Principle & Practice Of Insurance
What is insurance? The mechanism of Insurance The process by which the unfortunate few, who suffer losses, share the burden with many who are exposed to risk of similar losses Primary burden of direct losses like damage due to fire Indirect losses like loss of production following such damage Secondary burden like physical and mental strain caused by anxiety of probable losses Cost of maintaining reserves to mitigate such losses, if they occur Pool of funds What is premium What is claim. Why insurance?
The purpose of insurance Making good the financial losses suffered by the insured due to loss or damage to assets, having some economic value, owned by him Provides financial protection in the event of such losses Entrepreneurs come forward to invest in various enterprises because Insurance guarantees such losses being paid for A facilitator of economic growth. Is Insurance a contract? If so what laws are applicable?. Offer happens when a person interested in taking insurance makes an offer to the insurance company by providing details in forms prescribed for this purpose - proposer Proposal form. Acceptance occurs when, after going through the contents in the proposal form and analyzing the same, the insurance company accepts the proposal and provides the proposer with the terms of insurance like what are all covered (known as scope of cover), what are not covered (called exclusions) ,amount of premium payable, other conditions of insurance, etc.
Consideration is the premium paid when proposer becomes insured Agreement between parties (consensus ad idem) is achieved through contents of proposal form and policy wordings Void and voidable insurance contracts Legal competencies of parties How is Insurance contract different from other contracts? Principle of ‘buyer beware’ known as caveat emptor vs principle of utmost good faith, called uberrima fide. Fundamentals and basic principles of Insurance Insurable interest - legal right to insure - ownership and joint ownership – how insurable interest of mortgager & mortgagee differ from each other – differentiator from wagering /gambling. Utmost good faith - proposer alone knows the good, bad and ugly features of the property he is insuring -
The insurance company does not see the property, it only accepts or rejects the proposal based on the information elicited in the proposal form - Insurance companies are custodians of public fund - fiduciary to all insured - judgment based on probability of loss and extent of loss – proposer’s duty to disclose material facts and what he ought to know Indemnity – no insured should make a profit out of insurance - The insured has to be placed after damage /loss in the same financial positional he /she was prior to the loss - correct Sum insured –over insurance & underinsurance – impact of depreciation on claims – salvage – modifications to principle – exceptions to strict indemnity Subrogation - corollary to principle of indemnity - transfer of the rights and remedies of the insured to the insurer – right to recover from a third party who caused the loss – insurer stepping into the shoes of the insured and getting the rights and remedies of the insured transferred to themselves - also to ensure the insured does not make a profit out of his insurance by getting money both from the insurance company and the third party who was responsible for the financial loss
Letter of subrogation - power of authority - other essential legal documents Contribution – another mechanism to ensure the insured cannot make a profit out of his insurance transactions by insuring same property with more than one insurance company and recovering from all of them - right of the insurer who has paid the loss under a policy to recover a proportionate amount from other insurers who are liable for the loss – insurances to which condition of contribution does not apply Proximate cause – effective and powerful cause - insured perils - named perils policies & all risks policies – exclusions - relating to perils, property and losses – need to determine the cause of loss to decide whether the loss is payable or not – proximate cause vs remote cause Who can take insurance? – Insurable interest – how it operates in different insurance policies Pricing and rating of Insurance.
(What goes into the pricing?) – rate is the price of a given unit of insurance - basics of ratemaking – how to determine sum insured – assessment and evaluation of hazard – classification of risks – coverage and other terms and conditions - pure premium – loadings to arrive at final premium – loss experience – excess/deductible – discounts When does insurance pay up? – claim settlement functions – claims procedures – investigation/survey/assessment – claim documentation – preliminary/interim/final survey reports - catastrophic losses – On Account payments – post settlement activities – arbitration How much? – Assessment – average clause – depreciation – excess/deductible – recoveries – standard & substandard claims – ex gratia payments If Insurance does not pay up, is there a redressal procedure? – Integrated Grievance Management System – The Consumer Protection Act, 1986 – Consumer Disputes Redressal Agencies with powers of civil court – District Forum/State Commission/National Commission – insurance ombudsman Since insurance is a contract, do we have recourse to the courts? Do we have a regulator? – need and importance of insurance regulations – insurance regulatory framework in India – The Insurance Act, 1938 – The Insurance Regulatory & Development Authority Act, 1999 - various stakeholders in insurance domain and regulations applicable to each of them Indian insurance industry vis-a vis global market – Unique features of Indian insurance industry – comparison of various aspects of Indian insurance industry with insurance industries in other countries Reinsurance – Insurance of insurers
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Section 1: Introduction to Insurance
- 1 What is insurance 07:21 Through this video tutorial you will be learning what is insurance?, why insurance?, is insurance a contract?, how is insurance contract different from other contracts?
Section 2: Special Principle of Insurance
- 2 Insurable interest & Utmost good faith 07:57 Through this video tutorial you will be learning who can insure? and also breach of this can render contract void or voidable
- 3 Indemnity & Subrogation 06:26 Through this video tutorial you will be learning who are insured not to make a profit out of insurance transaction and also the the right of the insurance company to take over insured’s recovery right
- 4 Contribution 03:42 In this video tutorial you will be learning the right of insurance company to recover from other insurance companies
- 5 Proximate cause 06:29 Through this video tutorial you will be learning about insurance company may deny or admit liability based on exclusions/inclusions
Section 3: Risk Management and Insurance
- 6 Classification of risk & Risk management tools 07:04 Through this video tutorial you will be learning which risks are insurable and which risks are not insurable and also need for risk management to ensure long term survival of organisation
- 7 Classification of loss & Handling of risk 07:06 Through this video tutorial you will be learning about impact of losses on the finance of the corporate/individual and also how this enables organisation to decide what to insure and for what value to insure