UNIT 3 Insurance

UNIT 3: INSURANCE
Power Point Presentation By:

Nashrat Majid
Asstn. Professor Of Law
NEF Law College
Definition.
• If one goes by the word meaning insurance is a contract between two parties
whereby the insurer agrees to indemnify the insured upon the happening of
a stipulated contingency, in consideration of the payment of an agreed sum,
whether periodical or fixed.
• Insurance falls into the main groups of life, property, marine, aviation,
health, transport, motor vehicle – third party liability, and personal accident
and sickness.
• In the present day affairs insurance means financial protection against losses
arising out of happenings of an uncertain event. In order to protect against
such losses one has to bear some financial burden also.
• Insurance is contract between two parties (one the insurer and second the
insured) whereby the insurer agrees to undertake the risk of the insured in
consideration of some amount known as premium and in return promises to
compensate a fixed sum of money to the insured party on happening of an
uncertain event like death.
Nature Of Insurance.
• By nature insurance is a devise of sharing risk by large number of people
among the few who are exposed to risk by one or the other reason.
• If a large number of subscribers to insurance serve the purpose of
compensation to few among them exposed to uncertain risks appears as a
co-operative look.
• Valuation of risk is determined as per predefined terms and conditions of the
insurance policies.
• However it depends on the value of insurance for which payment is made in
case of contingency. This provides basis of the amount to be paid.
• Insurance is a policy regulated under laws and therefore the amount of
insurance can neither be paid as gambling nor as charity.
Principles Of Insurance.
To ensure the proper functioning of an insurance contract, the insurer
and the insured have to uphold the 7 principles of Insurances
mentioned below:
1.Utmost Good Faith
2.Proximate Cause
3.Insurable Interest
4.Indemnity
5.Subrogation
6.Contribution
7.Loss Minimization
• PRINCIPLE OF UTMOST GOOD FAITH: The fundamental principle is that both the parties in an
insurance contract should act in good faith towards each other, i.e. they must provide clear and
concise information related to the terms and conditions of the contract. The Insured should provide
all the information related to the subject matter, and the insurer must give precise details regarding
the contract.
• PRINCIPLE PROXIMATE CAUSE: This is also called the principle of ‘Causa Proxima’ or the
nearest cause. This principle applies when the loss is the result of two or more causes. The insurance
company will find the nearest cause of loss to the property. If the proximate cause is the one in which
the property is insured, then the company must pay compensation.
• PRINCIPLE OF INSURABLE INTEREST: This principle says that the individual (insured) must
have an insurable interest in the subject matter. Insurable interest means that the subject matter for
which the individual enters the insurance contract must provide some financial gain to the insured
and also lead to a financial loss if there is any damage, destruction or loss.
• PRINCIPLE OF INDEMNITY: This principle says that insurance is done only for the coverage of
the loss; hence insured should not make any profit from the insurance contract. In other words, the
insured should be compensated the amount equal to the actual loss and not the amount exceeding the
loss.
• PRINCIPLE OF SUBROGATION: Subrogation means one party stands in for
another. As per this principle, After the insured, i.e. the individual has been
compensated for the incurred loss to him on the subject matter that was insured, the
rights of the ownership of that property goes to the insurer, i.e. the company.
• PRINCIPLE OF LOSS MINIMISATION: This principle says that as an owner, it is
obligatory on the part of the insurer to take necessary steps to minimise the loss to the
insured property. The principle does not allow the owner to be irresponsible or
negligent just because the subject matter is insured.
Types Of Insurance.
LIFE INSURANCE: Life Insurance provides for your family or some other
named beneficiaries on your death. Life Insurance guarantees a specific promised
sum of money to a designated beneficiary upon the death of the insured, or the
insurance if he survives the term of the policy.
HEALTH INSURANCE: Generally, Health Insurance covers the expenses incurred
on the illness of the insured. Such as hospitalization, visits to the doctor's office,
and prescription of medicines. It also has sub-type as dental insurance which is
done to cover dental costs.
MOTOR VEHICLE INSURANCE: Automobile insurance is perhaps the most
held types of insurance. Typical automobile policy covers liability for bodily injury
and property damage, medical payments, attorneys fees in case of a lawsuit. If a
person gets an accident, it helps in recovering of the financial loss the person had.
It is treated as a contract between a person who is the victim of the accident and the
insurance company. However, the insured has the option to cover his vehicle
against own damage by paying an extra premium.
PROPERTY INSURANCE: Any building or immovable structure can be insured
through property insurance plans. This can be either your residence or commercial
space. If any damage befalls such a property, you can claim financial assistance
from the insurance provider. Keep in mind that such a plan also financially
safeguards the content inside the property.
Present State Of Insurance Industry In India.
There are currently 57 insurance companies in India, of which 46 are from the private sector. There
are 24 life insurance and 33 non-life insurance companies in India. The major names in the sector are:
LIFE INSURANCE:
Life Insurance Corporation (LIC)
HDFC Standard Life
SBI Life Insurance
ICICI Prudential Life Insurance
NON LIFE INSURANCE:
New India Assurance
United India Assurance
National Insurance Company
ICICI Lombard
Oriental Insurance Company
Bajaj Allianz
• The market share of private sector players has increased over the years. In the
non-life insurance sector, private companies had a market share of 54.68 % in FY
19 (as of Jan ‘19). In the life insurance sector, private companies had a market
share of 33.74 % in FY 19 (as of Jan ‘19).
• The overall market for insurance is expected to be $ 280 bn by 2020.
• Gross premiums in India reached $ 94.48 bn in FY 18. Of this number, the split
between life insurance and non-life insurance was Life insurance: $ 71.1 bn Non-
life insurance: $ 23.38 bn
• The last few years have seen a lot of activity in the sector. This is a testament to
the vibrancy of the industry in India.

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