Insurance is a mechanism by which the losses suffered by a few are spread over many, exposed to similar risks. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the premiums collected from the insuring public and the insurance companies act as trustees to the amount collected.

Insurance is a hedge against the occurrence of unforeseen incidents. Insurance products help you in not only mitigating risks but also helps you by providing a financial cushion against adverse financial burdens suffered.

Insurance business is divided into four classes:

1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance. Life Insurers transact life insurance business; General Insurers transact the rest. No insurance company can transact both Life and General insurance business as per law in India.

All insurance covers other than Life are called General Insurance. Fire, Marine, Motor, Health, Burglary, Personal Accident, Household, Shopkeeper Insurance and Engineering Insurance are examples of General Insurance coverage.

Accidents... illness... fire... financial securities are the things that one would worry about any time. General Insurance provides the much-needed protection against such unforeseen events. General Insurance is not meant to offer returns but is a protection against contingencies. Some types of insurance like Motor Insurance and Public Liability Insurance are compulsory under the law in India.

It is important to have adequate amount of coverage for each insurance policy. For any asset or property insurance, the value of the asset based on market value or reinstatement value should be taken into consideration before deciding sum insured. If the sum insured is not adequate, the percentage representing the uncovered portion of the asset is to be borne by the insured.

Almost everything that has a financial value in a person’s life and has a probability of getting lost, stolen or damaged, can be covered through insurance. Property (both movable and immovable), vehicle, cash, household goods, health, dishonesty and also liability towards others can be covered.

The owner of the property has a legal right to obtain insurance on the property if he is likely to suffer any financial loss. When the property is lost/damaged, only person having legal right in the property can ask for claim under insurance Only person having insurable interest in the property can get the property insured.

Premium is the price payable by the proposer for purchasing the insurance products.

Mediclaim Policy provides reimbursement of hospitalization expenses for illness/disease suffered or accidental injury sustained during the term of the policy.

Third Party Administrator (TPA) is an intermediary between an insurance company, insured and hospital for speedy settlement of claims under Health Insurance. TPA makes arrangement with hospitals to provide cashless service to the insured so that insured does not have to pay heavy medical bills from his pockets. Incase of claim TPA directly pays to the hospital/ insured and gets reimbursed by insurance company subsequently.

Tariff Advisory Committee (TAC) is the body constituted by IRDA through nominated members from Insurance companies. Its main task is to control and advise rates of risk and improvement of risk after loss/accident. Unless exempted specifically for any class of business the rates, terms etc determined by the TAC are binding on all insurers.

Tariff business is the one where rates are fixed by Tariff Advisory Committee and chargeable by all non life insurance companies. Non-tariff business rates may be charged according to the suitability of the insurer.

A proposal form is a printed form of the insurer on which a risk is proposed or insurance by the party interested in taking insurance. It contains material information about the risk proposed for insurance and forms the basis of the contract between the insurer and the insured.

A cover note is an unstamped document issued in advance of the policy covering a risk when the policy cannot be issued immediately due to some reason.

An Agent is the representative of Insurance Company whereas broker is the representative of the consumer or policyholder. An agent is licensed to work for only one company, whereas a broker can deal with more than one company.

Underwriting means assessment of risk. Underwriting of a risk involves consideration of material facts on the basis of which a decision will be taken whether to accept the risk and if so at what rate of premium and on what terms and conditions.

It is an arrangement by which an insurer having accepted a risk (generally a heavy risk) gives off part of the risk to another insurer so that his own ultimate liability is reduced.

Risk Management is very important for an organization, as it is a managerial function concerned with protection of firm’s assets, earnings or profits, legal / personal liabilities against financial losses that may result from accidental happenings. It follows a systematic method of managing various risks to which a company is exposed.

Currently there are 14 insurers operating in general insurance in India.

1. Bajaj Allianz General Insurance Co. Ltd.
2. ICICI Lombard General Insurance Co Ltd.
3. IFFCO Tokio General Insurance Co. Ltd.
4. National Insurance Co. Ltd.
5. The New India Assurance Co. Ltd.
6. The Oriental Insurance Co. Ltd.
7. Reliance General Insurance Co. Ltd.
8. Royal Sundaram Alliance Insurance Co Ltd.
9. Tata AIG General Insurance Co. Ltd.
10. United India Insurance Co Ltd.
11. Cholamandalam General Insurance Co. Ltd.
12. HDFC-Chubb General Insurance Co. Ltd.
13. Export Credit Guarantee Corporation Ltd.
14. Agriculture Insurance Co. of India Ltd.