Page 3 - MARKETING & PUBLIC RELATIONS EBOOK IC88
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Exporters run the risk of importers in the other country defaulting on the payments
to accept goods.
Doctor runs the risk of being charged with negligence and subsequent liability for
damages.
B. How insurance works
Conceptually, the mechanism of insurance is very simple. People who are exposed
to the same risks are brought together.
If any one of them suffers a loss, the other will share the loss and make good to the
person who lost.
The manner in which the loss is to be shared can be determined before hand.
The share could be collected from the members after the loss has occurred or the
likely shares may be collected in advance, at the time of admission to the group.
The share which is collected in advance is called the premium.
C. Classification
Insurance business is broadly classified into two groups – general and life insurance.
In India, life insurance policies may cover the accident and sickness risks, as
additional covers losses through individual behaviour like fraud, burglary,
professional negligence by doctors.
Non life insurance policies are mostly for short periods of one year,
D. Principle of indemnity
The value may be the price at which it is brought or the price at which it is likely to
be sold.
Insurance does not prevent the loss. It only compensates, there is an argument that
the compensation would be would be proper only idf the original can be substituted
with a fresh asset.
The principle of indemnity does not apply in the case of life insurance
The worth of a person to his wife and children in the areas of guidance, love support
or mental and intellectual development, cannot be equated to his income or even
valued in terms of money.
E. Importance of insurance industry
The capital market as well as the govt looks to the insurance companies for financial
support.
Insurers specifically support investments in infrastructure like housing, drinking,
drainage water, road transport, electricity.
Insurance along with banking provides the infrasructure for trade and industry to
perform.
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