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
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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