Insurance

Defining Investment: A current
commitment of $ for a period of time
in order to derive future payments
that will compensate for:
The time the funds are committed
The expected rate of inflation
Uncertainty of future flow of
funds

Risk and Insurance
Services
Session 8

Insurance
• Protection against possible financial losses,
arising on the happening of an unexpected event
• A Contract whereby one party (the insurer)
agrees in consideration of money paid to it (the
premium) by another party to indemnify the other
against loss resulting on the happening of certain
events

Insurance: Stepping Stone
• It started from Lloyd’s coffee house London
• First policy was issued in England in 1583
• In India first policy was issued in 1870

Insurance Benefits
Safeguard self and family for future
requirements
Peace of mind in case of financial loss
Encourage savings
Provide a protection cover
Get a tax rebate

Reinsurance
• Sharing of the risk by an insurance company with
another insurance company
• Company that issued the policy initially is called
primary company and the company to which the
risk is transferred is called the reinsurer

Insurance Basics
• The Contract of Insurance is between the Insurer
and Insured for a consideration called ‘premium’.
• The thing insured is called the ‘subject matter’
and the interest of the insured in the subject
matter is called ‘insurable interest’.
• The uncertain events or casualties are called
perils insured against.

Fundamental Principles
• Principle of Utmost Good Faith
• Principle of Insurable Interest
• Principles of Indemnity

Fundamental Elements
• Principle of Subrogation
• Principle of Contribution