Business Services

Services and their features, banking and e-banking, the principles and kinds of insurance, and communication, transport and warehousing services.

Key ideas

• Services are intangible, inconsistent, inseparable (made and used at the same time), cannot be stored, and need the customer’s involvement.
• Commercial banks accept deposits (current, savings, fixed), lend through overdrafts, cash credit and loans, and send money by cheque, draft and online transfer.
• E-banking lets customers bank at any time and place; NEFT settles transfers in batches, while RTGS settles large sums one by one, at once.
• Insurance spreads risk: many people pay a small premium so that the few who suffer a loss are compensated.
• Its seven principles are utmost good faith, insurable interest, indemnity, proximate cause, subrogation, contribution and mitigation of loss.
• Life insurance is not a contract of indemnity, because a life cannot be valued in money; fire and marine insurance are.
• Warehouses (private, public, bonded, government, cooperative) remove the hindrance of time and help with consolidation, break-bulk, stockpiling and steady prices.

Remember

Watch out

• Paying the full sum insured when the loss is smaller: indemnity pays only the actual loss.
• Calling life insurance a contract of indemnity.
• Charging overdraft interest on the whole amount withdrawn instead of only on the excess over the balance.

Worked example