Page 44 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 3: Nature and Scope of Insurance

4. It helps Economic Progress: The insurance helps in economic progress by protecting the Notes
society from huge losses of damage, destruction and death. Provides an initiative to work
hard for the betterment of the masses. The next factor of economic progress, the capital, is
also immensely provided by the masses. The property, the valuable assets, men, machine
& the society cannot lose much at the disaster.

Self Assessment

Fill in the blanks:
4. Insurance provides certainty of payment at the …………………………………… of loss.
5. The insurance …………………………………… the payment of loss and thus protects the
assured from sufferings.
6. The insurance helps in ……………………………… progress by protecting the society from
huge losses of damage, destruction and death.
3.3 Scope of Insurance

You must be aware that insurance is a protection against financial hammering arising on the
happening of an unexpected event. Insurance policy helps in not only mitigating risks but also
provides a financial militate against adverse financial loads suffered. Insurance is a contract
between two parties, the insurer or the insurance company, and the insured, the person seeking
the cover. Within this contract, the insurer agrees to pay the insurer for financial losses arising
out of any unforeseen events or risk in return for a regular payment of premium. Therefore,
these insurance plans are also called as a Risk Cover Plans, which means to financially compensate
for losses that occur uncertainly through accident, illness, theft, natural disaster.

3.3.1 Insurance Scope in India

You must remember that insurance is a nice-looking option for investment but most people are
not aware of its advantages as an investment option. Remember that foremost and first, insurance
is about risk cover and protection. By buying life insurance, you buy peace of mind.

Notes Insurance also serves as an excellent tax saving mechanism.
The Government of India has provided tax incentives to life insurance products in order to
facilitate the flow of funds into productive assets.

The insurance sector has opened up for private insurance companies with the enactment of IRDA
Act, 1999. A large number of companies are competing under both general and life Insurance.
The FDI cap/equity in this sector is 26% and the proposals have to be cleared by Insurance
Regulatory and Development Authority (IRDA) established to protect the interest of holder of
Insurance policy and act as a regulator and facilitator in the industry.
Some of the major players in this sector are LIC, Max New York Life Insurance, Bajaj Allianz,
ICICI Prudential, HDFC Standard Life, Metlife Insurance, Birla Sun Life Insurance, etc.

Various types of instruments and policies are coming up in the market to attract more clients.
Most of the population of India is not insured, hence there is a lot of scope in this sector and a
number of companies are planning to enter the sector.

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