follows:
(Amount of insurance carried/Amount of insurance required) * Loss = Amount of recovery
This document provides an introduction to insurance, including its history and evolution. It discusses how insurance works by pooling risks and premiums to compensate losses. It outlines some key risk management techniques like risk avoidance, retention, reduction and financing. Specifically, it explains how insurance transfers risk by having many policyholders pay premiums into a common fund that is then used to pay claims of those who suffer losses from insured events. The document provides examples of early insurance practices throughout history and the development of the insurance industry in India.
Insurance is a form of risk management where one party agrees to pay an agreed amount of money to another party in the event of a loss or damage. The key aspects of insurance include risk transfer through premium payments, hedging against contingent losses, and regulatory requirements to protect policyholders. Reforms since the 1990s have opened India's insurance sector to private companies and increased competition, leading to greater access and customer choice. Further reforms aim to strengthen regulation and increase insurance coverage, especially for health, life and small businesses. A developed insurance sector supports the economy through risk protection, long-term funding, and financial stability.
This document provides definitions for over 50 insurance terms, beginning with terms related to reinsurance. It defines terms such as ab initio, accident, accident cover, act of God, actual total loss, adjuster, advice, agent, aggrieved party, agreed value, amount covered, arbitration, arson, Australian Financial Services Licensee, and binder. The document continues alphabetically defining additional insurance-related terms through to contribution.
Insurance is a social device for spreading the chance of financial loss among
a large number of people. Insurance protects against pure risk.
Risk is the possibility of losing economic security.
Risk can be of two kinds: speculative or pure And only pure risks are insurable
Pure risk involves only two possible outcomes:
loss or no loss, with no possibility of gain or profit
Speculative Risk
involves three possible outcomes: loss, no loss or profit
The Law of Large Numbers:
The average of the results obtained from a large number of trials should
be close to the expected value.
Underwriting:
The process of selecting certain types of risks that have historically
produced a profit.
Peril:
A potential cause of loss. Accident, fire, and theft are common perils.
Hazard:
Anything that increases the seriousness of a loss or increases
the likelihood that a loss will occur.
Adverse Selection:
Is the tendency of person with a higher than average chance
of loss to seek insurance at the average state, which if not
Controlled by underwriting, result in higher than expected
Loss levels.
Insurance is not same as gambling. Gambling is creat a new
speculative risk and socially is unproductive but insurance
Deals with pure risk and socially is productive.
Insurance is not same as hedging. Insurance involves the
Transfer of pure risk and reduce objective risk but hedging
Involves just the transfer of speculative risk not risk
Reduduction.
Types of Insurance:
Private insurance, consist of health insurance, property and
liabilty insurance.
Government Insurance, cnosist of social insurance and other
Government insurance programs.
How does insurance work?
You pay a fee called a premium, and in exchange,
the insurance company agrees to pay you a certain
amount of money
-Basic Characteristics Of Insurance
Pooling of losses
Payment of fortuitous losses
Risk transfer
Indemnification
-Pooling of losses
Spreading of losses incurred by the few over the entire group.
• Key mechanism is “law of large number”.
• Future losses are predicted based on law of large number.
Note
• Pooling of loss is the spreading of losses incurred by the few over the
entire group so that in the process average loss is substituted for actual loss.
• The primary purpose of pooling is to reduce the variation in possible
Outcomes , which reduces risk.
-Payment of fortuitous losses
A fortuitous loss is one that is unforeseen and
unexpected and occurs as a result of chance.
Insurance policies do not cover intentional losses
-Risk Transfer
Risk transfer means that a pure risk is transferred from
the insured to the insurer,who typically is in a stronger
Financial position to pay the loss than the insured.
-Indemnification
Means that the insured is restored to his or her approximate
financial position prior to the occurrence of the loss.
- Insurable Risk
Insurer normally insure only pure risk.
This module discusses risk management and insurance. It covers topics such as risks and risk management, different types of risks, methods of handling risks including avoiding, controlling, accepting and transferring risks. It also discusses the basic concepts of insurance including risk pooling, law of large numbers, requirements of insurable risks, advantages and disadvantages of insurance. Additionally, it covers personal risk management process, objectives of risk management pre-loss and post-loss, insurance market dynamics and underwriting cycle. Finally, it discusses some key legal principles of insurance contracts such as offer and acceptance, consideration, insurable interest, subrogation and utmost good faith.
Insurance involves the equitable transfer of risk, where an insurer agrees to compensate an insured for a potential loss in exchange for a premium payment. The key parties are the insurer (the company), the insured (the policyholder), and the premium (the amount charged). Insurance is governed by acts and involves a contract between the insurer and insured regarding a specific insurable risk, with defined terms and conditions. For a risk to be insurable, it must be measurable, accidental in nature, and not catastrophic. Common types of insurance include life, property, liability, and guarantee policies.
Life insurance concept, nature & use of life insurance, distinguishing c...Ravi kumar
Life insurance is a contract where an insurer agrees to pay a designated beneficiary a sum of money upon the death of the insured. Key features include the payment of regular premiums by the policyholder and a lump sum payment to beneficiaries. The process involves filling out an application, providing proof of age and medical examination, and acceptance by the insurer. Life insurance provides financial protection for dependents and encourages savings. It has an economic nature by providing for a family's needs and a legal nature as defined by law. Characteristics include insurable interest of beneficiaries and utmost good faith of both parties.
An insurance contract is an agreement between an insurer and a policyholder where the insurer agrees to provide compensation or benefits to the policyholder in exchange for premium payments. The basic elements of a contract include consideration, meeting of the minds, capacity to contract, and offer and acceptance. An insurance contract is considered a unilateral, conditional, aleatory, and contract of adhesion. A policy is the written agreement that details all terms of the insurance contract, including the rights and obligations of both parties. It contains details like policy clauses, general provisions, provisions related to the insured, and other important information.
Lean system and innovation in strategic Cost ManagementYash Maheshwari
This provides detailed discussion of Lean system and techniques to deal with it such as just in time, six sigma, TPM, Business Process Re-engineering etc.
This document outlines an endowment policy, which is a type of life insurance that pays out a lump sum amount either upon the death of the policyholder or at the end of a specified term. It provides both a living benefit through periodic payouts as well as life insurance coverage. There are several types of endowment policies that vary based on factors like whether the payout is made to one or multiple lives insured, or whether the payout amount is the standard sum assured or a double amount. While endowment policies have benefits like long-term investment and dual protection, they also have drawbacks such as higher premiums and lower surrender values compared to term insurance plans.
In this presentation we will deal with Insurance organizations, their operational structure, insurer’s function and key business terms used in this sector.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
The document discusses the Insurance Regulatory and Development Authority (IRDA) of India. It was established in 1999 by an act of Parliament to regulate and promote the insurance industry. The IRDA aims to protect policyholders' interests, ensure the growth of ethical insurance practices, and foster an orderly insurance market. It has the power to license insurers and other industry bodies, enforce conduct standards, and adjudicate disputes. The IRDA is headed by a 10-member board including a Chairperson and whole-time members appointed by the central government.
Fire insurance protects people from financial losses caused by fires. It involves sharing fire-related losses incurred by some through contributions to a common fund by all who are exposed to fire risk. Fire insurance pays for losses that are unexpected and occur due to chance. It aims to restore the insured's financial position prior to the loss through the principle of indemnity.
This document provides an overview of marine insurance and key concepts related to business risk management. It defines marine insurance as a contract where the insurer agrees to indemnify the insured for losses from marine adventures. Some key points covered include the meaning and purpose of marine insurance policies, principles like utmost good faith and insurable interest, types of policies and clauses, insured perils and exclusions, losses like total/partial/average losses, and warranties. The document also compares the different levels of coverage under the Institute Cargo Clauses A, B and C.
This document summarizes a presentation about general/non-life insurance. It defines insurance and outlines key principles like utmost good faith, insurable interest, indemnity, contribution, subrogation, and loss minimization. It defines general insurance and describes major types like fire, motor, health, and marine insurance. For fire insurance, it explains scope and perils covered. For marine insurance, it outlines scope, who can take policies, selecting sum insured, and claims. It provides an overview of New India Assurance Co., including its history, position in the market, vision, mission, strengths, international presence, and awards.
The document discusses various types of insurance contracts in India including life, fire, and marine insurance. It outlines key elements such as insurable interest, indemnity, disclosure requirements, and types of policies for each. For life insurance, it describes who can have an insurable interest and different types of life policies. For fire insurance, it discusses the average clause, insurable interest, and types of fire policies. For marine insurance, it discusses insurable interest, maritime perils, and types of marine policies.
Insurance is a contract where an insurer agrees to compensate a policyholder in the event of a specified loss or liability in exchange for premium payments. Key principles of insurance include utmost good faith, indemnity, and insurable interest. There are various types of insurance like life, fire, marine, personal accident, health, and property insurance which are governed by the general principles of contract law and aim to socialize risk while protecting policyholders from financial losses.
This document provides an introduction and overview of insurance. It discusses that insurance helps spread risk over many individuals and helps people recover from losses. Insurance is important for businesses to manage risks to property, equipment, inventory and more.
The document then defines insurance as a social device that provides financial compensation for losses through accumulated contributions of participants. It explains key insurance terms like insurer, insured, policy, and premium. It distinguishes assurance which guarantees payment of a sum, from insurance which covers risks that may or may not occur.
Finally, the document outlines principles of insurance like utmost good faith between parties, the requirement of insurable interest, the principle of indemnity where payment covers actual loss, and other principles like
Chapter 1[definition and nature of insurance]aaykhan
The document defines insurance as a cooperative method for spreading risk over a group of individuals exposed to the same risks. It discusses key terms like risk, chance of loss, peril, hazard, loss, and the roles of the insurer and insured. The definition section examines insurance as both a functional and contractual concept that allows individuals to receive payment in the event of a specified loss or contingency in exchange for regular premium payments.
Insurance allows individuals to manage risk by paying premiums to an insurance company in exchange for financial protection from losses. The insurance company collects premiums from many policyholders to create a risk pool that pays out to those who experience losses. There are different types of insurance like health, home, auto, and life that protect against risks such as illness, accidents, property damage, and death. The amount of risk determines the cost of insurance, with higher risks factors resulting in higher premiums.
The document introduces the concept of insurance by defining it as a way to share risks and losses among a group of people. It discusses key insurance terms like risk, peril, hazard, contracts, premiums and rates. The main functions of insurance are explained as spreading risk among many individuals, providing security, enabling credit, and preventing losses. Different types of insurance like personal, commercial and special risks are also briefly introduced.
This document provides definitions for over 50 insurance terms, beginning with terms related to reinsurance. It defines terms such as ab initio, accident, accident cover, act of God, actual total loss, adjuster, advice, agent, aggrieved party, agreed value, amount covered, arbitration, arson, Australian Financial Services Licensee, and binder. The document continues alphabetically defining additional insurance-related terms through to contribution.
Insurance is a social device for spreading the chance of financial loss among
a large number of people. Insurance protects against pure risk.
Risk is the possibility of losing economic security.
Risk can be of two kinds: speculative or pure And only pure risks are insurable
Pure risk involves only two possible outcomes:
loss or no loss, with no possibility of gain or profit
Speculative Risk
involves three possible outcomes: loss, no loss or profit
The Law of Large Numbers:
The average of the results obtained from a large number of trials should
be close to the expected value.
Underwriting:
The process of selecting certain types of risks that have historically
produced a profit.
Peril:
A potential cause of loss. Accident, fire, and theft are common perils.
Hazard:
Anything that increases the seriousness of a loss or increases
the likelihood that a loss will occur.
Adverse Selection:
Is the tendency of person with a higher than average chance
of loss to seek insurance at the average state, which if not
Controlled by underwriting, result in higher than expected
Loss levels.
Insurance is not same as gambling. Gambling is creat a new
speculative risk and socially is unproductive but insurance
Deals with pure risk and socially is productive.
Insurance is not same as hedging. Insurance involves the
Transfer of pure risk and reduce objective risk but hedging
Involves just the transfer of speculative risk not risk
Reduduction.
Types of Insurance:
Private insurance, consist of health insurance, property and
liabilty insurance.
Government Insurance, cnosist of social insurance and other
Government insurance programs.
How does insurance work?
You pay a fee called a premium, and in exchange,
the insurance company agrees to pay you a certain
amount of money
-Basic Characteristics Of Insurance
Pooling of losses
Payment of fortuitous losses
Risk transfer
Indemnification
-Pooling of losses
Spreading of losses incurred by the few over the entire group.
• Key mechanism is “law of large number”.
• Future losses are predicted based on law of large number.
Note
• Pooling of loss is the spreading of losses incurred by the few over the
entire group so that in the process average loss is substituted for actual loss.
• The primary purpose of pooling is to reduce the variation in possible
Outcomes , which reduces risk.
-Payment of fortuitous losses
A fortuitous loss is one that is unforeseen and
unexpected and occurs as a result of chance.
Insurance policies do not cover intentional losses
-Risk Transfer
Risk transfer means that a pure risk is transferred from
the insured to the insurer,who typically is in a stronger
Financial position to pay the loss than the insured.
-Indemnification
Means that the insured is restored to his or her approximate
financial position prior to the occurrence of the loss.
- Insurable Risk
Insurer normally insure only pure risk.
This module discusses risk management and insurance. It covers topics such as risks and risk management, different types of risks, methods of handling risks including avoiding, controlling, accepting and transferring risks. It also discusses the basic concepts of insurance including risk pooling, law of large numbers, requirements of insurable risks, advantages and disadvantages of insurance. Additionally, it covers personal risk management process, objectives of risk management pre-loss and post-loss, insurance market dynamics and underwriting cycle. Finally, it discusses some key legal principles of insurance contracts such as offer and acceptance, consideration, insurable interest, subrogation and utmost good faith.
Insurance involves the equitable transfer of risk, where an insurer agrees to compensate an insured for a potential loss in exchange for a premium payment. The key parties are the insurer (the company), the insured (the policyholder), and the premium (the amount charged). Insurance is governed by acts and involves a contract between the insurer and insured regarding a specific insurable risk, with defined terms and conditions. For a risk to be insurable, it must be measurable, accidental in nature, and not catastrophic. Common types of insurance include life, property, liability, and guarantee policies.
Life insurance concept, nature & use of life insurance, distinguishing c...Ravi kumar
Life insurance is a contract where an insurer agrees to pay a designated beneficiary a sum of money upon the death of the insured. Key features include the payment of regular premiums by the policyholder and a lump sum payment to beneficiaries. The process involves filling out an application, providing proof of age and medical examination, and acceptance by the insurer. Life insurance provides financial protection for dependents and encourages savings. It has an economic nature by providing for a family's needs and a legal nature as defined by law. Characteristics include insurable interest of beneficiaries and utmost good faith of both parties.
An insurance contract is an agreement between an insurer and a policyholder where the insurer agrees to provide compensation or benefits to the policyholder in exchange for premium payments. The basic elements of a contract include consideration, meeting of the minds, capacity to contract, and offer and acceptance. An insurance contract is considered a unilateral, conditional, aleatory, and contract of adhesion. A policy is the written agreement that details all terms of the insurance contract, including the rights and obligations of both parties. It contains details like policy clauses, general provisions, provisions related to the insured, and other important information.
Lean system and innovation in strategic Cost ManagementYash Maheshwari
This provides detailed discussion of Lean system and techniques to deal with it such as just in time, six sigma, TPM, Business Process Re-engineering etc.
This document outlines an endowment policy, which is a type of life insurance that pays out a lump sum amount either upon the death of the policyholder or at the end of a specified term. It provides both a living benefit through periodic payouts as well as life insurance coverage. There are several types of endowment policies that vary based on factors like whether the payout is made to one or multiple lives insured, or whether the payout amount is the standard sum assured or a double amount. While endowment policies have benefits like long-term investment and dual protection, they also have drawbacks such as higher premiums and lower surrender values compared to term insurance plans.
In this presentation we will deal with Insurance organizations, their operational structure, insurer’s function and key business terms used in this sector.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
The document discusses the Insurance Regulatory and Development Authority (IRDA) of India. It was established in 1999 by an act of Parliament to regulate and promote the insurance industry. The IRDA aims to protect policyholders' interests, ensure the growth of ethical insurance practices, and foster an orderly insurance market. It has the power to license insurers and other industry bodies, enforce conduct standards, and adjudicate disputes. The IRDA is headed by a 10-member board including a Chairperson and whole-time members appointed by the central government.
Fire insurance protects people from financial losses caused by fires. It involves sharing fire-related losses incurred by some through contributions to a common fund by all who are exposed to fire risk. Fire insurance pays for losses that are unexpected and occur due to chance. It aims to restore the insured's financial position prior to the loss through the principle of indemnity.
This document provides an overview of marine insurance and key concepts related to business risk management. It defines marine insurance as a contract where the insurer agrees to indemnify the insured for losses from marine adventures. Some key points covered include the meaning and purpose of marine insurance policies, principles like utmost good faith and insurable interest, types of policies and clauses, insured perils and exclusions, losses like total/partial/average losses, and warranties. The document also compares the different levels of coverage under the Institute Cargo Clauses A, B and C.
This document summarizes a presentation about general/non-life insurance. It defines insurance and outlines key principles like utmost good faith, insurable interest, indemnity, contribution, subrogation, and loss minimization. It defines general insurance and describes major types like fire, motor, health, and marine insurance. For fire insurance, it explains scope and perils covered. For marine insurance, it outlines scope, who can take policies, selecting sum insured, and claims. It provides an overview of New India Assurance Co., including its history, position in the market, vision, mission, strengths, international presence, and awards.
The document discusses various types of insurance contracts in India including life, fire, and marine insurance. It outlines key elements such as insurable interest, indemnity, disclosure requirements, and types of policies for each. For life insurance, it describes who can have an insurable interest and different types of life policies. For fire insurance, it discusses the average clause, insurable interest, and types of fire policies. For marine insurance, it discusses insurable interest, maritime perils, and types of marine policies.
Insurance is a contract where an insurer agrees to compensate a policyholder in the event of a specified loss or liability in exchange for premium payments. Key principles of insurance include utmost good faith, indemnity, and insurable interest. There are various types of insurance like life, fire, marine, personal accident, health, and property insurance which are governed by the general principles of contract law and aim to socialize risk while protecting policyholders from financial losses.
This document provides an introduction and overview of insurance. It discusses that insurance helps spread risk over many individuals and helps people recover from losses. Insurance is important for businesses to manage risks to property, equipment, inventory and more.
The document then defines insurance as a social device that provides financial compensation for losses through accumulated contributions of participants. It explains key insurance terms like insurer, insured, policy, and premium. It distinguishes assurance which guarantees payment of a sum, from insurance which covers risks that may or may not occur.
Finally, the document outlines principles of insurance like utmost good faith between parties, the requirement of insurable interest, the principle of indemnity where payment covers actual loss, and other principles like
Chapter 1[definition and nature of insurance]aaykhan
The document defines insurance as a cooperative method for spreading risk over a group of individuals exposed to the same risks. It discusses key terms like risk, chance of loss, peril, hazard, loss, and the roles of the insurer and insured. The definition section examines insurance as both a functional and contractual concept that allows individuals to receive payment in the event of a specified loss or contingency in exchange for regular premium payments.
Insurance allows individuals to manage risk by paying premiums to an insurance company in exchange for financial protection from losses. The insurance company collects premiums from many policyholders to create a risk pool that pays out to those who experience losses. There are different types of insurance like health, home, auto, and life that protect against risks such as illness, accidents, property damage, and death. The amount of risk determines the cost of insurance, with higher risks factors resulting in higher premiums.
The document introduces the concept of insurance by defining it as a way to share risks and losses among a group of people. It discusses key insurance terms like risk, peril, hazard, contracts, premiums and rates. The main functions of insurance are explained as spreading risk among many individuals, providing security, enabling credit, and preventing losses. Different types of insurance like personal, commercial and special risks are also briefly introduced.
The passage provides details about the history and development of the life insurance sector in India, including the following key points:
- The life insurance sector was initially dominated by private players until it was nationalized in 1956 with the formation of LIC.
- The sector was reopened to private players in 2000 with the establishment of IRDA to regulate the industry and the issuance of licenses to several private insurers.
- Major private insurers that entered the market include HDFC Life, Max Life, ICICI Prudential, Bajaj Allianz, among others, many of which formed through joint ventures with foreign partners.
Insurance can be defined as the equitable transfer of risk of loss from one entity to another in exchange for payment. It involves an insurer, insured, a premium, and compensation for loss due to a specified peril or risk. Key principles of insurance include utmost good faith, insurable interest, indemnity, subrogation, contribution, proximate cause, and mitigation of loss. Insurance provides important social and economic benefits but also involves costs like business costs and fraudulent claims. Regulations ensure transparency and consumer protection in the insurance industry.
The document discusses life insurance and provides definitions and explanations of key concepts:
- Life insurance is a contract where the insurer agrees to pay a sum of money to the insured or their beneficiaries upon the insured's death or other specified event.
- Both parties have responsibilities - the insurer must pay claims as agreed, while the insured must disclose all relevant information truthfully and pay premiums.
- There are various types of life insurance policies that can provide financial protection or serve as investment vehicles. Life insurance plays an important role in protecting families and encouraging savings.
The document provides an overview of how insurance works. It explains that insurance involves individuals pooling funds through premium payments to cover losses experienced by a few. When many individuals face the same risks, insurance allows for losses to be shared across the community in a manageable way for all. Premiums collected are invested, and surpluses are used to pay future claims or returned to policyholders. Examples illustrate how insurance protects against risks of fire or death by having many share the costs of losses affecting a few.
This document provides an overview of insurance. It defines insurance as a means of protection from financial loss through risk management. The key characteristics of insurance are pooling of losses, payment of fortuitous losses, risk transfer, and indemnification. There are six prerequisites for an insurable risk, including that the loss must be accidental, determinable, and not catastrophic. The types of insurance discussed include life, non-life, general, marine, fire, personal accident, vehicle, and others. The benefits of insurance to society include indemnification for loss, less worry and fear, investment funds, loss prevention, and credit enhancement. The document also discusses insurance products, reinsurance, bancassurance, and provides a definition
A project report_on_consumer_perception towards life insuranceSANJAYBT
The document discusses the history and current state of the insurance industry in India. It provides background on the origins and development of insurance globally and in India, including how the industry transitioned from being privately-owned to nationalized and then liberalized again. It also outlines the key players and segments in the current Indian insurance landscape.
This presentation is all about insurance. It will cover some topics.
1-What is Insurance ?
2-Why Insurance ?
3- Type of Insurance
4-What is Risk?
5- Peril and Hazard
6- Transfer of Risk ?
7- Mitigation
8-WHAT IS GENERAL INSURANCE ?
9- Type Of General Insurance
10- Insurance Company Operations
11- Underwriting, Claims Settlement
12- Reinsurance
Insurance is defined as a contract between an insurer and insured where the insured pays a premium in exchange for the insurer compensating for losses arising from events such as death, accidents, or property damage. It allows individuals to pool risks, with the insurer using collected premiums to cover losses while also investing premiums to generate capital for economic development. The key functions of insurance are providing certainty of compensation for losses, distributing risk across a large number of policyholders, and providing security for insured individuals and their property.
The document defines insurance as a method of spreading risk and financial losses from unfortunate events among a group of individuals. Insurance converts the uncertainty of risk for an individual into certainty for a group by pooling resources from many to pay for losses suffered by a few. The key purposes of insurance are to provide protection against financial losses from risks and act as a social security system.
Insurance involves pooling risks and transferring them to insurers in exchange for premium payments. It provides financial protection against losses from risks like accidents, diseases, property damage, legal liabilities and death. Risk is the possibility of an unexpected outcome, loss or damage occurring. Common risk management techniques include risk avoidance, loss control, risk retention and risk transfer through insurance. Insurance contracts require elements like insurable interest, utmost good faith, indemnity and subrogation. Life insurance can be term, whole-life, endowment or annuities providing periodic income in retirement.
In business, risk management is defined as the process of identifying, monitoring and managing potential risks in order to minimize the negative impact they may have on an organization. Examples of potential risks include security breaches, data loss, cyberattacks, system failures and natural disasters.
This document provides an overview of the basic insurance process. It discusses key concepts such as:
- The definition of insurance as a guarantee of compensation for specified losses in exchange for premium payments.
- The three main types of risk: pure risk which can only result in losses, speculative risk which can result in profits or losses, and financial risk which are measurable losses.
- The risk management process which involves determining client objectives, identifying exposures, evaluating risks, constructing a risk treatment plan, implementing it, and monitoring it.
- Basic characteristics of insurance contracts such as being a legal agreement where the insurer takes on the risk of the insured in exchange for premium payments, with the goal of cooperatively sharing the
This document provides an overview of life insurance and SBI Life Insurance Company. It discusses the role and importance of life insurance, including as an investment, risk cover, tax planning, financial planning, and for economic development. It then provides details about SBI Life Insurance, which is a joint venture between State Bank of India and Cardif SA. SBI Life aims to offer a comprehensive range of life insurance and pension products at competitive prices with high customer satisfaction. It leverages SBI's large banking network for distribution. The document outlines SBI Life's mission and growth plans to become a leading life insurer in India.
1. Insurance companies must collect sufficient premiums to cover expected losses, operating expenses, reserves for unexpected losses, and allow for investment income.
2. Key factors that determine premium prices include the cost of losses, cost of doing business, cost of capital reserves, and contributions to catastrophe reserves.
3. Insurance provides benefits like stability for families and businesses, facilitates credit, and allows for savings and investment in the economy. It also reduces costs and promotes loss prevention.
The document provides information on different types of insurance policies including fire, marine, motor and personal accident insurance. It summarizes the key details of each type of insurance such as what risks are covered, claim procedures, documentation required and exclusions. It also discusses the importance of insurance and provides definitions and explanations of core insurance concepts like risk, peril and indemnity.
Insurance involves spreading risk from individuals to a group by collecting small premiums from many to pay for losses suffered by a few. It provides protection against financial losses from unexpected events by converting uncertainty into certainty through pooling of risks and resources. The main objectives of insurance are to generate premium income, earn a reasonable profit, and spread risk widely through adequate retention limits and reinsurance.
Similar to L-1-2-Definition-of-Insurance (1).pptx (20)
Company Valuation webinar series - Tuesday, 4 June 2024FelixPerez547899
This session provided an update as to the latest valuation data in the UK and then delved into a discussion on the upcoming election and the impacts on valuation. We finished, as always with a Q&A
[To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
This presentation is a curated compilation of PowerPoint diagrams and templates designed to illustrate 20 different digital transformation frameworks and models. These frameworks are based on recent industry trends and best practices, ensuring that the content remains relevant and up-to-date.
Key highlights include Microsoft's Digital Transformation Framework, which focuses on driving innovation and efficiency, and McKinsey's Ten Guiding Principles, which provide strategic insights for successful digital transformation. Additionally, Forrester's framework emphasizes enhancing customer experiences and modernizing IT infrastructure, while IDC's MaturityScape helps assess and develop organizational digital maturity. MIT's framework explores cutting-edge strategies for achieving digital success.
These materials are perfect for enhancing your business or classroom presentations, offering visual aids to supplement your insights. Please note that while comprehensive, these slides are intended as supplementary resources and may not be complete for standalone instructional purposes.
Frameworks/Models included:
Microsoft’s Digital Transformation Framework
McKinsey’s Ten Guiding Principles of Digital Transformation
Forrester’s Digital Transformation Framework
IDC’s Digital Transformation MaturityScape
MIT’s Digital Transformation Framework
Gartner’s Digital Transformation Framework
Accenture’s Digital Strategy & Enterprise Frameworks
Deloitte’s Digital Industrial Transformation Framework
Capgemini’s Digital Transformation Framework
PwC’s Digital Transformation Framework
Cisco’s Digital Transformation Framework
Cognizant’s Digital Transformation Framework
DXC Technology’s Digital Transformation Framework
The BCG Strategy Palette
McKinsey’s Digital Transformation Framework
Digital Transformation Compass
Four Levels of Digital Maturity
Design Thinking Framework
Business Model Canvas
Customer Journey Map
Anny Serafina Love - Letter of Recommendation by Kellen Harkins, MS.AnnySerafinaLove
This letter, written by Kellen Harkins, Course Director at Full Sail University, commends Anny Love's exemplary performance in the Video Sharing Platforms class. It highlights her dedication, willingness to challenge herself, and exceptional skills in production, editing, and marketing across various video platforms like YouTube, TikTok, and Instagram.
Digital Marketing with a Focus on Sustainabilitysssourabhsharma
Digital Marketing best practices including influencer marketing, content creators, and omnichannel marketing for Sustainable Brands at the Sustainable Cosmetics Summit 2024 in New York
Storytelling is an incredibly valuable tool to share data and information. To get the most impact from stories there are a number of key ingredients. These are based on science and human nature. Using these elements in a story you can deliver information impactfully, ensure action and drive change.
Taurus Zodiac Sign: Unveiling the Traits, Dates, and Horoscope Insights of th...my Pandit
Dive into the steadfast world of the Taurus Zodiac Sign. Discover the grounded, stable, and logical nature of Taurus individuals, and explore their key personality traits, important dates, and horoscope insights. Learn how the determination and patience of the Taurus sign make them the rock-steady achievers and anchors of the zodiac.
At Techbox Square, in Singapore, we're not just creative web designers and developers, we're the driving force behind your brand identity. Contact us today.
IMPACT Silver is a pure silver zinc producer with over $260 million in revenue since 2008 and a large 100% owned 210km Mexico land package - 2024 catalysts includes new 14% grade zinc Plomosas mine and 20,000m of fully funded exploration drilling.
How are Lilac French Bulldogs Beauty Charming the World and Capturing Hearts....Lacey Max
“After being the most listed dog breed in the United States for 31
years in a row, the Labrador Retriever has dropped to second place
in the American Kennel Club's annual survey of the country's most
popular canines. The French Bulldog is the new top dog in the
United States as of 2022. The stylish puppy has ascended the
rankings in rapid time despite having health concerns and limited
color choices.”
Part 2 Deep Dive: Navigating the 2024 Slowdownjeffkluth1
Introduction
The global retail industry has weathered numerous storms, with the financial crisis of 2008 serving as a poignant reminder of the sector's resilience and adaptability. However, as we navigate the complex landscape of 2024, retailers face a unique set of challenges that demand innovative strategies and a fundamental shift in mindset. This white paper contrasts the impact of the 2008 recession on the retail sector with the current headwinds retailers are grappling with, while offering a comprehensive roadmap for success in this new paradigm.
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
Discover timeless style with the 2022 Vintage Roman Numerals Men's Ring. Crafted from premium stainless steel, this 6mm wide ring embodies elegance and durability. Perfect as a gift, it seamlessly blends classic Roman numeral detailing with modern sophistication, making it an ideal accessory for any occasion.
https://rb.gy/usj1a2
How MJ Global Leads the Packaging Industry.pdfMJ Global
MJ Global's success in staying ahead of the curve in the packaging industry is a testament to its dedication to innovation, sustainability, and customer-centricity. By embracing technological advancements, leading in eco-friendly solutions, collaborating with industry leaders, and adapting to evolving consumer preferences, MJ Global continues to set new standards in the packaging sector.
Top mailing list providers in the USA.pptxJeremyPeirce1
Discover the top mailing list providers in the USA, offering targeted lists, segmentation, and analytics to optimize your marketing campaigns and drive engagement.
HOW TO START UP A COMPANY A STEP-BY-STEP GUIDE.pdf46adnanshahzad
How to Start Up a Company: A Step-by-Step Guide Starting a company is an exciting adventure that combines creativity, strategy, and hard work. It can seem overwhelming at first, but with the right guidance, anyone can transform a great idea into a successful business. Let's dive into how to start up a company, from the initial spark of an idea to securing funding and launching your startup.
Introduction
Have you ever dreamed of turning your innovative idea into a thriving business? Starting a company involves numerous steps and decisions, but don't worry—we're here to help. Whether you're exploring how to start a startup company or wondering how to start up a small business, this guide will walk you through the process, step by step.
3. Concept of Insurance
Insurance is based on this concept-
Transfer of risk from an individual to a group or
community
Sharing of loss by all on equitable basis
200 motorbikes in a town valued Tk.30,000 each.
04 motor bikes are either stolen or totally damaged
every year. Loss = Tk.1,20,000.
Rate of contribution= L/V x100,
L= Loss, V=total value.
Tk.(1,20,000/60,00,000)x 100 = 2% on value.
Each member to contribute= 2% of Rs.30,000 i.e.
Tk.600 to compensate 4 motor bikers each yr.
but is that all ?........
4. Concept of Insurance…….
It is possible that after a loss few members
do not pay.
To avoid such situations, the contribution
can be taken in advance
To organize a system it shall require some
expenses as well
It is also possible that the estimate of loss of
only four m/c may deviate
To solve it, the contribution can be suitably
increased to Tk.750 per member or 2.5% per
value of m/c to meet expenses and
deviations
5. INSURANCE
So, from individual point of view, insurance
is an economic device whereby an individual
substitutes a small contribution for a large
uncertain financial loss
It eliminates the risk of financial loss that an
individual may suffer by loss/damage to his
property
7. 7
Example
Say 1000 motor cars valued @ 300,000/- are observed
over a period of five years. On an average say per year
two are total loss by accident. Then the total annual
loss would be Tk. 600000. If the loss is to shared by
all the thousand owners then they have to contribute
Tk.600/-
The loss experience will be established by taking the
past experience, geographical area in which the
vehicles are used and density of traffic.
8. IMPORTANT ELEMENTS INVOLVED IN
THE CONCEPT OF INSURANCE
Subject matter of insurance.
The PERIL (risk)
The financial loss.
Subject matter is property, human life,
machinery, goods etc.,
Peril is fire, storm, burglary, earth quake, injury,
explosion etc.,
Financial loss is normally defined before the
contract is signed.
9. How Insurance Co. use Concept of Insurance
Insurance Companies work on large scale
and in an organized manner
Collect premium contribution in advance
from a large number of members
Compensate the few sufferers
Collect/maintain statistical data to find the
behavior of various categories of insurances
or policies and segments of insured
members
10. How Insurance Co. use Concept of Insurance….
Use probability theory to predicts the expected loss
and analyze it
Fix the premium rate in a scientific manner based
on past data analysis and changes expected for
each product.
The rate should be near accurate otherwise
Insurance Company shall suffer a loss.
11. How Insurance Co. use Concept of Insurance….
While fixing premium or contribution, addition
is also done for administrative expenses,
provision for future contingencies and profit in
the rate of premium
Sell the insurance product in large numbers to
spread the risk
To invest the idle or surplus funds available
with the insurer to earn an investment income
12.
13. What is Insurance ?
Insurance is something that we hear all the time.
Car Insurance, Motor Bike Insurance, Factory
Insurance, Health Insurance, Personal accident
Insurance, Ship Insurance, Aircraft insurance, Satellite
Insurance, Cattle Insurance, there are a whole bunch
of insurance products available.
What is Insurance ?
Insurance is a contract between the insurer (The
Insurance Company) and the insured (You) to get paid
an amount as compensation if any unforeseen event
occurs.
It’s a financial security against certain contingencies
14. Definition of Insurance
The collective bearing of risk is Insurance. – W.
Beverideges
Insurance is a cooperative form of distributing a
certain risk over a group of persons who are
exposed to it and who are agree to ensure
themselves. – Ghosh and Agarwal
15. Insurance
Insurance may be described as a social device
whereby a large group of individuals, through a
system of equitable contributions, may reduce or
eliminate certain measurable risks of economic
loss common to all members of the group. –
Encyclopedia Britannica
16. Insurance…….
Insurance in law and economics is a form of risk
management primarily used to hedge against the
risk of a contingent uncertain loss.
Insurance is defined as the equitable transfer of
the risk of a loss from one entity to another in
exchange for payment.
17. Insurer VS Insured
An insurer is a company selling the insurance;
an insured or policyholder is the person or
entity buying the insurance policy
Insurer
Insured
Insurance
18. Functional Definition of insurance
Insurance is defined as 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 ensure themselves against that risk-
M.N Mishra
19. Definition explanation
A co-operative device to spread the risk
The system to spread the risk over a number of
persons who are insured against that risk
The principal to share the loss of each member
of the society on the basis of probability
The method to provide security against losses to
the insured
20. Contractual Definition
Insurance has been defined to be that in which
sum of money as a premium is paid in
consideration of the insurer’s incurring the risk
of paying a large sum upon a given contingency.
21. Explanations……..
Certain sum called premium is charged in
consideration
Against the consideration large sum is
guaranteed to be paid by the insurer
The payment will be made in a certain definite
sum
The payment is only upon a contingency
22. Definition in legal sense
Insurance can be defined as a contract between
two parties by which one party undertakes to
make good or indemnify any financial loss
suffered by other party, in consideration of a
sum of money, on the happening of a specified
event e.g. fire, accident or death.
We call the party agreeing to pay for the losses
the insurer. We call the party whose loss makes
the ‘insurer’ pay the claim the insured.
23. Characteristics of Insurance
1. It is a contract for compensating losses.
2. Premium is charged for insurance Contract.
3. The payment of Insured as per terms of
agreement in the event of loss.
4. It is a contract of good faith.
5. It is a contract for mutual benefit.
24. Characteristics of Insurance
6. It is a future contract for compensating losses.
7. It is an instrument of distributing the loss of
few among many.
8. The occurrence of the loss must be accidental.
9. Insurance must be consistent with public policy
25. Why do we need Insurance?
As everyone knows, future is uncertain.
An element of RISK is always there in life or in any activity.
There may be a scenario's where the loss due to some
event would be extensive and we would not be in a position
to absorb the losses.
A factory or office is totally damaged due to fire or
earthquake, etc.
The entire investment and loan amount is at stake
It is better to be proactive - Arrange Insurance
26. Purpose and Need of insurance
Indemnifies loss
Reduces worry and fear
Makes available funds for investment
Provides employment to a large number of
people
Educates people about loss prevention
Insurance enhances credit worthiness
Social benefits
27. Function of Insurance
Primary Function
Provision of certainty of payment at the time of
loss
Provision of protection
Risk sharing
Secondary Function
Prevention of loss
Provision of Capital
28. Secondary Functions Continue….
Ensuring welfare of the Society
Employment
Financial services
Loss control/prevention
Savings/investments
Economic growth/development
29. Nature of Insurance
1) Sharing of Risks
2) Co-operative Device
3) Valuation of Risk
4) Payment made on contingency
5) Amount of Payment
6) Large Number of Insured Persons
7) Insurance is not gambling
8) Insurance is not charity
30. Sharing of Risks
Insurance is a device to share the financial losses
on the happening of a specified event.
The event may be death in case of life insurance
fire in fire insurance
If insured the loss arising shared by all insured
31. Co-operative device
Insurance plan is the cooperation of large
number of persons
Agree to share the financial loss
A particular risk which is insured.
Insurer would be unable to compensate all
losses
By insuring a large number of persons, he is able
to pay the amount of loss.
32. Value of risk
The risk is evaluated before insuring
Charge the amount of share of an insured,
premium.
Expectation of more risk, higher premium may
be charged
The probability of loss is calculated at the time
of insurance.
33. Amount of payment
Depends upon the value of loss
The particular insured risk
In life insurance the financial loss suffered
The insurer promises to pay a fixed sum
The contingency takes place
If the policy is valid and in force at the time of
the event.
34. Payment at contingency
Payment is made certain contingency insured
Life insurance contract is a contract of certainty
death or the expiry of term will certainly occur
the contingency in the fire or the marine perils
contingency occurs payment is made otherwise
no amount is given to the policy-holder.
35. Large number of insured persons
To spread the loss immediately, smoothly and
cheaply
Large number of persons should be insured
Lower the cost of insurance and the amount of
premium
Insurance is not a gambling
serves indirectly to increase the productivity
uncertainty changed into certainty insuring
property
life insurance is essentially non-speculative
36. Insurance is not charity
Charity is given without consideration but
insurance is not possible
provides security and safety to an individual in
consideration of premium it guarantees the
payment of a loss
It is a profession charging a nominal premium
for the service.
38. Principles of Probability
repeated over a large number of trials
how likely loss-event is to happen and how
much this loss-event is likely to cost
financially
The events to be examined are those which
are uncertain
The frequency with which an event happens
or repeated reflects the actual probability
The larger is the sample under examination.
39. Principles of Probability
In a commercial factory, the probability of a theft is 0.1, fire
is 0.05 and for M.B is 0.3
There should be larger contributors or insurance contracts
Expenses incurred by Insurer - Administrative expenses in
procuring premium, other management expenses, taxes,
provision for contingencies; and profit
The rate of contribution is accordingly added/loaded to
meet these expenses and profit.
40. Principles of Probability
But if we study Two small samples- 100 houses each and one bigger 1000 hs.
Yr burnt houses (I) burnt houses (II) (III)
1 06 16 99
2 09 04 103
3 12 10 100
4 08 12 97
5 15 08 101
Total 50 (5 yrs.) 50 500
Chance of loss 10 houses/yr/100 10 houses/yr/100 100/yr/10000
Estimate of probability- 10/100=.1 10/100=.1 100/1000= .1
but the variation of loss per year is different:
Loss per year 6- 15 04-16 97- 103
This problem can be reduced by the insurance companies by observing a
larger sample over a period of large number of years and adjust the
probability with margin of errors or variations.
41. Principles of Probability
WHAT If things may not happen in the future as they were
expected ?
Then the estimate of probability used to calculate the price
may be inaccurate and contribution (premium) may be
insufficient to meet the liabilities and expenses.
Actuaries work on the law of probability
42. Role of insurance companies in
the economic development
Formation of capital & increase of
investment
Reduce of hindrance of risk
Maintenance of national wealth
Distribution of risks
Extension of business
Increase of awareness
43. Prospects of insurance in Bangladesh
Higher GDP
Increased population
New business’s individual insurance
Developing mass awareness about insurance
44. Problems of insurance in Bangladesh
Low per capital income
Poor knowledge of agents
Illiteracy
Religious superstition
Low awareness
Low savings
Shortage of fund
45. Insurance Contract
Insurance may be defined as a contract
whereby one party agrees to indemnify the
other party against a loss which may be
arise or to pay a certain sum of money on
the happening of a certain event in return
of a compensation called premium -M. K.
Ghosh & A. N.Agarwal
46. Insurance is that in which a sum of money as a
premium is paid in consideration of the insurer’s
incurring the risk of paying a large sum upon a
given contingency- M. N Mishra.
Insurance Contract
47. ESSENTIALS OF COMMERCIAL CONTRACT
A. Elements of General Contract
1. Offer & Acceptance
2. Consideration
3. Legal capacity to contract or competency
4. Consensus “ad idem”
5. Legality of object
48. B. Elements of Special Contract relating to Insurance
1. Life Insurance
a. Utmost Good Faith (Uberrima Fides)
b. Insurable Interest
2. General Insurance
a. Utmost Good Faith (Uberrima Fides)
b. Insurable Interest
c. Indemnity
d. Subrogation
e. Proximate Cause
49. Essentials of an Insurance Contract
A. Legal elements
Plurality of members
Offer & acceptance
Legal relationship
Lawful consideration of object
Capacity to contract of the parties
Free consent
Certainty
50. B. Element related to insurance business
Written contract
Insurable interest
Fiduciary relationship
Payment of premium
Financial indemnity
Causa proxima
Proportionate contribution
Subrogation
51. Principles of Insurance contract
Insurable interest
Utmost good faith
Proximate cause
Indemnity
Contribution
Subrogation
Mitigation of loss
Warranties
52. Insurable Interest
The word "interest" can have a number of
meanings. In the present context it means a
financial relationship to something or
someone.
The insurable interest is the pecuniary interest
whereby the policy-holder is benefited by the
existence of the subject matter and is prejudice
by the death or damage of the subject matter.-
M. N Mishra
53. Essential Criteria
a) There must be some person, property (thing),
liability or other legal right capable of being
insured
(b) That person, thing etc. must be the subject
matter of the insurance
(c) The person wishing to have insurance must
have the legally recognized relationship to the
subject
54. How It Arises
Insurance of Persons
Insurance of Property (physical things)
Insurance of Liability (legal responsibility)
Insurance of other legal Rights
55. When is it needed?
a) When the insurance is arranged
(b) When a claim arises.
56. Utmost Good Faith
Still frequently referred to by its Latin name
"uberrima fides", utmost good faith relates to
the duty of disclosure upon the parties involved
in an insurance contract.
57. Ordinary Good Faith
Ordinary good faith means that the parties must
behave with honesty and such information as
they supply must be substantially true.
It is not their responsibility to ensure that the
other person asks all relevant questions
Ordinary good faith is effectively the negative
duty of not telling lies
58. Utmost Good Faith
Insurance is subject to a more tough duty of
good faith
positive duty of revealing all vital information
the other party asks for this information or not.
59. (a) Material Facts
"Material facts" must be revealed, whether asked
for or not
A fact that would influence the judgment of a
prudent insurer in determination
Accept the risk, or on what terms he will accept
it".
60. (b) Non-material facts
would not influence the existence or terms of
the contract
Matters of common knowledge;
Facts already known, or deemed to be known, by the
insurer;
Facts which improve the risk
63. 2.6 Remedies for a Breach of Utmost Good Faith
Avoid the contract;
Refuse payment of a particular claim;
Additionally sue for damages if fraud is involved;
Waive the breach, in which case the
contract/claim is valid.
64. 3. PROXIMATE CAUSES
Insurable interest and utmost good faith apply
to all insurance contract
exclusively related to claims
Proximate cause important with all types of
insurance
65. 3.1 Definition of Casa proximate
The active efficient cause that sets in motion a
train of events which brings about a result,
without the intervention of any force started
and working actively from a new and
independent source. -M N Mishra
67. 4. INDEMNITY
will not apply to every kind of insurance
Suppose, a person insured his factory for Tk.20
lakhs against fire, the factory is partially burnt
and it is estimated that a sum of Tk.10 lakhs will
be required to restore it to the original
condition. The insurer is liable to pay Tk.10
lakhs only.
68. 4.2 Implications
An exact financial compensation
Some types of insurance deal with "losses" that
cannot be measured precisely in financial terms.
Life insurance and most personal accident
insurances. Both are dealing with death or injury
to human beings and there is no way that these
things can be measured precisely
69. 4.4 How Indemnity is provided
(a) Cash payment
(b) Repair
(c) Replacement
(d) Reinstatement
70. 4.3 Link with Insurable Interest
Principle represents the financial "interest" in
the subject matter
Exactly what should be payable in a total loss
situation
Life and personal accident insurances having an
unlimited insurable interest
Indemnity cannot apply to them.
71. 4.5 Salvage
Certain property remain damage
The remains have any financial value
Value has to be taken by insurer when providing
an indemnity
Value of the salvage is deducted from the
amount payable to the insured
Insurer pays in full and disposes of the salvage
72. 4.6 Abandonment
Mostly found in marine insurance
Surrendering the subject matter
Other classes of property insurance policies
usually specifically exclude abandonment.
Completely handed over to the insurer
Therefore benefit from its residual value
73. 4.7 Policy Provisions Preventing Indemnity
(a) Average
For example, if the actual value of property at the time
of a loss was Tk.2 million and it was only insured for
Tk.1 million, we may say that the property is only 50%
insured. Therefore, by the application of average only
50% of any loss is payable.
(b) Policy excess/deductible
(c) Policy franchise
(d) Policy limits
74. 5. CONTRIBUTION
In simple terms, contribution means that if two
(or more) insurers are contracted to provide an
indemnity to the same person (interest), the
insurers should share ("contribute" towards) the
indemnity payment.
75. 5.2 How Arising
(a) The respective policies must each be providing
an indemnity
(b) They must each cover the same financial interest
(c) They must each cover the same peril giving rise
to the loss
(d)They must each cover the same subject matter;
(e) Each policy must cover the loss
76. 5.5 How Calculated
Policy A has a Sum Insured of Property 200,000
Policy B has a Sum Insured of Property 400,000
There is a loss in the amount of Property 60,000
77. Which one selected…….
(a) We may say A should pay Property 20,000
and B should pay Property 40,000.
(b) We could say A should pay Property 30,000
and B should pay Property 30,000.
Method (a) above is known as the "respective
sums insured" method.
Method (b) above is known as "independent
liability" method
78. 6 SUBROGATION
Again in simple terms, subrogation provides that
an insurer who provides an indemnity is entitled
to take over and use for his own benefit any
recovery rights the insured may possess against
third parties.
Suppose, a house is insured for Tk.2 lakhs against fire, the
house is damaged by fire and the insurer pays the full value
of Tk.2 lakhs to the insured. Later on the damaged house is
sold for Tk.20, 000. The insurer is entitled to receive the
sum of Tk.20, 000.