2. What is Insurance
Insurance is a financial arrangement and a contract between an
individual or entity (the policyholder) and an insurance company (the
insurer). The purpose of insurance is to provide protection and financial
coverage against specific risks or uncertainties in exchange for regular
3. • Insurer: The insurer is the insurance company or organization that provides the
insurance coverage. The insurer assumes the financial risk associated with the
specific events or risks covered by the insurance policy. In exchange for this
coverage, the insured pays premiums to the insurer. The insurer's primary role is to
assess risks, collect premiums, and pay out claims when covered events or losses
occur. Insurers use actuarial and underwriting practices to determine the pricing of
policies and to manage risk across their pool of policyholders.
• Insured: The insured is the individual or entity (such as a person, business, or
property) that purchases and owns the insurance policy. The insured is the party
seeking protection or coverage against specific risks or events. When the insured
experiences a covered loss or event, they have the right to make a claim with the
insurer to receive financial compensation or benefits as outlined in the insurance
policy. The insured is also responsible for paying premiums to the insurer to
maintain the policy.
4. Purpose Of Insurance
• Financial protection - Insurance is a financial product that provides
peace of mind and protection against loss, damage or theft.
• Compensation - Insurance claim protects an individual from the
prospect of large financial burdens resulting from an accident or
• Business confidence - Insurance plan will help to get coverage for
damages to home and pay for the cost of repairs or rebuilding etc,
whichever is needed.
5. Insurance and Economic Development
• Risk Mitigation: Insurance provides financial protection against unexpected events, reducing the fear of
financial loss and encouraging entrepreneurship, investment, and economic growth.
• Business Growth: Insurance supports business expansion by safeguarding assets, providing liability
coverage, and mitigating operational risks, fostering a conducive environment for investment and
• Employment and Income Stability: The insurance sector creates job opportunities, contributing to
increased employment and income stability for individuals, which, in turn, drives economic growth and
• Infrastructure Development: Insurance supports large-scale infrastructure projects by offering
coverage against risks, facilitating the development of critical infrastructure that enhances economic
• Social and Economic Resilience: Insurance helps communities and individuals recover from disasters
and adverse events, reducing the long-term impact of such events on economic growth and fostering
overall economic resilience.
6. Insurance Agent
An insurance agent is a licensed professional who works on behalf of an
insurance company or multiple insurance companies to sell insurance
policies to individuals and businesses. These agents are intermediaries
between insurance providers (insurers) and potential policyholders (the
7. Insurance Agents Regulation
• Licensing: Insurance agents are required to obtain a license from the
relevant regulatory authority before they can sell insurance products. The
licensing process typically involves passing an exam, meeting educational
requirements, and undergoing a background check.
• Training and Continuing Education: Insurance agents may be required to
complete specific training programs and continuing education courses to
keep their knowledge up-to-date and maintain their license.
• Professional Conduct: Regulations often outline the ethical and
professional standards that insurance agents must follow. This includes
acting in the best interest of the client, providing accurate information, and
avoiding conflicts of interest.
8. • Disclosure Requirements: Insurance agents are usually required to disclose
certain information to clients, such as their commission structure, the insurance
company they represent, and any potential conflicts of interest.
• Sales Practices: There may be regulations regarding how insurance products can
be marketed and sold to consumers. This can include restrictions on cold-calling,
aggressive sales tactics, and misrepresentation of policy features.
• Consumer Protection: Regulations aim to protect consumers from unfair
practices and ensure that insurance policies are suitable for their needs. This may
involve rules related to policy cancellation, claim handling, and policyholder
• Complaint Handling: Insurance agents must have a process in place to handle
customer complaints and grievances. This ensures that any issues raised by clients
are addressed promptly and fairly.
9. • Insurance Company Relationships: Regulations may address the
relationship between insurance agents and the insurance companies
they represent, including rules about appointments and termination of
• Record Keeping: Insurance agents are often required to maintain
detailed records of their transactions, including client information,
policy details, and sales documentation.
• Regulatory Oversight: Regulatory authorities are responsible for
overseeing insurance agents' activities, enforcing compliance with
regulations, and taking appropriate action against agents who violate
10. Agents Compensation
• Commissions: Commissions are the most common form of compensation for insurance agents. When an
agent sells an insurance policy, they receive a percentage of the premium paid by the policyholder. The
commission rate can vary depending on the type of insurance, the insurance company, and the agent's
experience and performance.
• Base Salary: Some insurance agents may receive a base salary from their employing insurance agency or
brokerage firm. In addition to the base salary, they may also earn commissions or bonuses based on their sales
• Bonuses and Incentives: Insurance companies may offer bonuses and incentives to agents who meet specific
sales targets or achieve other performance goals. These additional payments serve as motivation for agents to
excel in their sales efforts.
• Renewal Commissions: In many cases, agents receive renewal commissions for policies that are renewed by
their clients. These commissions are typically lower than the initial commission but provide agents with
ongoing income for policies that continue in force.
11. • Contingent Commissions: Some insurance companies offer
contingent commissions based on the overall performance of the agent
or the agency in selling the company's insurance products. These
commissions are often tied to the total business volume produced by
the agent or agency.
• Fee-Based Compensation: In certain situations, insurance agents may
charge a fee for providing specialized advice or services. This fee-
based compensation model is more common in certain types of
insurance, such as commercial insurance or high-value insurance
12. Life Insurance
Life insurance is a contract between an individual (policyholder) and an
insurance company. In exchange for regular premium payments, the
insurance company promises to provide a predetermined sum of money
to the policyholder's beneficiaries upon the insured's death. This
financial benefit is known as the death benefit. Life insurance is
designed to provide financial security and support to the insured's loved
ones in the event of the insured's untimely death.
13. Types of Life Insurance
• Term Life Insurance: Offers coverage for a specific term (e.g., 10, 20, or 30 years). If
the insured dies during the term, the death benefit is paid to the beneficiaries. It does not
build cash value.
• Whole Life Insurance: Provides lifetime coverage and includes a cash value component
that grows over time. Premiums are typically higher than term life insurance but remain
level throughout the insured's life.
• Universal Life Insurance: Combines a death benefit with a flexible savings component.
Policyholders can adjust premium payments and the death benefit over time.
• Variable Life Insurance: Allows policyholders to invest part of their premiums in
various investment options. The cash value and death benefit may vary based on the
performance of the investments.
14. General Insurance
General insurance, also known as non-life insurance, is a type of
insurance that provides coverage for losses and damages that are not
related to human life. It covers assets, properties, and liabilities against
various risks such as accidents, thefts, natural disasters, and legal
15. Types of General Insurance
• Home Insurance: Protects homes and their contents against damages from fire, theft, natural
disasters, and other perils.
• Auto Insurance: Provides coverage for vehicles against accidents, theft, and third-party liabilities.
• Health Insurance: Offers coverage for medical expenses, hospitalization, and sometimes
• Travel Insurance: Provides coverage for unexpected events while traveling, such as trip
cancellations, medical emergencies, lost baggage, etc.
• Business Insurance: Protects businesses against various risks, including property damage, liability
claims, and business interruption.
• Liability Insurance: Offers protection against legal liabilities arising from third-party claims for
injury, property damage, or other losses.
• Marine Insurance: Provides coverage for marine vessels and cargo against risks during transit.
16. Principles of Insurance
• Principle of Utmost Good Faith: According to this principles, the
person who is getting insured must willingly disclose to the insurer, all
his complete & true information regarding the subject matter of
• Principle of Insurable Interest: In terms of this principle, You
should have personal interest in the subject matter of Insurance. That
means you can take insurance for your car, not your friend’s car.
• Principle of Indemnity: This principle tells that the insurance is not
to make profit, but only to compensate you against the losses incurred.
So, the maximum claim can be passed is upto your actual loss. That
means making your loss good.
17. • Principle of Contribution: In terms of this principle, If there are more than two
insurers, the insurance company has right to share the loss with other insurers.
• Principle of Subrogation: once the insured is paid for the losses due to damage to
his insured property, then the ownership right of such property shifts to the insurer.
For example, If your bike is stolen and the insurance company has paid you the
compensation, thereafter, if the bike is found, you cannot make your claim on the
• Principle of Loss minimization: this principle tells that Insurance buyer shall put
all the effort to minimize the losses. If your car is stolen, you shall immediately
call the police, insurance company. You cannot just sit and relax, feeling that your
car has insurance.
• Principle of Causa Proxima (Nearest Cause): According to this principle, when
a loss if caused by more than one causes, then the nearest or the closest cause
should be taken into consideration to decide the liability of the insurer.
18. Aspect Life Insurance General Insurance
Nature of Coverage
Covers the risk of death and
provides financial security to
beneficiaries upon the insured's
Covers a wide range of risks
such as accidents, property
damage, liability, health, travel,
Provides financial support to
beneficiaries and can serve as an
Mitigates financial losses caused
by unexpected events, accidents,
damage, or liabilities.
Based on factors like age, health,
lifestyle, and coverage amount.
Determined by risk-specific
factors such as type of coverage,
vehicle, location, etc.
Difference between Life and General
19. Aspect Life Insurance General Insurance
Duration of Coverage
Policies can have longer terms,
ranging from several years to a
Typically has shorter terms,
usually one year, with renewal
Involves principles such as
insurable interest, utmost good
faith, and sometimes the
principle of indemnity.
Adheres to principles like
indemnity, subrogation, and
mitigation of loss.
Examples of Policies
Term life insurance, whole life
insurance, universal life
Auto insurance, home
insurance, health insurance,
liability insurance, travel