A PRESENTATION

ON
Classification of insurance, and principle
Presented By
Gemechu Feyissa Gudu
Nov 2016

Outline of Presentation
Meaning of insurance
classification of insurance sector
Element of insurance
Principle of insurance
Current
scenario of

General
insurance in market share

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.

cont

In financial sense
It is a social device in which a group of

individuals (insured) transfer risk to another

party (insurer) in order to combine loss
experienced, which permits statistical prediction
of losses and provides for payment of losses from
funds contributed (premium) by all members who
transferred risk.

Contractual Definition
Insurance is a contract in which a sum of
money is paid to the assured as consideration
of insurers incurring the risk of paying a
large sum upon a given contingency.

Classification of insurance
GENERAL
(NON-LIFE)

LIFE

Motor
insurance

Fire
Insurance

Aviation
insurance

Health
Marin
Insurance insurance

Agricultur
al
insurance

General Insurance is also known as Non-Life Insurance in

India. it covers insurance of property against fire,
burglary, theft; personal insurance covering
health, travel and accidents; and liability
insurance covering legal liabilities.
This category of insurance virtually covers all
forms of insurance except life. Other covers
may include insurance against errors and
omissions for professionals, credit insurance
etc.
Common forms of general insurance are motor,
fire, home, marine, health, travel, accident and
other miscellaneous forms of non-life insurance

General Insurance
Definition

Unlike life insurance policies, the

cont
tenure
of general insurance policies is
normally not that of a lifetime. The
usual term lasts for the duration of a
particular economic activity or for a
given period of time.
Most general insurance products are
annual contracts.
.

Motor insurance covers all damages and liability to a

vehicle against various on-road and off-road

emergencies. A comprehensive policy even secures
against damage caused by natural and man-made
calamities, including acts of terrorism.
Motor insurance offers protection to the vehicle
owner against:
Damage to the vehicle
It also pays for any third party liability determined by
law against the owner of the vehicle
Motor insurance is mandatory in India as per the
Motor Vehicles Act, 1988 and needs to be renewed
every year. Driving a motor vehicle without
insurance in a public place is a punishable offence.

1. motor insurance

Cont,,,,
In fact, third party insurance is a

statutory requirement i.e. the owner of

the vehicle is legally liable for any injury
or damage caused to a third party life or
property, by or arising out of the use of
the vehicle in a public place.
A comprehensive motor insurance policy
would include personal accident and
liability only policy (third party insurance)
in addition to own damage cover
(damage to owners vehicle) in one policy

Cont
Auto Policy is required to be taken to cover the
risks that arise to the owner, vehicle and third party.
This includes the Compulsory Vehicle Policy.
Auto insurance protects against the risk
of accidents!

Health insurance
It is a form of collectivism by means of
which people collectively pool their risk,
in this case the risk of incurring medical
expenses.
surgical expenses of the insured
individual due to hospitalisation from an
illness.
There are basically two types of Policy
Health Covers namely:
a) Individual Policy
b) Family Floater Policya

Cont
a. Individual policy provides health cover for a
single individual only. It is an agreement between
an individual (policyholder/customer) and the
insurer (insurance company).
It is a legal document that is valid for a year.
Such an individual policy needs to be
renewed before the expiry of the
contract in order to enjoy continued
benefits provided by the insurance
company.
.

Cont
b) Family Floater Policy
A Family Floater Health Insurance Policy is a health
cover where in the entire family will be covered
under a single Sum Insured. Such a policy covers
reimbursement of hospitalization expenses for
illness/diseases contracted or injury sustained by the
Insured person, but should not exceed Sum Insured
(all claims in aggregate) for that family as stated in
the Schedule in any one period of insurance. Just like
individual policy, this floater policy needs to be
renewed before the expiry of the contract for
enjoying continued benefits.

Marin(cargo ) insurance
Business involves the import and export of goods,
within national borders and across international
borders.
Movement of goods is fraught with risk which can
result in damage and/or destruction of shipments.
This leads to substantial financial losses for both the
importers as well as the exporters. Marine cargo
insurance covers goods, freight, cargo and other
interests against loss or damage during transit by
rail, road, sea and/or air.

Cont.

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types of fire policy

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cont..

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cont

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cont

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ELEMENTS OF INSURANCE

Insurance - combination of three

elements
1. Insurance as a Transfer System
2. Insurance as a Business
3. Insurance as a Contract

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Cont

1. Insurance as a Transfer System transferring of risks from Insured to IC

which is financially sound and has
capacity and willingness to take risks.
Loss exposure can give rise to three types
of losses, namely:
a) Property loss (including net income
loss),
b) Liability loss, and
c) Human and personnel loss.
d by Gemechu

Nov 2016

Cont.
2. Insurance as a Business - insurance primarily
attempts to meet its costs and expenses from premium
that it earns and also make a reasonable margin of
profit for its own sustainability.
Other benefits to society as a whole such as:
a) Payments for the costs of covered losses
b) Reduction of the insureds financial uncertain
c) Efficient use of resources
d) Support for credit
e) Satisfaction of legal requirements
f) Satisfaction of business requirements
g) Source of investment funds for infrastructure
development
h) Reduction of social burden
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Nov 2016

Cont..

3. Insurance as a Contract - an insurance

policy is a legally enforceable contract. The
contract is between IC and the Insured.
An insurance contract must meet four
requirements:
i.

Offer and acceptance

ii. Consideration
iii. Capacity
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iv. Legal purpose

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PRINCIPLES OF INSURANCE

Principle of Utmost Good Faith

A positive duty voluntarily to disclose,
accurately and fully, all facts material to
the risk being proposed, whether requested
or not.
Non-disclosure of any fact may be
unintentional on the part of the insured.
Even so such a contract is rendered
avoidable at the insurers option and it can
refuse any compensation.
Any concealment of material facts is
considered intentional

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2, principle of Indemnity

financial compensation sufficient to place

the insured in the same financial position
after a loss as he enjoyed immediately
before the loss occurred. Indemnity thus
prevents the insured from recovering
more than the amount of his pecuniary
loss. It is undesirable that an insured
should make a profit out of an event
because if he/she was able to make a
profit there might well be more fires and
more vehicle accidents
Made in terms of

Cash,payment,Repair,Replacement
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Reinstatement

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Cont

Principle of Subrogation
Restitution of rights of an assured in favour of
Insurer against third party for any damages
caused by him in place of assured after
Insurer has indemnified him for the loss
Objectives of the principle:
i. Prevents insured from profiting from damage.
ii. Enforces rule of law that guilty is brought to
book and made to pay for the loss.
iii.Helps Insurer to partially or fully recover
amount paid for loss.
iv. Helps to lower insurance rates.
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Cont.

Principle of Contribution
It means indemnity provided for loss occurring
on asset, which is insured with several
insurers has to be shared pro rata
Corollary of doctrine of Indemnity and hence is
applicable in case of GI.
Requisites
Insured asset/Person (in case of
hospitalization insurance) must be common
to all policies
Risk insured against must be common to all
policies
All policies must be in force during the
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occurrence of loss etc

classification general insurance

There are totally 16 General Insurance (Non-Life)
Companies in India. These 16 General Insurance
companies have been classified into two broad
categories namely:
a)PSUs (Public Sector Undertakings)
b)Private Insurance Companies

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CONT

PSUs (Public Sector Undertakings)These insurance companies are wholly

owned by the Government of India.
There are totally 4 PSUs in India namely:
a) National Insurance Company Ltd
b) Oriental Insurance Company Ltd
c) The New India Assurance Pvt Ltd
d) United India Insurance Company Ltd
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CONT Sector
Public
National Insurance
Co. Ltd.
The New India
Assurance Co. Ltd.
The Oriental
Insurance Co. Ltd
United India
Insurance Co. Ltd.
Etc .

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Private Sector
Apollo DKV Health Insurance Ltd
Bajaj Allianz General Insurance
Co. Ltd
Cholamandalam MS General
Insurance Co. Ltd
Future Generali Insurance
Company Ltd
HDFC Ergo General Insurance
Co Ltd
ICICI Lombard General
Insurance Ltd
Iffco Tokio General Insurance
Pvt Ltd
Reliance General Insurance Ltd
Royal Sundaram General
Insurance Co Ltd
01/13/17
Star Health and Allied

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THANK
U