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The Nature of The Nature of InsuranceInsurance
Insurance = replace the (certainty/uncertainty) of risks with (certainty/uncertainty).
Concept of risk transfer:
Insurance = a device to transfer the risk from
____________ to____________.
The Nature of The Nature of InsuranceInsurance
an individual a group
Concept of Pooling of Concept of Pooling of RisksRisks
Pooling of risks is the sharing of losses by all
members of a group.
Importance of InsuranceImportance of Insurance
1. To the modern business world:– Enable the existing firms to continue the business
– Encourage new business ventures
– Help small businesses
– Reduce reserve requirement
– Assist in credit provision
Importance of Importance of InsuranceInsurance
A meansof saving
A meansof saving
Protect
family incomeProtect
family income
2. To private persons:
Importance of InsuranceImportance of Insurance
3. To the whole economy:– Reduce the possibility of loss
– Provide funds for the econom
y
– Get invisible earnings
Fundamental Insurance Fundamental Insurance PrinciplesPrinciples
• Utmost good faith
• Insurable interest
• Indemnity– Subrogation– Contribution
• Proximate cause
Insurable Risks and Non-Insurable Risks and Non-Insurable RisksInsurable Risks
Within human controlBeyond human control
Probability of loss: incalculableProbability of loss: calculable
Against public policyConsistent with public policy
Loss: no basis for computingLoss: measurable in $
Non-insurable risksNon-insurable risksInsurable risksInsurable risks
Insurable Risks and Non-Insurable Risks and Non-Insurable RisksInsurable Risks
Non-insurable risksNon-insurable risksInsurable risksInsurable risks
Risk: too small or too frequent
Risk: not too small or too frequent
Resulted from warNot resulted from war
Insured: no insurable interestInsured: insurable interest
• Insurance underwriters– Assess insurance applications
– Determine premium rate
• Insurance agents– Sales representative of a particular insurance
company
• Insurance brokers– Sales representative of different insurance
companies
MiddlemenMiddlemen
Procedures of Obtaining Procedures of Obtaining an Insurance Policyan Insurance Policy
1. Making an application to insure
2. Making an offer to the insured quotation
3. Signing of cover note or letter of acceptance
4. Payment of premium
5. Issue of insurance policy
1. Informing the insurance company
2. Providing the proof of loss
3. Investigation of claims
4. To be indemnified
Procedures of ObtainingProcedures of Obtainingan Insurance Claiman Insurance Claim
• Reinsurance
• Over-insurance
• Under-insurance
• Deductible clause
• No claim bonus
Some Common Some Common Insurance Insurance
TerminologiesTerminologies
Types of InsuranceTypes of Insurance
FireInsurance
FireInsurance
LifeAssurance
LifeAssurance
MarineInsurance
MarineInsurance MPFMPF
AccidentInsuranceAccidentInsurance
AviationInsuranceAviation
Insurance
InsuranceInsurance
• Fire insurance on domestic and business premises policies
• Household policies
• Consequential loss policies
• Special perils policies
• Declaration policies
FireFireInsuranceInsurance
FireFireInsuranceInsurance
• Whole life policies
• Term life policies
• Endowment policies
• Life annuities
LifeLifeAssuranceAssurance
LifeLifeAssuranceAssurance
• Hull insurance
• Cargo insurance
• Freight insurance
• Shipowner’s liability insurance
• Valued policies
• Voyage policies
• Time policies
• Floating policies
MarineMarineInsuranceInsurance
MarineMarineInsuranceInsurance
• Accidental damage while in flight• Liability to passengers• Liability to lives and properties on the
ground
AviationAviationInsuranceInsuranceAviationAviation
InsuranceInsurance
• Motor insurance
• Public liability insurance
• Employees’ compensation insurance
• Credit insurance
• Fidelity guarantee insurance
• Medical and sickness insurance
AccidentAccidentInsuranceInsuranceAccidentAccidentInsuranceInsurance
• Came into full operation on 1st Dec, 2000.
• Launched under the need for retirement protection.
• All employees and self-employed persons aged 18-65 are required to participate.
• Both the employer and the employee have to make a contribution.
Mandatory Mandatory Provident FundProvident Fund
Mandatory Mandatory Provident FundProvident Fund
Local Insurance Local Insurance IndustryIndustry
• Governed by the Office of the Commissioner of Insurance
• Ruled by the Insurance Companies Ordinance
• Self-regulatory
the Hong Kong Federation of Insurers