Procedures of obtaining an insurance policy.

1. Procedures of obtaining an insurance policy. • (a) Making an application to insure Individual customer has to fill in an application form, which normally includes the following information. For example, Claim history,value of the insured item and personal information of the insured.

2. (b) Making an offer to the insured- Quotation. • Once a proposal is accepted, an actuary will consider the suggestion of the underwriter and work out premium that the client has to pay.Usually this offer is just a quotation.Since different insurance companies or different policies may have variations in premium rate, it is better for the client to make comparisons before making decision.

3. (c) Signing of cover note or letter of acceptance. When two parties agree with the offer, the insurance will prepare the insurance policy and bill the insured. This may take some time to complete, the insurer may issue a cover note or letter of acceptance for temporary uses.Both the cover note or letter of acceptance and the insurance policy have the same legal force.

4. (d) Payment of premium • The cover note will not be effective until the premium is paid.If the payment is made and proof of purchase is received, the deal is done.

5. Issue of insurance policy An insurance policy is a written agreement of both the insurer and the insured. IT cover the details in rights and responsibilities of both parties.It will usually be issues within 30 days after the cover note is issued.

6. An insurance policy will usually include the following points. • THE PREAMBLE OR RECITAL CLAUSE. • THE OPERATIVE CLAUSE. • EXCEPTIONS. • THE SCHEDULE. • SIGNATURE OR ATTESTAION CLAUSE. • If both parties agree, a renewal note will be issued when the contract is approaching the end. • After you have read through all of the above contents, please press here!Back to the first page

7. They lead to the main policy information, and state the condition in which the policy will operate. Back to the “Point of the insurance policy”

8. This clause sets out the particular circumstance in which the insurance company will compensate the insured. Back to the “Point of the insurance policy”

9. This section details those risks or events which are not covered by the policy. Back to the “Point of the insurance policy”

10. It contains the details of the contract, e.g. the policy number, name and address of the insured, expiry date, renewal date and premiums. Back to the “Point of the insurance policy”

11. The signature of the insurance company or its representative. Back to the “Point of the insurance policy”

12. Procedures of making an insurance claim If the insured suffers a specified loss from the risk, he is entitled to compensation. A claim will have to be made. There are several steps involved in making claims:

13. To inform the insurance company • Normally, the policy will state the way in which a claim should be made, and the policy holder must provide full particulars of the claim within a specific period. • The notifying period varies from case. Some ask for 48 hours notification but some allow for a mouth. A Claim form needed to outline all the losses. Sometimes the report can be handled through phone conversation.

14. (b) Proof of loss It is the policy holder’s responsibility to prove that a loss has been suffered due to an event or occurrence which is covered by the policy. In addition, the amount of loss must also be proved.

15. (C ) Investigation of claims The way of investigation largely depends on the size of the claim. If the claim is only in a small amount, it is usual for the insurance company to settle the claim without further enquiry. For large claims, loss assessors will be called upon to investigate the case. Loss assessors are employee of independent firms. Thy will examine the claim and give advice on its validity.

16. (d) To be indemnified After the claim has been verified and accepted by the insurance company, the insured will be indemnified, which can either be in cash or replacement of the item. Depending on the root cause of the loss, sometimes the insurer may get back the claim payment from a third party.

17. Some common Insurance Terminologies. Reinsurance Over-insurance Under-insurance Deductible clause No claim bonus (NCB) After you have read through all of the above contents, please press here! Back to the first page

18. Reinsurance is a system used by insurers to insure the risks they have covered with other insurers. It can be treated as ‘the insurance of insurance’. It is a way of spreading insurances’ risk and protecting them from paying the whole amount of a claim by themselves. This system is particularly important for insurance companies of small financial capacities. Back to the common terminologies

19. Over-insurance refers to the case of insuring goods for more than their real value. It usually applies to things that may fluctuate in value. Back to the common terminologies

20. It is opposite of over-insurance, which means insuring good foe less than their real value. Back to the common terminologies

21. A Deductible amount is the amount of a loss that the insured agrees to bear. In other words, the insurance company only pays for part of a loss,I.e. the amount deducting the deductible amount. Back to the common terminologies

22. NCB is a record of information of the insured, which acts as a signals to the insurance company to determine the amount of premium. Take the example of motor insurance, if an insured does not make any claim for years, he has a good NCB record, which reflect that he is a good driver in general.In such case, the insurance company may reduce his premium as an encouragement.In contrary, for an insured with poor NCB record, the insurance company may increase his premium. Back to the common terminologies

23. Importance Of Insurance To The Modern Business World And Private Persons. As we have discussed, the primary function of insurance is risk transfer by replacing uncertainty with certainty, which involves re-distribution of the cost of unexpected loss by pooling of risks.Beside, insurance also has other functions.

24. For the business world Enable the existing firms to continue the business Insurance can protectfirms from financial ruin.It enables them to continue the business even when any misfortune or unexpected event occurs.

25. Encourage new business ventures Firms are more willing to invest in new ventures,as they realize the insurance companies will cover their risks.

26. Help small businesses Without insurance, only large firms can sustain losses.Insurance allows small business to pool their exposure to losses and thus reduces their risks.

27. Reduce reserve requirement Insurance greatly reduces the necessity and amount of reserve requirement for emergency uses. Instead, the reserves can be released for further investment and development.

28. Assist in credit provision Firms are more willing to provide credit facilities to others if they realize the collection of the out-standing debts can br covered by insurance.

29. For private persons Protect family income Insurance can help to solve the financial problem of a family in case of death or permanent disablement of the breadwinner.

30. A means of saving Most people find it difficult to save money, but an insurance policy often provides a habit of saving for the future.

31. For the whole economy Reduce the possibility of loss In general, the insurance companies will require the insured to do something to reduce the possibility of loss.

32. Provide funds for the economy Prior to the need of indemnity, the insurance companies always have a large sum of premiums received.They will use this money to invest in a variety of business, which contributes to the overall development of the economy.

33. Get invisible earnings Insurance businesses conducted overseas are important parts of invisible earnings of a country. They help to earn revenue from other countries in the form of both underwriting profits and investment incomes. Back to the first page