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COURSE CODE: SJER3218

INTRODUCTION TO

GENERAL INSURANCE(PENGENALAN KEPADA INSURANS AM)

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COURSE INFORMATION

Brief Introduction to General Insurance

Risk and Its Treatment

Different Definitions of Risk Chance of Loss Peril and Hazard Classification of Risk Major Personal Risks and Commercial Risks Burden of Risk on Society Techniques for Managing Risk

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COURSE INFORMATION

The Insurance Mechanism

Definition and Basic Characteristics of Insurance

Characteristics of an Ideal Insurable Risk

Adverse Selection and Insurance Insurance vs. Gambling

Insurance vs. Hedging

Types of Insurance

Benefits and Costs of Insurance to Society

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COURSE INFORMATION

Fundamentals of Risk Management

Meaning of Risk Management

Objectives of Risk Management

Steps in the Risk Management Process Identify, Measure and Analyze Loss Exposures

Appropriate Techniques for Treating Loss Exposures

Implement and Monitor Risk Management Program

Benefits of Risk Management Personal Risk Management

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COURSE INFORMATION

Risk Identification & Measurement

Outlines the basics of risk identification andreviews basic material on probability and statistics

Pooling Arrangements and Diversification ofRisk

Explains how pooling arrangements diversify risk

and that pooling arrangements are the essence ofinsurance transactions

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COURSE INFORMATION

Insurance Pricing

Presents general factors affecting insurancepremiums. Highlights the incentives of insurers to

classify, discusses when classification is desirable,explains the underwriting cycle and summarizesinsurance price regulation

Risk Aversion and Risk Management byIndividuals and Corporations

Presents basic theory on the demand for insuranceby individuals and businesses

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COURSE INFORMATION

Legal Principles in Insurance

Principle of Indemnity

Principle of Insurable Interest

Principle of Subrogation Principle of Utmost Good Faith

Requirements of an Insurance Contract

Distinct Legal Characteristics of Insurance

Contracts Law and the Insurance Agent

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COURSE INFORMATION

Analysis of Insurance Contracts

Basic parts of an insurance contract

Definition of the Insured

Endorsements and Riders

Deductibles

Coinsurance

Other-insurance provisions

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COURSE INFORMATION

Insurance Company Functional Operations

Rate making

Underwriting

Production

Claims settlement

Reinsurance

InvestmentsOther functions

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COURSE INFORMATION

Insurance Company Financial Operations

Property and Casualty Insurers Balance Sheet,Income and Expense Statement, Measuring Profit

and Loss

Insurance Documents (in Malaysia)

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COURSE INFORMATION

The Classes of General Insurance Business & ItsPractices (in Malaysia)

Automobile Insurance (in The United States)

Presents basic features of personal auto policies andrating factors used in pricing these policies. Alsoprovides a detailed discussion of compulsory liability

coverage and no-fault insurance

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COURSE INFORMATION

Homeowners Insurance (in The United States)

Presents basic features of homeowners policies andrating factors used in pricing these policies. Also

provides a detailed discussion of the impact ofcatastrophes on property insurance markets

Other Property and Liability Insurance Coverages

(in The United States)

Commercial Property Insurance Coverages (in TheUnited States)

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INSURANCE IN BRIEF

Primary Function of Insurance:-

Equitable distribution of financial losses of the few who are insuredamong the many insured.

Secondary Function of Insurance:-

Stabilization of costs managing the risks;

Stimulation of business enterprise transfer of risks;

Provision of security for expansion of business removal of fears

and worries of potential losses; Reduction of losses both in frequency & security through risk

improvements and many others.

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GENERAL INSURANCE IN BRIEF

What is General Insurance?

General insurance provides cover against risks usually not coveredby life insurance.

It is usually made for a period of 1 (one) year or less and at the end ofthe period are renewable by mutual consent of the insurer and theinsured.

End of policy period insurer reassesses the risk and the premiumrate may be changed:-

Change in the nature of the individual risk to be insured; Notification of changes as part of utmost good faith.

Most general insurance contracts are contracts of indemnity.

Usually, there will be a large number of small claims and very fewextremely large claims.

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GENERAL INSURANCE IN BRIEF

What is General Insurance?

More than 1 (one) claim can be made in each year of insurance underthe same policy.

The insured risk may not rise in line with the duration of insuranceand in fact, it may decrease due to better safety measures taken bythe insured e.g. installation of water sprinklers.

Basic principles governing the conduct of general insurancebusiness:-

Insurable Interest;

Utmost Good Faith;

Subrogation;

Contribution;

Proximate Cause.

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GENERAL INSURANCE IN BRIEF

Several main General Insurance classes (in Malaysia):-

Fire & Perils Fire, House owners, Householders, Consequential Loss, Industrial

All Risks

Marine Hull & Machinery, Collision Liability, Cargo and Freight etc.

Motor Private Cars, Commercial Vehicles (including Special Types) and

Motorcycles Miscellaneous Accident

Burglary, All Risks, Money, Plate Glass, Fidelity Guarantee, Bondsetc.

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GENERAL INSURANCE IN BRIEF

Several main General Insurance classes (in Malaysia):-

Liability

Employers Liability, Public Liability, WC, FWCS etc.

Engineering Electronic Equipment, CAR, EAR, Machinery Breakdown etc.

Aviation

Hull and Liability etc.

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GENERAL INSURANCE IN BRIEF

General Underwriting:-

Underwriting process of assessment and selection ofrisks and the determination of premium, terms and

conditions. Purpose anti selection, adequacy of premium charged.

Process identification, evaluation of risk and selectionof risks through proposal forms, additional

questionnaires and survey.

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GENERAL INSURANCE IN BRIEF

Determination of Premiums, Terms and Conditions

Premium is the price for insurance. For majority classesof insurance, the premium charged is the premium rate

per unit coverage x by the number of units of coveragerequired = % rate of the sum insured / limit of liability =RM premium.

Coverage, risk improvement (pre-acceptance), warranties

(control hazards), exclusions, restricted cover and excess.

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GENERAL INSURANCE IN BRIEF

Minimum premium

Short period or pro-rata

Premium warranty (60 days), 7 days (Agents) or Cash

Before Cover (CBC)

Tariff rating:-

Revise Fire Tariff (including discount)

Revise Motor Tariff Others (Non-Tariff):-

All Risks Basic Fire rate + 25%

Other than All Risks - Ongoing market rate

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GENERAL INSURANCE IN BRIEF

Insurance Documents:-

Proposal form information gathering, completed and duly signed for assessment of risk being proposed (excluding Marine Cargo andLarge Risks);

Cover note temporary policy as evidence of an insurance contractwhilst the actual policy is issued;

E-cover note motor insurance business;

Certificate of insurance normally issued when insurance is madecompulsory by law e.g. RTA, Marine;

Policy not the contract of insurance but represents writtenevidence of it. It has to stamped;

Endorsement amendments / alterations to the policy;

Renewal notice, Claim form, Discharge form etc.