Page 51 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes
Reliance General, which is part of Reliance Capital, has posted 25 per cent increase in gross
written premium to ` 706 crore in the June quarter.
Question
Discuss the widening scope of insurance in Reliance General Insurance.

Source: http://articles.economictimes.indiatimes.com/2013-08-30/news/41619016_1_reliance-general-
insurance-fire-insurance-commercial-lines

3.7 Summary

A group of persons who agree to share the financial loss may be brought together
voluntarily or through publicity or through solicitations of the agents.
The risk is evaluated on the basis of probability theory before insuring since the premium
payable on a policy is to be determined. Probability theory is that body of knowledge,
which is concerned with measuring the likelihood that something will happen and making
estimates on the basis of this likelihood.
The life insurance claim is a certainty, because the contingency of death or the expiry of
term will certainly occur and the payment is certain.

The amount of payment depends upon the value of loss suffered due to the happening of
that particular insured risk, provided insurance is there up to that amount.

The price of insurance is basically linked to the cost of claims, which is only known
subsequently.
Failure of taking insurance, however, amounts to gambling because the uncertainty of
loss is always looming on the head. Insurance removes all these uncertainty and the
assured is given certainty of payment of loss.

The main function of the insurance is to provide protection against the probable chances
of loss.

The insurance assist financially to the health organization, fire brigade, educational
institution and other organizations which are engaged in preventing the losses of the
masses from death or damage.

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.
Insurance buyers can only spend up to the limit of what carriers would accept to insure;
their loss is limited to the amount of the premium.

3.8 Keywords

Chance of Loss: The concept of chance of loss refers to a fraction. The numerator is either the
actual or the expected number of losses; the denominator represents the number exposed to loss.
Hazards: Hazards are conditions that increase the frequency or the severity of losses.

Hedging: The concept of hedging is refers to transferring the risk to the speculator through
purchase of future contracts.
Loss: Loss is commonly used term which means being without something previously possessed.

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