Page 37 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes One view is that if the chance of loss exceeds 40 per cent, the cost of the policy will exceed
the amount that the insurer must pay under the contract. For example, an insurer could
issue ` .100000 life insurance policy on a man of age 99, but the pure premium would be
about ` .98000, and an additional amount for expenses would have to be added. The total
premium would exceed the face amount of the insurance.
Based on these requirements, personal risks, property risks, and liability risks can be
privately insured, because the requirements of an insurable risk generally can be met. By
contrast, most market risks, financial risks, production risks, and political risks are usually
uninsurable by private insurers. These risks are uninsurable for several reasons. First,
they are speculative and so are difficult to insure privately. Second, the potential of each to
produce a catastrophic loss is great; this is particularly true for political risks, such as the
risk of war.
Finally, calculation of the proper premium for such risks may be difficult as the chance of
loss cannot be correctly estimated. For example, insurance that protects a trader against
loss because of a change in consumer tastes, such as a style change, generally is not
available. Accurate loss data are not available, and there is no accurate way to calculate a
premium. The premium charged may or may not be adequate to pay all losses and expenses.
Since private insurers are in business to make a profit, certain risks are uninsurable because
of the likelihood of large losses.

Self Assessment

Fill in the blanks:
17. If a person intentionally causes a loss, he or she should not be indemnified for the
…………………………
18. Forecast of future ………………………………….. may be inaccurate if a large number of
intentional or non-random losses occur.

Case Study Govt. Plans Insurance Scheme for Girl Child

nder the special scheme of conditional cash transfer, the government will provide
cash on certain conditions, such as at birth and registration of the girl; at the time
Uof enrolling in school, updation of immunisation cards and at completion of
primary school, elementary school and secondary education. The remaining sum would
be given at the age of 18 years if the girl is unmarried.
Under the scheme, the girl will receive a lump sum when she turns 18. Women and child
development minister Renuka Chowdhury said the ministry had proposed the conditional
cash transfer scheme during the 11th Plan.

“The move is to reward parents that will help in checking declining sex ratio and discourage
female foeticide and infanticide,” said an official.
Question

Explain the steps taken by government in case of providing insurance cover to girl child.
Source: http://articles.timesofindia.indiatimes.com/2007-12-27/india/27995371_1_girl-child-special-
scheme-conditional-cash-transfer

32 LOVELY PROFESSIONAL UNIVERSITY