Nature And Definition Of Insurance
1.0 Introduction
Risk and uncertainty are incidental to life. Man may meet untimely death. He may suffer from accident, destruction of property, fire, floods, earthquakes and other natural calamities. Whenever there is uncertainty, there is risk as well as insecurity. People always want to avoid the financial consequences of these risks e.g replacing personal property that is lost or damaged. Insurance exists because risk exists. Insurance cannot remove the risk or the likelihood that one might become a victim of risks, but it ensures the transfer of all or some of the financial impact.
Insurance is a contract between two parties (insurance company (A) and the insured or policyholder (B) in which the risk is transferred to the insurance company in exchange for the payment (in advance) of a token called Premium with the insurance company agreeing to make good the loss to the policy holder whenever he suffers any loss. 1
Social and economic changes open up new areas in which insurers are called upon to provide insurance coverage. Apart from natural risks to life, the risks to life from coups, kidnapping and political assassinations have become
…
