INSURANCE

Insurance is a means of protection from financial loss. It is a form of risk

management, primarily used to hedge against the risk of a contingent or uncertain
loss.
An entity which provides insurance is known as an insurer, insurance company,
insurance carrier or underwriter. A person or entity who buys insurance is known
as an insured or as a policyholder. The insurance transaction involves the insured
assuming a guaranteed and known relatively small loss in the form of payment to
the insurer in exchange for the insurer's promise to compensate the insured in the
event of a covered loss. The loss may or may not be financial, but it must be
reducible to financial terms, and usually involves something in which the insured
has an insurable interest established by ownership, possession, or pre-existing
relationship.
The insured receives a contract, called the insurance policy, which details the
conditions and circumstances under which the insurer will compensate the insured.
The amount of money charged by the insurer to the policyholder for the coverage
set forth in the insurance policy is called the premium. If the insured experiences a
loss which is potentially covered by the insurance policy, the insured submits a
claim to the insurer for processing by a claims adjuster. The insurer may hedge its
own risk by taking out reinsurance, whereby another insurance company agrees to
carry some of the risk, especially if the primary insurer deems the risk too large for
it to carry.
 COMMERCIAL BANK

A commercial bank is a type of bank that provides services such as accepting

deposits, making business loans, and offering basic investment products that is
operated as a business for profit.
It can also refer to a bank, or a division of a large bank, which deals with
corporations or large/middle-sized business to differentiate it from a retail
bank and an investment bank.

Origin of the term[edit]

See also: History of banking
The name bank derives from the Italian word banco "desk/bench", used during
the Italian Renaissance era by Florentine bankers, who used to carry out their
transactions on a desk covered by a green tablecloth.[1] However, traces of banking
activity can be found even in ancient times.
In the United States the term commercial bank was often used to distinguish it
from an investment bank due to differences in bank regulation. After the Great
Depression, through the Glass–Steagall Act, the U.S. Congress required that
commercial banks only engage in banking activities, whereas investment banks
were limited to capital market activities. This separation was mostly repealed in
1999 by the Gramm–Leach–Bliley Act.

Role[edit]
The general role of commercial banks is to provide financial services to general
public and business, ensuring economic and social stability and sustainable growth
of the economy.
In this respect, credit creation is the most significant function of commercial banks.
While sanctioning a loan to a customer, they do not provide cash to the borrower.
Instead, they open a deposit account from which the borrower can withdraw. In
other words, while sanctioning a loan, they automatically create deposits.
Primary functions[edit]

 Commercial banks accept various types of deposits from public especially from
its clients, including saving account deposits, recurring account deposits, and
 fixed deposits. These deposits are returned whenever the customer demands it
or after a certain time period.
 Commercial banks provide loans and advances of various forms, including
an overdraft facility, cash credit, bill discounting, money at call etc. They also
give demand and term loans to all types of clients against proper security. They
also act as trustees for wills of their customers etc.

Regulations[edit]
Main article: Bank regulation
In most countries commercial banks are heavily regulated and this is typically done
by a country's central bank. They will impose a number of conditions on the banks
that they regulate such as keeping bank reserves and to maintain minimum capital
requirements.
Services by product[edit]
Commercial banks generally provide a number of services to its clients, these can
be split into core banking services such as deposits and loans and other services
which are related to payment systems and other financial services.
Core products and services[edit]

 Accepting money on various types of Deposit accounts

 Lending money by overdraft, and loans both secured and unsecured.
 Providing transaction accounts
 Cash management
 Treasury management
 Private Equity financing
 Issuing Bank drafts and Bank cheques
 Processing payments via telegraphic transfer, EFTPOS, internet banking, or
other payment methods.
Other functions[edit]
Along with core products and services, commercial banks perform several
secondary functions. The secondary functions of commercial banks can be divided
into agency functions and utility functions.
Agency functions include:

 To collect and clear cheques, dividends and interest warrant

 To make payments of rent, insurance premium
 To deal in foreign exchange transactions
 To purchase and sell securities
 To act as trustee, attorney, correspondent and executor
 To accept tax proceeds and tax returns
Utility functions include:

 To provide safe deposit boxs to customers

 To provide money transfer facility
 To issue traveler's cheques
 To act as referees
 To accept various bills for payment: phone bills, gas bills, water bills
 To provide various cards such as credit cards and debit cards
 PROVISION REGARDING CONTITUTION OF BOD

A board of directors is a group of people who jointly supervise the activities of

an organization, which can be either a for-profit business, nonprofit organization,
or a government agency. Such a board's powers, duties, and responsibilities are
determined by government regulations (including the jurisdiction's corporations
law) and the organization's own constitution and bylaws. These authorities may
specify the number of members of the board, how they are to be chosen, and how
often they are to meet.

In an organization with voting members, the board is accountable to, and might be
subordinate to, the organization's full membership, which usually vote for the
members of the board. In a stock corporation, non-executive directors are voted for
by the shareholders, with the board having ultimate responsibility for the
management of the corporation. The board of directors appoints the chief executive
officer of the corporation and sets out the overall strategic direction. In
corporations with dispersed ownership, the identification and nomination of
directors (that shareholders vote for or against) are often done by the board itself,
leading to a high degree of self-perpetuation. In a non-stock corporation with no
general voting membership, the board is the supreme governing body of the
institution, and its members are sometimes chosen by the board itself.
Asset and liability management

Asset and liability management (often abbreviated ALM) is the practice of

managing financial risks that arise due to mismatches between
the assets and liabilities as part of an investment strategy in financial accounting.
ALM sits between risk management and strategic planning. It is focused on a long-
term perspective rather than mitigating immediate risks and is a process of
maximising assets to meet complex liabilities that may increase profitability.
ALM includes the allocation and management of assets, equity, interest rate and
credit risk management including risk overlays, and the calibration of company-
wide tools within these risk frameworks for optimisation and management in the
local regulatory and capital environment.
Often an ALM approach passively matches assets against liabilities (fully hedged)
and leaves surplus to be actively managed.
 CONCLUSION

The insurance sector has a vast potential not only because incomes are increasing
and assets are expanding but also because the volatility in the system is increasing.
In a sense, we are living in a more risky world. Trade is becoming increasingly
global. Technologies are changing and getting replaced at a faster rate. In this
more uncertain world, for which enough evidence is available in the recent period,
insurance will have an important role to play in reducing the risk burden
individuals and businesses have to bear. In the emerging scenario, the insurance
industry must pay attention to (a) product innovation, (b) appropriate pricing, and
(c) speedy settlement of claims. The approach to insurance must be in tune with
the changing times.

The mission of the insurance sector in India should be to extend the

insurance coverage over a larger section of the population and a wider segment of
activities. The three guiding principles of the industry must be to charge premium
no higher than what is warranted by strict actuarial considerations, to invest the
funds for obtaining maximum yield for the policy holders consistent with the
safety of capital and to render efficient and prompt service to policy holders. With
imaginative corporate planning and an abiding commitment to improved service,
the mission of widening the spread of insurance can be achieved. As I said at the
beginning, you who are graduating today have an important role in fulfilling this
mission.