Insurance

@#.Insurance:-
Insurance is a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against the risk.
More specific definition can be given as follows – Insurance may be defined as a consisting one party (the insurer) agrees to pay to the other party (the insured) or his beneficiary, a certain sum upon a given contingency (the risk) against which insurance is sought.

@#. History and development of insurance.
Ans: Historical development of the various branches of insurance is given below: -
1. Marine: Marine is the oldest form of insurance and come first in the list. This type of insurance probably began in ‘Northern Italy’ sometime during the 12th and 13th century and gradually the concept was rather transferred to or taken over by the ‘United Kingdom’.
The present Act regulating the marine insurance business is the Marine Insurance Act, 1906 and this Act is followed in our country also.
2. Fire: Fire insurance came second in the list of development. The Great Fire of London in 1666 practically demonstrated the necessity and urgency of fire insurance. In 1868 Fire Offices Committee (FOC) was formed which has multi – various responsibilities like, uniform rating, statistics and various technical advices to member companies subsequently also developed various other bodies, such as Joint fire research organization , Salvage corporations etc who are directly and indirectly helping the fire insurance business on a sound scientific line.
3. Life: The third in the list of development is the Life insurance business. In 1774 the Life Assurance Act was passed in the British Parliament requiring the presence of insurable interest before one could effect a life policy on the life of another. All these gradually gave life assurance a sound, systematic and scientific basis as wee seen in the present day
4. Accident: The last in the list of development is the accident insurance business. Accident insurance basically started from personal accident insurance. The effect of industrial revolution in the 19th Century.
Common features of development these are –
1. Insurance developed basically in response to a demand created by the insuring community.
2. Industrial revolution of the 19th Century was largely responsible for rapid growth of insurance business.
3. In the early days there were absence of reliable statistical data and theoretical soundness. Gradually this vacuum was filled in by various theoretical approaches and concerted actions of various associations. This ultimately gave legal, technical, scientific and theoretical soundness to the business of insurance.
4. In the earliest days insurers started as specialist offices, but gradually with multi – various demands they turned into composite offices.
5. The idea as to maintenance of reserve for withstanding catastrophe losses gradually developed and now days hardly there is company which does not provide for a such a reserve.
6. The necessity of reinsurance gradually developed with the increase in the insurer’s commitment on a particular risk.


#. Nature of insurance

Ans: The insurance has the following characteristics which are generally observed in case of life, marine, fire and general insurance.
1. Sharing of risk: The most important sight of insurance is sharing of risk. Insurance is a device to share the financial which might be fall on an individual or its family and the hoping of specified event.
2. Co – operative device: The most important feature of every insurance plan is the co – operation of large number of persons who in effect agree to share the financial loss arising due to a particular risk which is insured. Such a group of persons may be brought together voluntarily or through publicity or through solicitation of the agents.
3. Value of risk: The risk is evaluated of money or share of an insured considered as premium.
4. Payment of contingency: The payment is made at a certain contingency insured. If the contingency occurred payment is made.
5. Amount of payment: The amount of payment depends upon the value of loss occurred due to the particular insured risk provided insurance is there up to that amount.
6. Large number of insured person: To spare the loss immediately smoothly and cheaply large number person should be insured.
7. Insurance is not a gambling: The insurance serves indirectly to increase the productivity of the community by eliminating worry and increasing initiative. The uncertain is changed into certainty by insuring property and life.
8. Insurance is not charity: Charity is given without consideration but insurance is not possible without premium. It is a profession because it provides adequate sources of the time of disasters only by charging a nominal premium for the service.
@#. Functions of insurance

Ans: The function of insurance can be studied into two parts primary function & secondary function.
A. Primary function
1. Insurance provides certainty: Insurance provides certainty at payment at the uncertainty of loss. The uncertainty of loss can be reduced by better and administration. The insurance changes premium for providing the said certainty.
2. Insurance provide protection: The main function of the insurance is to provide protection against the probable chances of loss. The time and amount of loss are uncertain and the insurance guarantees the payment of loss and thus protects the assure form sufferings.
3. Risk sharing: The risk is uncertain and therefore the loss arising from the risk is also uncertain. When risk takes place the loss is shared by all the persons who are exposed to it.
B. Secondary function:
1. Prevention of loss: The insurance joins with those institutions whose are engaged in preventing the loss of society.
2. It provides capital: The insurance provides capital to the society, the industry, the business, and the individuals are benefited by the investment and loans of the insurance.
3. It improves efficiency: The insurance eliminates worries and miseries of losses at death and destruction of property. It improves not only his efficiency but the efficiencies of the masses are also advanced.
4. It helps economic progress: The insurance by protecting the society from huge losses of damage or destruction and death.
5. Invisible export: Insurance has immense potentially to work as invisible export of a country by way of providing insurance services abroad. This may be done either by providing direct insurance services abroad or by accepting re – insurance form abroad. Such exports definitely have a favorable impact on the balance of payment of country and can indeed assume a major proportion to the total exportable items.

@#. State the importance/necessity of insurance.

Ans: Insurance has some importance and necessity and these are given below: -
1. Insurance provide financial security and safety.
2. Insurance creates savings which is important in general people.
3. Insurance provides the facilities of investment.
4. Insurance brings of mental satisfaction in personal life.
5. Insurance provides financial security at old age.
6. Insurance reduces the hindrances of risk in business.
7. Insurance make development of foreign trade.
8. Insurance take important role of formatting of capital.
9. Insurance take important role in maintained of national wealth.
10. Insurance create employment opportunities in economic environment.
11. Insurance create establishment of social security.
12. Insurance increases awareness of citizens.
13. Insurance solutes the unemployment problem.
14. Insurance eliminates dependency.
15. Insurance reduces inflationary pressure.

@#. Distinguish between insurance and gambling.

Insurance Gambling
1. In insurance risk are existing, they may occur at any time. For example, death, old age fire, marine perils, accident etc may occur at any time. If there is no insurance, the person will suffer at the occurrence of this perils, but insurance is taken against these risk, the insurer will provide a fixed or indemnify the amount of loss occurred due to the insured perils. Thus, insurance is protection against theses risk. 1. In case of gambling the risk does not exist it is being created game or amusement while one suffers and another will gain. In absence of such game nobody will suffer. In absence of insurance, the property will suffer. While due to insurance no party will suffer.
2. In insurance contract, insurable interest in essential. Without insurable interest, it would be wagering contract. 2. In gambling, insurable interest is not essential.















@#. Kinds of insurance.
Ans: The insurance can be divided form two angles –
A. Business point of view: The insurance can be classified into three categories from business point of view. They are –
1. Life insurance: Life insurance is different from other insurance in the sense that, the subject matter of insurance is life of human being. The insurer will pay the fixed amount of insurance at the time of death or at the expiry of certain period.
2. General insurance: The general insurance includes property insurance, liability insurance and other forms of insurance.
3. Social insurance: The social insurance is to provide protection to the weaker section of the society who is unable to pay the premium for adequate insurance. Pension plan, disability benefits, unemployment benefits, sickness insurance and industrial insurance are the various form of social insurance.
B. Risk point of view: The insurance can be classified into following categories –
1. Personal insurance: The personal insurance includes insurance of human life which may suffer loss due to death, accident and diseases. Therefore the personal insurance is further sub – classified into life insurance, personal accident insurance, and health insurance.
2. Property insurance: The property insurance includes marine insurance, fire insurance, automobile insurance, cattle insurance, crop insurance, machinery insurance, theft insurance.
3. Liability insurance: The liability insurance covers the risk of third party, compensation to employees, liability of automobile owners, and reinsurances.
4. Guarantee insurance: The guarantee insurance covers the loss arising due to dishonesty, disappearance, and disloyalty of the employers or second party.
5. Other forms insurance: Besides these insurance there are certain other insurances which are included under general insurance. The examples of such insurances are export – credit insurance, state employee insurance etc.