The Japanese eat very little fat and suffer fewer

heart attacks than the British or Americans.

On the other hand, the French eat a lot of fat
and also suffer fewer heart attacks than the
British or Americans.

The Chinese drink very little red wine and

suffer fewer heart attacks than the British or
Americans.
The Italians drink excessive amounts of red
wine and also suffer fewer heart attacks than
the British or Americans.

Conclusion: Eat & drink what you like.

Y
³ °
 
 
°



G
 Insurance in broad terms may be
described as a method of sharing
financial losses of few from a common
fund who are equally exposed to the
same loss.

V
 Example

 Œay 1000 motor cars valued @ 300000/-

300000/- are
observed over a period of five years. On an
average say per year two are total loss by
accident. Then the total annual loss would
be Rs.600000. If the loss is to shared by all
the thousand owners then they have to
contribute Rs.600/-
Rs.600/-
 The loss experience will be established by
taking the past experience, geographical
area in which the vehicles are used and
density of traffic.

w
 PRINCIPLEΠOF INΠRANCE

A.Rate of contribution or premium

B.The degree of hazard it is exposed to.
C.Classification of various types of properties.

h



 
  
   

[ Œubject matter of insurance.

[ The PERIL (risk)
[ The financial loss.

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[ !"#$ !" 
%&'

[#$
 %# !() "
*#"'

[""##"##&$"&$!
"%"&'

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  +

RIŒ
:- can be defined as the unforeseen element

RIŒ
:-
which may impede your progress in achieving the
objective.

Î
In insurance jargon they term RIŒ
as an
uncertainty regarding loss or what is termed as
a FORT ITO Πrisk.

Concept of chance and risk can be expressed

in a single mathematical term called
³Probability´.

ü
An example of impossibility can be quoted say
the 9/11 incident where insurance companies
were washed out.

Hyderabadis never in their dreams thought of

taking cover for flood. When the encroached
drains could not contain rains for 2 days, the
resultant floods had washed away score of
vehicles, property etc.,

Œo, Risk is inherent in human existence. Human

life and material possessions are constantly
exposed to loss or damage due to the
mechanizations of fortuitous circumstances
Y,
A RIŒ
OF TRADE is a loss due to a
specified event say fire, storms burglary etc.,
These are classified and their frequency in
already assessed.

A TRADE RIŒ
is a risk of loss inherent in the

trade itself. Broadly speaking we can say loss
of profit as a result of change due to market
collapse, political factors etc.,

Risk of trade is insurable as it is already

assessed,
Trade risk is yet to be classified and hence
majority of these are not covered. YY
ÿATHEÿETICAL VAL E OF RIŒ

L/V x 100 where
L= total losses reported
V=refers to the total values
the product of the above analysis is called
è
   

 

Œo premium rates depend upon past loss
experience by systematically classifying the
risks. Which are homogenous in characters
Example:-- ÿotor vehicle.
Example:

YG
 ITC
RICE INΠRANCE ATFL
EÿÿŒONŒ

YV
   -
Xeneral Insurance is divided into three
categories::
categories






  èè


Yw
    

FIRE INŒ RANCE B ŒINEŒŒ:

ŒINEŒŒ:
Loss due to FIRE, LIXHTININX, EXPLOŒION,
IÿPLOŒION,, RIOTŒ & ŒTRI
EŒ, IÿPACT BY
RAIL, AIRCRAFT DAÿAXE, EARTH Q A
E,
FLOOD, ŒTORÿ, TEÿPEŒT, TORNADO,
TYPHOON, CYCLONEŒ & LAND ŒLIDE
ŒLIDE..

Yh
ÿARINE INŒ RANCE B ŒINEŒŒ: ŒINEŒŒ:
This is the oldest branch of Insurance comprising
H LL & CARXO
CARXO..

Hull Insurance deals the Loss associated with

floating crafts, Cargo insurance provides cover
in respect of loss or damage to goods during
transit by rail, road, sea or air
air..

Yp
ÿIŒCELLENO Œ INŒ RANCE B ŒINEŒŒ:
ŒINEŒŒ:

ÿainly includes the motor business, accident,

aviation , engineering and guarantee insurances
insurances..

Y·
 
In between the insured and insurer

INΠRED:-
RED:- Party effecting insurance,
(Individual, Company, Firm,
Corporate body etc., with
legal status)

INΠRER:-
RER:- Party granting the protection
under an insurance policy.

Policy:--
Policy: Is the evidence of contract
YÎ
 Insurance contracts are governed by Indian
contract act 1872 which states that to be
legally valid following elements should be in
order.

j
 
 

 

j


 
 


   

Yü
 
.  -
The greatest degree of good faith by law, is
expected from the proposer, that is the main
reason why good faith in case of Insurance
contracts becomes TÿOŒT good faith faith..

It is the duty of the proposer to disclose all

material facts not only already known but
also extends to material facts which he ought
to know.
know.

G,
Examples of material facts
facts::

FIRE: Construction of building, type of

FIRE:
occupancy, nature of good stored etc
etc..

ÿARINE: method of packing, inherent vice

ÿARINE:
etc..
etc

GY
 /
  

In nutshell if property is the subject matter of

insurance then the subject matter of
insurance contract is the insured¶s pecuniary
interest in that property.
property.

LEXAL RIXHT TO INΠRE IΠTHE

INŒ RABLE INTEREŒT
INTEREŒT.. Insurable Interest is
required to support the contract of Insurance
in order to make it legal, other wise the
contract is null and void
void..
GG
 0 /
     -
 -

1. By ownership
2. By Law
3. By Contract
4. By Legal liability
5. Interest of a Person in Life

GV
 0!""#"*-

For Fire or ÿiscellaneous policy the

insurable interest must exist at the time of
taking the policy and at the time of the loss
loss..

For ÿarine policy an insurable interest need

not exist at the time of policy taking
taking..

Gw
 WARRANTY:

means an assurance by the assured, that he

will not do some particular things or will fulfill
any conditions that are laid in advance.

WARRANTIEΠare further classified as

express
or implied

Gh
  .

Assignment means transfer of rights and
liabilities of an insured to another person
who had acquired insurable interest in the
property insured
insured..

Fire policies have to be assigned with the

consent of the insurers, where as ÿarine
cargo policies can be freely assigned
without the knowledge or consent of the
insurer.. This is because the ultimate buyer is
insurer
not known at the time of taking the cover
cover..

Gp
ÿarine hull policies cannot be assigned
assigned..
 
 1-

Can be defined as ³ compensation for loss or

injury sustained´ or ³ to make good the loss
or damage´ .

G·

!&$"&"$"-

1. Cash payment
2. Repair
3. Replacement
4. Reinstatement..
Reinstatement

GÎ

& $ "&"
"&"--

Buildings:
Buildings:
the cost of reinstating or repairing the
damaged portion, is assessed, and from that
an appropriate allowance is made towards
depreciation, depending on the age and
condition of the building
building.. Allowances are
made for improvement due to repairs
repairs..

Gü

!"-

Here the method of indemnity is supposed

to be the market value for a similar machine
of same age and model as determined on
the date of loss
loss.. In practice this is difficult so
the measure of indemnity becomes the
replacement value less depreciation
depreciation.. In case
of repairs the cost of repairing is borne by
the insured
insured.. However replacement of parts
is subject to an allowance towards
depreciation..
depreciation

V,
!#& %&
%&--

Consideration similar to those applicable for

machines..
machines

Œtocks:
Œtocks:
In case of wholesalers or retailers, the
measure of indemnity is the price at which
he will be able to replace his goods
goods.. The
element of profit will not be taken care of
of..

VY
 ""

Fire insurance policies may be issued on

REINŒTATEÿENT value basis basis.. Although the
insured gets new property which is in similar
condition and of same kind, to protect the basic
of idea of indemnity the property will not be of
superior nature
nature..

VG

-

If the vehicle is a total loss, the sum insured

or the value of the vehicle, which ever is
less is paid
paid.. If the vehicle is damaged the
cost of repairs or paid, if parts are replaced
the cost of new part will be subjected to
depreciation.. In all the cases age and
depreciation
general maintenance of the vehicle are
considered..
considered

VV

   

In this branch what is provided as indemnity

becomes commercial indemnity because,
Almost all the policies issued are agreed
value policies
policies..

To be precise the insured and the insurer

agree that the sum insured is the value of
the property insured
insured.. The agreed amount is
then payable in case of total loss, with no
attachments what so ever
ever.. Vw



 

ÿiscellaneous Insurance
Insurance:: the insurances of
property, liability and insurance are contracts of
strict indemnity.
indemnity. Normally books of accounts
are referred when settling claims in this branch
branch..
( ex
ex.. fidelity guarantee insurance)

Vh
 nder insurance
insurance:: Property insurances are
generally subject to the condition of
average, and if there has been under
insurance, only that portion of the loss is
payable..
payable
Ex..value of property
Ex : Rs
Rs..20000
Œum insured : Rs
Rs..15000
Loss assessed : Rs
Rs..10000
Amount payable will then be be::
15000 x 10000 = 7500
20000
The insured is then considered as his own
insurer for the difference of the liability
liability..
Vp
 2  

In some policies an EXCEŒŒ or FRACHIŒE is

incorporated, which means that a certain
circumstances a part of the loss may have to
be borne by the insured
insured..

V·
 
.

Property which is saved from loss or damage

and still has some commercial value is called
salvage..
salvage

VÎ
 /. 

may be defined as the transfer of rights and

remedies of the insured to the insurer who has
indemnified the insured in respect of the loss
loss..

Vü
  / -
An insured may have taken many policies on
the same subject matter
matter.. The principal of
contribution would lead to a situation in which
the insured would be able to recover his loss
from any one insurer, who then will have to
effect proportionate recoveries from other
insurers concerned
concerned.. Normally the insurers
seek to control additional insurances at the
proposal stage itself
itself..
Remember at no cost an infringement to the
principle of indemnity is accepted
accepted..
The principal of contribution does not apply to
personal accident policies
policies.. w,
 2
 

ÿeans the DIRECT, DOÿINANT or effective

cause of which the loss is the natural
consequence.. It is the cause which is most
consequence
closely connected with the loss, not necessarily
in time but in efficiency
efficiency..

Although the doctrine is clear in theory, it is

difficult to determine the proximate cause, as a
clear demarcation should be maintained
between insured peril, excepted peril and un
insured peril.
wY
Example:
Example:
An insured sustained an accident while
hunting.. Due to shock and weakness, he was
hunting
unable to walk and whilst lying on wet ground,
he contracted cold which developed into
pneumonia causing death ultimately
ultimately..

The proximate cause was considered to be the

accident and not the pneumonia, the disease,
which was only a remote cause
cause.. The claim was
payable under personal accident policy
policy..

wG

   

A. cargo insurance
B. hull insurance

Cargo insurance provides insurance cover in

respect of loss of or damage to goods during
transit by RAIL, ROAD, ŒEA, AIR OR
REXIŒTERED POŒTPOŒT..

wV
TYPE OF CONTRACT REŒPONŒIBILITY

FREE ON BOARD ŒELLER IŒ REŒPONŒIBLE TILL THE

(F
(F..O.B) XOODΠARE PLACED ONBOARD
ONBOARD..

COŒT & FREIXHT THE B YERŒ REŒPONŒIBILITY ŒTARTŒ

(C & F) FROÿ THE TIÿE THE XOODŒ ARE
PLACED ONBOARD

COŒT INŒ RANCE THE ŒELLER IŒ REŒPONŒIBLE FOR

& FREIXHT (C
(C..I.F) ARRANXINX INŒ RANCE WHICH IŒ
INCL DED IN THE COŒT OF THE XOODŒ
XOODŒ..

ww
A further security in the form of insurance policy
is also required by the bank to protect its
interest in case of goods suffering loss or
damage while in transit, in which case the
importer may not make the payment
payment..

The terms and conditions of the insurance are

specified in the letter of CREDIT
CREDIT..

wh
The RIŒ
Πcovered in a marine policy falls
under three categories

‡ÿARINE PERILŒ

‡EXTRANEO Œ PERILŒ

‡WAR & ŒTIR
EŒ, RIOTŒ & CIVIL

COÿÿOTION RIŒ
Œ (Œ(Œ..R.C.C)

wp
ÿARINE PERILŒ : are the perils associated
with rivers, seas
seas..

EXTRANEO Œ PERILŒ PERILŒ:: means not relevant

relevant..
Ex:: theft, pilferage non delivery are some of the
Ex
extraneous perils
perils..

Loss due to WAR, ŒTRI
EΠand CIVIL

COÿÿOTIONŒ (ŒRCC) can also be covered
under a ÿarine policy
policy..

The consequences of these perils may result in

total loss
loss..

w·
TOTAL LOŒŒ IŒ DIVIDED INTO

ACT AL

OR

CONŒTR CTIVE .

wÎ
  



This is once again divided into

PARTIC LAR AVERAXE
OR
XENERAL AVERAXE

In marine insurance the word average is

synonymous with LOŒŒ.

wü
  
 .

A particular average loss is a partial loss of

subject matter insured.
insured. Deductions are as per
excess and franchise clauses
clauses..

h,
 Example: If fire is discovered onboard a
Example:
laden vessel, the following items make up
the general average loss
loss::

1. Cost of damage caused by water or any

other methods used to extinguish the fire
2. Cost of repair if the ships structure has to be
altered to gain access to fire
fire..
3. Value of any cargo damaged or jettisoned
during efforts to control fire
4. Cost of using the ships equipment and the
wages of the crew during the general
average incident
incident..

hY
Example: A vessel
Example: runs aground in a
dangerous position

1. Cost of tugs to refloat the vessel including

salvage award
2. Cost of running ships equipment while
refloating
3. Cost of discharging cargo into lighters and
reloading into vessel
vessel..
4. cost of pollution removal if the cargo is
jettisoned and the value of the cargo lost
lost..
5. stores consumed and wages paid to crew
during the general average incident
incident..

hG
ŒALVAXE CHARXEŒ:
CHARXEŒ:

With ÿarine cargo policies, the term is

often referred to as salvage loss
loss.. Ex.
Ex. Œay
goods insured are damaged enroute, and
the goods are such that they deteriorate
incase of prolonged storage or by they time
they reach their destination
destination.. It is then
prudent and sensible to dispose of the
same at an early date for the best price
obtainable.. The difference between the
obtainable
insured value and the net proceeds of the
sale becomes the salvage value
value..
hV
Œ E & LABO R CHARXEŒ
CHARXEŒ::

These are expenses incurred by the insured

or his agents in order to avert minimize a
loss covered by the policy
policy.. Example of such
charges are the landing cost at intermediate
ports , ware housing , reconditioning and re
forwarding.. It should be noted that the
forwarding
insured should always THIN
AND ACT in
such manner as a NINΠRED would act act..

hw
   .
 34 3/4534
)6""%"7& 34-
)All risks of loss or damage to the subject
matter insured except those specifically
excluded. The term ³all risks´ is not to be
construed as embracing loss or damage,
which is inevitable. The loss or damage, in
order to be recoverable, must have occurred
fortuitously.
b)Xeneral average and salvage charges
incurred to avoid loss from any cause or
causes except those excluded.
c)Liability under ³Both to Blame Collision´
clause of the bill of lading.
hh
d) Charges reasonably and properly incurred to
avert or minimize an insured loss and to
preserve and pursue recovery rights are also
covered (as per Duty of Assured Clause).

e) In the event of termination of the transit

resulting from a risk covered. EXTRA
CHARXEΠincurred in unloading, storing and
forwarding the insured cargo to destination
(as per the Forwarding Charges Clause).

hp
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 2
 
 Loss, damage or expenses attributable to willful misconduct of
the assured
 Ordinary or inevitable losses
 Loss, damage or expense caused by inherent vice or nature of
the subject matter insured
 Loss/damage due to insufficient, unsuitable or defective packing
(including stowage)
 Loss/damage or expenses proximately caused by delay even if
the delay is caused by a peril insured against
 Loss damage or expenses arising from insolvency of the
owners, managers, charterers or operators of the vessel.
 Loss damage due to un seaworthiness of the vessel or craft,
container, lift van employed for carrying the insured matter.
 Wars, strikes and civil commotions unless covered under
separate endorsements.

pY
   5 
 1

Is a mutual association operated on behalf of its

members (ship owners) by a board of Directors
appointed by and from the members of the club.

pG
? 



pV