A Study on Birla Sun Life Insurance Products

Topics: Insurance, Life insurance, Investment Pages: 21 (5465 words) Published: August 3, 2012

• What is Insurance
• Purpose and its needs
• History of Insurance
• Fundamental Principles of Insurance.

What is Insurance..???

Insurance is a system of providing financial protection against loss of or damage to an asset. In this system, a number of people who are exposed to similar kind of risk, agree to pay certain sums of money ( called premiums) to create a common pool of funds. This pool generates a compensation to the individual who suffers an accident or loss of asset.

Purpose and Need of Insurance


• Owner of the asset (or the one who derives benefit from the asset.) is interested in its existence and its remaining in tact • This is so, because loss of or damage to the asset would result in deprivation of benefits derived from it. Loss of or damage to the asset would lead to financial losses of the owner. • Hence there is always a sense of financial insecurity with regard to the asset. • Such a financial concern arises from the fact that every asset is exposed to the risk of being destroyed, lost or damaged due to some accidental occurrence. • Different assets are exposed to different risk


• Risk means likelihood of damage to asset caused by an accidental occurrences . • Risk to an asset causes financial insecurity to the owner. The asset’s owner therefore, needs protection against such financial loss. • Thus, insurance becomes relevant only if there are uncertainties about occurrence of events leading to losses. No uncertainty, no insurance.

History of Insurance Industry

• Insurance business started with covering marine related risk, namely • Loss of ship by sinking due to bad weather in high seas. • Goods in transit by ship robbed by sea pirates.
• Loss of or damage of goods due to transit.
• The first Insurance policy was issued in England in 1583.

History of Insurance Industry in India

• Insurance started in 1818 with life insurance business transacted transated by an England company, named Oriental Life Insurance Company Limited. • The first Indian insurance company was the Bombay Mutual Life Assurance Society Limited, Formed in 1870 followed by a quite good number of Indian companies in various parts of the country. • In 1956, life insurance business was nationalized and LIC of India was formed on 1 September 1956 giving it exclusive privilege of doing life insurance business in India. • In 1999, relevant laws were amended and insurance business was made open to private players.


Some useful terms in Insurance:

A) INDEMNITY: A contract of insurance contained in a fire, marine, burglary or any other policy excepting life assurance and personal accident and sickness insurance is a contract of indemnity. This means that the insured, in case of loss against which the policy has been issued, shall be paid the actual amount of loss not exceeding the amount of the policy, i.e. he shall be fully indemnified. The object of every contract of insurance is to place the insured in the same financial position, as nearly as possible, after the loss, as if his loss had not taken place at all. It would be against public policy to allow an insured to make a profit out of his loss or damage.

B) UTMOST GOOD FAITH : Since insurance shifts risk from one party to another, it is essential that there must be utmost good faith and mutual confidence between the insured and the insurer. In a contract of insurance the insured knows more about the subject matter of the contract than the insurer. Consequently, he is duty bound to disclose accurately all material facts and nothing should be withheld or concealed. Any fact is material, which goes to the root of the contract of insurance and has a...
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