STUDY MATERIAL INSURANCE PART-1

STUDY MATERIAL INSURANCE PART-1

What is insurance?
Well it simply means protection against future contingent losses. Insurance provides financial
protection against a loss arising out of happening of an uncertain event. A person can avail this
protection by paying premium to an insurance company.
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A pool is created through contributions made by persons seeking to protect themselves from
common risk. Premium is collected by insurance companies which also act as trustee to the pool.
Any loss to the insured in case of happening of an uncertain event is paid out of this pool.
Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it
spreads the risk of a few people over a large group of people exposed to risk of similar type.
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Definition:
Insurance is a contract between two parties whereby one party agrees to undertake the risk of
another in exchange for consideration known as premium and promises to pay a fixed sum of
money to the other party on happening of an uncertain event (death) or after the expiry of a
certain period in case of life insurance or to indemnify the other party on happening of an
uncertain event in case of general insurance.
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As per Insurance Act 1938
The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is
covered is known as the 'insured' or 'assured'.
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Concept of Insurance
The concept behind insurance is that a group of people exposed to similar risk come together and
make contributions towards formation of a pool of funds. In case a person actually suffers a loss
on account of such risk, he is compensated out of the same pool of funds. Contribution to the
pool is made by a group of people sharing common risks and collected by the insurance
companies in the form of premiums.
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General Insurance Corporation of India
The entire general insurance business in India was nationalized by General Insurance Business
(Nationalization) Act, 1972 (GIBNA). The Government of India (GOI), through Nationalization
took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers
carrying on general insurance business.
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of
GIBNA. It was incorporated on 22 November 1972 under the Companies Act, 1956 as a private
company limited by shares. GIC was formed for the purpose of superintending, controlling and
carrying on the business of general insurance.
As soon as GIC was formed, GOI transferred all the shares it held of the general insurance
companies to GIC. Simultaneously, the nationalized undertakings were transferred to Indian
insurance companies. After a process of mergers among Indian insurance companies, four
companies were left as fully owned subsidiary companies of GIC (1) National Insurance
Company Limited, (2) The New India Assurance Company Limited, (3) The Oriental Insurance
Company Limited, and (4) United India Insurance Company Limited.
The next landmark happened on 19th April 2000, when the Insurance Regulatory and
Development Authority Act, 1999 (IRDAA) came into force. This act also introduced
amendment to GIBNA and the Insurance Act, 1938. An amendment to GIBNA removed the
exclusive privilege of GIC and its subsidiaries carrying on general insurance in India.
In November 2000, GIC is renotified as the Indian Reinsurer and through administrative
instruction, its supervisory role over subsidiaries was ended.
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002)
coming into force from March 21, 2003 GIC ceased to be a holding company of its subsidiaries.
Their ownership were vested with Government of India.
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PART2: http://bankexamdiscussion.blogspot.com/2015/01/study-material-insurance-part-2.html

PART3: http://bankexamdiscussion.blogspot.com/2015/01/study-material-insurance-part-3.html