Principle of Insurance, & IRDA, “Should Insurer Compensate Loss from Riots?”
Presented By Group 2:Richa Anjali Pawan Kanchan G Alok Sachin Yash G Sipak

Insurance Definition
 Insurance is a contract whereby, in return

for the payment of premium by the insured, the insurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events.

Principles of Insurance
Risk Utmost Good Faith Insurable Interest Indemnity

Subrogation Contribution
Proximate Cause
Mitigation of loss

g. a ship sinking etc. For e.: A factory catching fire.Risk  The term Risk is used to describe all the accidental happenings which produce a monetary loss. .

Let the buyer beware  Declaration of all material Information about the subject mater of insurance .Utmost Good Faith  Good faith.

Intentional. Misrepresentation. at what rate of premium and subject to what terms and conditions  Breach of duty of utmost good faith arises in two ways: Non-disclosure of material facts.Contd…  Material Information is that information which enables the insurer to decide:  whether he will accept the risk and.oversight. proposer thought it’s not essential etc.  if so. .

.Insurable Interest  The legal right enjoyed by the owner of a property to insure is called ‘Insurable Interest’. The insurance will become null and void. without the insurable interest.

Every person has an insurable interest in his own life. From above example.The owner of a taxicab has insurable interest in the taxicab because he is getting income from it. if he sells it. we can conclude that. he will not have an insurable interest left in that taxicab.Insurable Interest For example :. . ownership plays a very crucial role in evaluating insurable interest. But.

. the insured has to be placed after the loss in the same financial position in which he was immediately before the loss.Indemnity  The principle of Indemnity states that under the policy of insurance.

Contd…  Applicability: When the losses suffered by the insured can be measured in terms of money It is practicable to place the insured in the same financial position which he occupied before the loss  In Marine Cargo where valued polices are issued. there is only commercial indemnity. .the value declared for insurance is accepted at the time of loss.

only the sum insured is payable. Property insurances. Exceptions for Indemnity: Personal Accident .If there is under insurance only proportionate value is payable.Limitation of Insurers liability: If the sum insured is less than the indemnity.Condition of average.

Subrogation  Transfer of rights and remedies from the insured to the insurer who has indemnified the insured in respect of the loss. .

Contribution  The right of insurers who have paid a loss under a policy to recover a proportionate amount from other insurers. . who are liable for the same loss.

.Proximate Cause The active efficient cause that sets in motion a train of events which brings about a result without intervention of any force started and working actively from a new source.

The insured must take all possible measures and necessary steps to control and reduce the losses in such a scenario. insured must always try his level best to minimize the loss of his insured property In case of uncertain events like a fire outbreak or blast.Mitigation of loss According to the Principle of Loss Minimization. . etc.

Case… A man travelling in a crowded train falls down and gets injured badly. Someone finds him takes him home. He develops fever which ultimately leads to Tetanus and is hospitalised. He is treated in the hospital for ten days then finally he dies! His wife realising he has a personal accident policy makes a claim with the insurance company. Because of his hurt and bleeding he becomes unconscious and lying by the side of the track. Is this claim payable? .

00 39.00 70.70 0.The 15 private players together saw their business grow 32 % to Rs 848 crore with a market share of 28. • • • • • • • ICICI Prudential Bajaj Allianz SBI Life HDFC Standard Max New York Life Tata AIG Aviva 271.00 69.50 1.44 %.00 48.00 28.00 4.00 22.00 90.00 19.00 • • • • • • • • Reliance Life Birla Sunlife Kotak Mahindra Old 33.00 124.72 Mutual ING Vysya Met Life Shriram Life Sahara Life Bharti Axa Life .00 26.

Study : India's insurance sector to see 500 per cent growth  India's insurance sector . The study added that the urban sector insurance was estimated to reach 25 billion dollars by 2010.60 billion-dollar industry India's more than one billion people are uninsured. life insurance 15 billion and insurance 10 billion dollars.500 % growth over the next three     years . the study by the Associated Chambers of Commerce and Industry A large part of rural India is still untapped due to poor distribution and large distances said MD Anil K Agarwal He said the study had revealed that rural & semi-urban India would contribute 35 billion dollars to the Indian insurance industry by 2010. .

.  Total value of the Indian insurance market (2004-05) is at Rs. 450 billion (US$10 billion).  Insurance & Banking Services’ contribution to the country's gross domestic product (GDP) is 7%  The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP.“indian insuranCe industry: new avenues for growth 2012” The potential of the Indian insurance industry is huge. It has an annual growth rate of 15-20% &  …. HOW???  …. ..the largest number of life insurance policies in force.

Contd…  The year 1999 saw a revolution in the Indian insurance sector------the ending of government monopoly -----the passage of the Insurance Regulatory and Development Authority (IRDA) Bill  “A foreign partner can hold 26% equity in an insurance company. .  Foreign investments of Rs. 8.7 billion have poured into the Indian market & 21 private companies have been granted licenses. but there was a proposal to increase this limit to 49%.


It is basically a ten members' team comprising of a Chairman.What is IRDA? Insurance Regulatory & Development Authority (IRDA) is regulatory and development authority under Government of India in order to protect the interests of the policyholders and to regulate. Came into being in 1999 after the bill of IRDA was passed in the Indian parliament. . promote and ensure orderly growth of the insurance industry. all appointed by Government of India. five full time members and four part-time members.

Mission of IRDA  To protect the interests of the policyholders. to regulate. promote and ensure orderly growth of the insurance industry and for matters connected there with or incidental there to .

Composition of Authority under IRDA Act. 1999  As per the section 4 of IRDA Act' 1999. (c) four part-time members. (all appointed by the Government of India) . 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.

. financial soundness. for the benefit of the common man. promote. To set. and to provide long term funds for accelerating growth of the economy. clear and correct information about products and services and make them aware of their responsibilities and duties in this regard. fair dealing and competence of those it regulates.Expectations The law of India has following expectations from IRDA To protect the interest of and secure fair treatment to policyholders. To ensure that insurance customers receive precise. To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments). monitor and enforce high standards of integrity.

To take action where such standards are inadequate or ineffectively enforced. To promote fairness. transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players. To bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation. to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery.Contd…. To ensure speedy settlement of genuine claims. .

code of conduct and practical instructions for mediator as well as the insurance company. Powers & Functions of IRDA It issues the applicants in insurance arena. . It also specifies obligatory credentials. a certificate of registration as well as renewal. Apart from this. nomination by policy holders. submission value of policy and other terms and proposals in the contract. suspension or cancellation of such registrations. It protects the interests of the policy holders in any insurance company in the matters related to the assignment of policy. withdrawal. and resolution of insurance claim.Duties. insurable interest. modification. it also defines the code of conduct for the surveyors and loss assessors involved with the insurance business.

undertaking inspection and investigating the audit of the insurers.Contd…. . profits. One of the major functions of IRDA includes endorsing competence in the insurance business. upholding and regulating professional organizations in insurance and re-insurance business is also a major duty of IRDA. mediators. provisions and conditions that may be offered by insurers in respect of general insurance business if it is not controlled or regulated by the Tariff Advisory Committee. It is also concerned with the regulation of the rates. IRDA is also entitled to for asking information. Apart from this. insurance intermediaries and other organizations related to the insurance sector.

It also regulates investment of funds by insurance companies as well as the maintenance of margin of solvency.Contd… It is also entitled to supervise the functioning of the Tariff Advisory Committee. IRDA specifies the terms and pattern in which books of accounts are to be maintained and statement of accounts shall be provided by insurers and other insurance mediators. .

IRDA also specifies the share of life insurance business and general insurance business to be accepted by the insurer in the rural or social sector.Contd… It is also empowered to be involved in the arbitration of disagreements between insurers and intermediaries or insurance intermediaries. . It is meant to specify the proportion of premium income of the insurer to finance policies.

. It also enables insurance companies which have paid out claims under policies to recover the cost of such claims from the relevant police authority in charge at the place of the riots.Claims for compensation under the Riot (Damages) Act 1886 The Riot (Damages) Act 1886 is designed to compensate people and businesses which suffer losses following riots.

or building in a police area has been injured or destroyed. or destroyed. and such compensation authority shall inquire into the truth thereof. . fix such compensation as appears to them. by any persons riotously and tumultuously assembled together. stolen. or destruction…  Claims for compensation under this Act shall be made to the compensation authority of the police area in which the injury. stealing or destruction took place. if satisfied. and shall. shop. or the property therein has been injured. such compensation as hereinafter mentioned shall be paid out of the police fund of the area to any person who has sustained loss by such injury. stealing.the aCt states… Where a house.

Conclusion Insurance can be summed up as “Praying for the best … …being PREPARED for the WORST”. .

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