Presentation on theme: "INTRODUCTION TO INSURANCE. MEANING OF INSURANCE Insurance is a contract of indemnity under which insurance company or insurer agrees to pay a certain."— Presentation transcript:
MEANING OF INSURANCE Insurance is a contract of indemnity under which insurance company or insurer agrees to pay a certain sum of money to compensate loss caused by the occurrence of uncertain event in consideration of certain periodical payments i.e. premium.
DEFINITION OF INSURANCE Insurance may be defined in two ways: Functional definition. Legal definition.
Functional Definition “Insurance is a co-operative device to spread loss caused by a particular risk over a number of persons who are exposed to it, who agree to insure themselves against that risk.” _prof. R.S.Sharma
LEGAL DEFINITION “insurance is a contract in which sum of money is paid by the assured in consideration of the insurer’s incurring the risk of paying a large sum upon a given contingency.” _Chief Justice Tindal
Features of Insurance Offer and Acceptance. Lawful objects. Contract. Consideration. Co-operative device. Protection against financial risks. Good faith. Contract of indemnity. Certainity and Contingency. Insurance is not gambling. Subrogation. Insurable interest. Insurance is not named as charity.
FUNCTIONS OF INSURANCE Functions of insurance can be divided into three categories: Primary insurance. Secondary insurance. Other functions.
Primary functions It provides certainity. It distributes risks. It provides security.
Secondary functions It provides capital. It increases efficiency. It helps in judging the viability of major projects. Insurance helps in loss reduction.
Other functions Economic development. Expansion of foreign trade. It provides funds to invest. Encouraging savings. It checks inflation. Self-confidence and goodwill. Social security. Credit facilities.
Life insurance In 1536- Richard Mortin issued the first policy on Williams Gybbon’s life. In 1696- The mercer’s company came into existence. In 1698- ‘Hand in Hand Society’ In 1721- Parliament passed an act. In 1818- First foreign company i.e.Oriental Company was in India. In 1829- ‘Madras equitable company’. in 1956- Mostly Indian companies entered into joint venture with the foreign companies to do jointly the business of life insurance. Some of which are: HDFC standard life insurance co. Ltd. Max-New york Life insurance co. Ltd. SBI Life Insurance Co. Ltd
General insurance companies such as New India insurance companies Ltd. Oriental fire and general insurance companies Ltd. National insurance companies Ltd. Reliance General insurance company.
Details of general insurance are as follows Property insurance- (fire insurance & marine insurance) Liability insurance- (theft, fidelity, motor & machine insurances )
Importance of Insurance Importance of insurance may be studied under four heads: Importance to an individual Importance to business Importance to commerce and industry Importance to society.
Importance to an Individual Insurance provides security and safety. It provides peace of mind. It eliminates dependency. It serves as a source of savings. Life insurance as a sound investment. It protects mortgage property. Others (family needs, old age needs and so on)
Importance to business Financial help. Reduces uncertainty of business losses. It improves efficiency. Indemnification. Grant of credit facilities. Continuous business. Employee’s security.
Importance to commerce and industry Economic development. Earns foreign exchange. Source of capital formation. Source of income
Importance to society Protection to society’s wealth. Economic growth. Standard of living. Social security benefits. Equitable distribution of loss. Removal of social evils. Accelerate the production cycle. Reduction in inflation. Huge funds.
Insurance as a social security tool Security and safety. Peace of mind. Encourage savings. Provides investment. Meets various needs. Helps in loss reduction. Increases efficiency. Enhancement of credit. Control inflation rate. Confidence in work.
Insurance and economic development Relationship between insurance and economic development. Factor affecting E.D. Investment necessary. Huge funds. Accelerate the production cycle. Protection against risk. Promotes foreign trade. Promotes financial stability.