Insurance is a contract between the insurer and the insured wherein against receipt of certain amount, called premium, the insurer agrees to make good any financial loss that may be suffered by the insured, due to the operation of an insured peril on the subject matter of insurance.
Insurance is a technique wherein a number of people, who are exposed to similar risk, participate in the scheme and contribute in the shape of periodic premiums. Such premiums are received by the insurer who is able to pay out of the premiums received by him, for the losses of some of those who have participated in the scheme.
Thus it is wonderful technique of spreading and transfer or risks.
Insurance business is divided into four classes , namely :
1) Life Insurance. Popular Products in Life insurance are Endowment Assurance (Participating), and Money Back (Participating). More than 80% of the life insurance business is from these products
2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance. Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle insurance is compulsory.
Life Insurers transact life insurance business; General Insurers transact the rest i.e. Fire Insurance, Marine Insurance and Miscellaneous Insurance.
In India Insurance is a federal subject.The primary legislations that deals with insurance business in India are: Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999.
Insurance Industry has Ombudsmen in 12 cities. Each Ombudsman is empowered to redress customer grievances in respect of insurance contracts on personal lines where the insured amount is less than Rs. 20 lakhs, in accordance with the Ombudsman Scheme. Addresses can be obtained from the offices of LIC and other insurers.