Insurance: Meaning, Origin and Development
Q. 1. Define Insurance, giving its meaning.
Ans. Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against risk. Risk is uncertainty of a financial loss. It should not be confused with the chance of loss which is the portable number of losses out of a given number of exposures. It should not be confused with peril which is defined as the cause of loss or with hazard which is a condition that may increase the chance of loss. Finally, risk must not be confused with loss itself which is the unintentional decline in or disappearance of value arising from a contingency. Wherever there is uncertainty with respect to a probable loss, there is risk.
Every risk involves the loss of one or other kind. The function of Insurance is to spread the loss over a large number of persons who are agreed to co- operate each other at the time of loss. The risk cannot be averted but loss occurring due to a certain risk can be distributed amongst the agreed parsons. They are agreed to share the loss because the chances of loss ie the time, amount, to a person are not known. Anybody of them may suffer loss to a given risk, so, the rest of the persons who are agreed will share the loss. The larger the number of such persons, the easier the process of distribution of loss. In fact, the loss is shared by them by payment of premium which is calculated on the probability of loss. In olden time, the contribution by the persons was made at the time of loss. The insurance is also defined as a social device to accumulate funds to meet the uncertain losses arising through a certain risk to a person insured against the risk.
Definitions- The definition of Insurance has been categorised into three parts:-
Functional – Definitions-Insurance is a co-operative device to spread the loss caused by a particular risk over a number of persons, who are exposed to it and who agree to insure themselves against the risk. Some important functional definitions of Insurance are as follows-
“Insurance is a social device whereby the uncertain risks of individuals may be combined in a group and thus made more certain, small periodic contributions by the individuals & providing a fund out of which those who suffer losses may be reimbursed.” RIEGEL & MALLER
“Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payment being made from the accumulation contributions of all parties participating in the scheme.”. -D. S. HANSELL
“Insurance is a system of protection against financial loss in which risk is shifted to a professional risk bearer, an insurance company, the insurer, in exchange for a certain sum of money agrees to pay the insured a certain sum of money if losses occur.” -ROSENBLANTT, BONNINGTON AND NEEDLES
“Insurance may be described as a social device whereby a large group of individuals through a system of equitable contribution may reduce or eliminate certain measurable risk of economic loss common to members of the group.-ENCYCLOPAEDIA BRITANICA
Thus the insurance is (a) a co-operative device to spread the risk: (b) the system to spread the risk over a number of persons who are insured against the risk (c) the principle to share the loss of each member of the society on the basis of probability of loss to their risk; and (d) the method to provide security against losses to the insured.
Contractual Definitions- Insurance has been defined to be that contract in which a sum of money as a premium is paid in consideration of the insurer’s incurring the risk of paying a large sum upon a given contingency. The important contractual definitions are as follows:-
“Insurance is a contract whereby one person, called the ‘insurer undertakes in return for the agreed consideration called the “premium”, to pay to another person called the ‘insured’ a sum of money or its equivalent on specified event.”– J. CHANNELL
“Insurance is a contract by which a sum of money is paid to the assured in consideration of insurer’s incurring the risk of paying a large sum upon a given contingency.” -JUSTICE TINDALL
“Insurance is a contract by which one party for a consideration, called the premium, assumed particular risks of other party and promises to pay him or his nominee a certain or ascertainable sum of money on a specified contingency.”-PATTERSON
The insurance, thus is a contract whereby (a) certain sum, called premium, is charged in consideration, (b) against the said consideration, a large sum is guaranteed to be paid by the insurer who received the premium (c) the payment will be made in a certain definite sum, ie, the loss or the policy amount whichever may be, and (d) the payment is made only upon a contingency.
(3) General Definitions– Some definitions are given by socialists. So these are called social definitions too. They consider the Insurance as ‘Remedy of safety from risk ‘Social law of risks’ distribution” “Safety against misfortune etc.
Firstly the definition of famous socialist SIR WILLIAM BEVRIDGE IS important. According to him- “The collective bearing of risk is insurance.”
Insurance is a plan by which large number of people associate themselves and transfer to the shoulders of all the risks that attach to individuals.-JOHN H. MAGEE
Insurance is a protection against economic loss provided by sharing the risk with others. -PROF. HOPKINS & OTHERS
Insurance is a provision which a prudent man makes against fortuitous or inevitable contingencies, loss or misfortune. It is a form of spreading risks.-THOMAS
Insurance is a substitution by a small known loss (insurance premium) of a large unknown loss which may or may not occur. -BOONE & KURTZ
Q. 2. Discuss the origin, evolution and development of Insurance.
Ans. Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against that risk. Risk is uncertainty of a financial loss. It should not be confused with the chance of loss which is the probable number of losses out of a given number of exposures. It should not be confused with peril which is defined as the cause of loss or with hazard which is a condition that may increase the chance of loss.
The origin of Insurance is lost in antiquity. The earliest traces of insurance in the ancient world are found in the form of marine trade loans or carriers’ contracts which included an element of insurance. Evidence is on record that arrangements embodying the idea of insurance were made in Babylonia and India at quite an early period. In Rigveda, the most sacred book of India, references were made to the concept ‘Yogakshema’ more or less akin to the well being and security of the people. The codes of HAMMURABI and of MANU had recognised the advisability of provision for sharing the future losses.
Development of Insurance:
(1) Marine Insurance- The marine insurance is the oldest form of insurance. Under Bottomry bond, the system of credit and the law of interest were well-developed and were based on a clear appreciation of the hazard involved and the means of safeguarding against it. If the ship was lost, the loan and interest were forfeited. The contract of insurance was made a part of the contract of carriage, and MANU shows that Indians had even anticipated the doctrine of average and contribution. Freight was fixed according to season and was expected to be reasonable in the case of marine transport which was then very much at the mercy of winds and elements. Travellers by sea and land were very much exposed to the risk of loosing their vessels and merchandise because the piracy on the open seas and highway robbery of caravans were very common. Besides, there were several risks. Many times, the vessel (ship) might have been captured by the King’s enemies or robbed by pirates or got sunk in the deep waters. The risk to owners of such ships were enormous and, therefore, to safeguard them the marine traders devised a method of spreading over them the financial loss which could not be conveniently borne by the unfortunate individual victims. The co-operative device was quite voluntary in the beginning, but now in modern times it has been converted into modified shape of premium.
The marine policies of the present forms were sold in the beginning of fourteenth century by the Brugians. On the demand of the inhabitants of Burges, the Count of Flanders permitted in the year 1310, the establishment in this Town of a charter of Assurance, by means of which the merchants could insure their goods, exposed to the risks of the sea. The insurance development was not confined to the Lombards and to the Hansa merchants, it spread throughout Spain, Portugal, France, Holland and England. The marine form and lending prominence of Lombards merchants got a prominent section of the London City. They built homes there and took the name of Lombard Street. Later on, this street became famous in insurance history. The Lloyd’s coffee-house gave an impetus to develop the marine insurance.
(2) Fire Insurance- After marine insurance, fire insurance developed in present form. It had been observed in Anglo-Section Guild Form for the first time where the victims of fire hazards were given personal assistance by providing necessaries of life. It had been originated in Germany in the beginning of sixteenth century. The fire insurance got momentum in England after the great fire in 1666 when the fire losses were tremendous. About 85 per cent of the houses were burnt to ashes and property worth of sterling ten crores were completely burnt off. Fire Insurance Office was established in 1681 in England. With colonial development of England, the fire insurance spread all over the world in present form. ‘Sun Fire Office’ was successful fire insurance institution.
In India, the general insurer started working since 1850 with the establishment of the Triton Insurance, Calcutta. Again in 1861, the North British and Mercantile catered the requirements of insurance business. The general insurance in India could not progress much. The slow growth of joint-stock enterprise and mechanised production was another reason for the low level of general insurance business.
(3) Life Insurance- Life insurance made its first appearance in England in 17th century, the first recorded evidence in England being the policy on life of William Gybbons on June 18, 1653. Even before this date annuities had become quite common in England, and marine insurance had, in fact, made its appearance three thousand years ago The life insurance developed at “Exchange Alley The first registered life office in England was the Hand-in- Hand Society established in 1696. The famous ‘Amicable Society for a Perpetual Assurance Office started its operation since 1706. Life insurance did not prosper in the United States during the 18th century, because of serious fluctuations in death-rate, but soon after 1800 some active interest began to be shown in this enterprise because of the application of level premium plan which had by then been in operation in U. K. for more than a generation. In India, some Europeans started the first life insurance company in Bengal Presidency, viz, the Orient Life Assurance Company in 1818. The year 1870 was a year of a landmark in the history of Indian Insurance separating the early period of pioneering attempts at life insurance from the subsequent period of steady development at the establishment of Indian Life Office, viz., Bombay Mutual Life Assurance Society in 1871. The next important life office was Oriental Government Security Life Assurance Co. Ltd., which started its operation in 1874. Since then several offices developed in India.
Miscellançous Insurance-The miscellaneous insurance took the present shape at the later part of nineteenth century with the industrial revolution in England. Accident insurance, fidelity insurance, liability insurance and theft insurance were the important form of insurance at that time. Lloyds’s Association was the main functioning institution. Now, insurances such as cattle insurance, crop insurance, profit insurance, etc., are taking place. The scope of general insurance is increasing with the advancement of the society.
Q. 3. Describe the characteristics and functions of Insurance.
Ans. Characteristics of Insurance- The insurance has the following characteristics:-
1. Co-operative Device-The most important feature of every insurance plan is the co-operation of large number of persons who, in effect, agree to share the financial loss arising due to a particular risk which is insured.
2. Value of risk- The risk is evaluated before insuring to charge the amount of share of an insured, herein called, consideration or premium.
3. Amount of payment- It depends upon the value of loss occurred due to the particular insured risk provided insurance is there up to that amount
4. Payment at contingency-The payment is made at a certain contingency insured. If the contingency occurs, payment is made
5. Sharing of risk-Insurance is a device to share the financial losses which might befall on an individual or his family on the happening of a specified event.
6. Large number of insured persons-To spread the loss immediately, smoothly and cheaply, large number of persons should be insured. In order to function successfully, the insurance should be joined by a large number of persons.
Functions of insurance- According to PROF. DINSDELL, the functions of insurance are as follows-
(1) Insurance provides protection-The main function of the insurance is to provide protection against the probable chances of loss, accidents and sufferings. Thus Insurance is the protection against financial losses.
(2) Insurance provides certainty Human life is full of risks. For this, a person takes insurance to get rid of these risks by which he/she can change uncertainty into certainty. It provides certainty of payment at the uncertainty of loss. Uncertainty can be reduced by better planning and administration. Is the words of RIEGAL AND MILLER, “The primary function of insurance is to reduce uncertainty of events.”
(3) Risk Sharing-When risk takes place, the loss is shared by all the persons who are exposed to the risk. The risk is shared by each and every insured in the shape of premium.
(4) It provides capital-The insurance provides capital to the society The accumulated funds are invested in productive channel. The dearth of capital of the society is minimised to a greater extent with the help of investment of insurance.
(5) Prevention of loss-Insurance prevents the losses of the society. Insurance companies publish many ideas of the prevention of loss. The insurance assists financially to the health organisation, fire brigade, educational institutions and other organisations which are engaged in preventing the losses of the masses from death or damage.
A society ‘Loss Prevention Association of India’ was established in India by the insurers. It awares people for future losses.
(6) It improves efficiency-The insurance eliminates worries and miseries of losses at death and destruction of property. The carefree person can devote his body and soul together for better achievements. It improves not only his efficiency but the efficiencies of the masses are also advanced.
(7) Means of savings Insurance works also as a means of saving. By taking insurance, one is compelled to save by paying the premium.
(8) Promotes exports-Insurance increases the exports business. It provides safety against the losses of goods. Insurance has made the foreign trade risk-free.
(9) To get Rebate in Income Tax-Many people take insurance for the purpose of getting the rebate in Income Tax.
(10) Contribution in the development of big Industries-Insurance contributes in the development of big industries by providing the protection against the risks which they have in their establishment.
(11) Provides a source of Investment-Insurance provides a source of investment to the people. Life Insurance Corporation issues various Bima Policies in which people can invest their money.
(12) Miscellaneous Functions-Insurance is a social work too which fulfils the following objects of policyholders-
1. It provides protection and mental peace.
2. It provides help in business.
3. It provides financial stability to commerce, industry and community
4. It contributes in reducing the loss.
Q. 4. Describe the main kinds of Insurance.
Ans. Kinds of Insurance-The insurance can be divided from two angles
1. Business point of view
II. Risk point of view
I. Business point of view- The insurance can be classified into three categories from the business point of view-
1. Life Insurance- At present, life insurance enjoys maximum scope because the life is the most important property of the society or an individual Each and every person requires the insurance. This insurance provides protection to the family at the premature death or gives adequate amount at the old age when earning capacities are reduced. Under personal insurance a payment is made at the accident. The insurance is not only a protection but is a sort of investment because a certain sum is returnable to the insured at the death or at the expiry of a period. The business of life insurance previously was wholly done by the Life Insurance Corporation of India. But now, many private companies like Bajaj Allianze, ICICI Prudential, HDFC and Max etc. have enterd in the field of life insurance.
2. General Insurance- The general insurance includes property insurance, liability insurance and other forms of insurance. Fire and marine insurances are strictly called property insurance. Motor, theft, fidelity and machine insurances include the extent of liability of insurance to a certain extent
3. Social Insurance- The social insurance is to provide protection to the weaker sections of the society who are unable to pay the premium for adequate insurance. Pension plans, disability benefits, unemployment benefits, sickness insurance and industrial insurance are the various forms of social insurance.
II. Risk point of view:
1. Property Insurance Under the property insurance property of a person/persons are insured against a certain specified risk. The risk may be theft of property or goods, damage to property at accident.
2. Marine Insurance-It provides protection against loss of marine perils. The marine perils are collision with rock or ship gets attacked by enemies, fire and capture by pirates etc. These perils cause damage, destruction or disappearance of the ship and cargo and non-payment of freight. So marine insurance insures ship (Hull), cargo and freight.
3. Fire Insurance- Fire insurance covers risks of fire. In the absence of fire insurance, the fire waste will increase not only to the individual but to the society as well. With the help of fire insurance, the losses, arising due to fire are compensated and the society is not losing much. The individual is protected from such losses and his property or business or industry will remain approxi mately in the same position in which it was before the loss. The fire insurance does not protect only losses but it provides certain consequential losses also. War risk, turmoil, riots, etc., can be insured under this insurance, too.
4. Crop Insurance- In our country the comprehensive crop insurance scheme was introduced by the Government of India commencing from kharif 1985-86. The insurance charges and claims in respect of crops insured in any state are shared between the Central Crop Insurance Fund and Crop Insurance Fund set up by the State Government. GIC maintains close and constant liaison with State Governments, RBI, NABARD, State Co-operative Banks, Commercial Banks and other agencies involved for smooth implementation of the scheme.
5. Machinery Insurance The machinery insurance policy covers machinery like compressors, pumps, turbines etc as also electrical machines such as transformers, electrical motors etc. The cover may be accident caused by faulty materials, action of centrifugal forces contributing to disruption of the rotating parts, malfunctioning or failure of safety devices, failure of lubrication due to malfunctioning of the lubricating oil pump or its own breakdown, electrical short circuit including electrical fire originating from failure of insulation and/or over-voltage or under-voltage conditions, abrupt and sudden stoppage of other connected machinery etc. The premium is decided as per Tariff rate and inspection by the engineer of the insurer.
6. Baggage Insurance- The baggage insurance policy covers baggage of travelling person except costly item like jewellery. It covers risks of loss, destruction or damage, at any time while travelling, by accident, fire or theft
7. Cattle Insurance- The cattle and livestock insurance was demanded since independence. No worth mentioning progress was made till 1972 when the general insurance was nationalised. Recently some progress has been made and figure of the progress is available since 1982. Cattle insurance have included cattle, sheep and goat etc.
8. Liability Insurance- The liability insurance covers the risks of third party, compensation to employees, liability of the automobile owners and reinsurance.
9. Guarantee Insurance-The guarantee insurance covers the loss arising due to dishonesty, disappearance and disloyalty of the employees or second party.
10. Other forms-Besides the property and liability insurances, there are certain other insurances which are included under general insurance. The examples of such insurances are export credit insurance, state employees insurance etc. whereby the insurer guarantees to pay certain amount at certain events. This insurance is extending rapidly these days.
Q. 5. Explain the role and importance of Insurance.
Ans. The process of insurance has been evolved to safeguard the interests of people from uncertainty by providing centainty of payment at a given contingency. The insurance principle comes to be more and more used and useful in modern affairs. Not only does it serve the ends of individuals, or of special groups of individuals, it tends to pervade and to transform our modern social order, too.
Insurance is important to all classes. The role and importance of insurance has been divided in four phases-
1. Individual and family importance.
2. Economic or Business importance.
3. Social Importance or utility.
4. National importance.
Individual and Family Importance:
1. Security and Safety- The insurance provides safety and security against the loss on a particular event. In cases of life insurance payment is made when death occurs or the term of insurance is expired. The loss to the family at a premature death and payment in old age are adequately provided by insurance The insurance provides safety and security against the loss of earning at death or in olden age, against the loss at fire, against the loss at damage, destruction or disappearance of property, goods, furniture and machines, etc
2. Peace of Mind- The security wish is the prime motivating factor. This is the wish which tends to stimulate to more work. If this wish is unsatisfied, it will create a tension which manifests itself to the individual in the form of an unpleasant reaction causing reduction in work. Thus the insurance affords peace of mind.
3. Encouragement of Savings- The elements of protection and investment are present only in case of life insurance. In property insurance, only protection element exists. In most of the life policies elements of saving predominates. These policies combine the programs of insurance and savings.
4. Investment and future planning- Everyone wants the increment in his income and property. He wants gain by investment. Insurance is the best way to increase anyone’s income or property. Anyone can plan to fulfil his future needs through it. The worries of future do not let him sleep calmly. By taking insurance policy he can fulfil his needs and also manage the education and marriage of his children.
5. Safety of domestic assets- Insurance protects the domestic properties from all risks. By taking insurance of house and all domestic properties such as T. V., refrigerator, car, jewellery etc. one can get safety from risks of fire, burgalary etc.
6. Tax-Exemption- The most important benefit of taking insurance is exemption in taxes. The amount of premium paid against a life insurance policy is exempt from income tax in India. It indirectly increases the saving-habit of the policyholder.
7. Improvement of health- Insurance plays the most important role in the improvement of health. Insurance company awares the people regarding their personal health, first aid etc. through publicity. The company checks the insured’s health from time to time. By this, the insured knows about the disese if any, and tries to get it remedied.
Economic or Business Importance:
The Insurance has been useful to the business society also. Some economic/business importance are so follows-
1. Uncertainty of business losses is reduced-In the world of business, commerce and industry a huge number of properties are employed. With a slight slackness or negligence, the property may be turned into ashes. The accident may be fatal not only to the individual or property but to the third party also. New construction and new establishment are possible only with the help of insurance. In absence of it, uncertainty will be to the maximum level and nobody would like to invest a huge amount in the business or industry. A person may not be sure of his life and health and cannot continue the business up to longer period to support his dependents. By purchasing policy, he can be sure of his earning because the insurer will pay a fixed amount at the time of death.
2. Business-efficiency is increased with insurance-When the owner of a business is free from the botheration of losses, he will certainly devote much time to the business. The care free owner can work better for the maximisation of the profit. The new as well as old businessmen are guaranteed payment of certain amount with the insurance policies at the death of the person, at the damage, destruction or disappearance of the property or goods.
3. Key Man Indemnification-Key man is that particular man whose capital, expertise, experience, energy, ability to control, goodwill and dutifulness make him the most valuable asset in the business and whose absence will reduce the income of the employer tremendously and up to that time when such employee is not substituted. The death or disability of such valuable lives will, in many instances, prove a more serious loss than that by fire or any hazard. The potential loss to be suffered and the compensation to the dependents of such employee require an adequate provision which is met by purchasing an adequate life-policies.
4. Enhancement of Credit-The business can obtain loan by pledging the policy of insurance as collateral for the loan. The insured persons are getting more loan due to certainty of payment at their deaths. The amount ofloan that can be obtained with such pledging of policy, with interest thereon will not exceed the cash value of the policy. In case of death, this cash value can be utilised for setting of the loan along with the interest. The insurance properties are the best collateral and adequate loan are granted by the lenders.
5. Business Continuation-Any business, particularly partnership business, may discontinue at the death of any partner although the surviving partners can restart the business, but in both the cases the business and the partners will suffer economically. The insurance policies provide adequate funds at the time of death. Each partner may be insured for the amount of his interest in the partnership and his dependents may get that amount at the death of the partner.
Social Importance:
Following points express the social importance of insurance-
1. Balanced development of family-Life insurance provides money at the time of financial problems in family. Insurance contributes in the balanced development of family by providing money at the right time for proper needs. Insurance is the key of happy and prosperous family.
2. Education facility- Insurance encourages the education very much. Now-a-days, many insurance policies provide for the proper education of children. Children can get higher and technical education through these policies. Many insurance institutions provide scholarships for the poor students.
3. Increase of Employment opportunities-Insurance is a big business. It has increased employment opportunities in the society. Thousands of people are posted on various posts in insurance companies. Thousands of insurance agents are doing their work in various fields. In this way insurance plays vital role in the development of employment opportunities.
4. Improvement of basic amenities-Insurance has an important role in the development of basic amenities like water, electricity, housing sanitary etc.
National Importance:
There are so many benefits from insurance at the national level. Some points of national importance are as follows-
1. Increase in National Savings-Every person saves money through insurance. Insurance increases national saving by encouraging the people for saving. This national saving increases the national investment. According to ANGELL-
“Insurance companies concentrate on the savings of numerous persons and invest them in the economy. Many of these funds would otherwise not be available for investment.”
2. Receipt of Foreign exchange-Insurance companies do insurance business in foreign countries also. Thus they increase the receipt of foreign exchange.
3. Reduction in Inflation-The insurance reduces the inflationary pressure in two ways. First, by extracting money in supply to the amount of premium collected and secondly, by providing sufficient funds for production narrow down the inflationary gap. With reference to Indian context it has been observed that about 5.0 per cent of the money in supply was collected in the form of premium. The share of premium contributed to the total investment of the country was about 10.0 per cent. The two main causes of inflation, namely, increased money in supply and decreased production are properly controlled by insurance business.
4. Economic growth of the country For the economic growth of the country, insurance provides strong hand and mind, protection against loss of property and adequate capital to produce more wealth. The agriculture will experience protection against losses of cattle, machines, tools and crop. This sort of protection stimulates more production in agriculture, in industry, the factory premises, machines, boilers and profit insurances provide more confidence to start and operate the industry. Welfare of employees create a conducive atmosphere to work. Adequate capital from insurers accelerate the production cycle. Similarly in business, too, the property and human materials are protected against certain losses, capital and credit are expanded with the help of insurance. Thus, the insurance meets all the requirements of the economic growth of a country.
Q. 6. Explain the composition, duties, powers and functions of Insurance Regulatory and Development Authority?
Ans. “Authority” means the Insurance Regulatory and Development Authority established under sub-section (1) of Section 3;
Establishment and incorporation of Authority- (1) With effect from such date as the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, an Authority to be called “the Insurance Regulatory and Development Authority”
(2) The Authority shall be a body corporate by the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.
(3) The head office of the Authority shall be at such place as the Central Government may decide from time to time.
(4) The Authority may establish offices at other places in India.
Composition of Authority-The Authority shall consist of the following members, namely:-
(a) A Chairperson;
(b) Not more than five whole-time members,
(c) Not more than four part-time members;
to be appointed by the Central Government from amongst persons of ability.
Duties, powers and and functions of Authority- The duties, powers and functions of Authority, inter alia, shall include-
(a) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration.
(b) Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policyholders, insurable interest, settlement of insurance claim, surrender value of policy, and other terms and conditions of contracts of insurance.
(c) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents:
(d) Specifying the code of conduct for surveyors and loss assessors
(e) Promoting efficiency in the conduct of insurance business;
(f) Promoting and regulating professional organisations connected with the insurance and reinsurance business;
(g) Levying fees and other charges for carrying out the purposes of this Act:
(h) Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business.
(i) Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under Section 64-U of the Insurance Act, 1938:
(j) Specifying the form and manner in which books of account shall be maintained and statement of accounts will be rendered by insurers and other insurance intermediaries:
(k) Regulating investment of funds by insurance companies;
(l) Regulating maintenance of margin of solvency:
(m) Adjudication of disputes between insurers and intermediaries or insurance intermediaries:
(n) Supervising the functioning of the Tariff Advisory Committee:
(o) Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f).
(p) Specifying percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector. and
(q) Exercising such other powers as may be prescribed.
Q. 7. Distinguish between Life, Fire and Marine Insurance.
Ans. Difference between Life Insurance and Fire Insurance- There are so many differences between life insurance and fire insurance. Only some of them are discussed here-
(1) The fire insurance is a contract of indemnity but the life insurance contract is a contract of certainty.
(2) In fire insurance payment of loss will be made only when fire is occurred whereas in life insurance payment is made surely.
(3) The fire may or not occur in fire insurance but in life insurance, the death will certainly occur.
(4) There are many types of risk in fire insurance whereas the risks in life insurance are divided into three classes the standard risk, sub-standard risk and uninsurable risk.
(5) The term of fire insurance does not last for more than one year but in life insurance it lasts for a very long period.
(6) Fire insurance includes only the element of protection whereas the life insurance includes the element of protection and investment.
(7) In fire insurance, the insurable interest must exist from the date of the proposal to the date of completion of the contract whether by death or by expiry of term. In life insurance, insurable interest must exist at the time of proposal. This is the reason that the insured property, insurance policy, or policy amount cannot be assigned to others in fire insurance whereas it is freely assignable in life insurance.
(8) The degree of moral hazard in fire insurance is maximum whereas it is very nominal in case of life insurance.
(9) Premium or sum assured is returnable in life insurance whereas no premium or sum is returnable in fire insurance.
Difference between fire insurance and marine insurance- There are many similarities in fire insurance and life insurance but the following differences in both insurance are as follows-
(1) The chances of moral hazard do not exist in marine insurance whereas there are so much chances of moral hazard in fire insurance.
(2) The insurable interest must exist both the time, at the inception and at the completion of the contract. This is the reason fire insurance policies cannot be freely assignable. The insurable interest in marine insurance must exist at the time of loss. So, the marine policies are freely assignable.
(3) Marine policies generally allow certain margin of profit to be charged at the time of indemnification of loss, but the fire policies do not allow it ordinarily.
(4) Marine insurance policies are generally valued policies and the market fluctuation is avoided, but the fire polices strictly adhere to the doctrine of indemnity and only the market value of the property, at the time of loss (valuable amount) is compensated.