Definition of Insurance
According to Prof. D.S. Hansell:
“A social device providing financial compensation for the effects of misfortune, the payments being made from the accumulated contributions of all parties participating in the scheme”.
According to Dr. W.A. Dinsdale:
“Insurance is a device for the transfer of risks of individual entities to an insurer, who agrees, for a consideration, to assume to a specified extent loss suffered by the insured”.
According to Ghosh and Agarwal
Insurance is a co-operative form of distributing a certain risk over a group of persons who are exposed to it.
Functions of Insurance
Insurance provides certainty of amount of loss. There are risks of happenings of time and amount of loss. Insurance removes these uncertainties and the assured receives the amount of loss. The insurer charges some amount to providing certainty.
The second main function of insurance is to provide assurance from probable chances of loss. Insurance cannot stop the happening of a risk or event but can compensate for losses arising out of it.
On the happening of a risk event, the loss is carried by all the persons presented to it. The share is obtained from every insured member by way of premiums.
Assist in Capital Formation
The collected funds of the insurer received by way of premium payments made by the insured are invested in many income-generating schemes.