Question: What are the Fundamental Principles of Insurance
Answer: The Following are the basic principles of insurance industry.
Good Faith: An insurance contract is a contract uberrimae fidei or a contract of absolute good faith. This fundamental rule applies to every type of insurance. It means that the parties to the contract must make a full disclosure of all the material facts relating to the contract. A material fact is one which would affect the judgment of a rational under writer in considering whether he would enter into a contract at all, or enter into it at one rate of another.
Insurable Interest: For an insurance contract to be valid the insured must possess an insurable interest in the subject-matter of insurance.
Indemnity: Indemnity is the controlling principle in insurance law. Contracts to indemnity the assured for what he actually loses by the happening of the events upon which the insurer's liability is to arise and in non circumstances is the assured in theory entitled to make a profit of his loss.
Subrogation: The doctrine of subrogation is just a corollary to the principle of indemnity. When a person insures his property against a particular risk, he can realise only the actual value of the loss of or damage to the property according to the principle of indemnity and, therefore, it follows that if the damaged property has any value left or the assured can recover the lost property or has any right against a third party regarding that property, these must pass on to the insurer.
The principle of subrogation does not apply to personal accident or life insurance. For instance, if an assured dies due to the negligence of a third party, his legal personal representative may be able to recover damages in addition to !he policy money. The insurers have to right of action against the third party in respect of damages).
Question: What are the different stages in Insurance?
Answer: Insurance business involves the following steps :
- Conceiving and designing insurance products
- Determining prices of insurance products.
- Publicizing them amongst consumers.
- Launching and selling them in the market through intermediaries.
- Collecting the premium and building up reserves.
- Creating liabilities to meet the losses of consumers.
- Investing the funds in the market.