Insurance Definition

Insurance is a contract whereby, in return for the

payment of premium by the insured, the insurers
pay the financial losses suffered by the insured
as a result of the occurrence of unforeseen
events.

Principles of Insurance
Utmost Good Faith
Insurable Interest
Indemnity
Subrogation
Contribution

Proximate Cause

Utmost Good Faith

Good faith- Let the buyer beware

Declaration of all material Information

about the subject mater of insurance

Material Information is that information

which enables the insurer to decide:
a) whether he will accept the risk and;
b) if so, at what rate of premium and subject to what
terms and conditions

Breach of duty of utmost good faith arises

in two ways:
Non-disclosure of material facts- oversight,
proposer thought its not essential etc.
Misrepresentation- Intentional.

Insurable Interest
The legal right enjoyed by the owner of a
property to insure is called Insurable
Interest. The insurance will become null
and void, without the insurable interest.

Indemnity
The principle of Indemnity states that under the policy of
insurance, the insured has to be placed after the loss in
the same financial position in which he was immediately
before the loss.

 Applicability:
o When the losses suffered by the insured can be
measured in terms of money
o It is practicable to place the insured in the same
financial position which he occupied before the
loss

In Marine Cargo where valued polices are

issued, there is only commercial
indemnity- the value declared for
insurance is accepted at the time of loss.

Limitation of Insurers liability:

If the sum insured is less than the indemnity,
only the sum insured is payable.
Property insurances- Condition of averageIf there is under insurance only
proportionate value is payable.

Subrogation
Transfer of rights and remedies from the insured
to the insurer who has indemnified the insured in
respect of the loss.

Contribution
The right of insurers who have paid a loss under
a policy to recover a proportionate amount from
other insurers, who are liable for the same loss.

Proximate Cause
No policy covers all types of risks. The insurance
company is liable to indemnify only against the
insured perils. The term Proximate cause
literally means the nearest cause or direct cause.
In insurance parlance it relates to the immediate
cause of the mishap, which resulted in the loss

Differences between Life and

General

Assurance vs. Insurance

Long term vs. Short term
Indemnity vs. Benefit policies
Other minor differences
Partial claims
Covered risks
Contribution/Subrogation/Proximate cause

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Basic Principles and Concepts of

Life Insurance
Economic Principle
Actuarial or Mathematical Principle
Legal Principle

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Economic Death
Physiological Death
Disability
Old age/Retirement
The risk suffered by a few is spread over a
large number of persons who face the
same risk
Each Contributes
Sum per head is small & Spreading of risk
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Actuarial ( Mathematical) Principle

How much each person should contribute
Premium
Process of fixing the contribution or
premium

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Legal Principles
Large no. of people contribute to common
fund
Essential to establish proper relationship
Understanding and relationship is done
using provisions of Law
Follow the legally acceptable
understanding, relationships and mutual
responsibilities

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Three Ways to ensure Economic

Stability
Social Security Schemes of the Govt.
Group Efforts/Group Insurance products
Individual Efforts/Life Insurance

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Life Insurance Business

Concept of Human Life Value (HLV)
Avg. Earnings in future
Deduct taxes, personal life and
health insurance premiums and
cost of self-maintenance
Working expectancy
Determine the Economic Value

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Advantages of Life Insurance

Major Financial Instrument
Advantages of Life Insurance over
other forms of investment

Creation of an Estate
Encourages Thrift
Collateral Security
Income Tax Exemption
Societal Benefits

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Life Insurance Products

Basic Building Blocks of Life Insurance
Term Insurance Products
Whole Life Products
Endowment Products (including Moneyback Policies)
Others
Global Products
Various Riders and their Impact

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Legal Aspects of Life Insurance-1

Ordinary Contracts vs. Life Insurance
Contracts
Insurance Act, 1938
Nomination and Assignment

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Legal Aspects of Life Insurance-2

IRDA Act, 1999 Privatization of Insurance
Industry
Subsequent Regulations (Brokers Regulation
etc.)
Other Channels of Distribution
Agents Compensation

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