Business Crunch

Chai time in India is receiving anglicized. A person prefers tea with biscuits. And the choice available today, the range now includes the regular glucose biscuits with varying sugar content. The cream filled biscuits in several flavor The biscuit production in the organized sector produces in the region of 60% of the total expenditure, the sense of balance 40 percent comes from the unorganized division which has a projected 30,000small bakeries extend across India. The industry is rising at a in good physical shape 15 percent a year though the target for the coming years has been pegged at 25 percent. In the previous few years there has been a rush forward in demand or biscuits and by 2006 the structured sector had natured into a Rs. 4250crore purchaser goods industry, baking 15lakh metric tonnes of biscuits. The unorganized sector was producing around 10 lakh tonnes manufacture a total of approximately 25 lakh tomes which translated in about 850 million packets. Over 70 percent of the famous biscuit market has been captured by Britannia and parles through ITC’ Sunfeast. A late participant is fast production inroads in the industries with a range of new innovations like orange-flavored Marie, Marie Light and Butterscotch-flavored cream biscuits. It has followed this up by means of the launch of Sun feast Milky Magic, Snacky and Golken Bakes.

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Principle of Cause Proximal: An insured can recover the boss only if the loss is caused by the risk insured. Such a risk should be the immediate cause and not a distant or remote cause of the loss. For example, if a ship carrying grapes meets with an accident there is delay in unloading an as a result the grapes are spoil t, and then the loss is not due to the accident. It is due to delay in unloading and the insured cannot recover it defrost he insurer. Thus, the nearest or proximate course jobless is taken into consideration.

Principle of Mitigation of loss: This means the insured must make all reasonable efforts to minimize the loss. He must act as if the property was not insured. If he does not take reasonable steps to mitigate the loss his declaim for compensation might be lost. The objective of this principle is to ensure that the insured does not become careless after insuring the property.

Principle of Subrogation: It implies that after compensating the insured, the insurer will become entitled to the rights of the insured. The insurer will step into the position of the insured. For example, if a house is damaged by fire, the insurer will be entitled to the amounts realized jolted sale of damaged house after payment of claim. However, the principle of subrogation is not applicable to life insurance as it is a corollary to the principle of indemnity.

Principle of Contribution: Principle of contribution is another corollary of the p0riciple of indemnity. When the same property is insured with two or more insurers, all the insurers will contribute proportionately to the compensations payable to the insured. For example, ram insures his house against fire for Rs. 50,000 with A & Co.; for 70,000 with B & Co. and for Rs 80,000 with C& Co. The house is damaged by fire and the actual loss is Rs. 40,000. A & Co. will pay Rs. 10.000, B & Co. Rs. 14,000 and C&Co. Rs. 16.000. if the insured recovers the full amount of loss from one insurance company other insurers will make proportionate contributions to that insurance company.

The main principles of insurance are:

Principle of utmost Good Faith: Insurance is a contract umber rime fide ism, i.e. a contract of utmost good faith. It means that both the parties to insurance contract should be absolutely honest to each other. The insured must disclose all material facts known to him about the subject matter coinsurance. Every fact, which is likely to affect the mind of prudent insurer’s indecision whether to accept the proposal for insurance and fix the premium, is a material fact. Similarly, the insurer must disclose the scope of insurance, which he is prepared to grant. Good faith forbids either party from concealing any material facts, which are likely to affect the judgment and decisions of the other party to enter the contract of insurance. If there is non-disclosure or misrepresentation of any material fact, the agreement will be invalid.

Principle of Indemnity: A contract of insurance is a contract of indemnity. It means that in as of loss, the insured shall be paid only the total amount of loss. He shall not be allowed to make and profit out of the contract. However, this principle is not applicable to life insurance. In life insurance, affixed demount is payable on the death of the insured or on the expiry of the specified period whichever is earlier. But fire insurance and marine insurance are contracts of indemnity. Their purpose is to put the insured in the same position after the loss in which he was before the loss or event. If the insured takes a policy for a sum more than the real value of the property, he will get only the actual amount of loss and not the whole of the sum insured.

Principle of Insurable Interest: According to this principle, the insured must have monetary interest in the subject matter of insurance. A person is said to have insurable interest when he will gain from the existence of the subject matter and will suffer a financial loss on its destruction. In fire insurance, insurable interest must be present both at the time of insurance as well as at the time of loss. In marine insurance, insurable interest must be present at the time of loss. In case of life insurance. Insurable interest must be presents at the time of insurance. In the absence of insurable interest the contract is not enforceable at law as it amounts to gambling.

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The functions and advantages of insurance are given below:

Security: Insurance provides security against risk of any loss due to an uncertain event. It creates a sense of security and peace in the minds of businessmen. They can carry on business activities without worrying about a possible loss.

Distribution of Risk:Insurance helps in spreading risk over a large number of persons. Large number of persons contributes to fund which is used to compensate the person suffering loss. A businessman cans transfer the risk of loss to the insurance company.

Competitiveness: Insurance enables s a businessman to carry on his business more confidently. His knows that loss will not destroy his business and he will get compensation from the insurer.

Specialization: Insurance enables businessmen to concentrate fully on business. Insurance company is an expert in risk bearing and can provide specialized insurance services.

Optimum Use of Capital: After taking an insurance policy, there is no need tots aside a part of capital to cover a business loss. The businessman can thus make better use of the available capital.

Promotion of foreign Trade: Foreign trade involves several types of risks. Insurance facilitates foreign trade by providing protection against these risks.

Loan Facility: The insured can borrow money against the security of a life policy. A person can save money and build an estate through life insurance.

Mobilization of Capital: Insurance companies accumulate huge funds for economic development of the country. They also provide underwriting facility for shares and debentures.

Social Welfare: Insurance encourages people to save money and provide for old age, education and marriage of children, etc. it also creates employment opportunities.

Insurance is a contract under which new party (the insurer) agrees in return for a consideration to pay an agreed amount of money to another party (the insured) and to make good a loss to something of value in which the insured has a pecuniary interest as a result of some uncertain event. Insurance is a device by which the loss caused by an uncertain event is spread over several persons who are exposed to it and who insure themselves against such an event.

The premium collected from several persons is used to compensate a few who actually suffer the loss. Thus, insurance is a means of protection against risk of loss due to unforeseen events.

The following conditions must be satisfied before a risk can be insured:

The risk to be insured must be uncertain at the time of insurance. For example, a person on the deathbed, or a house on fire cannot be insured.
The amount of loss must be foreseeable and capable of estimation. For example, risk of loss due to changes in fashion cannot be estimated in terms of mathematical probability.
The risk must be spread over a large number of persons.
The insurance premium must be such that an average insured can afford it.
The risk must be dispersed over a wide geographical area so that the happening of a single event in a small region may not put a heavy burden on the funds of the insurer.

Causal Proximal is a Latin term, which means approximate cause or the cause, which, in a natural and unbroken series of evens, is responsible for a loss or damage. According to the principle of Cause Proximal, the insurer is liable to provide of loss only when the loss occurs due to the insured risk. If the risk insured is the remote cause of loss, the insured is intolerable to pay compensation. When there is a series of causes, the proximate or nearest cause is taken into account to determine the liability of the insurer. For example, if the cargo in a ship is destroyed by seawater flowing into the ship through a hole made by rats in a lead pipe, the insurer is held liable as the cargo jaws proximately destroyed by the seawater.

Insurable interest means some pecuniary interest in the subject matter of insurance contract the insured must be so situated with regard to the subject matter insured that he would benefit from its existence and would suffer loss form any kind of damage inflicted on it. For example, a person has insurable interest inches own life and in the life of his/her spouse or family members. Similarly, a consumer of goods or other properties has insurable interest in them.

In life insurance, insurable interest must be present at the time of making the contract. In case of fire insurance, insurable interest must be present both at the item of taking fire policy and at the time of actual loss.

Assurance means a contract under which the sum insured is bound to be paid sooner or later. One the other hand, insurance refers to contract under which compensation is payable only when the loss occurs. If there is no loss, no amount is payable. In case of insurance the loss is uncertain and may not happen. But in assurance claim is bound dematerialize. Life insurance is a contract of assurance whereas fire as marine policies is contracts of insurance.

There are two main types of insurance converge: (i) insurance of personal: and (ii) insurance of property. The former covers the risks of illness, death, accident, etc. Insurance of property covers risks of fire, theft, marine losses, etc. Thus, the more important types of insurance are as follows:

Life Insurance: In a contract of life insurance, the insurer undertakes to pay a specified amount of money on the death of the insured or on the expiry of a fixed period, whichever is earlier.

Fire Insurance: In a contract of fire insurance, the insurer undertakes to bear the loss, which may be suffered by the insured due to damage or destruction of property by fire.

Marine insurance: In a contract of marine insurance, the insure undertakes to cover the risks of loss on the sea (marine losses). Perils of the sea include robbery, theft, and capture of the ship by enemy, etc. The insurer is known as underwriter.

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A contract of life insurance is not a contract of indemnity. It is not possible to estimate the pecuniary loss resulting from the death of a person. The drew fore, a fixed amount is paid to the insured if he survives till the maturity of the policy. In case the insured person dies before the expiry of the rod, the sum is paid to his nominee. Thus, life insurance is treated as an assurance for payment of money and is called ‘life insurance’.

Insurance plays a significant role in business. It offers the following benefits to businessmen: (i) Insurance provides security against risk of loss and thereby reduces the tension in the minds of businessmen. (ii) It helps in the distribution of risk. A large number of businessmen contribute a small amount each to pay compensating to the few who actually suffer loss. (iii) Insurance enables businessmen to concentrate on the management of business as the risk is transferred to the company. (iv)It facilitates the optimum use of available capital as a businessman need not sets aside a part of the capita to cover a business loss. (v) Insurance promotes foreign trade by covering marine losses. (vi) It promotes savings and investment in the country. Insurance companies mobiles large amounts of money for productive sue. (vii) Loans can be raised against the security of life insurance policies. (viii) Insurance promotes social welfare as people can make provision for old age, auctioned marriage of children, etc.