INSURANCE4CONSUMERS-AGENTS[ประกัน 保险 asuransi]

THE TERM OF UNCERTAINTY

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THE IMPORTANCE OF INSURANCE

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WHO ARE THE SELLERS OF INSURANCE

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WHO ARE THE BUYERS OF INSURANCE

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UNDERWRITERS AND BROKERS

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THE HISTORY OF LLOYD'S

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In the year 1688 a coffee house in Tower Street near the Tower of London, was owned by a man called Edward Lloyd. Being so near the River Thames, his customers included ships’ masters, provision merchants, and bankers with a maritime interest. In those days there was no organized market, and people wishing to insure went from house to house and shop to shop asking businessmen to cover their risks to whatever extent they could afford. On the chance of finding several such people at one call, those in search of insurance began to call at Lloyd’s to inquire if anyone was interested. Lloyd began to provide paper and pens for the convenience of customers and gradually the sale of insurance became more important than the sale of coffee.

After Lloyd’s death in 1713 the business continued, eventually becoming a private club whose members owned and controlled the premises and restricted entry to those in shipping and insurance. The Lloyd’s Act of 1871 finally established Lloyd’s as a Corporation, run by a committee elected by the members.

The underwriters, even in the modern premises, have ' boxes ' around the floor which are reminiscent of the traditional coffeehouse settle. These boxes give a certain amount of privacy to underwriters discussing risks with brokers.

LLOYD'S OF LONDON

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Lloyd’s is a market, of international standing, where individuals known as underwriters accept insurance. These underwriters have been elected ‘Underwriting Members of Lloyd’s' by a special voting process which involves meeting strict financial and other standards set by the Corporation of Lloyd’s. This Corporation owns the premises and oversees the market. It also collects shipping and other information from all over the world. It does not itself transact insurance, which is entirely a matter for individual underwriters. The most succinct definition of Lloyd’s was once given by a famous caller named Farrant. A caller is the red-robed presidential figure who sits in the rostrum beneath the Lutine Bell and calls brokers who are wanted by colleagues in the ‘room’ or on the telephone. Farrant said ‘Individually we are underwriters, collectively we are Lloyd’s’.

THE INSURANCE MARKET IN BRITAIN

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Like all market, the Insurance Market is a place where buyers and sellers are in contact with one another, either directly, or indirectly, to fix prices. The British Insurance Market is very large, and reaches out not only to every household in Britain but to every country in the world. The explanation lies in the absolute reliability of the market: Lloyd’s, in particular, has an international reputation second to none. Despite the growth in many countries of an insurance market to cater for local populations, re-insurance through London as a ‘ hedge ‘ against possible heavy claims is a normal practice, so that some of the benefit of this business still flows to Britain.

London is the largest insurance market in the world. Besides British and Commonwealth firms there are also Lloyd’s underwriters and foreign companies with London offices.

For the readers information, kindly note that I will also be writing about the insurance market in Singapore and Malaysia in my future posting in this site.

NATIONAL INSURANCE

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Insurance against unemployment, sickness and old age is now undertaken in many countries by the government and in Great Britain it is under the control of the Ministry of Health and Social Security. A very limited scheme of social insurance existed in Germany as long ago as 1844, but in Great Britain national insurance dates from 1908-1911, Lloyd George being mainly responsible for its introduction. Previously some of the trade unions had provided insurance against sickness and unemployment for their members. In 1929 the scheme was extended to include pensions for widows.

In 1947 a more comprehensive scheme, based largely on the Beveridge Report, and including a wide range of new benefits, was introduced. Retirement and unemployment pay were increased, and the scheme was made compulsory on all but a very few workers. In addition, however, to contributions being demanded from those entitled to draw benefit, compulsory contributions have to be made by employers, and a third contribution is made by the government, which also finds it necessary to bear most of the cost of the health service. It was the intention both of Lloyd George and Beveridge that national insurance should be operated on strict insurance principles-that is, that the amounts paid should be sufficient to cover all payments of benefit. Owing to the continued decline in the value of money since the scheme was introduced, it has been necessary to increase the benefits, especially retirement pensions. Although the contributions have also been increased, this has not no been sufficient to cover the cost of benefits, and since 1964 the government has had to bear an increasing share of the cost. The last Labour Government proposed to introduce a more ambitious pension scheme with greatly increased contributions from both employers and employees.

TYPES OF ACCIDENT INSURANCE

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The four types of accident insurance covered are stated below:

(a) Insurance of liability. The largest volume of accident business covers this kind of liability. Employer’s liability for accidents at work, liability of the organizers of public functions for accidents occurring to the public in the course of the event, and above all the liability of motor-vehicle owners for accidents involving third parties, are the chief policies offered.

In any contract there are two principals to the contract, who may be termed the First Party and the Second Party. In insurance contracts these are the insured and the insurers. Third Parties are any other persons affected by the contract, for example passengers, pedestrians, cyclists, etc. The Road Traffic Act 1930 of Britain made it compulsory to have Third Party insurance, i.e. for motorists to protect themselves against liability for death of, or bodily injury to, members of the public. Third parties are therefore nearly always covered by the motorist’s insurance policy. In those cases where an uninsured driver or one whose policy is defective because of some breach of ‘utmost good faith ‘ , causes injury, a Central Fund administered by the Motor Insurers ‘ Bureau of Britain now provides compensation. In Britain a driver who has ‘ Fully Comprehensive’ cover will also receive compensation if he is injured, or if his vehicle is damaged. Because of the high degree of risk when young persons are driving, many insurance companies in Britain will not give ‘ Fully Comprehensive’ cover to persons under the age of 21. ( For Malaysian readers, kindly take note that I will be going into further details regarding motor insurance in my future posting at this site).

(b) Insurance of property. Policies of this sort cover a wide range of risks. Many of these risks are covered by the Householders’ Policies discussed under Fire Insurance. Other are the insurance of shop windows, insurance of herds and flocks against disease, insurance against vandalism, etc. Another type of policy is the ‘all-risks’ policy which offers cover against very wide possibilities. In one recent case a family returned home from holiday to find that a group of vandals had moved in during their absence and had completely wrecked their home. Unfortunately this was not included in their householder’s policy, although a separate policy was available for a small extra premium.(For Malaysian readers, kindly take note that some of the insurance coverages that I have mentioned here are only available in Britain. Even though they are not available in our Malaysian insurance market, I will still be going into further details for knowledge purposes).

(c) Personal accident insurance. These policies cover the insured in respect of death, total or partial disablement, loss of limbs, hospital expenses, etc. They may also cover parties or group of people, e.g. club members on an outing, or sport club players who may be hurt. Short term policies cover railway journeys, and may often be purchased from machines in the concourses of airports or at railway terminals in Britain and other parts of the world. The sums covered by these policies are quite considerable, which emphasizes the rarity of aircraft accidents. A Canadian company once ran the slogan ‘When did you last hear of someone getting kicked to death by a donkey?’ It so happened that deaths in aircraft and deaths by donkey kicks had occurred that year in Canada with equal frequency, 59 deaths by each. Accidents are common, but they are not as common as all that.

(c) Insurance of Interest. Very often interested parties in some event may find themselves open to criticism of their actions which may involve financial compensation. There are many examples, for instance a member of a club committee may authorize some payment which is outside the rules. Professional persons may be held liable for incorrect professional advice given to clients. An executor of a will may pay out the moneys involved and then find a genuine beneficiary who demands compensation. All these contingencies can be insured against. The commonest of the Fidelity Guarantees are the Commercial Fidelity Guarantees taken out by firms upon employees. These Fidelity Bonds restore moneys embezzled by the employee; but it should be noted usually the firm is only reimbursed after the employee has been charged in the courts. There has to be a deterrent or this type of crime would increase, and that would be ‘ against public policy’.

ACCIDENT INSURANCE

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The term ‘Accident Insurance ‘ has come to mean any kind of insurance not covered by marine insurance, fire insurance, or life assurance. It became clear as the Industrial Revolution developed that accidents were an inevitable accompaniment to progress. The transport revolution, which accompanied industrial progress, filled first the canals, then the railways, and finally the roads with such a volume of restless traffic as our ancestors would never have deemed possible. Technology invaded every industry; mining, manufacturing, and commerce itself became increasingly mechanized.

The four types of accident insurance covered are; insurance of liability; insurance of property; personal accident; and insurance; and insurance of interest.

TYPES OF LIFE ASSURANCE POLICIES

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Industrial Life policies developed in the middle of the nineteenth century as a form of life assurance which would appeal to the industrial classes in Britain. It provided small benefits for very tiny premiums. ‘Penny Death’ policies were quite normal. For a penny a week a sum could be assured which would cover funeral expenses, and even a tombstone. It is perhaps no accident that these policies developed immediately after the Poor Law Amendment Act had created the workhouse system. Fear of that ultimate disgrace, to be buried by the parish in a pauper’s grave, drove even the very poor to pay their insurance money to the insurance agent who called weekly and became in many ways a friend and legal and financial adviser to his poor and often illiterate customers. Today the Industrial Life Offices, through their countrywide network of agents, still have their finger on the nation’s pulse, though now the benefits are less gruesomely necessary and the weekly savings may be pounds rather pence.

Life assurance is primarily designed to cover death or retirement of the insured. It is therefore often a provision for dependents. The possible benefits are:

(a) A lump–sum benefit at death. This may be considerable or may only be enough to cover funeral expenses.

(b) An income benefit commencing at death and lasting the widow for her life, or until re-marriage, or until the children reach a certain age.

(d) The repayment of a mortgage on a house, so that the widow and dependents are sure of ownership of the property on the death of the mortgagor. As property values have risen in recent years, it has become more difficult for a widow to keep up the payments herself on the property. Many building societies and banks now insist that mortgages must be backed up by life assurance. It is distressing for a Society or bank to evict a family because repayments are no longer being made, at a time when they have recently suffered the loss of their bread-winner.

The chief type of policy are:

(a) Whole life policies, payable at death; the premiums being payable either throughout life or to some agreed age, usually 60 years of age.

(b) Endowment policies. Here the sum agreed is payable at the end of a given number of years, or at death if this occurs sooner. It is a popular form of long term-term saving, carrying with it the benefit of insurance cover during the time of the saving. ‘With-profits’ policies return not only the sum assured, but profits actually made on the savings, which have been invested by the company. Usually 90 per cent of the profits made are returned to the policy holder.

(c) Family income policies. In this type of policy it is arranged that if death occurs during the period stated in the contract the benefit will be paid not in one lump sum but by a series of regular repayments, terminating with a final sum at the end of a period. This is very suitable for a man with a young family, since it covers his widow and dependents with a certain minimum income at once in the event of his death. This income will continue until the end of the period agreed, which is usually arranged to cover the time before the children are able to support themselves.

(d) Mortgage-security policies. These have been referred to the above.

(e) Group life policies. These are very convenient to small employers who cannot afford a pensions department to manage investments for pension purposes. The policies can be taken out to cover an agreed sum on each member of the group. An employee who leaves the firm can usually arrange to commute his benefits to a personal insurance cover on terms suitable to his age and pocket.

(f) Unit-linked policies. These policies are issued with a minimum of investigation into the life being insured. They are issued in conjunction with an Investment Trust, about 93 per cent of the monthly sum invested being used to purchase units in the trust. The other 7 per cent is used for insurance cover. Income tax advantages and capital gains on the units invested make this type of policy attractive to persons paying income tax at a standard rate.

In the Malaysian assurance industries there many more types of life assurance polices and these will be further discuss in my future posting at this site.

LIFE ASSURANCE

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Life assurance on a long-term basis became possible after Edmund Halley, the famous Astronomer Royal, published his mortality tables in 1693. Based on an investigation into man’s expectation of life, the tables opened the way to predicting probable future mortalities. Previous to this, life assurance had only been conducted on a short-term basis. The earliest policies were designed to provide ransom money for sailors captured off the Barbary coast by the Barbary pirates. In 1705 an Amicable Society for a Perpetual Assurance Office was formed which collected contributions from members who wished to provide for their dependents. At the end of each year the funds available were shared among the dependents of members who had died during the year. The sum provided therefore was not steady, but depended upon (a) the sums collected, and (b) the number of members who died.

About one-quarter of the total of all insurance premiums is for life assurance, and some companies specialise in this type of business. This branch of insurance is generally known as assurance, since the risk differs in one important particular from those covered by insurance.

In the case of insurance a premium is paid to provide cover in the case of some eventuality such as fire taking place. If the insured suffers no loss from fire during the period for which the insurance was effected, then no payment to the insured will be due from the insurance company. In the case of life assurance, however, the eventuality-the death of the assured-is certain, the only uncertainty being as to when it will occur. The sum assured also-except for whole life policies-is certain to be paid to someone, to the assured if he lives to the end of the period of assurance or to some relative if he dies before that time. Expectation of life for men and women of different ages can be calculated with great accuracy. The amount of a life-assurance premium will depend on the sex and age of the person whose life is to be assured, the length of the period of assurance and the amount of the assurance. Nowadays, most life assurance is taken out in the form of endowment policies which combine assurance with saving. In this case the assured takes out a policy for a specified number of years. If he survives to the end of the period he receives the sum for which he assured his life together with any bonuses his policy has earned.

FIRE INSURANCE

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Fire insurance began a few years after the Great Fire of London (1666) when a speculative builder Nicolas Barbon started the Fire Office in 1680. By 1805 there were 11 fire offices in London and over 30 in the British Isles. They ran their own fire brigades and issued fire marks to be affixed to the walls of building to mark them as being insured by particular company. Brigades sometimes refused to put out a fire on properties which were not insured, but sat around to be ready if the flames spread to properties bearing their fire marks. Later a good deal of co-operation developed and eventually the fire-brigades became part of the public service.

By the start of the twentieth century the need for household policies covering a wider range of risks began to be appreciated. By the 1920s policies covering not only fire but storm and tempest, burst pipes, impacts, explosions, and burglary were introduced. In more recent years aircraft damage, collapse of television aerials, and householders’ liabilities to the public have been added.

One feature of this type of insurance is the influence it has exerted over the years on public policy. The whole question of safety in buildings is continuously under review. Lower premiums are offered to firms and householders who take more sophisticated precautions such as installing sprinkler devices. Even the layout of towns and housing projects to leave adequate fire gaps and escapes on high building are affected by the activities of the insurance lobby, who have the public interest as well as their own interests at heart.

The chief types of policy issued by the fire offices are:

(a) Fire insurance on domestic and business premises, and their contents.

(b) Consequential Loss insurance. (This type of policy ensures that a firm continues to receive reasonable payments in lieu of profits while rebuilding is going on. Otherwise the business may lose all connection with its customers, and are be unable to pay fixed charges such as rates and mortgage repayments which still continue even when the premise have been destroyed.)

(c) Special perils. Many of these are now covered in the normal householder’s policies, but flooding is a special peril which is sometimes not covered by these policies. (For Malaysian readers kindly note that flooding is covered in our Houseowner's and Householder's policies. I will be going into further details regarding these policies in my future posting at this site.)

(d) Household policies. These have already been described above.

MARINE INSURANCE-LOSSES AT SEA

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There may be total loss or partial loss:

(i) Total loss. If a ship is lost at sea , or if the cargo is completely destroyed , this is known as an actual total loss. If the cargo is so seriously damaged that it can no longer serve the purpose for which it was intended , or if the ship itself has to be abandoned , this is called a constructive total loss.

(ii) Partial loss. Frequently, however, a ship or its cargo may suffer only partial damage. In this connection the term average is used in marine insurance (and in fire insurance also ) to mean loss. Thus, there is general average and particular average.

General average occurs, for instance, if some of the cargo has to be jettisoned in order to secure the safety of the ship. In this case the loss is not borne only by the owners of cargo but also by the shipowners , since the loss was incurred in order to save the ship. Similarly, if the ship has damage and has to be towed into port the extra expense incurred in doing this will not fall entirely on the shipowners but also on the owners of the cargo, since it was in their interests too for the ship to be saved from total loss.

Particular average occurs when part of the cargo or the ship suffers damage, and where the partial loss is entirely borne by either the owners of the cargo or the shipowners , as the case might be. If, for example , the ship was in collision any damage would be the responsibility of the shipowners; on the other hand, if sea water, shipped while the vessel had struggling through heavy seas, should damage the cargo that would be the responsibility of the owners of the cargo. Thus, a policy taken out “with particular average” provides insurance against all risks at sea, but if it is “free of particular average, “ then cover is provided only against total loss and general average.

In the case of partial loss the extent of the damage has to be assessed by an independent official, know as an average adjuster. In order to secure international uniformity in the adjustment of general average, the York-Antwerp Rules were drawn up.

THE MAIN SECTIONS OF MARINE INSURANCE

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The main sections of marine insurance are hull, cargo, freight, and shipowner’s liability.

(a) Hull. The hull of the vessel, which includes the machinery, can be covered against damage or total loss by storm, stranding, fire, collision, or other perils of the sea. Insurance begins from the laying of the keel, when the insurable interest lies with the shipbuilder. After passing into the hands of the buyer, the insurable interest lies with the shipowner from then on. Some policies are time policies, lasting usually for 12 months, or they may be voyage policies lasting from port of departure to port of arrival without a specific time being agreed.

(b) Cargo. The insurance of cargo is absolutely vital in the import and export trade, since the question of payment for the goods hinges around the existence of a reliable insurance policy. This will be explained in detail in my future posting, and the reader is urged to investigate this aspect of cargo insurance thoroughly. The main point is that the existence of an insurance policy in conjunction with a Bill of Lading means that whoever purchases the goods by purchasing the Bill of Lading also subrogates (inherits the rights to ) the insurance claim that may arise if the goods are lost at sea. He therefore buys with confidence, since his purchase is completely secure. Without the insurance policy no one would be prepared to pay for the goods until they had arrived safely.

Cargo policies refer to the movement of goods exported from or imported to a country. At some point the insurable interest will pass from the seller to the buyer, according to the contract of sale. Usually this will be either an F.O.B contract (Free on Board-the seller to deliver the goods on board the carrying vessel)or a C.I.F contract (Cost, Insurance, Freight- the seller to deliver the goods to the port of destination).

Cargo policies cover all risks including war and strike risks, and are based on the value placed on them by the seller-this means the ordinary invoice price. The holder usually has the right to claim, since, except in rare instances, the property in the cargo vests with the holder of the Bill of Lading , to which the policy and invoice are invoice are attached. It follows that for the whole of the time the marine policy is in effect the cargo is the property of the holder of the Bill of Lading.

Floating policies are a variation of cargo policies. They give cover for a specified sum, say $1 million, and eliminate the necessity of insuring each cargo separately. For instance a cross-Channel ferry would be greatly inconvenienced if underwriting insurance had to be negotiated for every trip. The master simply notifies the value of the cargo before sailing on each voyage, and this is set against the floating policy. As soon as the sums already covered approach the total value of the policy the premium will be renewed to extend the cover for a further period.

Open-cover agreements are sometimes made by which an underwriter agrees automatically to cover any consignment notified to him up to a certain limit at a pre-arranged rate for a particular voyage. Policies are issued after shipments are notified.

(c) Freight. The word ‘freight’ is often used as a synonym for cargo, but it has a different meaning in insurance. Here the word means the charge for carrying cargo. A shipowner often gets the freight in advance, but since he is not legally entitled to it until the cargo is safely delivered, he may face an action for recovery of the freight should the cargo be lost overboard. If it is not recoverable because of a special clause in the contract of carriage it will form part of the insured value of the cargo. If it is payable on delivery, it will be a matter for the shipowner to insure against loss of freight. It follows that in nearly every case there is some party with an insurable interest in the freight. Underwriters are prepared to cover this risk of loss of freight, just as in fire insurance they are prepared to cover not only the risk of a fire itself, but the risk of loss of profits while a building is out of use after the fire. Since ‘freight’ is the reward for carrying, it is the income of the carrier.

(d) Shipowners’ liabilities. These are very numerous: not only cargo, passengers, and crew but other vessels, fixed installations such as piers and wharves, and even beaches are liable to be damaged by the actions of ships and ships’ masters. After the Torrey Canyon disaster near Land’s End, a bond of 3 million pounds was required from the owners to cover claims for detergent used, and loss of business suffered by the authorities and businessmen involved in clearing the beaches of oil from the tanker. These eventualities represent a further heavy burden placed upon shipowners. Insurance relives them of these risks, and enables them more confidently to go about their business on the high seas.

MARINE INSURANCE

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Ever since 1575, when a Chamber of Assurance was set up in the Royal Exchange of the City of London, there has been a recognized centre for the registration of marine–insurance policies. Registration is evidence of the terms of the contract and is helpful in settling disputes. The 1601 Act already referred to set up a Court of Arbitration to settle disputes over policies.

The insurance of ships and their cargoes is perhaps the oldest form of insurance , for there is evidence that it existed some 2000 years ago. Marine insurance, as this branch of insurance is called, is undertaken by underwriters who are members of Lloyd’s and by marine-insurance companies. Lloyd’s underwriters are the most widely known and the most important insurers in the world. They undertake all kinds of insurance business, but they are best known for marine insurance. Lloyd’s itself does not do insurance business; this is undertaken by its members, either as individuals or working in small syndicates. Lloyd’s as an institution dates from the eighteenth century, when business was transacted in a coffee-house run by Edward Lloyd which was much frequented by merchants engaged in foreign trade. In those days coffee-house were more in the nature of clubs, some being the resort of men of learning and others of businessmen. Today Lloyd’s has its own large premise.

The members of Lloyd’s are underwriters, so called because of the custom of writing their names under any risk a portion of which they were prepared to cover. At the same time they indicated the amount of risk they were prepared to undertake. If a cargo worth $80,000 is to be insured one underwriter may be willing to cover (say) $4000, and if so he will attach his name to group amount. Another underwriter or a syndicate (that is, a small group working together) may choose to cover $6000. The broker who acts between the shipper and the underwriters will go from one to another until the full $80.000 has been covered. In this way the risk is spread over a number of members. A marine insurance company generally covers an entire risk itself.

THE TYPES OF INSURANCE

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The four main branches of insurance are:

(a) Marine Insurance

(b) Fire Insurance

(c) Life Insurance

(d) Accident Insurance

There is no real difference between the words 'insurance' and 'assurance', but in Britain it has become customary to use the word assurance when referring to life policies. The events being insured in life assurance will assuredly happen-for we all die, whereas in all other insurances we do not necessarily ever suffer a loss. This seems to be the reason for the word 'assured' in connection with life policies.

THE SCOPE OF INSURANCE

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There are many business risks which can be insured against. A shopkeeper will usually also want to insure his shop window, if it is a large one, and companies exist which specialize in this branch of insurance. Merchants and manufacturers responsible for the dispatch, by railway, road, sea or air, of large consignments of goods will insure them against damage or loss while they are in transit. If the railway carries goods at “company’s risk”- the charge for which is higher than if the goods are sent at “owner’s risk”- this means that the railway itself is accepting responsibility for the goods arriving at their destination undamaged. Letters and parcels can be sent by registered post, and in this case it is the Post Office which takes responsibility for their safe arrival. In these last two instances the railway and the Post Office respectively are really acting as insurers.

Insurance against fire dates back more than a thousand years. The first company in England to undertake fire insurance was established in London in 1680. It is interesting to note that the early insurance companies operated their own fire brigades in order to try to reduce the damage for which they would have to pay compensation.

To receive compensation in the case of fire only to the value of the premises and goods which have been destroyed may not fully indemnify a trader for his loss. As a result of the fire he may be put out of business until he has acquired new premises and stock. To cover such contingencies, it is possible to insure against loss of profit as a result of fire. Those who own motor vehicles –ships and aircraft can insure them against damage or loss. In the case of motor vehicles the law compels the owner to insure against what is called ”third-party” claims. A third party is any person, other than the insurance company and the insured, who is involved in an accident. For example, a pedestrian who has been knocked down by a motor car might put in a claim against the driver for compensation for injury. In this case the pedestrian is the third party.

Under the Employers’ Liability and Workmen’s Compensation Acts an employee could bring a claim for compensation against his employer if he had suffered injury at work. If the injury was serious a court of law might award compensation to the extent of thousands of dollars. This, however, is now part of the Socso Scheme, but employers can take out insurance policies to cover themselves against at common law which might be brought by an employee who suffers injury while at work and can prove the accident was due to the employer’s negligence. An individual, too, can insure himself against accidents. Many people used to insure themselves before taking a journey by train, and many still do so when they are travelling by air.

Where employees have to handle large sums of money belonging to their employers there is always the risk of loss to the employer if an employee turns dishonest. This risk, too, can be insured against, and is know as Fidelity Guarantee insurance.

Another branch of insurance which is very useful to business is cover against bad debts. All firms sell goods on credit have to face the possibility that some of their customers will not pay what they owe. This is a relatively new from of insurance, although several attempts have been made in the past to provide this kind of cover for businessmen. It was not until the insured was asked to bear a portion of the risk himself that successful schemes were worked out and operated. It is now an expanding branch of insurance provided by the overseas insurance companies. In order to encourage the export trade, many United States import and export companies has taken insurance against the non-payment of debts by foreign import merchants. British exporters can insure against bad debts of this kind through the Exports Credit Department of the Board of Trade, which has opened offices for this purpose in a number of important cities in Great Britain as well as in London. The business is conducted in very much the same way as that of an insurance company, the exporter paying a premium according to the risk involved.

The terms of each item of insurance are set out in a policy, and it is very important, therefore, that the insured should read this carefully, as sometimes there are exceptional circumstances to which the insurance will not apply and of which the insured should be aware.

Some insurance companies undertake all kinds of insurance, although some specialize in life assurance and others in general insurance.

The volume of insurance business has increased enormously during the past fifty years or so the total assets of insurance companies during that period have increased by ten times and their premium income by twenty times.

There are many other risks besides those mentioned above which can be insured against. A society holding an outdoor function and having to incur heavy expenses in its preparation can insure against rain on the day of the event. The organisers of agricultural shows and athletic meetings often cover themselves against possible loss in this way. In the United States it is compulsory for banks to insure their deposits up to a certain amount. This is a very valuable safeguard for small investors, who suffered heavy losses from the many American bank failures of the 1930s. If you wish, you can even insure your holiday against rain!

PAYING OUT THE JUST CLAIMS

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If an insured person suffers a loss as a result of the peril against which he has insured he is entitled to be indemnified for the loss. The correct procedure is to make a claim on an appropriate claim form. This form must as usual be completed with the utmost good faith, and will then be considered by the insurance company. The following points will enter into their considerations:

(a) Was the insured peril the proximate cause of the loss? If so liability exists; if not the claim does not justify payment from the pool of an indemnity sum.

(b) Even if the claim appears at first sight to be justified, are there any breaches of the conditions of the policy? For instance in a motor-accident policy there is usually a clause that the vehicle must be regularly serviced, the tyres must be in good condition, etc. If I wreck my vehicle after skidding owing to the bad state of the tyres my claim will probably fail.

(c) If the claim is justified, what is the correct amount which will indemnify the applicant? Many claimants do not understand indemnity and ask for the replacement price of the goods destroyed. We have already seen that the true indemnity figures takes account of depreciation and may be considerably less than the replacement price.

When a ‘fair’ valuation has been agreed the insurance company pays the agreed sum. If this is large they may find it necessary to borrow from their bankers or even to sell some of their investments in order to realize the money to pay the claim. When the liner Andrea Doria sank, British insurance firms paid 4 million pounds within a few days

THE INSURANCE COMPANIES AS INSTITUTIONAL INVESTORS

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A slight diversion here is well worth while to take a quick look at the importance of the insurance companies as institutional investors. Investors are people who save part of their incomes and lend the savings to firms who are in need of capital. The money invested is used by the firms, either in primary, secondary, or tertiary production. It is converted into fixed assets of every kind, which are then used to produce more and more consumer goods. In short this is the capitalist system of production. Whether you live in a Communist, Socialist, or Capitalist society the use of the invested funds is the same. The difference between these systems is purely one ownership.

An institutional investor is an organization which collects savings from people and invests the savings in the same way as the private investor. The banks are an obvious example of institutional investors, but it is probably true to say that the insurance companies are at least equal in importance to the banks. This is particularly so today, because a change in the distribution of wealth since the Second World War has put more and more wealth into the hands of the poorer sections of our population. Heavy taxation of the rich has reduced the share of investment they are able to make, yet it has not put vast fortunes at the disposal of the poor. The increase in wealth has been so distributed that it has meant only a small increase for each family, and much of the increase is in better pension schemes, welfare facilities, etc. In other words personal and social insurance has played a large part in the increased standard of living of the mass of the people. The industrial life societies, with their countrywide network of agents, have been entrusted by many ordinary people with the small savings they can now afford, in the form of insurance and assurance policies. This represents a very valuable contribution to the capital requirements of industrialists, transport and shipping firms, farmers, forestry and other extractive industries, and wholesale and retail traders. It may fairly be said that through the medium of the insurance companies we have become a property-owning democracy.

By taking care of the ‘pool’ , investing it wisely in a balanced portfolio, keeping away from the involvement in the industries and concentrating on safe investments yielding a reasonable return the insurance companies have increased the reserves available to the insured members of the general public in times of distress or natural disaster.

TAKING CARE OF THE 'POOL'

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The pool of resources from which compensation is to be paid must be large enough to meet all possible eventualities, and the insurance companies therefore maintain adequate 'catastrophe reserves'. These reserves are invested as carefully as possible.

A high proportion of this reserves is for life-assurance cover, which will be paid out to widows and orphans when death occurs. The rest is for general insurance activities, fire, marine, and accident policies. Clearly the skill of the investors in the service of the insurance companies is of the utmost importance to the policy holders and the shareholders of the companies.

FIXING THE PREMIUM

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On the basis of the answers given to the questions in the proposal form the underwriters will decide a fair premium for the policy that the proposer wishes to take out. It should be noted that one part of the proposal form is a declaration signed by the proposer to the effect that he warrants the truth of the statements made. This warranty reinforces his common-law duty to show the utmost good faith with a contractual duty to have told the truth in every particular. This contractual duty is even more strict than the common-law duty, since any inaccuracy makes the contract voidable, whether or not it relates to a material fact. A material fact is defined as one which will influence an underwriter in entering into, or fixing the premium for, a contract of insurance. This declaration is the basis of the contract of insurance. It is incorporated in the offer of the Insurance Company to insure the proposer for a certain sum of money called a premium. The person desiring insurance can accept this offer by paying the premium, whereupon commences, and a policy will be issued giving a full account of what has been agreed.

INSURABLE AND NON INSURABLE RISKS

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Not all risks are insurable. Insurance depends upon the calculation of probabilities. The probability that an event will occur is estimated by the underwriter. In Life Assurance statisticians called actuaries are experts in the statistical analysis of probabilities in the mortality, sickness and retirement fields. Statistical records over a very long period enable them to calculate the chances of any particular applicant, say a bus driver, suffering from a disability, or dying before the policy matures. The premium is then fixed at such a figure that the insurance company will be able to meet the obligations it has assumed.

Some risks are not susceptible to insurance, because there are no records on which to make calculations. I cannot insure against the risk that I shall prove to be a fool in business, for there are no records of my success or failure to help the actuaries.

All the questions in the proposal form shown below affect the calculations of the probability of someone being hurt. For instance in Question 3:

(a) The date of the event. Some days are busier than others. A public entertainment on Tuesday will not attract many people, for they will be at work. A public entertainment on Saturday and Sunday will attract a large crowd, with consequently greater chances that someone will be hurt.

(b) Number of days involved. If it goes on for only one day the risks will be smaller than of it to run over a complete week.

(c) Full particulars of the event. If it is a ‘Dogs Show‘ the risks will be less than if it is a sports-car meeting or an air-display. The actuaries need to know what type of event is being staged before they can fix the premium.

(d) The anticipated attendance. It will make a great deal of difference to the chances of someone being hurt if the attendance is large. Not only will the numbers available to be hurt be greater, but the chances of collisions will be greater too. This applies especially in car parks, or on terraced stands.

Under the heading of insurable risks come such risks as fire, burglary, storm and tempest, marine disasters, and motor vehicle and aviation accidents. Non-insurable risks include such item as the chances that the goods a businessman has bought will cease to be fashionable before he has sold them, or the chances that a slump will develop so that his business proves unprofitable.

A SAMPLE OF THE PROPOSAL FORM

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PROPOSAL FORM
for
PUBLIC ENTERTAINMENTS,
CONCERT AND SIMILAR EVENTS

THE INSURANCE ACT: You are to disclose ion the proposal form fully and faithfully all the facts you know or ought to know otherwise the policy issued hereunder may be void.

1. Name of Persons, Committee or Authority in whose favour insurance is
required..............................................................................................................

2.Address............................................................................................................

3.(a)Date of event.....................................................................................
(b) Number of days involved (allow for setting up and dismantling).........
(c) Full particulars of the event including where it is to be held.................
(d) Anticipated attendance....................................................

4. Are any grandstands or street decorations to be erected?......................
If so-(a) Will these be approved by the Local Authority?............................
(b) What will be the capacity of the grandstands?........................................
(c) By whom will they be erected?..................................................................

5. Is there to be a car park?.............................................................................
If so-(a) What will be maximum capacity?.....................................................
(b) Will any charge be made?..................................................................
(c) Will tickets be issued?........................................................................
(If so please attach a specimen)
(d) Will any notices be displayed disclaiming liability?.......................
(If so please attach wording)

6. Will adequate precautions be taken to protect the public from any dart
throwing, rifle shooting or similar side shows?...............................................

7. Is there to be a display of fireworks?...............................................................
If so-(a) Will this be operated by independent contractors?.........................
(b) What precautions to avoid injury will be taken?.............................

8. Please state-
(a) Limit of Indemnity required.............................................................
(b) Whether insurance is required against liability arising out of:
(i) Damage to property by fire and explosion.................................
(ii) Personal injury caused by fireworks..........................................
(iii) Car park for which a charge is made..........................................

Declaration:

I agree that this proposal shall form the basis of the contract between me and ABC Insurance Company and I am willing to accept a policy subject to the terms prescribed by the company therein and to pay the premium thereon.

Date..........................................

Signature of Proposer............................................

HOW AN INSURANCE POLICY IS BROUGHT INTO EFFECT

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The first thing to do when we wish to insure against any risk is to state clearly what the risk is, and to provide information which will enable the insurance company to assess the probability of the risk occurring. This is most easily done by filing up a standard Proposal Form which will be supplied by the company; if the risk is of a very unusual nature such a standard form may use together with other questionnaires. The top posting in this site shows a typical proposal form; in this case for liability to members of the public who may suffer an accident of some sort at a funfair or outdoor concert, etc.

A PAGE TO TEST YOU ON THE BASIC PRINCIPLES OF INSURANCE

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THIS POST TO BE PUBLISH SOON!!!!

BASIS PRINCIPLE OF INSURANCE

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Let us recapitulate the basic Principles of Insurance. The basic principles are:

1. A person who insures a motor vehicle must have an insurable interest in it.

2. The sums contributed to an insurance pool are called premiums.

3. Payment for losses suffered is called compensation.

4. Insurance contracts must be made with both parties showing the utmost good faith.

5. To restore a person to his original position before he suffered a loss is to idemnify him.

6. The sum payable on a life policy is called the benefit.

7. An insurance company which pays out a claim then subrogates the rights of the insured party.

8. If two policies cover the same loss each company will contribute towards it.

9. Public policy is aimed at reducing or preventing crimes.

10. By means of which policies of insurance the loss lighteth rather easily upon many than heavily upon few.

THE DOCTRINE OF PROXIMATE CAUSE

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This rule says that if we insure against a certain eventuality we are entitled to compensation only if that eventuality is the immediate (or proximate) cause of the loss. If the immediate cause is some other peril, which has been especially excepted by the insurance policy, then no claim arises. For instance, if I insure my house against fire and a petrol tanker runs into it and cause a blaze, the chain of events to a fire (an insured peril) and I may claim. Suppose the policy excludes fires cause by road accidents-because the house is situated at the bottom of a hill on the way to an oil refinery. The excepted peril is clearly the proximate cause of the loss, fire following naturally as a consequence of the accident, and no claim arises.

I will go into further details on this subject 'proximate cause' in the future posting in this site.

THE SECOND COROLLARY OF INDEMNITY-SUBROGATION

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If the principle of indemnity says that I must be restored to the condition I was before I suffered the loss, it would be wrong for me to accept an agreed sum in compensation and then continue to have any other rights as well. A few examples will illustrate this

Example 1. My car is wrecked in an accident. I agree to accept RM40,000 in settlement of my claim. The wreck is worth RM3,500 when sold to the workshop for use as spare parts. If I received this RM3,500 as well as the RM40,000 I would be getting more than the true indemnity for my loss. The insurance company therefore steps into my shoes as owner of the wreck, and the RM3,500 returns to the pool. The word ‘subrogate’ means ‘to step into the place of’, or ‘to find a substitute for’. One could say that when they pay out the claim the insurance company inherits all the rights of the person accepting settlement of the claims. This means that they also inherit the right to sue other parties in the accident for any share of the loss which their negligence may have caused.

Example 2. A celebrated American racehorse which had won many classic races broke his leg on a Californian track. The owner had insured the horse for $250,000 with a British insurance firm, who had take the precaution of sending a representative to the track. The owner was about to give the veterinary surgeon permission to destroy the animal when the insurance representative declared his interest. He would not permit the animal to be destroyed, and soon the rare sight of a horse with a leg in plaster could be seen in the stables where the insurance company were trying to cure the animal. They paid out the claim for the racehorse and although he never raced again he was put to stud and had many fine descendants. The insurance company eventually recovered from breeding fees more than the sum paid out, and restored to the ‘pool’ all its losses. Subrogation had taken place in the nick of time to prevent the destruction of the animal.

THE FIRST COROLLARY OF INDEMNITY-CONTRIBUTION

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Suppose I insure my goods against fire for RM100,00 and suffer a loss by fire of the insured goods for that amount. I shall be indemnified for the loss and receive RM100,000 out of the pool. Suppose I insure against the loss with two or three companies, would it be fair for me to claim from each company the sum of RM100,000? Clearly it would not, for I would be restored to a better position that I was in before. This would be against public policy, for it might encourage me to cause the loss to happen, so that my condition improves.

Such double insurance is unlikely today, and the insured might even be suspected of fraudulent intent. A more usual case would be where two policies overlapped, as for example where a burglary policy and an all-risks policy exist covering the same goods. The companies concerned will contribute to the loss proportionately, the exact division depending upon the terms of the original policies. To discover whether they should pay in full, or only contribute, every claim form asks the insured ‘Is any other company interested in the goods which are the subject of this claim?’ An honest answer to this question lets the insurance company know their true position.

THE PRINCIPLE OF INDEMNITY AND LIFE ASSURANCE

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The principle of indemnity cannot apply in a straightforward way to life assurance, for no sum of money can equate the loss of life. Similarly in personal accident cases the loss of a limb cannot be measured accurately in terms of money. All that these policies can do is to provide a sum of money, called the benefit payment, as compensation.

Even so the principle does have some influence. Life assurance premiums are roughly related to the way life of the person concerned, for he must be able to afford the premiums, and weekly benefits for loss of earnings after an accident are not allowed to exceed the normal, earnings of the insured.

LATEST NEWS!!!

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Today is 01/01/2008, and it marks a very significant day in my life and the beginning of a new year for me as I had already a made a very important decision by resigning from my job with the insurance company I am attached to for more than 12 years. Today also marks the 'soft' launch of my insurance site tor the general public after months of preparation. From today onwards I will be spending more time on this site to provide and help the agents and insuring public by providing them with the necessary information and knowledge on insurance.

As the insurance industry is changing rapidly from time to time, consumers; insurance agents and the general public needs more informative articles and guidelines to be able to make an informed decision in insurance buying and selling respectively.

With the above topics in mind, and with the advancement of the internet tool as a form to share ideas; information and knowledge, I decided to share my experience in the insurance industry by starting this insurance site whereby everybody can access to all the facts you need to know about insurance. In this insurance site, readers will find an extensive information on various aspect of insurance and I strive to provide only quality articles, so if there is a specify topic relating to insurance that readers would like me to cover, please feel free to contact me anytime at my e-mail address at insuranceblog4u@gmail.com or you can always drop in a comment at this site.

Thank you to those readers who contribute daily to my insurance site.

A STORY OF INDEMNITY

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The insurance companies themselves have used the example of a man who knocks over someone’s beer in a crowded pub to illustrate indemnity. Suppose I knocked over someone’s glass of beer, from which he had already taken a generous swig, in a pub. I would of course apologize, and insist on buying him another pint. In other words I would more than make up for the damage, and would restore him to a better position than he was in before. The insurance company would not be generous in this way. It would make the most careful inquiries as to how much had been drunk already, and would replace the exact quantity spilled. It is no function of the insurers to pay out more from the pool than is necessary; to do so would offend against the principle of indemnity.

PRINCIPLE NO. 3-INDEMNITY, WITH CONTRIBUTION AND SUBROGATION

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The contract of insurance is one of indemnity, except in the case of life assurance and personal-accident insurance. In everyday use the word 'indemnity' means to restore someone to the position that he was in immediately before the event concerned took place. For instance, an employer undertakes to indemnify his employee if the employee is put to expense of any sort on behalf of the employer’s business. If I pay out fares, or postage for my employer he will refund the money to me.

The contract of insurance is the same, in that a person suffering a loss after insuring against it will be indemnified for the amount of the loss. He will be restored as near as possible to the condition that was in immediately before the loss occurred. Indemnity never restores us to a better position than we were in before, if it did people might fell tempted to make the loss occur. Therefore any depreciation in value suffered by the property since it was purchased new, must be take into account.

Example. A motor vehicle which originally cost RM60,000 is wrecked in an accident two years after purchase. From the current list published by the motor traders, the insurance company can see that the vehicle is now worth only RM48,000. This sum will therefore be complete compensation.

PRINCIPLES NO: 2-UBERRIMA FIDES OR UTMOST GOOD FAITH

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When a contract is made it is presumed that people will deal honestly with one another, but it is also deemed that neither party will be a fool. You are therefore expected in the eyes of the law to ask sensible questions when entering into a contract. The law says caveat emptor, let the buyer beware. If I want an oak dining table and I agree to buy the table for RM 6,000, the law will not allow me to back out of the agreement, if the table turns out to be made of walnut. I should have inquired about which wood it was made from before I placed a firm order. The rule therefore for simple contracts is caveat emptor, let the buyer beware.

With insurance contacts the rules are more strict. Uberrimae Fidei, ‘of utmost good faith’ is the rule with these contracts. The person wishing to be insured must be absolutely open in his dealings with the insurance company, because in deciding what is a fair premium to charge, the insurance company will depend absolutely on the truth of the facts given by the applicant. For instance, if I reply to the question ‘ How old are you?’ that I am 20 years old when in fact I am 45 years old, this would make a great difference to the premium in certain policies. Life assurance is very cheap to a 25-year-old, and much more expensive to a 45-year-old. We shall see later that a Proposal Form filled up by an applicant for insurance is really a set of questions designed to discover the full facts. On the basis of these facts a fair premium is decided. False answers to the question render the policy voidable at the election of the aggrieved party, so that the insurance company need not pay out compensation, nor need they refund the premium to the applicant.

The requirement to show the ‘utmost good faith’ is strict. Supposing I am asked in the proposal form, ‘Is your father living?’ It so happens that he is , but he is on his death-bed and in fact dies later the same day. It would be a breach of’ utmost’ good faith not to reveal this material fact even though I were telling the truth when I wrote ‘ yes ‘ in answer to the question.

These first two principles of insurance(insurable interest and utmost good faith) apply to all contracts of insurance. You may insure only if you have an insurable interest, and you must show the utmost good faith in all your dealings with the insurance company

Therefore it is incumbent on both parties to an insurance contract-the insurance company as well as the insured- to disclose at the time the insurance is effected all relevant particulars which might materially influence the other party's willingness to make the contract. No important information must therefore be held back. This would debar a man from taking out a life-assurance policy if he knew that he was suffering from an incurable disease without first informing the insurance company of the fact.

I will further elaborate on this subject ( utmost good faith) in my future posting at this site.

PRINCIPLE NO: 1-INSURABLE INTEREST

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Everyone who has an insurable interest in something is entitled to insure it against any risks that may occur. To have an insurable interest we must be in danger of suffering some loss or incurring some liability should the thing concerned be destroyed or damaged in any way. If we shall not suffer loss or incur some liability then we may not insure; if we do we shall waste our premium because under no circumstances will we be allowed to receive money from the pool.

It is therefore perfectly all right to insure my own house, furniture, motor car, jewellery, etc. because I will suffer loss should they be destroyed, damaged or stolen. I can insure my own life, or my wife’s life, or even the life of the man who manages my business. It would be quite wrong to insure someone else’s house, furniture, motor car, jewellery, etc. because I have no real interest in it, and will suffer no loss if it is damaged or stolen. I cannot insure Henry Tan house and claim money if it is burned down. If this were allowed I might just be tempted to help it burn down. Of course very few people do commit crimes, but if crime of this sort were encouraged, even if only by a small amount, it would be very unpleasant for the victims. It is therefore ‘against public policy’ to permit to insure without an insurable interest.

Therefore to simplified the whole meaning of insurable interest, let me point out to you that it is illegal for persons or firms to take out insurance against risks which do not directly affect them. In general, when the insured makes a claim under an insurance policy he must first have to suffered some kind of loss himself. A man can insure his own property against fire or burglary, but not the house of a friend or neighbour. The insured must have an insurable interest in what he insures.

THE PRINCIPLES AND DOCTRINES OF INSURANCE

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There are three main principles of insurance, and a famous doctrine which is rather similar to be a basic principle.

Two of the principles apply to every contract of insurance. They are the principles of Insurable Interest, and Uberrima Fides or Utmost Good Faith. The third principle, Indemnity, applies to all contracts of insurance except personal accident and life assurance. It has two corollaries, Contribution and Subrogation. Finally, the doctrine is called the Doctrine of Proximate Cause.

Let us take a careful look at each of these principles at my next posting.

HOW THE 'INSURANCE POOL' WORKS

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The successful conduct of an insurance-pool system depends for success on three main points.

(a) The contributions to the pool must be adequate to pay the claims made by those who suffer a loss.

(b) The pool itself must be looked after carefully and wisely invested, so that it grows bigger year by year.

(c) The just claims must be paid promptly and in full.

Each of these three points is easy to say, but difficult to achieve, and a full understanding of what is involved in each point is important. Before looking at the detailed arrangements made by insurance companies to put these points into effect, we must first consider the principles which control all insurance activities.

AN EARLY INSURANCE ACT

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The preamble to an Act of Parliament of 1601 in Britain included the phrase

By means of which policies of assurance…..the loss lighteth rather easily upon many, than heavily upon few.

This phrase explains rather well the basic idea of insurance, which is that losses shall be shared more evenly among the whole population, rather than be suffered by just the odd unfortunate person. The word ‘population’ here can mean just those who are interested, or it can mean every person in the country, as for instance in Britain with its National Insurance Scheme. Whichever meaning it has, we must be clear that the losses that are suffered are real enough. The family house is burnt down have suffered a loss, but if they were fully insured against fire it may cost them only a small premium. Enough money will be provided from the pool to restore them to their previous condition in a rebuilt house, or similar accommodation elsewhere.

It is worth returning to the phrase from the Act of 1601. It says so exactly, in its old-fashioned way, what happens when a heavy loss suffered by one person becomes only a tiny loss, because his partners in the insurance scheme have helped him bear the blows of a cruel and unkind fate—the loss lighteth rather easily upon many than heavily upon few.

THE PRINCIPLES OF INSURANCE

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The principle upon which insurance is based is “the pooling of risks.”If the incidence of some particular risk can be calculated from past experience its probability can be calculated. If, for example, over a long period of time fire has destroyed business premises to the value of an average of RM 50 millions a year such premises can be insured against fire if the combined payments collected from people insuring against this risk total RM 50 millions plus the insurance company’s expenses in conducting the business. Thus, what happens is that each person insuring against a particular risk pays a relatively small contribution to a common fund or pool, from which compensation can be paid to those who suffer in that way. The same result would be achieved if a large group of businessmen made an agreement to share any loss due to fire (or due to any other specified cause) among themselves. It is obviously more satisfactory to allow an independent body like an insurance company to undertake the business.

Insurance, therefore, can be effected only against those risks the probability of which can be mathematically calculated. It must be stressed that the insurance company itself is not taking any risk of loss, for, by spreading the risk over as wide a field as possible, the compensation it is called upon to pay should be well covered by the premiums it collects. Most Malaysian insurance companies have now been in existence long enough to have built up large reserves which protect them against any abnormal demands which might be made upon them. If, however, insurance companies find that are having to pay out more in premiums for a particular risk, they will clearly have to increase their premiums. An insurance company will keep a separate fund for each branch of insurance it undertakes.

THE NATURE OF INSURANCE-THE 'POOLING' OF RISKS

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A “pool” is a collection of money contributed by interested parties for a particular purpose. With a football pool, for example, the participants put a contribution into a central pool of money. They then try to guess something quite extraordinary, for example which eight teams will draw their matches next Sunday. Very often nobody guesses correctly, and the one who guesses nearest to the correct answer collects all the money in the pool, apart from the portions taken by the Government for taxation and by the management for the expenses of running the pool. A football pool therefore has the basic plan as explained above.

The difference with insurance is that it is not the lucky person who takes all, but the unlucky person or persons who take enough to enable them to recover from the unkind blow that fate has dealt them. This is much better than a football pool. A football pool is a gamble; a surrender of part of our assets in the wild hope that good fortune will smile upon us. Insurance is a much wiser and more sensible activity. It is a surrender of a tiny portion of our assets in order that a pool of money shall be created. From this pool, if we suffer the risk insured against, compensation will be paid to restore us to our previous good condition. We shall never win a fortune, we all know this is unlikely anyway, but we shall be sure that whatever standard of living we have achieved will continue for years to come.

With life assurance the man who insures his own life so that his wife and children are provided for should he die, is not gambling upon his death. He does not wish to win the money in the pool; he hope to lead a normal healthy life, and the feeling of security he gets from knowing his family is covered by a Family Protection Policy will help him enjoy life all the more.

THE ADVANTAGES OF INSURANCE

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Many risks have to be faced by people who run businesses. Some of these risks, as will be seen below cannot be insured against. There are , however, a great many risks against which it is possible nowadays to insure.

For example, in return for a payment, known as a premium, an insurance company will undertake to compensate the person making the payment (the Insured) in the event of a specified loss. Thus, if Jimmy is the owner of a shop with a value of RM100,000 which he wishes to insure against fire he will take out a policy(the document setting out the exact terms of the agreement) with an insurance company. Jimmy will then have to pay a premium at regular intervals, the amount depending on the value of the property insured. If he wishes to obtain full compensation for any loss he may suffer he must must insure his property for its full value. If the shop should be completely destroyed by fire he will, after due inquiries have been made, receive a sum of RM100,000 as compensation. Similarly, he could insure his stock against fire or burglary.

The advantage of insurance is clear. In return for a relatively small payment Jimmy is relieved of worry regarding the safety of his property, for he knows that should he suffer loss he will receive compensation. How, then, does it come about that an insurance company can bear risks which people like Jimmy cannot bear? That subject will be made clear in the next part of my site.

THE PURPOSE OF INSURANCE

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The purpose of insurance is to provide a sum of money in compensation for any damage that has been suffered as a result of running the risk that we insured against. Every policy of insurance defines the risk that is being insured against, and if that risk causes a loss the person insured will receive compensation to indemnify him for the loss. The meaning of this phrase will be made clear later in this site of mine.

DEFINITION OF INSURANCE

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What is insurance? Consumers and even some agents could not even really know the actual definition of insurance. Insurance is actually a method of financial protection by which one party undertakes to indemnify another against certain forms of loss.. An insurance company pools the payments for this service and invests them to earn further funds. Each insured person pays a relatively small amount, the premium, for a stated period of coverage. In return the company will, subject to an assessment of a claim, reimburse the insured for loss caused by an event covered in the policy.

Forms of insurance have existed since the earliest civilizations. Modern insurance began with the medieval guilds, which sometimes insured members against trade losses. The specialized fields of fire and maritime insurance developed in the 17th and 18th centuries. The development of probability theory allowed the statistical likelihood of damage to be calculated , making insurance as a business possible

SERVICES PROVIDED BY THIS INSURANCE SITE

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THIS POST IS STILL:

THE AIMS OF THIS INSURANCE SITE

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THIS POST IS STILL:

MY ASSOCIATION WITH THE INSURANCE INDUSTRY

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THIS POST IS STILL:

AUTHOR INTRODUCTION

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FRANCIS PAY, the author association with the insurance industry goes back more than thirty two years ago when he began his career in the insurance line with an authorised underwriting agencies in Batu Pahat, Johor in the year of 1975.

From there on he had worked in several insurance companies and underwriting agencies until his resignation on 01/01/2008 from his former job in an insurance company which he had worked with for more than 12 years.

With the author 32 years of experience in the insurance industry he had decided to devote his time in creating this insurance site to offer independent information on various aspect of insurance both to the consumers and insurance agents.

COMMENTS AND CONTRIBUTIONS

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Feel free to leave your comments ; ideas and feelings about my blog and articles posted!!! They are highly appreciated. Comments are moderated and spam will not be tolerated and will be deleted!!! If you wish to share something or have any problems regarding any insurance matters from any insurance company, just feel free to state your problems through the comment section or if you are unable to do so, you can always write to me at my e-mail address which is stated in the “my profile” section or if you are unable to find it I have it down below for you:

insuranceblog4u@gmail.com

In order to leave your comments in my blog, you need to have a Gmail account. If you do not have one, kindly sign up for one today!!! It is free of charge!!! Gmail is easy to use and they have a storage capacity of 5.7 GB and is still increasing everyday so that you will never need to delete another message. To apply for the free Gmail account, kindly click at the link provided below:

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DISCLAIMER AND LEGAL NOTICES

2007-10-10T01:16:00.000+08:00

DISCLAIMER AND LEGAL NOTICES: Insurance 4 consumers-agents is a blog about general and life insurance for the general public; consumers and agents which is published by the author who have been in the insurance industry for more than 32 years. While the author have taken all reasonable precautions to ensure that the advice, information and data given in the blog are reliable and accurate, the author cannot accept legal responsibility for them. The advice contained herein is not meant to replace legal or other professional counsel, and should be used in conjunction with governing laws and regulations. Views expressed in the articles are not necessarily those of the author. The author reserve the right to alter or change the contents in this blog without notice to reflect changes within the insurance industry.

PLEASE NOTE: No part of this blog publication may be reproduced, or stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission of the author. For information regarding permission, please write to insuranceblog4u@gmail.com