What is Insurance?
Insurance basically means ‘to insure’ someone against uncertainties or probable losses that may occur by some other being, company or state. In other words, we may say insurance is a promise in which one party guarantees another party to secure him/her from future uncertainties in exchange for some payment in any form called premium.
Insurance policy is the contract between the insurer and the insured, who is also known as the policyholder, which contains all the details about that particular insurance and the legal claim payable by the insurer.
Insurance has become a very popular business throughout the world. Many companies have emerged in this business, out of which many companies have grown as MNC’s and they are functioning at the global level. Their main source of income is the premium received from the policyholders and their main expenses include settlement of claims, agent’s fee, a salary of employees, etcetera.
Insurance companies in India
In India, there are many companies running in this business. As per a report IRDAI has recognized 24 life insurance companies and 34 non-life insurance companies along with 2 reinsurance companies. They all function as per the rules and regulations set up by IRDAI( Insurance Regulation and Development Authority of India).
Insurance agents are the persons who sell the insurance policies on behalf of insurance companies and get a commission from the companies for the same. There are two types of agents, that is, independent agents and captive or exclusive agents. Independent agents work for many firms and get the commission as per the policies sold whereas captive or exclusive agents are employed by a single insurance firm and sells the policies of that firm only, in return they are awarded either by commission or by salary as an employee.
In India, Insurance companies are governed by the Insurance Act, 1938, which was basically passed by the British during their colonial rule in India. It provides the complete legal framework within which the insurance business operates in India. Apart from this, there are other acts also which separately deals with different types of policies, Life Insurance of India Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972 are among them.