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Project Three: Aids to Trade

Taking any one AID TO TRADE, for example Insurance and gathering information on following
aspects

1. History of Insurance Lloyd’s contribution.

2. Development of regulatory Mechanism.

3. Insurance Companies in India

4. Principles of Insurance.

5. Types of Insurance.

6. Importance of insurance to the businessmen.

6. Benefits of crop, orchards, animal and poultry insurance to the farmers.

7. Terminologies used (premium, face value, market value, maturity value, surrender value)

and their meanings.

8. Anecdotes and interesting cases of insurance. Reference of films depicting people

committing fraudulent acts with insurance companies.

9. Careers in Insurance.
1. History of Insurance Lloyd’s contribution.
With roots in marine insurance, Lloyd's was founded by Edward Lloyd at his coffee
house on Tower Street in 1688. Lloyd’s created a participating or cooperative type of
insurance by combining risk takers’ resources to protect a group of shipments in a
cooperative way. Individuals with marine shipments and ships pooled their funds to
protect their investments in the ships and the shipments. It was a milestone in the
development of insurance, using the law of large numbers to spread risk. It was
popular with sailors, merchants, and ship owners, and Lloyd catered to them with
reliable shipping news. The establishment became known as a good place to
purchase marine insurance. The shop was also frequented by mariners involved in
the slave trade. Lloyd's obtained a monopoly on maritime insurance related to the
slave trade and maintained it until the early 19th century. The Lloyd's Act gave the
business a sound legal footing. The Lloyd's Act of 1911 set out the organization's
objectives, which includes the promotion of its members' interests and the collection
and dissemination of information. However, insurance as a risk management strategy has
been around for probably 1,000s of years.

2. Development of regulatory Mechanism.


The Insurance Regulatory and Development Authority of India (IRDAI) is a regulatory
body under the jurisdiction of Ministry of Finance , Government of India and is tasked
with regulating and licensing the insurance and re-insurance industries in India.[1] It was
constituted by the Insurance Regulatory and Development Authority Act, 1999,[2] an Act of
Parliament passed by the Government of India.[3] The agency's headquarters are
in Hyderabad, Telangana, where it moved from Delhi in 2001.[4]
IRDAI is a 10-member body including the chairman, five full-time and four part-time
members appointed by the government of India.
The functions of the IRDAI are defined in Section 14 of the IRDAI Act, 1999,[1] and include:

 Issuing, renewing, modifying, withdrawing, suspending or cancelling registrations


 Protecting policyholder interests
 Specifying qualifications, the code of conduct and training for intermediaries and agents
 Specifying the code of conduct for surveyors and loss assessors
 Promoting efficiency in the conduct of insurance businesses
 Promoting and regulating professional organisations connected with the insurance and
re-insurance industry
 Levying fees and other charges
 Inspecting and investigating insurers, intermediaries and other relevant organisations
 Regulating rates, advantages, terms and conditions which may be offered by insurers
not covered by the Tariff Advisory Committee under section 64U of the Insurance Act,
1938 (4 of 1938)
 Specifying how books should be kept
 Regulating company investment of funds
 Regulating a margin of solvency
 Adjudicating disputes between insurers and intermediaries or insurance intermediaries
 Supervising the Tariff Advisory Committee
 Specifying the percentage of premium income to finance schemes for promoting and
regulating professional organisations
 Specifying the percentage of life- and general insurance business undertaken in the rural
or social sector
 Specifying the form and the manner in which books of accounts shall be maintained, and
statement of accounts shall be rendered by insurers and other insurer intermediaries.

3. Insurance Companies in India


Life Insurance Corporation - Life Insurance Corporation of India (abbreviated
as LIC) is an Indian statutory insurance and investment corporation. It is under
the ownership of Ministry of Finance , Government of India .
The Life insurance Corporation of India was established on 1 September 1956, when
the Parliament of India passed the Life Insurance of India Act that nationalized the insurance
industry in India. Over 245 insurance companies and provident societies were merged to
create the state-owned Life Insurance Corporation of India.[2][3]
As of 2019, Life Insurance Corporation of India had total life fund of ₹28.3 trillion. The total
value of sold policies in the year 2018–19 is ₹21.4 million. Life Insurance Corporation of
India settled 26 million claims in 2018–19. It has 290 million policy holders.

Aditya Birla General Insurance

Bajaj Allianz General Insurance.

Bharti AXA General Insurance

Cholamandalam MS General Insurance.

Digit General Insurance

Edelweiss General Insurance

Future Generali General Insurance

IFFCO Tokio General Insurance

4. Principles of Insurance
The Principle of Utmost Good Faith
 Both parties involved in an insurance contract—the insured (policy
holder) and the insurer (the company)—should act in good faith
towards each other.

The Principle of Insurable Interest


Insurable interest just means that the subject matter of the contract must
provide some financial gain by existing for the insured (or policyholder) and
would lead to a financial loss if damaged, destroyed, stolen, or lost.

The Principle of Indemnity

 Indemnity is a guarantee to restore the insured to the position he or


she was in before the uncertain incident that caused a loss for the
insured. The insurer (provider) compensates the insured
(policyholder).

The Principle of Contribution

 Contribution establishes a corollary among all the insurance contracts


involved in an incident or with the same subject.

The Principle of Subrogation


This principle can be a little confusing, but the example should help make it
clear. Subrogation is substituting one creditor (the insurance company) for
another (another insurance company representing the person responsible
for the loss).

The Principle of Proximate Cause

 The loss of insured property can be caused by more than one


incident even in succession to each other.
 Property may be insured against some but not all causes of loss.

The Principle of Loss Minimization

 In an uncertain event, it is the insured’s responsibility to take all


precautions to minimize the loss on the insured property.

5. Types of Insurance.
 Life Insurance.
 Motor insurance.
 Health insurance.
 Travel insurance.
 Property insurance.
 Mobile insurance.
 Cycle insurance.
 Bite-size insurance.

6. Importance of insurance to the businessmen.

Importance and Benefits of Insurance


1. Security and Safety: It gives a sense of security and safety to the
businessman. It enables him to receive compensation against actual
loss. He can concentrate on his business with a secure feeling that in
case of losses arising from insurable risk, his losses will be
compensated.
2. Distribution of risk: Risk in insurance is spread over a number of
people rather being concentrated on a single individual.
3. Normal expected profit: An insured trader can enjoy normal
margin of profit all the time. He is protected from unexpected losses
because of insurance.
4. Easy to get loans: A trader can get bank loans easily if his stock or
property is insured, as insurance provides a sense of security to the
lenders.
5. Advantages of Specialization: Businessmen can concentrate on
their business activities without spending more time on safeguarding
their property. The insurance companies, on the other hand, can
provide specialized insurance services.
6. Development of Social Sectors: Insurance funds are available for
economic development particularly for the development of social
sectors. Especially for a developing country like India, insurance
funds are an important source for investing in infrastructure projects
(roads, power, water supply, telecom etc).
7. Terminologies used (premium, face value, market value, maturity
value, surrender value) and their meanings.
The insurance premium is the sum of money an individual or business must pay for
aninsurance policy. The amount of insurance premium that is paid out by the policyholder
to the insurance company depends on a variety of factors.

your face value is the amount of money your beneficiaries will receive from your
insurance company at the time of your death. You might hear it called your death benefit,
coverage amount or face amount.

A market value clause is an insurance policy clause whereby the insurer must


compensate the insured the market price of the covered property rather than the actual
cash value or the replacement value of the covered property.

Maturity Value — (1) Under a whole life insurance policy, the amount payable if the
insured person lives to the last age on the mortality table on which the values of the
contract were based or because of the insured's death.

The cash surrender value is the sum of money an insurance company pays to a
policyholder or an annuity contract owner if their policy is voluntarily terminated before its
maturity or an insured event occurs. Cash value is the amount of equity in a policy against
which a loan can be made.

8. Anecdotes and interesting cases of insurance.


Case study: Harpreet Singh Oberoi was working with Mirasu Marketing as a sales
representative. He was covered under a personal accident policy obtained by his employer
through Oriental Insurance Co.

On June 7 2004, Oberoi met with an accident, for which an FIR was registered at the
Jalandhar police station. Oberoi suffered several injuries and was hospitalized for a week.
Following discharge, he continued treatment, but suffered 50% disability. Oberoi lodged a
claim of Rs 1,85,000 with supporting documents such as bills, prescription slips, payment
receipts etc. But the claim was neither settled nor rejected, prompting Oberai to file a
complaint before the Jalandhar district forum against the insurance company and his
employer. The employer refuted its liability as the policy was a contract between Oberoi and
Oriental Insurance Co. The employer also questioned the jurisdiction of the Jalandar forum
as Oberoi was working in Mumbai when the accident occurred. The insurance company
stated that it could not decide on the claim as Oberoi had not submitted all necessary
documents. The Forum held the insurance company liable to pay Rs 1,85,000, while the
employer was asked to pay 9% interest, Rs 5,000 in compensation and Rs 3,000 toward
costs.
The insurance company appealed to the Punjab State Commission; the employer did not.
The state commission observed that the employer had failed to furnish relevant documents.
It held the insurer and employer jointly and severally liable to pay Rs 1,85,000.

9. Careers in Insurance.
 Administrative Officer.
 Assistant Administrative Officer.
 Development Officer.
 Insurance / Composite Agents.
 Insurance Surveyors.
 Actuaries.
 Insurance Underwriter.
 Investment Professionals.

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