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.
Life insurance corporation of India provides wide range of life insurance products its your time to decide which one you want as we all know life is precious protect it by taking right insurance product.
Life insurance can be an important part of your financial strategies, helping to ensure a more secure financial future for your loved ones when you're gone
ULIPs are innovative forms of life insurance that provide safety of your insurance cover with wealth enhancement opportunities. For more information visit - www.aegonreligare.com/ulip/ulip.php
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.
Life insurance corporation of India provides wide range of life insurance products its your time to decide which one you want as we all know life is precious protect it by taking right insurance product.
Life insurance can be an important part of your financial strategies, helping to ensure a more secure financial future for your loved ones when you're gone
ULIPs are innovative forms of life insurance that provide safety of your insurance cover with wealth enhancement opportunities. For more information visit - www.aegonreligare.com/ulip/ulip.php
Life Insurance is a form of risk management primarily used to transfer the risk of uncertain loss.
It provides compensation for financial loss only not profit.
Life insurance is a protection against the RISK of financial loss that would result from the premature death of an insured. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured. The death benefit is paid by a life insurer in consideration of premium payments made by the insured.
2. Insurance Insurance is pooling of risks. In a contract of insurance, the insurer undertakes, in consideration of a sum of money (premium), to make good the loss suffered by the insured against a specified risks such as fire and any other similar contingency of compensate the insured on the happening of a specified event such as accident or death. The business of insurance is related to the protection of the economic values of assets. INSURE
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5. Life Insurance Polices Digital Commerce Annuities Policy Whole Life Policy Endowment Policy Types of Life Insurance Policies Provides Life Insurance protection over one's lifetime. Under these policies, the payment of the assured sum is a certainty in contrast to the term insurance contracts. Only the time of payment of the assured sum is an uncertainty. These can be either participating type or non-participating type . Term Policy Term Policy and whole life insurance policies focus on risk-coverage Endowment policy and annuities insurance policies focus on investments ULIPs focus on both risk-coverage and the investments ULIP
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10. Key Players in the Insurance Industry IRDA has so far granted registration to 12 private life insurance companies and 9 general insurance companies. If the existing public sector insurance companies are included, there are currently 13 insurance companies in the life side and 13 companies operating in general insurance business. General Insurance Corporation has been approved as the "Indian reinsurer" for underwriting only reinsurance business.
11. What is ULIP ? A category of financial solutions that combine the safety of insurance protection with wealth creation opportunities U: Unit L : Linked I : Insurance P : Plan Premium for ULIP Investment as Unit Life Coverage
24. Investment Option For Your Money FUND TYPE ASSET MIX POTENTIAL RISK /REWARD Maximiser Balancer Protector Equity& Related securities: Max 100% Debt, Money market & Cash: Max 25% Debt. Money market & Cash: Min 60% Equity & Related securities: Max: 40% Debt Instruments, Money market & Cash: Max 100% High Moderate Low
29. Comparison of ULIP with other Investment Modules INSTRUMENT RATE OF RETURN TIME PERIOD RISK MIN INVESTMENT MAX INVESTMENT TAX FREE RETURN TAX BENEFIT NSC 8% 6years No 100 No limit No Yes PPF 8% 15years No 500 70000 Yes Yes ELSS Market Return 3years Risky 500 No limit Yes Yes ULIP Market Return 5years Risky Module 500 No limit Yes Yes FD 9.5% 5years No 10000 No limit No Yes MUTUAL FUND Market Return Open Ended High 500 No limit Capital gain @10% for time less than 1year Only in ELSS Funds STOCK Variable No time frame Very high Variable No limit Capital gain @10% for time less than 1 year No
32. Bone Of Contention ULIP The whole controversy has one single point of contention i.e. who is the controlling authority. Since the introduction of ULIPs, which is essentially a insurance policy, in the Indian Markets IRDA has been over looking the functioning of all the insurance companies selling this particular product. But, keeping in mind the fact that ULIP premium is being used to invest in a fund that invests money in stocks or bonds, SEBI has contended that all 14 companies selling ULIP has to take its permission before selling the same in the markets.
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34. Unfolding Of Events 9 th April 10 th April 13 th April 14 th April 21 st April ULIP Saga SEBI issues show cause notice to all insurance companies selling ULIPs, asking them why they did not take permission before selling the same SEBI bans sale of all ULIP products, creating a panic amongst insurance players IRDA counters by issuing an order permitting all insurers to sell ULIP Regulators SEBI and IRDA agrees to settle the issue of jurisdiction over ULIPs mutually at the High Level Coordination Committee (HLCC)set up by government Government asks SEBI and IRDA to move court immediately on the contentious issue of who will regulate unit-linked insurance products SEBI, IRDA, Ministry Of Finance Officials meet and decide to maintain status quo and allow selling of ULIPs, in the market The decision goes in favour of the IRDA and IRDA will continue to govern the ULIPs.
42. Awareness (2/2) Retailer/CSP introducing the new savings product Very effective in SEC B, C & D segments 7 8 9
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Editor's Notes
Digital disintermediation leads to cost savings for the supplier, the benefits of which can be passed on to the customer => Digital Price Discovery 48% of all payments by value in India are electronic, which will rise to 70% by 2015.In the case of consumer-to-business transactions, the share currently is 3%, which will rise to 15% by 2015. As per Mckinsey India Payments 2009, Mobile payments in India will rise at a CAGR of 51.1% to 1.1 billion USD by 2015 Source for data on growth of internet and mobile payments: Mckinsey India Payments, 2009 Source for data on Reduction in transaction costs due to digital infomediary: Santa Rosa University(USA) Chapter notes 2007 - www.santarosa.edu/~ssarkar/cs66sp07/ch4notes.htm
Digital disintermediation leads to cost savings for the supplier, the benefits of which can be passed on to the customer => Digital Price Discovery 48% of all payments by value in India are electronic, which will rise to 70% by 2015.In the case of consumer-to-business transactions, the share currently is 3%, which will rise to 15% by 2015. As per Mckinsey India Payments 2009, Mobile payments in India will rise at a CAGR of 51.1% to 1.1 billion USD by 2015 Source for data on growth of internet and mobile payments: Mckinsey India Payments, 2009 Source for data on Reduction in transaction costs due to digital infomediary: Santa Rosa University(USA) Chapter notes 2007 - www.santarosa.edu/~ssarkar/cs66sp07/ch4notes.htm