Importance Of Insurance In Insurance

CHAPTER 1
INTRODUCTION

INSURANCE

Insurance means equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a risk management form primarily used to hedge against the risk of uncertain loss.
An insurer is selling the insurance; the insured is the person buying the insurance policy.
The money to be charged for a certain amount of insurance coverage is called the premium.
The insured receives a contract which is called the insurance policy, it details with the conditions and circumstances under which the insured will be financially compensated.

WHY DO WE NEED INSURANCE?
Insurance is a risk managing process. When we buy insurance then we transfer the cost of a potential loss to the insurance company in

100 Crore, thereby paving the way for promotion of health insurance as a separate vertical.

 The amended law enables foreign reinsurers to set up branches in India and defines Re-insurance to mean “the insurance of part of one insurer’s risk by another insurer who accepts the risk for a mutually acceptable premium”, and thereby excludes the possibility of 100% ceding of risk to a re-insurer, which could lead to companies acting as front companies for other insurers.

 Further, the amendments to the laws will enable the interests of consumers to be better served through provisions like those enabling penalties on intermediaries / insurance companies for misconduct and disallowing multilevel marketing of insurance products in order to curtail the practice of mis-selling. The amended Law has several provisions for levying higher penalties ranging from up to Rs.1 Crore to Rs. 25 Crore for various violations including mis-selling and misrepresentation by agents / insurance