MODULE-3

INSURANCE CONTRACT
Insurance Contract-Meaning
The insurance contract or agreement is a contract whereby the insurer promises to pay
benefits to the insured or on their behalf to a third party if certain defined events occur. Subject
to the "fortuity principle", the event must be uncertain .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.
Elements:
 Offer and acceptance
 Consideration
 Legal purpose
 Competent parties
Insurance offers support to the policyholder and helps to reduce the uncertainties in the
business or in human lives. With the help of a policy, the insured party is protected against future
hazards, vulnerabilities and accidents.
Essentials of Insurance contract
1. Agreement- Insurance is an agreement between two parties
2. Free consent- It is the result of mutual trust of both the parties
3. Competent to contract- A competent person is one someone who is of legal age
4. Lawful objects- It should not be against public policy
5. Lawful consideration- Anything of value promised by made by one to another
6. Compliance with Legal formalities- Accept rules and regulations
Principles of Insurance Contract
1. Utmost Good faith
2. Insurable Interest
3. Proximate cause
4. Subrogation
5. Indemnity
6. Contribution
7. Loss mitigation
8. Disclosure of all relevant information

1. Utmost good faith

It implies that the insurer and the insured must act in good faith and disclose all
material facts concerning the subject matter of insurance. The insurer and the insured must
provide clear and concise information regarding the terms and conditions of the contract.
2. Insurable interest
 The insured must have an insurable interest in the subject matter of the contract.
Insurable interest means monetary interest. No person can enter in to a valid contract of
insurance unless he has insurable interest in the subject matter of interest.
3. Proximate cause
The principle of proximate cause is the cause that is primary to the occurred event.
The proximate cause or legal cause is an underlying cause of an accident. For example, if
a truck driver swerves and hits a car, the driver is the actual cause of the accident. But if
they moved to avoid a bicyclist riding on the road, the bicyclist unsafe driving might be
the proximate cause
4. Indemnity
All insurance contracts, except life and personal accident insurance are based on the
principle of indemnity. It means that the insured will be paid only the actual amount of
loss or the amount of policy whichever is less. Indemnity is the guarantee to restore the
insured to the to the position he or she was in before the uncertain incident that caused a
loss to the insured
5. Subrogation
According to this principle, when the insurer pays compensation to the insured for
loss, the insurer will get all the rights of the insured in respect of the damaged property
and against a third party who is responsible for the loss.
6. Contribution
The principle of contribution applies to all double insurance contracts. In other
words, each insurer is bound to contribute to the loss of the insured in proportion to the
policy amount. Contribution allows for the insured to claim indemnity to the extent of
actual loss from all the insurance contracts.
7. Mitigation of losses
This principle reminds the insured of his duty to take all necessary steps to minimize
or mitigate the loss, in case of occurrence of the risk insured. The insured must be very
careful and active to make every efforts to minimize the loss.

The insurance Regulatory and Development Authority (IRDA) Act 1999

Insurance Regulatory and Development Authority of India (IRDA), is a statutory

body formed under an Act of parliament i.e. Insurance Regulatory and Development
Authority Act, 1999 for over all supervision and development of the Insurance sector in
India.
The IRDA Act 1999 was passed as per the major recommendation of the Malhotra
Committee report (1994) which recommended establishment of an independent regulatory
authority for insurance sector in India. Later it was incorporated as a statutory body in
April, 2000.
Composition of IRDA
It consist of ten members
 A Chairman
 Five whole time members
 Four part-time members
(All appointed by government of India)

Functions of IRDA Act (essay)

1. Ensure orderly growth of Insurance Industry
2. Protect Interest of the policy holders
3. Issue consumer protection guidelines to the insurance companies
4. Grant modify ,and suspend license for insurance companies
5. Lay down procedures for accounting policies to be adopted by the insurance
companies
6. Inspect and audit of insurance companies and other related agencies
7. Re-insurance limit monitoring
8. Regulation of product development and their pricing including free pricing of
products
9. Ensure the health of the industry by preventing sickness through appropriate actions
10.Monitor investments

IRDA (Investment) Regulation 2000 (IRDAI)

In August 2000, the IRDA began accepting applications for registrations through
invites and allowed companies from other countries to invest up to 26% in the market.

Objectives of IRDAI
 Ensure competition
 Ensure customer satisfaction
 Ensure financial security
 Protecting the interest of Investors
 Promoting fairness and transparency
 IRDA guidelines for Insurance brokers SEBI Act 1992
The Securities and Exchange Board of India Act (SEBI), 1992 is an act that was
enacted for regulation and development of securities market in India. It was amended in the years
1995, 1999, and 2002 to meet the requirements of changing needs of the securities market.
The Securities and Exchanges Board of India (SEBI) has said that the products sold by
many insurance companies require compliance with SEBI rules. It now insists that insurance
companies must comply with these rules. The unstated follow-on action would be that if the
sellers of these products fail to comply with these rules, SEBI would impose penalties upon them
based on the powers conferred on it under the SEBI Act.
It was the 15th Act of 1992.It is a statutory regulatory body that was established by the
Government of India in 1992 for protecting the interests of investors investing in securities along
with regulating the securities market. SEBI also regulates how the stock market and mutual funds
function.
Regulatory functions of SEBI are as follows:
(a) Registration of Brokers and Agents: It registers brokers, sub-brokers, transfer agents,
Merchant banks etc.
(b) Notifications of Rules and Regulations:
(c) Levying of Fees:
(d) Regulator of Investment Schemes:
(e) Prohibits Unfair Trade Practices:

Functions of SEBI (Securities Exchange Board of India)

 MODULE-4
INSURANCE MARKET

Insurance Market -Meaning

An insurance market refers to the buying and selling of insurance and the entities involved
in these transactions. Insurance is a risk management contract aimed to protect policyholders
from unforeseen future events. Conservative investors like the insurance sector because of its
safety and steady growth.
Definition:
According to the Financial Times Lexicon, the insurance market is simply the "buying and
selling of insurance." Consumers or groups buy insurance for risk management from insurers
offering coverage for specific risks.

Features of Insurance Market

1. Sharing of Risk. Insurance is a device to share the financial losses which might befall an
individual or his family on the happening of a specified event.
2. Co-operative Device.
3. Value of Risk.
4. Payment at Contingency.
5. Payment of Fortuitous Losses.
6. Amount of Payment.
7. A large number of Insured Persons.

Marketing of Insurance Companies

The importance of marketing for your business manifold. It makes the customers aware
of your products or services, engages them, and helps them make the buying decision.
Furthermore, a marketing plan, a part of your business plan, helps in creating and maintaining
demand, relevance, reputation, competition, etc.
Insurance marketing is about identifying and targeting the right customers, then hitting
them with clever, hard-to-resist tactics to show them why your insurance company is their best
bet. Sure, it might include a nifty website, eye-catching flyers or snappy online ads—but there's
much, much more to it than that. The objective of insurance marketing is to generate demand,
increase leads and drive revenue through sales.
Role of Insurance Marketer
An insurance marketing specialist is responsible for strategizing, creating, and
implementing marketing campaigns that support business development and growth at an
insurance company. They work to elevate the company's larger marketing efforts through
brand awareness that supports lead generation and conversion.

Four P‘s of Marketing

1. Price
2. Promotion
3. Place
4. Product

Types of Marketing System

Marketing system refers to the various methods of selling and marketing insurance
products. These methods of selling are also called distribution system. An efficient
distribution system is essential to an insurance company’s survival.

Marketing of Life Insurance

The life insurance market is at the forefront in helping protect this risk through various
long term protection and savings products. These products enable households to provide for
long term financial security and also drive long term financial planning.

Benefits
1. Life Cover against Uncertainty.
2. Financial Security.
3. Tax Benefits.
4. Long-Term Savings.
5. Inclusions of Riders.
6. Loan against Policy.
7. Retirement Planning Option.
8. Investment Tool.
Marketing of General Insurance
General insurance or non-life insurance policy, including automobile and homeowners
policies, provide payments depending on the loss from a particular financial event. General
insurance is typically defined as any insurance that is not determined to be life insurance.
Insurance marketing is all about marketing the insurance service to attract more customers,
which leads to profit generation.
Benefits
1. A General Insurance policy cover reimburses the insured for a financial loss caused due
to certain events as stated in the respective general insurance policy.
2. It gives you peace of mind during loss and covers major portion or total loss.
Channels of Sales
A channel sales strategy involves using partners and third parties—such as referral
partners, affiliate partners, wholesalers, distributors, managed service providers, marketplaces
or value-added resellers—to sell your products or services.

OPERATIONS OF INSURANCE COMPANY

INSURANCE COMPANY OPERATIONS The most important insurance company
operations consist of the following: ● Ratemaking ● underwriting ● Production ● Claim
settlement ● Reinsurance Insurers also engage in other operations, such as accounting, legal
services, loss control, and information systems.
1. Rate Marketing
Rate making (aka insurance pricing, also spelled ratemaking), is the determination of
what rates, or premiums, to charge for insurance. A rate is the price per unit of insurance for
each exposure unit, which is a unit of liability or property with similar characteristics.
2. Underwriting
Underwriting is the process of assessing the amount of risk you present to a potential
insurer. Professional underwriters review the criteria on your application to see if it’s
possible to offer you a policy and, if so, how much coverage you’re eligible for. Then, they
set your monthly premium based on the information. Underwriting also helps your
insurance provider calculate the potential cost of covering you. For instance, if you’re a
younger, healthy person with a low-risk lifestyle, you’re likely less expensive to cover. On
the other hand, if you’re older or engage in risky hobbies, your provider is more likely to
have to pay out an insurance claim.
3. Production
Manufacturing insurance offers businesses financial protection from a wide range of
claims that the business may be vulnerable to. These claims can often be made by a third
party but can also be made by a company employee. By investing in manufacturing
insurance, you gain financial protection from these adverse events.
4. Claim settlement
Life insurance claim settlement is a process where the claimant/beneficiary can make
a request to the policyholder's insurance company to avail the death benefits under the life
insurance of the insured in case of the policyholder's death.

5. Re-insurance
Reinsurance occurs when multiple insurance companies share risk by purchasing
insurance policies from other insurers to limit their own total loss in case of disaster. By
spreading risk, an insurance company takes on clients whose coverage would be too great of
a burden for the single insurance company to handle alone.