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INSURANCE

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Insurance, in law and economics, is a form of risk

management primarily used to hedge against the risk of acontingent loss. Insurance is defined as the equitable transfer

of the risk of a loss, from one entity to another, in exchange

for a premium, and can be thought of as a guaranteed small

loss to prevent a large, possibly devastating loss. An insurer is

a company selling the insurance; an insured is the person or

entity buying the insurance. The insurance rate is a factor

used to determine the amount to be charged for a certain

amount of insurance coverage, called the premium. Risk

management, the practice of appraising and controlling risk,has evolved as a discrete field of study and practice.

INSURANCE

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Categories of Insurance

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MISSION OF IRDATo protect the interests of the policyholders, to regulate,

promote and ensure orderly growth of the insuranceindustry and for matters connected therewith or incidental

thereto.

Composition of Authority under IRDA Act, 1999

As per the section 4 of IRDA Act' 1999, Insurance Regulatory and

Development Authority (IRDA, which was constituted by an act of

parliament) specify the composition of Authority

The Authority is a ten member team consisting of

(a) a Chairman;

(b) five whole-time members;

(c) four part-time members,

(all appointed by the Government of India)

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The Insurance Regulatory and

Development Authority (IRDA)

Powers, Duties & Functions of IRDA

protection of the interests of the policy holders in matters concerningassigning of policy, nomination by policy holders, insurable interest,settlement of insurance claim

regulating investment of funds by insurance companies;specifying the form and manner in which books of account shall bemaintained and statement of accounts shall be rendered by insurers and

other insurance intermediaries;

IRDA was set up as an independent regulatory authority,IRDA has been framing regulations and registering the private sector

insurance companies.

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control and regulation of the rates, advantages, terms and conditionsthat may be offered by insurers in respect of general insurancebusiness

specifying requisite qualifications, code of conduct and practical

training for intermediary or insurance intermediaries and agents;promoting and regulating professional organizations connected

with the insurance and re-insurance business;

calling for information from, undertaking inspection of, conducting enquiriesand investigations including audit of the insurers, intermediaries, insurance

intermediaries and other organisations connected with the insurance business;

promoting efficiency in the conduct of insurance business;

specifying the percentage of life insurance business and generalinsurance business to be undertaken by the insurer in the rural or social

sector.

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Insurers' business model

Underwriting and investing

The business model can be reduced to a simpleequation: Profit = earned premium + investment income

- incurred loss - underwriting expenses.Insurers make money in two ways: (1) throughunderwriting, the process by which insurers select therisks to insure and decide how much in premiums to

charge for accepting those risks and (2) by investing thepremiums they collect from insured parties

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Premium payment options

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Global insurance industry

Life insurance premium written in 2008

Global insurance premiums grew by 11% in 2008(or 3.3% in real terms) to reach $4.1 trillion. The

macro-economic environment wascharacterised by slower economic growth in 2008 and rising inflation. Profitability improved in lifeinsurance and fell slighlty in thenon-life sector during the year.

Non-life insurance premium written in 2008

Life insurance premiums grew by 12.6%, accelerating in the advanced economies with theexception of Japan and Continental Europe. Non-life insurance premiums grew by 7.6% during theyear.

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Criticism of insurance companies

Reluctance of insurance companies to take on high-risk cases (e.g.

houses in areas subject to flooding, or young drivers) runs counter tothe principle of insurance

Other criticisms include:

Insurance policies contain too many exclusion clauses. For example, some house

insurance policies do not cover damage to garden walls]

Many insurance companies now use call centres and staff attempt to answer questionsby reading from a script] It is difficult to speak to anybody with non expert knowledgeWhile policyholders find their premium payments decrease when dealing withcompanies who sacrifice the use of trained insurance agents, they also risk greater financial loss due to inadequate coverage protection.

Those companies who invest in educated insurance agents provide a valued service tothe community. Policyholders who work with knowledgeable insurance agents are morelikely to identify needs, evaluate options, purchase sufficient insurance protection, andminimize the risk of heavy financial loss for themselves and their family.

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Insurance

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Latest news in insurance sector

1) Bajaj Allianz Life policies for women

2) Max new york life insurance joins hand

with city co-operative bank

3) Life insurance sectors premium

income fall 11% acc. To IRDA report

4) IDBI Fortis life insurance

launches Homesurance protection

plan

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29586239-Insurance