insurance management cyc

8/7/2019 Insurance Management cyc

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Insurance Management


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LIFE INSURANCE

Life insurance is a contract under which the insurer(Insurance Company) in consideration of a premiumpaid undertakes to pay a f

ixed sum of money on thedeath of the insured or on the expiry of a specifiedperiod of time whichever is earl

ier.In case of life insurance, the payment for lifeinsurance policy is certain.Event insured against is sure to happen only the timeof its happening is not known. So life insurance isknown as Life Assurance.The subject matter of insurance is life of humanbeing.Life insurance provides risk coverage to the life of aperson.On death of the person insurance offers protectionagainst loss of income and compensate thetitleholders of the policy.


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BASIC PRINCIPLES OF LIFE INSURANCECONTRACT

In India Indian Contract Act,1872 governs the

commercial contractsA insurance policy is a contract in terms of theIndian Contract Act, 1872

Insurance is a specialized type of contract.


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PRINCIPLES OF LIFE INSURANCE

As such it is subject to the following three

additional principles apart from usualessentials of valid contractPRINCIPLE OF UTMOST GOOD FAITH

PRINCIPLE OF INSURABLE INTERESTPRINCIPLE OF INDEMNITY


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PRINCIPLE OF UTMOST GOOD FAITH

The contract of life insurance is a contract of utmostgood faith.

The insured should be open and truthful and shouldnot conceal any material fact in giving information tothe insurance company, while entering into acontract with insurance company.

Misrepresentation or concealment of any fact willentitle the insurer to repudiate the contract if hewishes to do so.


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Principle Of Utmost Good FaithA positive duty to disclose accurately & fully all the factsmaterial to risk being proposed whether asked for or notMaterial fact can be every circumstances is material whichwould influence the judgment of prudent insurer in arriving atthe decision to accept risk and fix premiumsFacts regarding age, height, weight, build, previous medicalhistory, smoking/drinking habits, operations, non-disclosureof earlier insurances, hazardous occupation must bedisclosed.Breach of utmost good faith arises due to misrepresentationor non-disclosure.


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PRINCIPLE OF INSURABLEINTEREST

The insured must have insurable interest inthe life assured.In absence of insurable interest, Contract ofinsurance is void.Insurable interest must be present at thetime of entering into contract with insurancecompany for life insurance. It is not

necessary that the assured should haveinsurable interest at the time of maturityalso.


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INSURABLE INTEREST

Insurable interest is a legal pre-requisite forinsurance

The primary interest of a person in the objectof insurance (such as a house, car, machineryor life) which gives him the right to takeinsurance and so to say, this is insurableinterest.


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PRINCIPLE OF INDEMNITY

A Contract of life insurance is not a contract of indemnity.The loss of life cannot be compensated and only a fixed sumof money is paid in the event of death of the insured. So, thelife insurance contract is not a contract of indemnity.The loss resulting from the death of life assured cannot becalculated in terms of money.The mechanism of insurance is meant to compensate losses.

Insurance cannot be used as a means to make profit out of it.This broadly is the principle of indemnity.


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Insurable interest exists in the followingcases

(a) A person has an unlimited insurable interest in his/her ownlife.(b) A person has an insurable interest in the life of his/herspouse.(c) A father has an insurable interest in the life of his son ordaughter on whom he is dependent. Likewise a son may haveinsurable interest in life of his parents.

(d) A creditor has an insurable interest in the life of thedebtor, to the extent of the debt.(e) A servant employed for a specified period has insurableinterest in the life of his employer.


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GENERAL INSURANCE

The general insurance includes property insurance,liability insurance and other forms of insurance. Fireand marine insurance comes under property

insurance.Liability insurance includes motor, theft, fidelity andmachine insurances to a certain extent.Fidelity insurance whereby the insurer compensatesthe loss to the insured when he is under the liabilityof payment to the third party


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TYPES OF GENERAL INSURANCE- H ealth insurance- P ersonal accident policy- G roup insurance policy- Automobile insurance- W orkers compensation- Liability insurance- Aviation insurance- B usiness insurance

- F ire insurance policy- Travel insurance policy- M arine insurance


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FIRE INSURANCE

Loss of life by fire is covered under Life insurance andloss of property by fire is covered under fire insurance.The General Insurance Act (Tariff) recommends the formof the contract in which a fire insurance is to be writtenD

EFINITIONA contract of fire insurance can be defined as a contractunder which one party ( the insurer) agrees forconsideration (premium) to indemnify the other party (Theinsured) for the financial loss which the latter may sufferdue to damage to the property insured by fire during a

specified period of time and up to an agreed amount.The insurer is liable to pay the loss only when loss iscaused by actual fire. The phrase loss or damage by firealso includes the loss or damage caused by efforts toextinguish fire.


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>> F IRE INSURANCE POLICYThe document containing the terms andconditions of the contract is known as FireInsurance PolicyA fire policy contains the name of theparties, description of the insuredproperty, the sum for which the propertyis insured, amount of premium payable andthe period insured against . The premium maybe paid either in single payment or by way ofinstallments


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FIRE AND SP ECIA L PERI LS POLICY-COVERS Cover loss due to the following perilsFire, Lightning, Explosion Storm, cyclone,typhoon, tornado, landslide Riot, strike and

terrorism damages Aircraft damageOverflowing of water tanks and pipes etc.


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M EANING OF FIRE

Fire is not described in the policy. It shouldtherefore, be taken in the general sense as anignition of some kind .Damage by lightening or explosion is notcovered unless these cause actual ignitionwhich spread into fire


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P OLICY DOES NOT COVER

1. The first 5% of each and every claim subject to a minimumof Rs. 10,000 in respect of loss arising out of Act of godperils such as Lightning, Landslide etc.2. Loss, destruction or damage caused by war, invasion, act of foreign enemy, mutiny, war like operations, civil war, militaryrising etc.3. Loss, destruction or damage caused to the insured propertyby pollution or contamination.4. Loss, destruction or damage to the stocks in cold storagepremises caused by change of temperature.5. Loss of earnings, loss by delay, loss of market or otherindirect loss or damage of any kind whatsoever.


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6 . Any loss or damage caused by or through or inconsequence directly or indirectly due toearthquake, volcanic eruption etc.7. Loss by theft during or after the occurrence of anyinsured peril except as provided under Riot, Strikeand Terrorism Damage cover.8. Loss, destruction or damage to any electricalmachine, apparatus, fixture, or fitting arising from oroccasioned by over-running, excessive Pressure,

short circuiting etc.


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M ARINE INSURANCE

Insurance on the risks of transportation of goods isone of the oldest and most vital forms of insuranceThe value of goods shipped by business firms each

year cost millions of rupees. These goods areexposed to damage or loss from numeroustransportation perils. The goods can be protected bymarine insurance contracts

In India the marine insurance is regulated by theIndian M aritime Insurance Act 1963


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DEFINITION

Marine insurance is a contract under which, the insurerundertakes to indemnify the insured in the manner and tothe extent thereby agreed, against marine losses, incidentalto marine adventures.

It may be defined as a form of insurance covering loss ordamage to vessels or to cargo during transportation to thehigh seas .The insured may be a cargo owner or a ship owner or afreight receiver.The insurer is known as the underwriter .The document in which the contract is incorporated is called

M arine policy .The insured pays a particular sum, which is called premium, inexchange for an undertaking from the insurer to indemnifythe insured against loss or damage caused by certain specifiedperils.


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M EANING OF M ARINE P ERILS

Maritime perils can be defined as thefortuitous (an element of chance or ill luck)accidents or casualties of the sea causedwithout the willful intervention of humanagency .The perils are incidental to the sea journeythat arises in consequence of the sea journey.


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INSURED P ERILS

They are storm, collision of one ship withanother ship, against rocks, burning andsinking of the ship, spoilage of cargo from sea

water, mutiny, piracy or willful destruction of the ship and cargo by the master (captain) of the ship or the crew, jettison etc.


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UNINSURED P ERILS

They are regular wear and tear of the vessel,leakage (unless it is caused by an accident),breakage of goods due to bad movement of the ship, damage by rats and loss by delay . Alllosses and damages caused due to reasonsnot considered as perils of the sea are notprovided insurance cover.


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TYPES OF MARINE POLICY

1. VOYAGE P OLICY

Under the policy, the subject matter is insuredagainst risk in respect of a particular voyage from aport of departure to the port of destination, e.g.Mumbai to New York.The risk starts from the departure of ship from theport and it ends on its arrival at the port of destination. This policy covers the subject matterirrespective of the time factor.


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2 . TIM E P OLICY

It is one under which the insurance is affectedfor a specified period of time , usually notexceeded twelve months.Time policies are generally used in connectionwith the insurance of ship. Thus if the voyage

is not completed with in the specified period,the risk shall be covered until the voyage iscompleted


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3. M IXEDP OLICIES

It is one under which insurance contract isentered into for a certain time period and fora certain voyage or voyages , e.g., Kolkata toNew York, for a period of one year.Mixed Policies are generally issued to ships

operating on particular routes.It is a mixture of voyage and time policies.


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4 . VALUEDP OLICIES

It is one under which the value of subject matter insured isspecified on the face of the policy itself. This kind of policyspecifies the settled value of the subject matter that is beingprovided cover for.The value which is agreed upon is called the insured value. Itforms the measure of indemnity in the event of loss.Insured value is not necessarily the actual value. It includes (a)invoice price of goods (b) freight, insurance and other charges(c) ten to fifteen percent margin to cover expected profits.


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5 . UNVALUED P OLICY

It is the policy under which the value of

subject matter insured is not fixed at the timeof effecting insurance but has to beascertained wherever the subject matter islost or damaged.


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6. O P EN P OLICY

An open policy is issued for a period of 1 2 months and allconsignments cleared during the period are covered by theinsurer.This form of insurance Policy is suitable for big companiesthat have regular shipments . It saves them the tedious andexpensive process of acquiring an insurance policy for eachshipment. The rates are fixed in advance, without taking thetotal value of the cargo being shipped into consideration.The assured also deposits a premium for the estimated valueof the consignment during the policy period.


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7 . BLOCKP OLICY

This policy covers other risks also in addition tomarine risks. When goods are to be transported by

ship to the place of destination, a single policyknown as block policy may be taken to cover all risks.E.g. when the goods are dispatched by rail or roadtransport for shipment, a single policy may cover all

the risks from the point of origin to the point of destination.


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Hull InsuranceNew policy form for marine insuranceIt provides cover for the following:Perils of the seas, rivers, lakesFire, explosion

Violent theft by persons from outside the vesselJettisonPiracyBreak downs to nuclear installations or reactorsContact with aircrafts or similar objects

Earth quake , volcanic eruptionAccident in loading, shifting of cargo,Collision of vessel with another..


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Hull Insurance continued .

Along with it freight coverage is also thereVessels under construction

Fishing vessels, sailing vessels etc..Including institute cargo clauses(A), (B), (c)


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H EALTH INSURANCE

A systematic plan for financing medical expenses isan important and integral part of a risk managementplan. With rising health care costs, it was no longerpossible for an individual to meet the heavy cost of treatment involving hospitalization.The reasons for rise in health care costs are:(a) Increase in medical treatment costs.(b) Technological advancements in medical

equipment.(c) High labour costs.


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DEFINITION

Health insurance is an insurance, which covers the financialloss arising out of poor health condition or due to permanentdisability, which results in loss of income.A health insurance policy is a contract between an insurer

and an individual or group, in which the insurer agrees toprovide specified health insurance at an agreed upon price(premium).It usually provides either direct payment or reimbursementfor expenses associated with illness and injuries.The cost and range of protection provided by health insurancedepends on the insurance provider and the policy purchased.


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H EALTH INSURANCEP OLICIES

The health insurance policies available in India are:(a) M ediclaim policy (individuals and groups)

(b) Overseas mediclaim policy(c) Raj Rajeshwari M ahila Kalyan Yojna(d) Bhagyashree Child Welfare P olicy(e) Cancer Insurance P olicy(f) Jan Arogya Bima P olicy


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Motor Insurance

The law says that drivers must have insuranceagainst third party injury or damage claims.This means if you were to injure someone elseor damage their property, you would haveinsurance to cover the claim. The law also saysthat the insurer must provide a certificate of

motor insurance as evidence that you haveinsurance.


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Introduction

This policy covers all types of vehicles plyingon public roads such as:-

* Scooters &Motorcycles* Private cars* All types of commercial vehicles* Motor Trade (vehicles in show rooms andgarages)


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Different types of motor policy

Third party - Gives you the minimum coveryou need by law - third party liability risks. Itmeans that if you cause an accident, the costof damage to other vehicles is covered.Policies of this type are very rarely issued asmost people combine it with fire and theft

cover.


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Third party fire and theft - In addition to theprotection given by third party, this covers lossor damage to your own car as a result of fire,theft, or attempted theft.


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Fully Comprehensive - The widest form of cover available, although it cannot protectagainst every conceivable risk. The mainbenefit is that it will pay for repairs or thereplacement of your car if it's damaged orstolen. Fully comprehensive policies normally

include personal accident insurance, providingpayments for death and specified seriousinjuries such as the loss of a limb or sight.


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Two types of covers are available:India

2 .P ackage P olicyIn addition to the coverage under liability only, this policycovers loss or damage to the insured vehicle and its accessoriesdue to:1. Fire, explosion, self-ignition or lightning.2. Burglary, housebreaking or theft.3. Riot and Strike.4. Malicious Act.5. Terrorist Act.6 . Earthquake (Fire and Shock) Damage.

7. Flood, Typhoon, Hurricane, Storm, Tempest, Inundation,Cyclone and Hailstorm.8. Accidental external means.9. Whilst in transit by road, inland waterway, lift, elevator or air.10. By landslide/Rockslide


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Exclusions under the policies are:

* Wear and tear, breakdowns* Consequential loss* Loss when driving with invalid driving licenseor under the influence of alcohol.* Loss due to war, civil war, etc.* Claims arising out of contractual liability.

* Use of vehicle otherwise than in accordancewith `limitations as to use (e.g. private carbeing used as a taxi)


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Liability Insurance

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