Life & Insurance (2)

07-Feb-2022: ABOUT INSURANCE

Insurance ensures protection of economic value of assets. Assets are insured against the risk of being destroyed or made non-functional due to any accidental occurrence. Risk is defined as the possibility of adverse results flowing from any occurrence. Insurance is used with reference to financial protection against a possibility, such as fire, accidental damage, theft, or medical expenses: motor insurance, household insurance, travel insurance, health insurance. 

Insurance reduces the impact of risk on the owner, and those who depend on the asset. Integral to the concept of insurance is the concept of risk. In insurance parlance, “RISK” is called “PERIL”. Only where risk prevails, is insurance applicable. Basically there are two types of Insurance : “LIFE” AND “NON-LIFE”. We are now concentrating on LIFE Insurance only.

LIFE INSURANCE

The economic value of a human life arises out of its relation to other lives. Whenever continuance of a life is financially valuable to others, either to family dependents, business associates, or educational and philanthropic situations, the necessity for life insurance is present. Human life is also considered as an income generating asset. This asset can be lost thru unexpected death or made non-functional thru sickness or disability caused by an accident. 

There is no certainty that an accident shall happen. Events that must occur at some time, such as death, are provided for by assurance. We all know that “DEATH” is the ultimate truth of life, but NOT its timing. Life Insurance exists because of this element of “UNCERTAINTY”. Life Insurance protects against loss of income of an individual. 

But it DOESN’T (1) protect the asset, (2) prevent its loss. Life insurance is designed to make an attempt to compensate a policyholder for a loss suffered, by the payment of money, repair, replacement, or reinstatement. In every case the policyholder is entitled to be put back in the same financial position as he or she was immediately before the event insured against occurred. There must be no element of profit or loss to the policyholder.

Most, but not all insurance policies are indemnity contracts. For example, personal accident and life assurance policies are not contracts of indemnity as it is impossible to calculate the value of a lost life or limb (whereas the value of a car or other property can be calculated). Insurance works on the principle of transferring risk from an individual to a group.

Life & Insurance (1)

02-Feb-2022: ABOUT LIFE

Life is an Excellent Gift of God to Mankind. But nothing in life is ever certain. Unexpected accidents, hospitalisations, business setbacks, ever decreasing work-force (resulting in retrenchments), terrorism can all mar our well-laid plans. In extreme cases we end up with loss of earning power. Thus the future may be uncertain. But one thing is certain. One needs to plan for it. It is a human tendency to postpone planning till retirement. But the later one starts saving the harder it is to do so. With longer life expectancy, rising inflation and declining interest rates, it is imperative that we start planning now.

• Conversely life is also full of opportunities for all of us to seize, like: 
• Financing our children's education (children are our biggest assets), 
• Buying our dream home (a place of protective roof on our head), 
• Taking a well-earned vacation (after all why we are earning – we need to enjoy life and need to recharge our energy for earning our livelihood), 
• To save for the time when we cannot earn sufficiently to sustain ourselves (saving for the rainy day, old age, retirement),
• We may wish we could safeguard our opportunities and protect against the uncertainties,
• And finally, for our sheer investment needs.

This is where “INSURANCE” comes in. This is explained in short in the following Part-2:

The Story of Insurance

There is an interesting story about how insurance works: Let’ say a class has 50 children, and they decide to go for a picnic. The teacher tells the children to keep Rs. 50 each for any expenses or emergency. During the picnic a student loses his entire Rs. 50 and he was crying as his parent may scold him. 

The teacher found a solution and asked each of the rest students to contribute Re 1 to the child who lost. Now each student has Rs. 49 including the one who lost. Everyone was happy as Re 1 loss is insignificant. This is how the Insurance works. Re 1 may be taken as premium. Chances of loss of life or property may be 1 in 50, as not everyone faces loss. Calculation / prediction of this chance is done by a highly accurate and sophisticated mathematical branch called Actuary Science.

Cost, Price & Value

15-Jan-2022: 

Cost, Price & Value: Explained in short in the Marketing parlance

Cost:

• The dictionary meanings are: the price paid to acquire, produce, accomplish, or maintain anything; an outlay or expenditure of money, time, labor, trouble, etc.
• Cost means a price that must be paid for something or a sacrifice.
• Cost most often refers to a specific amount of money that a seller wants for the item they are selling. However, cost is also used more generally to mean whatever the price of an item is.
• But in today’s world of Marketing, Cost is an objective term which generally refers to all types of expenses incurred to produce, procure, create or manufacture an item.
• Cost is of Objective nature. It remains constant under unchanged circumstances.

Price:

• The sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale.
• Price is used mainly of single, concrete objects offered for sale; charge, of services:
• But in today’s world of Marketing, Price is an objective term which generally refers to Cost plus a margin amount which is called profit, which rewards the maker / producer / procurer / creator / manufacturer.
• Sometimes the Price may be less than the Cost under certain undesirable constraints.
• Price is of Objective nature. It may change on various different reasons for the same cost.

Value:

• Intrinsic worth, merit, or importance of an object;
• Monetary or material worth, as in commerce or trade.
• Value, worth imply intrinsic excellence or desirability.
• Value is that quality of anything which renders it desirable or useful:
• Value is of Subjective nature. It doesn’t change on its own.
• Sometimes the Value of an Object can be changed which is called the “Value Addition”, by undergoing certain processes.
• Value is sometimes divided into two types:
• Objective, Physical, Utility; which remains constant.
• Subjective, Emotional, Esteem; which varies from person to person, time to time, etc.

National Mathematics Day

22-Dec-2021: NATIONAL MATHEMATICS DAY

Former prime minister Manmohan Singh in 2012 declared December 22 as National Mathematics Day to honour the legendary mathematician Shri Srinivasa Ramanujan.

Vice President Venkaiah Naidu Tweeted, "My humble tributes to the legendary mathematician, Shri Srinivasa Ramanujan on his birth anniversary, which is also celebrated as National Mathematics Day. On this day, let us spread awareness on the importance of mathematics in sustainable development, innovation and most of all in improving the quality of lives."

Professor Neena Gupta, a mathematician at the Indian Statistical Institute in Kolkata, has been awarded the 2021 DST-ICTP-IMU Ramanujan Prize for Young Mathematician. The Ramanujan Prize is given annually to an eminent Mathematician by the International Centre for Theoretical Physics (ICTP), Trieste and the government of India.

THE MAN WHO KNEW INFINITY

December 22 is marked as the National Mathematics Day every year, remembering one of India's greatest mathematicians Srinivasa Aiyangar Ramanujan (Born 22-Dec-1887, Died 26-Apr-1920), who contributed to explaining the analytical theory of numbers and worked on elliptic functions, continued fractions, and infinite series. At the time of his death in 1920, Ramanujan had discovered his own theorems and independently compiled 3900 results.