Insurance constitutes a very important aspect of any person's or family's financial life. It is an important pillar ensuring the continued financial well-being of a family in case of any eventuality. Though we all are familiar with the term "insurance", there exists a huge gap in "what the customer needs" and "what the customer gets". The need is for an unbiased approach to insurance advisory keeping 'you' at the center and then providing you with quality advisory and customer services.

Being insured is next to being wise. Insurance is one of the pillars on which the financial stability of any person, family or business stands. Insurance is your financial protection against any unfortunate event happening in future. But for any insurance to be meaningful, it should be taken on time, should be of appropriate coverage such that the financial risk is largely mitigated and should be suited to your needs. Unfortunately today a lot of risks are uncovered and even if insurance is taken, the coverage is generally inadequate. Further more, there is generally lack of awareness of the insurance products available resulting in mismatch between the needs and the actual policies subscribed by policyholders.

We strongly believe that any person, family or business must be appropriately covered at all times against relevant risks with appropriate policies to ensure that their financial well-being is beyond any unfortunate circumstance. The insurance risks must be properly evaluated and policies that match your needs the most should be selected. As an organisation we believe in overall financial planning of the customer which can help us in achieving moving towards the overall well being of the customer. The approach towards any financial or insurance advisory must be customer centric and unbiased to any particular product or idea. The idea is to get the right coverage, at the right time, through the right product and at the right cost to the customer.

Taking insurance is not an event but a process which has a long term impact and something that demands your commitment and discipline. As such any insurance decision must be carefully taken after understanding all relevant aspects. Every customer has a right to know all details of the insurance policy he/she is subscribing to. Further on part of the customer, all relevant facts must be fairly disclosed to the insurer.

What is Insurance?

Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. It is like a transfer of financial risk of a loss, from one entity to another, in exchange for payment. There are two parties involved in insurance. They are: the insured (policy holder) and the insurer (insurance company). The policyholder pays a certain amount of fees (premium) at regular intervals to the insurer. And in return, the insurance company agrees to cover the financial losses and expenses of the policyholder. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

How does Insurance work?

When one takes an insurance policy, a premium is paid to the insurance company. This money is pooled with the premiums of others who have taken insurance with the particular firm who are exposed to the similar risks that you have covered. The collected premiums forms a pool of money from which any claim is settled or paid off. The basic underlying assumption is that a majority of the policy-holders would never need to rise the claim, thus making it viable arrangement for the insurance provider.

Types of Insurance:

Insurance is available for a very large number of reasons and purposes. In general, the insurance is divided into two main categories - Life & Non-Life. The non-life category has many different types of insurance available. The following are prominent types of insurance available...

  • Life Insurance - coverage in case of death / injury of the insured
  • Health Insurance - medical and accident insurance in case of any illness / accident
  • Motor Insurance - insurance against damages and third party claims in case of any accident, damage to vehicles
  • Travel Insurance - insurance while traveling against loss of luggage / documents, accident / illness during travel, etc.
  • Credit Insurance - insurance against loans taken in case of any eventuality
  • Property Insurance - insurance of property like home / factory, etc. and movable assets against calamities, fire, theft, etc.
  • Fire Insurance - insurance to property against against accidents, fire, lightening, riot , floods, etc.
  • Marine Insurance - insurance against the 'perils of the sea' covering namely hull, cargo & freight
  • Professional Indemnity Insurance - insurance against loss/circumstances incurred as result of negligent act, error or omission in carrying out the profession / business.

Principles of Insurance

The concept of Insurance is based on six principles which applies to all the parties involved in the contract.

  • Insurable Interest - It means that a person must have monetary interest in life, property or an event legally entitling that person or business to insure it. Unless the insured will suffer financially in the event of a loss, he does not have an insurable interest and is not legally entitled to insure that particular risk...
  • Indemnity - It means to bring back the insured at the same financial level (to the extent possible) at which the insured was before the specified incident happened. This principle does not apply to life insurance as human life cannot be fully compensated.
  • Utmost Good Faith - It implies that both parties to an insurance contract have an obligation to act in good faith in their dealings with each other.

    Contribution - The right of an insurer to call on other insurers similarly, but not necessarily equally, liable to the same insured to share the loss of an indemnity payment. The principle of contribution allows the insured to make a claim against one insurer who then has the right to call on any other insurers liable for the loss to share the claim payment.

  • Subrogation - The insurance company acquires legal rights to pursue recoveries on behalf of the insured.
  • Proximate Cause - The immediate and effective cause of the loss; not necessarily the last event before the occurrence which in a chain of circumstances leads naturally and directly in the ordinary cause of events to the loss. The first event in a series that results in a claim. It is not always the one that is nearest in time to the event.

Insurance in India:

Insurance in India is dates back to 1818, when Oriental Life Insurance Company was started in Kolkata to cater to the needs of European community. In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer. The oldest existing insurance company in India is the National Insurance Company Ltd., which was founded in 1906. In the year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the insurance business.

In 1999 the government opened up the insurance sector by allowing private companies to start insurance business and also allowed foreign direct investment of up to 26%. With effect from December 2000, the 4 subsidiaries of GIC have been de-linked and were set up as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited. Today in India, there are 24 life and 22 general insurance companies in the private sector whereas in the public sector, there is 1 life and 6 general Insurance companies.

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country's GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country and its citizens.

Insurance Regulations:

Insurance laws and regulations in India takes care of all matters related to various insurance companies in the country. In India, there is one regulatory authority i.e. Insurance Regulatory and Development Authority (IRDA of India) which oversees important aspects of the industry and the functioning of the life insurance companies & provide them with guidelines. Established by the government, it safeguards the interest of the insurance policy holders of the country.

Other supporting organisations which facilitate in the working of the industry

  1. Tariff Advisory Committee: The primary task is to regulate and control the rates, benefits, terms and conditions offered by life insurance companies in India.
  2. Insurance Association of India: All insurance companies in India are members of the Insurance Association of India. It has two councils under its patronage, mainly (a) Life Insurance Council (b) General Insurance Council
  3. Ombudsmen: Ombudsmen play important role in regulating and ensuring smooth functions of the insurance companies. They are appointed to address all complaints relating to settlements of claims. Anyone having a grievance against an insurance company can approach Ombudsmen for redressal.

Insurance Terms:

  • Insured - A person, group or organization whose life/health or property is covered by an insurance policy.
  • Insurer - A person or company who provides risk cover to the insured in return for a premium. Insurance
  • Premium - An insurance premium is the money charged by insurance companies for covering risks.
  • Sum Assured - The money paid by the insurance companies to the insured/claimant on the maturity of insurance contract or on a claim.
  • Claim - A claim is a legal action to obtain money or property. It is a demand by the insured for his rights on the happening/damages/loss of the covered risks.
  • Broker - A person or organisation who functions as an intermediary between two or more parties in negotiating agreements like an insurance contract. A broker is a highly regulated entity which deals with all insurance companies on behalf of its customers. A broker is different from an agent which deals with only one insurance company. The entity being a consolidator of business to the insurance company is able to negotiate better deals and service.
  • Certificate of Insurance - A document which describes the insurance policies maintained by an insured is known as certificate of insurance. It contains the policy number, effective and expiry dates and name of the insurance company It is a certificate which acts as a proof of insurance.

Cover note - A cover note is a temporary certificate of insurance issued by the Insurer before the policy is issued and after the Insured has submitted a duly filled in proposal form along with the premium paid in full. It is valid for a period of 60 days from the date of issue and then a certificate of insurance is issued once the cover note expires


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