REINSURANCE AND DOUBLE INSURANCE

REINSURANCE AND DOUBLE INSURANCE

•     BANKING AND INSURANCE
PRINCIPLES  OF INSURANCE

•     MEANING OF REINSURANCE

1.       EVERY INSURER HAS A LIMIT TO THE RISK THAT HE CAN UNDERTAKE

2.       IF ANY TIME A PROFITABLE VENTURE COMES HIS WAY,HE MAY INSURE IT EVEN IF THE RISK INVOLVED IS BEYOND ITS CAPACITY .IN ORDER TO SAFEGUARD HIS OWN INTEREST,HE MAY INSURE THE SAME RISK EITHER WHOLLY OR PARTIALLY WITH OTHER INSURERS, THIS IS CALLED REINSURANCE.

3.       THE REASON FOR REINSURANCE LIKE THE REASON FOR ORIGINAL INSURANCE IS THE NECESSITY OF SPREADING THE RISK

4.       REINSURANCE CAN BE DONE IN ALL KINDS OF INSURANCE.THE INSURER HAS AN INSURABLE INTEREST IN THE SUBJECT MATTER INSURED TO THE AMOUNT BY HIM BECAUSE OF CONTRACT OF REINSURANCE IS ALSO A CONTRACT OF INDEMNITY

5.       THE RE INSURER ARE LIABLE TO PAY THE AMOUNT OF THE LOSS TO THE ORIGINAL INSURER ONLY IF THE ORIGINAL INSURER HAS PAID THE AMOUNT TO BE ASSURED.

6.       THE RE INSURER IS NOT LIABLE TO THE INSURED AS THERE IS NO PRIVITY OF THE CONTRACT

7.       REINSURANCE POLICY IS COEXTENSIVE WITH ORIGINAL POLICY.

•     DOUBLE INSURANCE

1.       WHERE THE ASSURED INSURES THE SAME RISK WITH TWO OR MORE INDEPENDENT INSURERS AND THE TOTAL SUM INSURED EXCEEDS THE VALUE OF THE SUBJECT MATTER.THE ASSURED IS SAID TO BE OVER INSURED BY THE DOUBLE INSURANCE.

2.       OVER INSURANCE WHERE THE AGGREGATE OF ALL THE INSURANCE EXCEEDS THE TOTAL VALUE OF THE ASSURED INTEREST AT RISK

3.       NO EXPRESS CONDITION IN THE CONTRACT OF INSURANCE BOTH DOUBLE INSURANCE AND OVER INSURANCE ARE LAWFUL

4.       EXAMPLE

5.       A INSURES HIS HOUSE OF  WORTH 60,000.40000 WITH B AND 30,000 WITH C

6.       THIS IS DOUBLE INSURANCE

7.       IF HE INSURES HIS HOUSE WITH B FOR 30,000 AND 30,000 WITH C AND THEN THERE IS NO DOUBLE INSURANCE

•     RULES IN DOUBLE INSURANCE

1.       RECOVERY OF ACTUAL LOSS NOT MORE THAN IT. BECAUSE CONTRACT OF INSURANCE IS  A CONTRACT OF INDEMINITY ONLY

2.       IF THE ASSURED RECOVER MORE THAN VALUE OF HIS INTEREST,THE EXCESS AMOUNT HE WILL HELD AS TRUSTEE

3.       LIABILITY OF INSURERS-CONTRIBUTION:-THE INSURERS ARE LIABLE TO CONTRIBUTE TO LOSS IN PROPORTIONATE TO THE AMOUNT FOR EACH ONE IS LIABLE.THE INSURER CAN RECOVER FROM CO  INSURER IF EXCESS IS PAID AS COMPARED TO CO INSURER HAS PAID LESS SHARE

4.       NO LIMIT IN CASE OF LIFE INSURANCE:-MAY TAKE ANY NUMBER OF POLICIES