Insurance

It is a contract in which an individual or entity receives financial protection or reimbursement against loss from a company .The company pools client’s risk to make payment more affordable for the insured.

In this contract ,between a client & a provider whereby the client makes monthly payment called Premium, in exchange for the promise that provider pay for certain expense. 

The company spreads the risk of any one’s expense by pooling the premium from many clients.It is a form of risk management primarily used to hedge against the risk of a uncertain loss.

Types of companies:

• Life Insurance Company:-These Companies deal with insuring lives ,pension product & annuities.
• General Insurance Company:-These Company provide all type of insurance apart from the Life Insurance.They include Automobile, Health, Credit ,Property  etc.

The distinction Between insuring against life and general business is that with regard to former ,the claim is fixed & certain But in that case of the latter,the claim is uncertain.

Investment of Money by Insurance Company:

There Is continuous inflows of funds for long period of time and liabilities in most of the cases is long term for ex many life policies are held for period of 30 or 40 or 50 or even more.As a result of these the liquidity is not problem for them. The guaranteed rate of return specified in insurance policies is relatively low.As a result of the combined result of all these facts ,the Investment of insurance companies have been largely in Government Bond ,Mortgage ,State and Local Govt Claim and Corporate Bonds.About 50% of the assets are invested in state and central govt Securities and some other approved security, presently by both LIC and GIC , at present.

Regulation :

Insurance Regulatory & Development Authority (IRDA) is a stuatory body set up for protecting the interest of policyholder and regulating ,promoting and ensuring orderly growth of Insurance Industry in India.It was contributed by parliament of India Act called Insurance Regulatory & Development Act 1999.

Headquarter lies in Hyderabad after being shifted from Delhi .Delhi and Mumbai being the regional offices. IRDA is 10 member body appointed by GOI .One is Chairman,Five whole time member ,Four Part time member.

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