Q.Insurance operates mainly on the principle of:

IRDA is the apex regulatory authority for insurance in India, created by the IRDA Act, 1999, to control and develop the insurance sector and to safeguard policyholders' interests.

The Insurance Regulatory and Development Authority (IRDA) is a statutory (autonomous) body established under the IRDA Act, 1999, with its head office at Hyderabad. It was set up on the recommendation of the Malhotra Committee, after the insurance sector was opened up to private and foreign players.

Main objectives and functions:

• To regulate, promote and ensure the orderly growth of the insurance and re-insurance business in India.
• To protect the interests of policyholders in matters such as issue of policies, settlement of claims and terms and conditions.
• To grant, renew, modify or cancel the registration/licences of insurance companies and agents.
• To lay down a code of conduct for insurers, agents and surveyors and to prescribe qualifications and training.
• To regulate investment of funds and maintenance of solvency margins by insurance companies.

By performing these roles, IRDA has brought discipline, competition and confidence to the Indian insurance industry.

Insurance is a contract in which the insurer agrees, for a premium, to indemnify the insured against a specified loss — a cooperative device that spreads risk over many.

In the Tamil Nadu HSC Commerce syllabus, insurance is defined as a contractual arrangement for managing risk.

• It is a contract between two parties: the insurer (insurance company) and the insured (policy-holder).

• In consideration of a payment called the premium, the insurer undertakes to compensate the insured for a loss arising from a specified risk or event.

• It is a cooperative device: the small premiums collected from many persons exposed to a similar risk form a common fund, out of which the losses of the unfortunate few are met.

• Thus insurance does not prevent risk but distributes/spreads its financial burden, giving security and peace of mind.