iii IC 38 insurance advisor exam, 100% pass, in 1st attempt Slide No 7 скачать в хорошем качестве

iii IC 38 insurance advisor exam, 100% pass, in 1st attempt Slide No 7

Slide Number 6 The Seven Pillars Principles of Insurance Part Two In our local Indian markets, we often see people bargaining over the value of used goods. When you go to a local bazaar to buy a second-hand bicycle or a used mobile phone you know that the price is based on the current condition of the item and not what it cost when it was brand new. Everyone understands that as things get older their value goes down. This common sense from our daily lives is exactly how the financial rules of insurance work. The goal is to make sure that a person is protected from a loss but also to ensure that no one uses a disaster to make an unfair profit. Now let us look deeply into the final four pillars that make up the legal foundation of our business. These rules are designed to keep the system fair for every member of the common pool. The fourth pillar is the Principle of Indemnity. This is perhaps the most important rule in all of general insurance. The rule states that the insurer must put the person back in the exact same financial position they were in just before the loss happened. This means if you have a used car that is five years old and it gets stolen the insurance company will provide enough money to buy another five-year-old car of the same model. They will not provide enough money to buy a brand-new luxury car that is worth ten times more. The main idea here is that there must be no profit from a loss. If people were allowed to make money when a disaster happens they might be tempted to cause accidents on purpose. This would be very dangerous for society and would quickly empty the pool of funds that we all rely on. There are four ways a company can provide this indemnity to a customer. The first is through a cash payment where the insurer simply gives the money to the customer. The second way is through repair where the company pays a workshop to fix the damaged asset and return it to its previous working condition. The third way is replacement where the company gives the customer a new item that is the same type and quality as the one that was lost. The fourth way is reinstatement which is common for buildings where the insurer pays to rebuild the structure exactly as it was before it was destroyed. These methods ensure that the customer is made whole again without gaining any extra wealth. The fifth pillar is called Subrogation. This is a formal term that means the transfer of legal rights. Imagine a situation where a neighbour is driving their car very carelessly and they crash into your parked car. In this case you have suffered a loss because of someone else's mistake. You have the right to ask that neighbour to pay for the repairs but you also have an insurance policy. If you choose to let your insurance company pay for the repairs the rule of subrogation begins. Once the company pays you the money they take over your legal right to go after the neighbour to recover that cost. You cannot take money from the insurance company and then also go to the neighbour to collect money for the same accident. That would mean you are getting paid twice for the same loss which would violate the rule of indemnity. Subrogation allows the insurance company to stand in your shoes and recover the funds from the person who was actually responsible for the damage. This helps keep insurance premiums low for everyone because the person at fault is the one who ultimately pays the price. The sixth pillar is the Principle of Contribution. Sometimes a person might buy two different insurance policies for the same house or the same shop. They might think that having two policies means they will get double the money if a fire happens. However the rule of contribution says that this is not allowed. If multiple policies cover the same risk the liability is shared proportionately between all the insurance companies involved. The total amount the customer receives will never be more than the actual value of the loss. If your shop suffers a loss of one lakh rupees and you have two different policies both companies will work together to pay you that one lakh rupees. They will not pay you one lakh each. This rule ensures that the principle of indemnity is strictly followed and that no one can profit by insuring the same item multiple times. The seventh and final pillar is the Mitigation of Loss. This rule is about the moral duty of the person who owns the insurance policy. It states that even though you have insurance you must act as if you are uninsured. If a small fire starts in your kitchen, you cannot just stand there and watch it burn while thinking that the insurance company will pay for everything. You have a legal and moral duty to try and extinguish the fire or call for help immediately. You must do everything a reasonable person would do to minimize the damage. If a person is found to be intentionally careless just because they have a policy the company may refuse to pay the claim. This is a very important rule ...