INSURANCE

Dr. N.N.Sengutpa
 Introduction
• Insurance is collective bearing of risk.
• Insurance spreads risks and losses of few people among
a large no. of people as people prefer small fixed liability
instead of big uncertain & changing liability.
• Insurance can be defined as a legal contract b/w 2 parties
whereby one party called Insurer undertakes to pay a
fixed sum of money on the happening of a particular
event, which may be certain or uncertain.
 Principles of Insurance

• Principle of Utmost good faith or “Uberrima

Fides”.
• Principle of Indemnity.
• Principle of Causa Proxima.
• Principle of Insurable Interest.
• Doctrine of Subrogation.
 Insurance in India

• Life Insurance in its modern form started in 1818.

• Oriental Life Insurance Company was the 1st insurance company
to be setup in India.
• The Insurance Act,1938 provides legislation to both Life & non-
life Insurance companies.
• LIC was setup in 1956
• IRDA was setup in 2000 as autonomous Insurance regulator.
 R.N.Malhotra Committee
Recommendations
• Government should bring down the stake in Insurance
companies to 50%.
• Private companies with minimum capital of Rs.100 Crores
should be allowed to enter the industry.
• No single company allowed to transact business in both
life & non-life segment.
• Foreign Companies allowed with collaboration with Indian
companies.
• Postal life Insurance should be allowed in rural areas.
• GIC & its subsidiaries not to hold more than 5% in any
company.
• Level playing field amongst the players.
 IRDA
• It was constituted as an autonomous body to
regulate the business of Insurance and re-
insurance in India.
• It not only frames and issues statutory &
regulatory stipulations but it also has to perform a
developmental and promotional role.
• Objectives if IRDA :
– Protection of Policyholders
– Healthy growth of Insurance sector.
 Life Insurance
• Life Insurance is a contract between 2 parties, the
Assured and the Assurer, whereby the latter for a
consideration promises to pay a certain sum of
money to the former on the happening of the
event insured against.
• Life Insurance is concerned with 2 hazards
namely:
– Dying prematurely leaving behind a dependent family
with no financial support.
– The market still is largely controlled by LIC.
 Benefits of Life Insurance
• Safeguards the insured’s family against
untimely death and provides Financial
support.
• Means of compulsory savings.
• Source of Income during old age.
• Improves lifestyle of the insured and his
family.
• Tax benefits u/s 88 of I.T.Act
 Reinsurance
• Reinsurance is primarily an insurance of
risks assumed by the primary insurer known
as the ceding company. The risk is shifted
to another insurer known as Reinsurer.
• Reinsurance operates on the same principles
as that of Direct Insurance i.e, to spread the
sharing of risks as widely as possible.
 Reinsurance is used for:
• Increase the company's underwriting capacity.
• Spread the risks with as many insurers as possible.
• To stabilize profits by leveling out peak losses.
• To provide protection against catastrophic losses
arising due to natural disasters and so on.
• TO retire from business or class of business or
territory.
• To obtain valuable advice and assistance with
respect to pricing, underwriting practices etc.