INSURANCE

Life is full of uncertainties. The chances of occurrence of an event causing losses are quite uncertain. There are risks of Indian Insurance Sector It is a well-known fact that the Indian economy has been amongst the fastest growing economies of the world. It is triggered by better performances of all the three sectors i.e., agriculture, industry and services.

With an increase in manufacturing and service sector activities, a directly proportional higher insurance penetration is the need of the hour. With the initiation of financial sector reforms, the Indian insurance sector which was till now under the government control has to set open for competition to meet the global challenge. The first step taken by the government was to establish IRDA Act with the objective of streamlining the development process. The Indian insurance market is a mega market with a huge potential.

Since the opening of the insurance sector in December the insurance industry is changing rapidly. Today companies operate in the life and in non-life segment. LIC of India has dominated the life segment for over four decades although only per cent of the insurable population was insured. From the year onwards IRDA started granting licenses to private players.

Thus general insurance sector has seen considerable expansion over the past few years. The premium income has recorded a growth rate of per cent. A department wise split shows that in the year - , per cent of business is derived from fire, per cent from marine insurance, per cent from motor insurance, per cent from health schemes, per cent from re-engineering and remaining per cent from other miscellaneous insurances. Amongst the fastest growing companies are the National Insurance, Bajaj Allianz, Tata-AIG and ICICI Lombard.

Currently, over per cent of the business underwritten (fire, marine, motor and engineering) is subject to tariff controls. death and disability for human life; fire and burglary risk for property; perils of the sea for shipment of goods and, so on. If any of these takes place, the individuals and/or, organisations may suffer a great loss, sometimes beyond their capacities to bear the same. It is to minimise the impact of such uncertainties that there is a need for insurance.

Investment in factory buildings or heavy equipments or other assets is not possible unless there is arrangement for covering the risks, with the help of insurance. Keeping this in mind, people facing common risks come together and make small contributions to a common fund, which helps to spread the loss caused to an individual by a particular risk over a number of persons who are exposed to it. Insurance is thus a device by which the loss likely to be caused by an uncertain event is spread over a number of persons who are exposed to it and who prepare to insure themselves against such an event. It is a contract or agreement under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make a loss, damage or injury to something of value in which the insured has a pecuniary interest as a result of some uncertain event.

The agreement/contract is put in writing and is known as ‘policy’. The person whose risk is insured is called ‘insured’ and the firm which insures the risk of loss is known as insurer/ assurance underwriter.