Introduction to Insurance • The business of insurance is related to the protection of economic values of assets. • Insurance is a mechanism that helps to reduce the effect of perils such as fire, floods, breakdowns, lightening, earthquakes etc • The business of insurance started with marine business traders in the Lloyd’s Coffee House in London. • The first Indian insurance company was the Bombay Mutual Assurance Society Ltd, formed in 1870. • Life insurance business was nationalized in India with the setting up of the Life Insurance Corporation of India (LIC) on September 1, 1956. • People who are exposed to the same risk come together and agree that if one of them suffers a loss, the others will share the loss and make good to the person who has lost. That is why Insurance is the business of ‘sharing’. • For insurance to remain a fair arrangement, the peril should occur in an accidental manner. • A human being is an income-generating asset. • Living too long can be as much a problem as dying too young. Insurance takes care of both risks. • Insurance extends beyond the coverage of tangible assets. For e.g. the voice of a singer or the legs of a dancer may be insured. • Personal accident and sickness insurance is classified as non-life in India. • The premium is based on expectations of losses. • The insurer is in the position of a trustee, managing the common fund for and on behalf of the community. • A life insurance company is a major instrument for mobilization of savings of people, particularly from the lower- and middle-income groups. • The vast amount of funds by way of premiums represents ‘pooling of risks’. • Insurance provides tax benefits, both in income tax and in capital gains. • Loans can be raised against the policy. • A life insurance policy is a property and can be transferred or mortgaged. • Insurance compensates losses Only to the extent of insured amount • Insurance is necessary because Assets may be damaged by external causes • Insurance helps to Reduce the consequences of adverse situations
Posted on: Tue, 09 Jul 2013 06:50:26 +0000
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