Insurance Fundamentals 20090302 1of2

Life Insurance
Fundamentals
February, 2009
CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.
Course Agenda
Module 1: Concept of Risk
Module 2: Insurance is a Contract
Module 3: Functions of Insurance
Module 4: Insurance Principles
Module 5: Industry segments
CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc. 2
Risk
Risk is uncertainty about the future
Not all risks are significant

Loss of an umbrella
In insurance parlance, risk is the

uncertainty about potential losses
which could cause financial setbacks
CONFIDENTIAL
Managing Risk
Possible in
property
Best option, but
insurance;
not very practical
limitations for life
insurance
AVOID CONTROL
RISK
RETAIN
TRANSFER
Scientifically
possible for Easiest option,
property but most
insurance; difficult expensive
for life insurance
CONFIDENTIAL
Types of Risk
Loss
Pure
No Loss
Loss
Gain
Speculative
No Loss
CONFIDENTIAL
Risk and Insurance
Only Pure Risks are insurable
Insurance
results in the risk being transferred to
the insurance company
Sharingof risk among large groups is the basis for

insurance
Loss of some, when borne by many, will not break any
CONFIDENTIAL
Characteristics of Insurable Risks
Loss should
occur by chance
be quantifiable (measurable)
be predictable (Law of large numbers should be
applicable)
not be catastrophic to the insurer (eg: War risk on
land)
not be due to illegal acts
CONFIDENTIAL
Course Agenda
CONFIDENTIAL
Insurance is a contract ..
INSURED
INSURER
Offers his risk
Agrees to
for transfer
undertake the
to the insurer
insureds risk
and agrees to
in return for an
pay
agreed
consideration
consideration
in return for
(premium)
the coverage
CONFIDENTIAL
Characteristics of Insurable Risks
Occur by chance
Quantifiable (measurable)
Not against Public policy
Not Illegal
Notbe catastrophic to the insurer (example:

Terrorism)
CONFIDENTIAL
Course Agenda
Module 3: Functions & Elements of Insurance
CONFIDENTIAL
Functions of Insurance
Primary Collective bearing of risk

functions Provide certainty
Provide protection
Prevention of losses
Secondary Small capital to cover large
functions risks
Contribution towards
development
Source of savings, therefore
investments
Foreign exchange earnings
Risk free trading
CONFIDENTIAL
Essential elements of Insurance
Offer & Agreement

Acceptance between
parties
Insuranc
Consideration
e
Contract
Capacity Legality
of parties of contract
CONFIDENTIAL
Course Agenda
CONFIDENTIAL
Principles of Insurance
Utmost
Good
Faith Insurab
Contrib
le
ution
Interest
Proxim
Subrog
ate
ation
Cause
Indemn
ity
CONFIDENTIAL
Utmo
st
Good Insur
Contri Faith able
Principles in detail
butio
Intere
n
st
Subro Proxi
gatio mate
n Caus
Inde e
mnity
Utmost The Applicant (Policyholder) is bound to make full

good faithdisclosure of all material facts
The Insurer is bound to make full disclosure of all
provisions in the contract
(Material Facts - Facts that influence the insurers
judgment and rate of premium to be charged)
Insurable Insured should have a pecuniary (financial interest) in

interest the subject matter of insurance and he should suffer a
financial loss on the occurrence of the insured event
Helps to separate insurance from gambling
Implies legal right to insure
Does not arise from relationship alone
CONFIDENTIAL
Utmo
st
Good Insur
Contri Faith able
butio
Intere
n
st
Subro Proxi
gatio mate
n Caus
Inde e
mnity
Proximate The admissibility of a claim under a policy is

cause determined by confirming whether the proximate
cause leading to the event is covered
It is defined as:
~ the active efficient cause
~ that sets in motion a train of events
~ which brings about a result
~ without the intervention of any forces from a
new/independent source
An insured can recover a loss under a policy only if he

Indemnityhas insurable interest
He can recover the loss only to the extent of his
insurable interest
Insurance of persons are usually not policies of strict
indemnity, because the value of life is not exactly
ascertainable
CONFIDENTIAL
Utmo
st
Good Insur
Contri Faith able
butio
Intere
n
st
Subro Proxi
gatio mate
n Caus
Inde e
mnity
SubrogatioSubrogation is the transfer of rights of rights and

n remedies of the insured to the insurer who has paid the
loss
This arises out of the indemnity principle that the
insured can not recover more than his insurable interest
Obviously not applicable to Life Insurance

Contributio Contribution is the right of an insurer who settles a
n claim to recover from other insurers who are liable for
the same loss
Like subrogation, not applicable to Life Insurance
CONFIDENTIAL
Course Agenda
CONFIDENTIAL
Insurance industry segments
Life & Property &

Health
Annuities Casualty
Loss of Life Loss of Assets / Health Risks

Property
Savings for Disease &
future Loss due to Disability
Liability
Retirement Healthcare in old
benefits Personal / age
Commercial
Individual and Individual and
group Individual and group
CONFIDENTIAL
group
Life & Annuity
Provides Insurance Cover

against death (Early Death)
Provides annuity benefits

when grow older (Long Living)
Only Human Beings are

subject matter for insurance
Provides range of products

for risk coverage & saving
CONFIDENTIAL
Property & Casualty
Provides Insurance Cover for

property against damages
Generally classified as
Marine, Fire, Motor, &
Miscellaneous insurance
Compensates the insured to

the extent of damage
subject to insured amount
Ensure Business continuity

& indemnity
CONFIDENTIAL
Health Insurance & Supplemental Coverage
Health Insurance provides

coverage against
Hospital expenses
Surgical expenses
Physicians expenses
Supplemental Coverage
provides coverage against
Dread disease
Critical illness
Long-term care
Dental & vision care
CONFIDENTIAL
Insurance jargon
Insured Peril
Insurer / Insurance Physical hazard
Company Moral Hazard
Liability Policy
Insurable Interest Cover Note
Insurable Risk Coverage
Agent Endorsement
Application Indemnity
Broker Exclusion
CONFIDENTIAL
The contents of this document are proprietary and confidential to Infosys Consulting Inc. and may not be disclosed in whole or in part at any time, to any
third party without the prior written consent of Infosys Consulting Inc.
2008 Infosys Consulting Inc. All rights reserved. Copyright in the whole and any part of this document belongs to Infosys Consulting Inc. This work may
not be used, sold, transferred, adapted, abridged, copied or reproduced in whole or in part, in any manner or form, or in any media, without the prior written
consent of Infosys Consulting Inc.
CONFIDENTIAL

Insurance Fundamentals 20090302 1of2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Insurance Fundamentals 20090302 1of2

Uploaded by

Copyright:

Available Formats

Life Insurance

Module 1: Concept of Risk

Module 2: Insurance is a Contract

Module 3: Functions of Insurance

Module 4: Insurance Principles

Module 5: Industry segments

Risk is uncertainty about the future

Not all risks are significant

In insurance parlance, risk is the

Only Pure Risks are insurable

Sharingof risk among large groups is the basis for

Loss of some, when borne by many, will not break any

Module 1: Concept of Risk

Module 2: Insurance is a Contract

Module 3: Functions of Insurance

Module 4: Insurance Principles

Module 5: Industry segments

Not against Public policy

Notbe catastrophic to the insurer (example:

Module 1: Concept of Risk

Module 2: Insurance is a Contract

Module 3: Functions & Elements of Insurance

Module 4: Insurance Principles

Module 5: Industry segments

Primary Collective bearing of risk

Offer & Agreement

Module 1: Concept of Risk

Module 2: Insurance is a Contract

Module 3: Functions of Insurance

Module 4: Insurance Principles

Module 5: Industry segments

Utmost The Applicant (Policyholder) is bound to make full

Insurable Insured should have a pecuniary (financial interest) in

Proximate The admissibility of a claim under a policy is

An insured can recover a loss under a policy only if he

SubrogatioSubrogation is the transfer of rights of rights and

Module 1: Concept of Risk

Module 2: Insurance is a Contract

Module 3: Functions of Insurance

Module 4: Insurance Principles

Module 5: Industry segments

Life & Property &

Loss of Life Loss of Assets / Health Risks

Provides Insurance Cover

Provides annuity benefits

Only Human Beings are

Provides range of products

Provides Insurance Cover for

Compensates the insured to

Ensure Business continuity

Health Insurance provides

You might also like