NATIONAL INSURANCE

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

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

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.

FIRE INSURANCE

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

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.