Insurance & capital markets in india
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Transcript of Insurance & capital markets in india
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Principles & Practice of Insurance
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TOPIC
Insurance & capital markets in India:Application and Management concept in the field of insurance.
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CONTENTS Insurance Important terms usedCharacteristicsPrincipleFunctionRelevance Capital market Purpose of capital market RiskCauses of RiskTypes of RiskPrinciples of Risk ManagementSteps in Risk ManagementRisk Management TechniquesReason for Risk or Risk Management practices
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INSURANCEInsurance is defined as a form of contract between two parties whereby one party(insurer) agrees to compensate the other party (insured) against a loss which may or may arise against a payment of a consideration (premium).
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IMPORTANT TERMS Insured InsurerPremium Compensation Insurance policy Insured amount Risk ContingencyPeril
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CHARACTERISTICS Contract Consideration Sharing of financial risk Co-operative device Risk evaluation in advance Good faith Contract of indemnity Amount of payment Insurance is not a gambling Insurance is not a charity
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PRINCIPLES Principle of indemnity Doctrine of subrogation Principle of causa proximaPrinciple of insurable interest Principle of utmost good faith
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FUNCTIONS
Primary FunctionsSecondary FunctionsOther Functions
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Primary FunctionsProvides certainityProvides protectionRisk-sharingProvides security
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Secondary function Prevention of loss Provides capital Improves efficiency Economic progress
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Other functions Encourages savings Feeling of Self confidence & goodwill Credit facility
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RELEVANCE OF INSURANCERelevance to an IndividualRelevance to BusinessRelevance to Society
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Relevance to an Individual Insurance provides security & safety Life insurance encourage savings Life insurance provides profitable investment Life insurance fulfils the need of a person
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Relevance to Business Uncertainty of business losses is reduced Business efficiency is increased enhancement of credit Businesses continuation Welfare of employees
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Relevance to Society Wealth of the society is protected Economic growth of the country Reduction in inflation
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Capital market Capital market is a market for long term securities (equity & debt).Capital market is a place where buyer & sellers engaged In trade of financial securities like bond ,stock etc
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Purpose of Capital MarketMobilize long term saving to finance long
term investment Provide risk capital in the form of equity Encourage broader ownership of productive
assets Lower the cost of transaction & information Provide liquidity with a mechanism enabling
the investor to sell financial assets
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RISK By risk we mean 'uncertainty'.In other words,it refers to 'possiblity ' or change of meeting a danger or suffering or change of exposure to adversity or danger.
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CAUSES OF RISK Natural CausesUnnatural Changes
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Natural Causes Seasonal Changes Geographical Changes Natural Changes
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Unnatural CausesHuman forces Economic causesGovernment policy
Other causes: the above list is illustrative ,not exhaustive. Therfore , in addition to the above mentioned natural and unnatural causes , sometimes causes like inefficient management lower quality of product ,etc.
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Type of risks Financial and non-financial risks Pure and speculative risksDynamic risks and static risks Fundamental and particular risks
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Principles of risk management Control of speculative risks Control of pure risk
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Steps in risk management Identification of source of risk Measurement of riskTreatment of risk Selecting suitable method of risk handling Implementing the selected method Evaluation
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Risk handling techniques
Avoiding risk Risk reduction Assumption of risk Transfer of risksInsurance
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Reason for risk or risk management practices Industries and business have grown in size,
diversification ,process and strategic alliances
Increase in business relations with suppliers, consumers, employees and government.
Business operations face many contingency due to tough competition between enterprises.
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THANK YOU