Syllabus

❖Origin
❖History and development of Insurance
❖Development of Insurance in Bangladesh
❖Definition of Insurance
❖Nature of Insurance
❖Functions of Insurance
❖Scope of Insurance
❖Role and Social values of Insurance
❖Insurance contracts
❖Principles
❖Essentials of Insurance Contracts.
History of Insurance Business In Bangladesh
 Insurance
❑Insurance is a means of protection from
financial loss in which, in exchange for a fee, a
party agrees to compensate another party in the
event of a certain loss, damage, or injury.
❑It is a form of risk management, primarily used
to hedge(protect/save) against the risk of a
contingent(probable)or uncertain loss. Wikipedia
 Functional Definition

• 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.

Thus Insurance is a…
❑a co-operative device to spread the risk
❑The system to spread the risk over a number of persons who are insured against
the risk.
❑The principle to share the loss of each member of the society on the basis of
probability of loss and
❑The method to provide security against losses to the insured.
 Contractual Definition
• The insurance has been defined to be that 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 insurance , thus , is a contract whereby

✓ certain sum , called premium, is charged in consideration,
✓ against the said consideration , a large sum is guaranteed to be paid by the
insurer who received the premium,
✓ the payment will be made in a certain definite sum-i.e, the loss or the policy
amount whichever may be , and
✓ the payment is made only upon a contingency.
• Ghosh and Agarwal : Insurance is a co-operative
form of distributing a certain risk over a group of
persons who are exposed to it.

• Mowbray and Blan : Insurance is a social device

for eliminating or reducing the cost to society of
certain types of risk.
 Nature of Insurance
1 Contract 9 protection of financial
risks
2 . Consideration 10 Based upon certain
principles
3 Sharing risk 11 Regulated by Law
4 Co-operative device 12 Investment portfolio
5 Value of risk 13 Insurance is not a
gambling
6 Payment at contingency 14 Insurance is not
charity
7 Amount of payment
8 Large number of insured persons
 Principles of Insurance

SL.NO Principles

1 Principles of Co-operation

2 Principles and Theory of Probability

 Functions of Insurance

Primary Function Secondary Function

a) It Provides Certainty a) Prevention of Loss

b) It Provides Protection b) Provides Capital
c) Ensures Risk-Sharing c) Improves Efficiency
d) Helps Economic
Growth/Progress
 Scope of Insurance
Life Insurance General Insurance Social Insurance
a) Marine Insurance a) Pension Insurance
a) Whole life insurance b) Fire Insurance
b) Term insurance (1)Property c) Automobile Insurance b) Unemployment
Insurance d) Livestock Insurance Insurance
c) Joint insurance e) Crop Insurance c) Disability Insurance
d) Personal accidental f) Theft Insurance
d) Sickness Insurance
insurance Liability insurance is an insurance
product that provides protection against
e) Health insurance (2) Liability
claims resulting from injuries and
damage to other people or property.
Insurance
f) Annuity insurance Liability insurance policies cover any
legal costs and payouts an insured party
is responsible for if they are found
legally liable.
a) Motor cycle Insurance
(3) Other b) Gono Insurance
Insurance c) Air Insurance
d) Export Credit Insurance
e) Sky Insurance
 Role and Social values of Insurance
Sl. No Issues
1 Bring peace of mind for individual

2 Wealth of society is protected

3 Economic growth of the country

4 Insurance provides security and safety to the society

5 Reduction in inflation

6 Uncertainty of business losses is reduced

7 Business efficiency is increased with insurance

8 Generates financial resources

9 Life insurance encourages savings:

10 Medical support:

11 Source of collecting funds

 Insurance Contracts
❑Insurance may be defined as a contract between two
parties of whereby one party called insurer undertakes, in
exchange for a fixed sum called premiums, to pay the other
party called insured a fixed amount of money on the
happening of a certain event.
❑Since insurance is a contract, certain sections of Indian
Contract Act are applicable.
❑Section 10 of this Act says, "All agreements are contract if
they are made by free consent of the parties, competent to
contract, for a lawful consideration and with a lawful object
and which are not hereby declared to be void".
 Essentials of Insurance Contracts
The insurance contract involves

(A)The elements of general contract,

and
(B) The element of special contract
relating to insurance.
 The Elements of General Contract
• The valid contracts, according to section 10 of Indian Contract Act 1872, must
have the following essentialities.

SL. No Issues
1 Agreement ( Offer and acceptance)
2 Legal Considerations
3 Competent to make contract
4 Free Consent
5 Legal Object
The special contract of insurance involves
principles
SL. No Issues
Insurable Interest
1
Utmost Good Faith
2
Indemnity,
3
Subrogation,
4
Warranties,
5
Proximate Cause,
6
Assignment and Nomination,
7
Return of Premium
8