Insurance and capital market in india , markting of insurance policies

INSURANCE AND CAPITAL MARKET IN INDIA , MARKTING

OF INSURANCE POLICIES

CONTENT INTRODUCTION OF INSURANCE FUNCTIONAL APPROACH CONTRACTUAL APPROACH IMPORTANT TERMS USED IN INSURANCE KIND OF INSURANCE LIFE INSURANCE GENERAL INSURANCE (MARIN INSURANCE) FIRE INSURANCE LIABILITIES INSURANCE SOCIAL INSURANCE OTHER INSURANCE Capital market Functions of capital market Instruments traded in capital market Types of capital market Difference between primary & secondary market

INTRODUCTION OF INSURANCE

Insurance is a contract, represented by a policy in which an individual on entity receives financial position or reimbursement against losses from an insurance company.

There can be two approaches for defining insurance 1. FUNCTIONAL APPROACHES 2. CONTRACTUAL APPROACHES

FUNCTIONAL APPROACH Insurance is device for the transfer,

to an insured of certain risk of economic loss that would otherwise be born by the insured.

FEATURES1. It is a co-operative device2. It provides security to the insured.

CONTRACTUAL APPROACH Insurance is a contract in which a sum of

money is paid to the assured in consideration of insurer’s the risk of paying a large sum upon a give contingency.

FEATURES1. It is a contract2. Whereby an insurer assumes the risk of

insured3. On the happening of a specific event

IMPORTANT TERMS USED IN INSURANCE

INSURANCE POLICY INSURER INSURED PREMIUM COMPENSATION INSURED AMOUNT CONTINGENCY

KIND OF INSURANCE Insurance can be mainly classified into two

categories.

1. LIFE INSURANCE2. GENERAL INSURANCE A – MARIN INSURANCE B - FIRE INSURANCE C - LIABILITY IONSURANCE D - SOCIAL INSURANCE E - OTHER INSURANCE

LIFE INSURANCE Life Insurance is a contract between an

Insured and an Insurer or Assurer, where the Insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of the Insured Person.

GENERAL INSURANCE (MARIN INSURANCE)

Marine Insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.

Marine also includes Onshore and offshore exposed property, (Container terminals, Ports, Oil Platforms, Pipelines), Hull, Marine Casualty, and Marine Liability. When Goods are transported Shipping Insurance is used.

FIRE INSURANCE A Fire Insurance is contract to

indemnify the insured for destruction of or damage to property caused by fire. The insurer undertakes to pay the amount of the Assured’s loss not in excess of the maximum amount stated in the policy.

LIABILITIES INSURANCE This type of insurance covers the risk of

liability against third parties, which an insurer might have to pay under certain circumstances

FOR EXAMPLE - Death of a worker while performing duty.

SOCIAL INSURANCE

This insurance is aimed at providing social security to the weaker section of the society. It may take the shape of pension plans disability or sickness benefits etc.

OTHER INSURANCE All other type of general insurance can be

placed under this category, like theft insurance, earthquake insurance, flood insurance, crop insurance, personal accident insurance etc.

Capital market Capital markets are financial markets for

the buying and selling of long-term debt or euity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies/ governments making long-term investments. Capital markets are defined as markets in which money is provided for periods longer than a year.

Functions of capital market

The capital market plays an important role immobilising saving and channel is in them into productive investments for the development of commerce and industry. As such, the capital market helps in capital formation and economic growth of the country.

a. The capital market acts as an important link between savers and investors.

b. Funds flow into the capital market from individuals and financial intermediaries which are absorbed by commerce, industry and government.

c. The capital market prides incentives to savers in the form of interest or dividend and transfers funds to investors. Thus it leads to capital formation.

d. The capital market encourages economic growth.

Instruments traded in capital market

Equity / ordinary shares Preference shares Debentures Bonds

Types of capital market Primary market Secondary market

Primary market A primary market is a place where

companies bring a new issue of shares for being subscribed by the general public for raising funds to fulfill their long-term capital requirement like expanding the existing business or purchasing new entity.

Various types of an issue made by the corporation are a Public issue, Offer for Sale, Right Issue, Bonus Issue, Issue of IDR, etc.

Primary market A primary market is a place where

companies bring a new issue of shares for being subscribed by the general public for raising funds to fulfill their long-term capital requirement like expanding the existing business or purchasing new entity.

Various types of an issue made by the corporation are a Public issue, Offer for Sale, Right Issue, Bonus Issue, Issue of IDR, etc.

Secondary market The secondary market is a type of capital

market where existing shares, debentures, bonds, options, commercial papers, treasury bills, etc. of the corporates are traded amongst investors.

The secondary market can either be an auction market where trading of securities is done through the stock exchange or a dealer market, popularly known as Over The Counter where trading is done without using the platform of the stock exchange.

Difference between primary & secondary market

s.no. Basis Primary market

Secondary market

1. Meaning The place where fresh issue of shares is made is known as Primary Market.

The place where formerly issued securities are traded is known as Secondary Market.

2. Type of Purchasing Direct Indirect

3. Buying and Selling between

Company and Investors

Investors

4. Intermediary Underwriters Brokers

5. Price Fixed price Fluctuates, depends on the demand and supply force

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