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Insurance Services
By : Gaurang Badheka
FSM, Sem - 3
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Risk and Uncertainty:
There is nothing certain in this world
Except the Death and the Tax
yet the death and tax are uncertain
as nobody knows
when will he die or when tax will change
- Benjamin Franklin
Insurance
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Insurance in broad terms may be
described as a method of sharing financial
losses of few from a common fund whoare equally exposed to the same loss.
What is insurance?
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Say 1000 motor cars valued @ 300000/- areobserved over a period of five years. On an
average say per year two are total loss by
accident. Then the total annual loss would be
Rs.600000. If the loss is to shared by all the
thousand owners then they have to contribute
Rs.600/-
The loss experience will be established bytaking the past experience, geographical area in
which the vehicles are used and density of
traffic.
What is insurance?
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Insurance is a contract by whichone party, for a considerationcalled premium, assumes a
particular risk of other party andpromises to pay him or hisnominee a certain or ascertainable
sum of amount on a specifiedcontingency.
What is insurance?
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Insurance is a contract by whichone party, for a considerationcalled premium, assumes a
particular risk of other party andpromises to pay him or hisnominee a certain or ascertainable
sum of amount on a specifiedcontingency.
What is insurance?
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It is a contract
One party (insurer) assumes the risk of
other party (insured)
Promises to certain or ascertainable sumof amount
Specific event
For a consideration called premium.
What is insurance?
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The business of Insurance is related to theprotection of economic value of assets.
The benefits from the asset may be direct or
indirect and Insurance ensures its protection.
Insurance is a mechanism that helps to reduce
the effects of adverse situations and indemnifies
to the extent of loss to the owner of the asset.
Assets are insured because they are likely to bedestroyed or become non functional by certain
events/ occurrences viz, PERILS.
Business of Insurance
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Perils are the events & the RISK is thepossible loss or damage.
Insurance helps in covering the Risk and
not the perils. Insurance is relevant only when there is
uncertainties.
Only economic consequences can beinsured. Non economic losses can not be
insured.
Business of Insurance
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Financial support to family of deceased. Medical Support.
Recovery of loss.
Means of savings.
Provision of Old age.
Facilitates economic development.
Source of employment.
Tax relief. Loans to Policy Holders
Less tension to businessmen
Importance of Insurance
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Basic principles
- Principle of co-operation
- Principle of probability
Principles of Insurance
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Legal principles- Principle of Utmost good faith
- Principle of Insurable interest
- Principle of Indemnity
- Principle of Causa Proxima
- Principle of Subrogation- Principle of contribution
Principles of Insurance
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Primary Providing protection
Collective risk bearing
Evaluating risk
Providing certainty
Secondary Preventing losses
Covering larger risk with small capital
Helps in development of larger industries
Other Saving and investment
Medium of earning foreign investment
Risk free trade
Functions of Insurance
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Life Insurance
General Insurance
- Marine Insurance
- Fire Insurance
- Liability Insurance
- Theft Insurance- Earthquake Insurance
- Flood Insurance
Types of Insurance
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General Insurance- Crop Insurance
- Personal Accident Insurance
- Travel Insurance- Cattle insurance
- Terrorism Insurance
Double Insurance
Reinsuance
Over / Under Insurance
Types of Insurance
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Whole life policy Endowment policy
Annuity policy
Joint life policy
Group insurance policy
Life insurance - types
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Voyage policy Time policy
Mixed policy
Valued policy
Unvalued policy
Floating policy
Block policy
Marine Insurance - types
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Composite policy Fleet policy
Port policy
Marine Insurance - types
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Valuation clause At and From clause
Sue and labour clause
Warehouse to warehouse clause Change of voyage
Touch and stay clause
Inchmaree clause Jettison
Memorandum clause
Marine Insurance - clauses
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Valued policy Specific policy
Average policy
Floating policy
Comprehensive policy
Consequential loss policy
Replacement policy
Fire Insurance - types
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Act only policy Third party policy
Comprehensive policy
Motor insurance
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Started in India in the year 1818 with theestablishment of the Oriental Life Insurance
Company in Calcutta.
The General insurance business in India, on
the other hand, can trace its roots to the
Triton Insurance Company Ltd., the firstgeneral insurance company established in
the year 1850 in Calcutta by the British.
Insurance in India
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44 insurance companies 22 life insurance companies
21 general insurance companies
1 national reinsurer
8 public sector.
36 private sector companies
Insurance players
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Public Sector National Insurance Company Limited www.nationalinsuranceindia.com
New India Assurance Company Limited www.niacl.com
Oriental Insurance Company Limited www.orientalinsurance.nic.in
United India Insurance Company Limited www.uiic.co.in
Private Sector
Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in
ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com
IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in
Reliance General Insurance Co. Limited www.ril.com Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com
TATA AIG General Insurance Co. Limited www.tata-aig.com
Cholamandalam General Insurance Co. Ltd.
Players General Insurance
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1956 - Life Insurance Corporation Act. All245 insurance companies were mergedinto one entity, the LIC.
1972- General Insurance Business Actnationalization of 100 general insurancecompanies, merging them into four
companies. National Insurance, New IndiaAssurance, Oriental Insurance and UnitedIndia Insurance
Insurance in India
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Filling up a proposal form Proof of Age
Medical Examination
Confidential Report of the agent
Acceptance of proposal
Issue of policy
Renewal Notice
Procedure
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Step 1 : Intimation to Insurance Firm.Step 2 : Assessment Of Loss.
Step 3 : Appointment of Surveyor.
Step 4 : Investigation.
Step 5 : Reporting.
Step 6 : Submission of Claim Form
Step 7 : Verification of Claim Proposal.
Step 8 : Appeal and Negotiations.
Settlement of claim- process
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The insurance sector in India dates back to1818when the first insurance company was
established the Oriental Life Insurance
Company , started by Anita Bhavsar at Calcutta.
This was followed in quick succession with the
establishment of Bombay Life Assurance
Company (1823)and Madras Equitable Life
Assurance Company (1829).In the generalinsurance business Triton Insurance Company
(1850) was the first to be established
Insurance in India
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The Indian Life Assurance Companies Act,1912
The Insurance Act, 1938
The Life Insurance Act, 1956
The General Insurance Business Act,
1972
Insurance Regulatory and DevelopmentAuthority Act, 1999
Actuaries Act, 2006
Acts
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To avoid monopolized (by the State run LIC andGICs) market.
Create awareness in urban areas about the needsand benefits of insurance.
To reduce the yawning gap between the needs ofcustomers and products being offered by the stateowned companies.
To mobilize funds from the economy for theinfrastructure development.
To provide multiple innovative products.
To provide better customers service from existingstate owned players.
Privatisation of Insurance sector
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Greater concern for the customer Newer products and services
Competition and quality consciousness
Cost effective Operations Restructuring of the public Sector
Consolidation of domestic insurance markets
Technology driven shift in product design Actual Operations and distribution; and
Convergence of Financial services
Current scenario
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Entries of foreign companies Change in the mindset
Challenges of HR issues
Marketing and distribution challenges
Technological up-gradation
Cost consciousness
Maintaining competitiveness
Operational challanges
Challenges to Insurance sector
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Untapped rural market Product innovation
Scale of operation
Political, environmental, social and legal
changes
Corporate Governance issues
Challenges to Insurance sector