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Function's of

Insurance.

ByAftab Mulla.


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WHATISINSURANCE?

The def in i t ion of insurance can be made from

two po in ts :

Funct ional def in i t ion .

Contractual def in i t ion.

FUNCTIONAL DEFINITION

Insurance is a co-operative device to spread theloss caused by a particular risk over a number of

persons who are exposed to it and who agree to

insure themselves against the risk.


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Contractual DefinitionIn the words of Justice Tindall, Insurance is a

contract in which a sum of money is paid to the

assured as consideration of insurers incurring

the risk of paying a large sum upon a given

contingency.


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BASICFUNCTIONSOF INSURANCE

1.Primary Functions

2.Secondary Functions

3.Other Functions

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PRIMARYFUNCTIONSOFINSURANCE

Providing protection The elementary purpose of insurance is to allow securityagainst future risk, accidents and uncertainty. Insurance cannot arrest the riskfrom taking place, but can for sure allow for the losses arising with the risk.Insurance is in reality a protective cover against economic loss, by apportioningthe risk with others.

Collective risk bearing Insurance is an instrument to share the financial loss.It is a medium through which few losses are divided among larger number ofpeople. All the insured add the premiums towards a fund and out of which thepersons facing a specific risk is paid.

Evaluating risk Insurance fixes the likely volume of risk by assessing diversefactors that give rise to risk. Risk is the basis for ascertaining the premium rate aswell.

Provide Certainty Insurance is a device, which assists in changing uncertaintyto certainty. 5


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SECONDARYFUNCTIONSOFINSURANCE

Preventing losses Insurance warns individuals andbusinessmen to embrace appropriate device to preventunfortunate aftermaths of risk by observing safetyinstructions; installation of automatic sparkler or alarmsystems, etc.

Covering larger risks with small capital Insuranceassuages the businessmen from security investments. Thisis done by paying small amount of premium against largerrisks and dubiety.

Helps in the development of larger industries Insuranceprovides an opportunity to develop to those larger industrieswhich have more risks in their setting up.

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OTHERFUNCTIONSOFINSURANCE

Is a savings and investment tool Insurance is the best savings andinvestment option, restricting unnecessary expenses by the insured.Also to take the benefit of income tax exemptions, people take upinsurance as a good investment option.

Medium of earning foreign exchange Being an international

business, any country can earn foreign exchange by way of issue ofmarine insurance policies and a different other ways.

Risk Free trade Insurance boosts exports insurance, making foreigntrade risk free with the help of different types of policies under marineinsurance cover.

Insurance provides indemnity, or reimbursement, in the event of anunanticipated loss or disaster. There are different types of insurancepolicies under the sun cover almost anything that one might think of.There are loads of companies who are providing such customizedinsurance policies.

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WORKINGOFINSURANCE


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MARKET SHARE

5%

1%

21%

28%

4%

12%

4%

9%

5%

2%3%

4% 2%

MAX NEW YORK

SHIRAM LIFE

BAJAJ ALLINZ

ICICI PRUDENTIALRELIANCE

SBI LIFE

TATA AIG

HDFC SLIC

BIRLA SUNLIFE

ING VYSYA

KOTAK MAHINDRA

AVIVA

MET LIFE


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CURRENT SCENARIO

Growing at the rate of 15-20% annually

75% population has no insurance

Adds 7% to countrys GDPLIC market share come down to 75% and private insurers

increased over 24%

Annuity or pension product have over 33% of market

Unity linked insurance scheme have monopoly


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MAJOR PLAYERS


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thank you

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