Insurance is a contract, represented by a policy, in which an individual

or entity receives financial protection or reimbursement against losses

from an insurance company.
The company pools clients' risks to make payments more affordable for
the insured.
Insurance policies are used to hedge against the risk of financial
losses, both big and small, that may result from damage to the insured
or her property, or from liability for damage or injury caused to a third
party.
There are a multitude of different types of insurance policies available, and virtually
any individual or business can find an insurance company willing to insure them, for
a price. The most common types of personal insurance policies are auto, health,
homeowners, and life.
Most individuals in India have at least one of these types of insurance, and car
insurance is required by law.
Businesses require special types of insurance policies that insure against specific
types of risks faced by the particular business. For example, a fast food restaurant
needs a policy that covers damage or injury that occurs as a result of cooking with a
deep fryer.
An auto dealer is not subject to this type of risk but does require coverage for
damage or injury that could occur during test drives.
There are also insurance policies available for very specific needs, such as kidnap
and ransom (K&R), medical malpractice, and professional liability insurance, also
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known as errors and omissions insurance.
▶ Provides protection against occurrence of uncertain events.

▶ Device for eliminating risks and sharing losses.

▶ Co-operative method of spreading risks.

▶ Facilitates international trade.

▶ Serves as an agency of capital formation.

▶ Financial support.

▶ Medical support.

▶ Source of employment.
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▶ Life Insurance can be termed as an agreement between
the policy owner and the insurer, where the insurer for
a consideration agrees to pay a sum of money upon
the occurrence of the insured individual's or
individuals' death or other event, such as terminal
illness, critical illness or maturity of the policy.
▶ Insurance in India can be traced back to the Vedas. For instance,
yogakshema, the name of Life Insurance Corporation of India's
corporate headquarters, is derived from the Rig Veda.

▶ Bombay Mutual Assurance Society, the first Indian life assurance

society, was formed in 1870.

▶ Other companies like Oriental, Bharat

and Empire of India were also set up
in the 1870-90s.

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▶ It was during the swadeshi movement in the early 20th century that
insurance witnessed a big boom in India with several more companies
being set up.

▶ By the mid-1950s, there were around 170 insurance companies and 80

provident fund societies in the country's life insurance scene. However, in
the absence of regulatory systems, scams and irregularities were
prevalent in most of these companies.

▶ As a result, the government decided to nationalize the life assurance

business in India. The Life Insurance Corporation of India was set up in
1956 to take over around 250 life insurance companies.

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▶ For years thereafter, insurance remained a monopoly of the
public sector. The sector was finally opened up to private
players in 2001.

▶ The Insurance Regulatory & Development Authority, an

autonomous insurance regulator set up in 2000, has extensive
powers to oversee the insurance business and regulate in a
manner that will safeguard the interests of the insured.

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▶ life insurance companies represent a vital resource that anyone can use to provide
security for those left behind after they pass away.

▶ There are two main types of organizational structures that life insurance companies
can take advantage of to help individuals get covered.
⚫ The one that works best will depend on
⚫ the size of the organization,
⚫ its location,
⚫ the target market
⚫ it’s serving and
⚫ the owner’s personal preference.

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Defining Mutual Organization

▶ Life insurance companies that utilize mutual organization are owned by their policy holders.

▶ This means that instead of the company being publicly traded, it is the policy holders who act as
shareholders and receive the same benefits as such.

▶ As a result, the most practical way of sharing profits comes from dividends that the company
must declare.

Benefits of Mutual Organization

▶ When a life insurance company utilizes mutual organization, there are some upfront
advantages for its policy holders.

▶ Because the company must answer solely to the policy holders, it means company interests are
far more aligned with the preferences of its patrons.

▶ This also limits the scope of the managers' responsibility, making their job easier and far more
focused. However, without being publicly traded, the only way the company can grow is by
selling more policies.

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Defining Stock Organization

▶ Life insurance companies that utilize stock organization become publicly traded entities.

▶ This means policy holders never own any shares in the company unless they purchase them directly from the
secondary market.

▶ This also means no policy holders can also become shareholders by doing the same.

▶ While in some cases, purchased policies may constitute the payment of dividends, it is far more common
under this structure to pay them only to shareholders.

Benefits of Stock Organization

▶ Under stock organization, policy holders always come second to shareholders.

▶ Despite having to cater to both groups of people on different levels, the company enjoys other advantages,
such as greater flexibility to grow and explore more financing options.

▶ In addition to growth from selling more policies, stock life insurance companies can also grow by issuing
more stock shares that can be more advantageous for the organization in the long run.

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▶ The internal structure of the life insurance company will typically
consist of a manager, clerical staff and agents, but their roles are a
little different based on the organizational structure being used.

▶ The main difference is that under mutual organization, the

manager answers strictly to the company’s policy holders,
▶ while under stock organization, the manager must also answer to
the company’s shareholders.

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Who is Insurance Underwriter

Insurance underwriters are professionals who evaluate and analyze the risks of insuring people and
assets and establish pricing for accepted insurable risks.
Underwriters help price life insurance, health insurance, commercial liability insurance, homeowners
insurance, etc.

Underwriters use computer programs and actuarial data to determine the likelihood and magnitude of
claim payouts over the life of the policy.

Evaluating an insurer's risk before the policy period and at renewal is a vital function of an underwriter.

Underwriters must analyze numerous rating factors when developing premium rates. However, not every
risk can be measured objectively.

Pricing is subject to underwriting discretion that typically follows systematic rating methodologies.

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GET INSURED
Thank You

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