INSURANCE - ITS FUNDAMENTAL PRINCIPLE 

INTRODUCTION

 Life is full of uncertainties. An event causing loss to an individual or a firm is uncertain and is not in the controls of anyone. The chances are thus uncertain and these risks such as death, injury and accidents to a human being, burglary and fire risk to property and goods, natural calamities etc. can cause a huge loss. This loss may be so huge for the business that it may not be able to bear it and might have to be closed. Thus, insurance plays a key role in removing the hindrance of risk.

 Insurance is a device by which the loss likely to be caused by an uncertain event is spread over a number of persons who are exposed to it and who prepare to insure themselves against such an event. it is a contract or agreement under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make a loss, damage or injury to something of value in which the insured has a pecuniary interest as a result of some uncertain event. The contract is put in writing and is known as ‘policy’. The person whose risk is insured is called “insured” and the firm which insures the risk of loss is known as insurer/assurance underwrite

 

 METHODOLOGY

 As this project aims to provide the reader a generalized concept of insurance and its principles as well as insights on its types, its companies and its policies and its sector in India , a considerable amount of data has been chosen specifically in order to enhance readability.

 1.1 WHICH TYPE OF DATA WAS COLLECTED ? 

 All the data provided in the project is based on secondary sources ranging from books to the data given by various recognized organizations in the internet. Therefore the data provided is precise and accepted generally. The data collected mostly comprises of qualitative data for explaining various concepts related to insurance and some quantitative data for explaining about the growth and share of various types of insurances 

HOW WAS THE DATA USED AND ANALYSED?

 The data collected was analyzed through processes constituting separate cross checking from different individuals and the approval of various dignitaries of the said field. It was used in order to explain the different categories of insurance, how each of them worked and how it helped both the parties involved in an insurance. The aims of this project as said before mostly comprised of giving the reader a generalized concept of the branch of insurance. the methods used was mostly qualitative and the data used is secondary in nature. 

 

FUNDAMENTAL PRINCIPLE OF INSURANCE

 

 

The basic principle of insurance is that an individual or a business concern chooses to spend a definitely known sum in place of a possible huge amount involved in an indefinite future loss. The loss of risk still remains but the loss is spread over a large number of policyholders exposed to the same risk. The small amount paid periodically is known as premium. This premium is pooled out of which the loss sustained by any policy holder is compensated . Thus the risk is shared. the insurance company fixes the premium through analysis of past events and the probable losses  caused by a risk, in a way through which they get profit .

 

Insurance , therefore is a form of risk management, ideally  defined as the equitable transfer of the risk of a potential loss from one entity to another,in exchange for a reasonable fee and organisations involved in these activities are known as insurance companies.