Ans.

1
The contract of insurance is a contract in which an insurer undertakes to indemnify an
insured against loss caused by a risk in exchange for a premium. In addition to assembly the
six traditional traits of coverage, the coverage settlement is specific in that it is likewise issue
to 4 specific elements in industrial contracts. Utmost Good Faith, Indemnity, Insurable
Interest and its derivatives Subrogation and contribution, additionally proximal, are
corollaries cause. Insurance contracts are similar to most different legal contracts; however,
sure options of insurance contracts differentiate them from most other legal contracts. The
peculiar features of the insurance contract are as follows:
a) Aleatory: Insurance contracts are said to be aleatory i.e. the values given up by the parties
are unstable. The insurer may pay a large claim in return for a small quantum or he may not
pay at all. In either case the change of values is not equal. It isn't true to say that an insured
will not get anything if there's no claim but what he does admit is freedom from solicitude
whether he sustain a loss or not. The peace of mind and freedom from solicitude are of far
lesser worth than the quantum of petty decoration paid. The performance of one or each party
is conditional the incidence of a happening that will ne'er materialize. A homeowners'
insurance contract guarantees to pay if there's injury by fire, for instance; the insurance
carrier doesn't get to do something unless the damage occurs.
b) Conditional: The Insurer isn't obliged to perform if the conditions set forth in the contract
aren't met. The Insured does not promise to meet the conditions but he cannot force the
Insurer to perform unless he does so. An illustration of this is the condition in an insurance
policy regarding announcement of claims that the Insurer be informed of a loss within a
quested time period. The Insured is not impelled to do so but the Insurer can refuse to keep
his pledge if the Insured doesn't misbehave with this condition. Because of this tentative
nature of an Insurance contract the Insured must be completely apprehensive of the
conditions of the policy if he's to admit its protection. Before the insurance contract is
activated, sure conditions should be met.
There are 2 styles of conditions: 1) conditions precedent 2) conditions subsequent. A
condition precedent is a condition that has got to be consummated to activate the contract. In
Associate in insurance contract, the conditions precedent is the payment of the premium and
a coated loss. Conditions ulterior are acts or duties that must be adhered to so as to receive
the advantages of the policy. an example of conditions subsequent is that the "Duties when a
Loss" section of the policy. To receive the benefits of the policy, the insured must adjust to
the written agreement requirements.
c) Unilateral: Only the Insurer makes a pledge to do commodity, the ensured on the other
hand after payment of decoration does not make any pledges, though he must misbehave with
the conditions if he wants the insurer to perform. He doesn't promise to meet the conditions;
thus, Insurance contracts are said to be unilateral as in discrepancy unilateral/single-sided
contracts in which both parties make enforceable pledges and either party can force the other
to perform or pay damages for not performing. Each party to the insurance contract virtually
whole considers the honesty of the opposite party. The non-depository financial institution
depends on the honesty of the insured in providing underwriting information; the insured
relies on the honesty of the insurer that they're going to pay once a coated loss occurs.
 d) Personal: Insurance contracts are particular meaning thereby that it is the loss to person
and not to the property itself that is ensured. You may say your auto is ensured but actually
its you who's ensured against fiscal loss caused by commodity passing to your auto.
Therefore, when a carg is vended the Insurance doesn't automatically pass on to the new
proprietor. It may be assigned but only with the concurrence of the Insurer because it's the
people who are insured and they prompt the hazard and Insurer are concerned as important
about the person as with the property which may be subject matter of Insurance.
e) Adhesion: The Insurance contracts are contracts of Adhesion. Utmost marketable
contracts are formulated after logrolling between the parties to the contract but Insurance
contracts are created by the insurers alone and they're presented to the ensured and he can
take them as they're or leave them. This fact impacts the way courts handle controversies
regarding contracts of Insurance. The rule is that if there is a nebulous clause also it'll be
interpreted in favour of the Ensured on the supposition that since the Insurer has articulated
the contract he should know what he wants to say and write it down easily. The insurance
contract is obtainable to the insured on an "as is," "take it or leave it" basis. The insured
cannot talk terms the policy terms, they're written only by the insurer. This insurance contract
feature is why coverage is taken in its broadest sense and exclusions are to be narrowly
applied. Any ambiguity is found in favour of the insured.
In general, an insurance contract must meet four conditions in order to be legally valid: it
must be for a legal purpose; the parties must have a legal capacity to contract; there must be
evidence of a meeting of minds between the insurer and the insured; and there must be a
payment or consideration.
Ans. 2
As risk is present in every part of our life, we cannot avoid it but we can minimise its impact
by taking insurance. The contract of insurance is a agreement wherein an insurer undertakes
to indemnify an insured towards loss as a result of a hazard in exchange for a premium.
There are 2 broad styles of insurance:
1. Life insurance
2. General Insurance

1. Life insurance: It is the most common insurance taken by people. It is a contract

provides money compensation just in case of death or disability. Some life insurance
policies even offer financial compensation once retirement or an exact amount of
time. Life insurance, thus, helps you secure one’s family’s financial security even in
their absence.

2. General insurance: It is a contract that offers financial compensation on any loss

excluding death. It insures everything aside from life. A general insurance
compensates one for financial loss because of liabilities involving one’s house, car,
bike, health, travel, and so forth the insurance firm to pay a add assured to hide
damages to the vehicle, medical treatments to cure health issues, losses due to larceny
or fire, or maybe financial problems throughout travel. Merely put, a general
 insurance offers financial protection for all of your assets against loss, damage, theft,
and alternative liabilities. it's different from life insurance.

Nowadays, insurance is available for each reasonably every risk. The most common
General Insurance are as follows:
A. Health insurance: This type of general insurance covers the value of medical
automotive. It pays for or reimburses the quantity you pay towards the treatment of
any injury or illness. It always covers:
 Medical care
 The treatment of essential sicknesses
 Medical bills before or post hospitalisation
 Day care procedures like Cataract operations

B. Motor Insurance: Motor insurance is for one’s car or bike just like what life
insurance is for our health. it's a general insurance cover that gives money protection
to the vehicles from loss due to accidents, harm, theft, fireplace or natural calamities.
Motor Insurance Contracts are situation to the primary ideas relevant to assets and
legal responsibility coverage in general. The proprietor of the car have to be a
registered proprietor to the car wherein she or he stands to gain with the aid of using
the protection of the car, right, hobby or freedom from legal responsibility and stands
to lose with the aid of using any loss , damage , damage or introduction of legal
responsibility.

C. Travel insurance: A travel insurance is a type of insurance in which one

compensates or pays for any money liabilities arising out of health/medical and non-
medical emergencies throughout the travel abroad or at intervals the country.

 Single Trip Policy: It covers one during a visit that lasts below a hundred and
eighty days.
 Annual Multi Trip: It covers one for many journeys taking within a year.

D. Home Insurance: Home insurance may be a cover that pays or compensates one for
damage to one’s home because of natural calamities, synthetic disasters or alternative
threats. It covers liabilities due to fire, earthquakes, burglary, theft, natural flood and
sabotage. It not solely offers money protection to the home, however also takes care
of the property within the property. This way that it covers each harm to one's
belongings and legal responsibility for any accidents and belongings harm as a result
of the proprietor or individuals of his/her own circle of relatives to different people. It
might also encompass harm as a result of family pets. The fee of homeowner's
coverage frequently relies upon on what it'd fee to update the residence and which
extra endorsements or riders are connected to the coverage. The coverage is a prison
settlement among the coverage organization and the named insured. It is a settlement
 of indemnity and could positioned the insured lower back to the kingdom he/she
changed into in previous to the loss.

E. Fire insurance: Fire insurance pays or compensates for the damages caused to one’s
property or product due to fire. It covers the replacement, reconstruction or repair
expenses of the insured property likewise because the encompassing structures. It also
covers the damages caused to a third-party property due to fire. In addition, it takes
care of the expenses of these whose keep has been affected because of fire. Certain
types of belongings, inclusive of accounting records, currency, deeds, and securities,
are regularly excluded from fire-coverage insurance or are declared uninsurable. Loss
from such reasons as war, invasion, insurrection, revolution, theft, and forget through
the insured also are typically excluded.

F. Crop Insurance: Crop insurance is a kind of safety coverage that covers agricultural
producers in opposition to surprising lack of projected crop yields or earnings from
produce income at marketplace. It is split into categories: crop-yield and crop-
revenue. Crop-yield coverage protects the anticipated sales because of surprising
yields, that's the quantity of a crop’s harvest. Crop-revenue coverage covers
anticipated sales from loss due to marketplace fluctuations of crop promoting prices.
Both varieties of coverage are a way to resource in catastrophe healing for
manufacturers because of surprising events. Causal elements covered under crop-yield
coverage ought to encompass natural failures like fire, drought, or flooding with the
aim of shielding manufacturers in opposition to yield or whole crop loss.

Ans. 3 (A)
Risk management is the continuing process to identify, analyse, evaluate, and treat loss
exposures and monitor risk control and financial resources to mitigate the adverse effects of
loss. The more is the possibility of occurrence of an event, the less exposure to the risk is
involved since the occurrence can prevented or mitigated; at the earliest and the minimum,
expenses can be estimated and budgeted. Therefore, this process make loss more predictable
which is at the core of every insurance programs.
The aim of risk management is to make an economical and efficient risk program is control
over the risk management functions with assurance that actions performed are desirable,
necessary, and effective to reduce the overall cost of operational risk. A risk management
program is always made and evaluated around the cost of risk.
The cost of Risk is comprised of: Retained Losses - Deductibles, Retention or Exclusions,
Net Insurance Proceeds, Cost for Loss Control Activities, Claim Management Expense and
Administrative Cost to Manage the Program.
The main characteristics of the risk management are as follows:
 Risk management is a continuous process. it is not one thing that gets checked off a
to-do list. Rather, it's never-ending activity. Having a risk management method means
your organization is aware of and understands the chances to that you're exposed. The
implementation of risk management needs a structure capable of reviewing and
 providing feedback on the effectiveness of the risk management procedures to
confirm that everyone the risks are recognized efficiently.

 It is specially undertaken for pure loss circumstances. Pure risk could be a category of
risk that can't be controlled and has 2 outcomes: complete loss or no loss at all. There
aren't any opportunities for gain or profit once pure risk is involved. Pure risk is
usually current in things akin to natural disasters, fires, or death. These situations can't
be foretold associated are on the far side anyone' control. Pure risk is additionally
stated as absolute risk.

 It needs to be followed by a step-by step process. it is a 4-step process which includes,

identifying loss exposures, analysing loss exposure, selecting right techniques and
implementing and monitoring the risk management programme.

 The potential loss must be measurable. Risk—or the chance of a loss—can be

measured victimisation applied math ways that are historical predictors of assets risk
and volatility.

 Historical data of events should be available which can be used to analyse the further
course of event happening in the future. Ordinarily used risk management techniques
embrace standard deviation, Sharpe ratio, and beta.

 Proposer should have an insurable interest in the event of risk occurrence. The term
“insurable interest” refers to a form of investment that protects against loss. once the
harm or loss of an item, event, or action can lead to monetary loss or alternative
problem, someone or entity has a stake in it. someone or entity with an insured
interest would purchase an insurance to cover the person, thing, or event within the
issue. If one thing happens to the asset, akin to it being destroyed or lost, the coverage
would cut back the chance of losses.
The benefits of a risk program should result in overall savings to the corporate entity when
evaluating these components in the aggregate.

Ans. 3 B)
Management of the risk is a standardised process and informal with no defined processes or
method. In formal way, it is a 4-step process which includes, identifying loss exposures,
analysing loss exposure, selecting right techniques and implementing and monitoring the risk
management programme.
The first step of risk management is identifying loss exposures which includes all the major
and the minor risk exposures to the property which makes it vulnerable to the property.
The different types of Loss Exposures within the province of risk management which can
be identifies are as follows:
A. Property loss exposure: Property loss exposures are associated with both real
property such as buildings and personal property such as automobiles and the contents
of a building. A property faces exposure to the losses because of accidents or
catastrophes which can be floods or hurricanes. Property owners face the possibility
of both direct and indirect (consequential) losses. If a car/ property is damaged in a
collision, the direct loss is the cost of repairs. Consequential or also called indirect
losses are non-physical losses such as loss of business. For example, a business might
be losing its own clients because of street being closed would be a consequential loss.
These kinds of losses include the time and effort required to arrange for repairs, the
loss of use of the car or warehouse while repairs are being made, and the additional
cost of replacement facilities or lost productivity.

B. Business Income loss exposure: Reduction in Revenue or Increase in Expense; can

be due to loss of Property or loss due to Civil or Statutory fines and judgments, or by
loss of Key Personnel.

C. Liability loss exposure: Under most legal systems, a party can be held responsible
for the financial consequences of causing damage to others. One is exposed to the
possibility of liability loss by having to defend against a lawsuit when he or she has in
some way hurt other people. In such cases when the responsible party might become
legally obligated to pay for the loss/injury to a persons or damage to any property.
Liability risk may occur due to several reasons like because of catastrophic loss
exposure or in case of accidental loss exposure. Product liability is an apt example: a
business is responsible for compensating people who have suffered or are injured due
to the supplying a defective product, which causes damage to an individual or another
business.

D. Human Resource /Personnel loss exposure: Because the financial consequences of

all risk exposures are ultimately borne by people, it could be said that all exposures
are personal. Some risks, however, have a more direct impact on people’s individual
lives. Exposure to premature death, sickness, disability, unemployment, and
dependent old age are examples of personal loss exposures when considered at the
individual/personal level. An organization might have to experience loss from these
events when any of these events affect employees. For example, social support
programs and employer-sponsored health or pension plan costs can be affected by
natural or man-made changes. Through Death, Disability, or Retirement Key
Personnel or catastrophic loss to many employees.

E. Crime loss Exposure: This type of loss exposure can result from employee
dishonesty (infidelity) or due to the losses such as burglary, robbery, or forgery done
by the outsiders. It may involve money, securities or similar types of property or
merchandise. It can also include threat of violence or actual violence, or they may
take place unfamiliar/unnoticed until it is discovered sometime after its having
 occurred. Often, the most serious losses are experienced when there is collusion
between an employee and an outsider.

F. Employee-Benefit Loss Exposure: This loss exposure happens when the employee
mistakenly or deliberately makes an error or omission in the administration of an
employee benefit program. It can arise due to the failure to comply with government
regulations and failure to pay promised benefits. It arises when any fiducial
responsibility is violated. The coverage of this loss exposure can be done by taking a
fiduciary liability insurance policy.