The Accountant is another official with a vital role to
play in the running of any business enterprise, and particularly that of an
insurer. The functions of this department are fairly obvious, but for
completeness we note:
(a) Record keeping: financial records must be
accurate and reliable.
(b) Collections: ensuring that money receivable
by the insurer is in fact paid clearly affects the...
Sunday, February 22, 2015
POLICY ADMINISTRATION
This is another departmental description that may
involve overlap with other sections or departments mentioned above or below.
The general areas of concern here may be:
(a) General or Life insurance? : this is a most
important question, since the policy document with each has a very different
significance. With general insurance, technically there need not be a policy
(although there almost...
MARKETING AND PROMOTION
Remembering the quotation above, this is a very
important area for the insurer.
The particular areas of responsibility include:
(a) Public Relations: as explained, this may
overlap to some extent with Customer Services, but the image of the company and
its perceived standing in the eyes of the public is of great significance. This
wide-ranging activity will include: (i) the co-ordination of...
CORE FUNCTIONS OF AN INSURANCE COMPANY
Whilst an insurance intermediary is unlikely to have close
contact with the internal organisation of insurance companies, it is good to
understand something of their infrastructure and to be aware of the various
departments and personnel behind the marketing process. These, in outline, are
considered below. Please remember, however, that there is no single system for
insurance companies to follow,...
SUBROGATION
Definition
Subornation is the exercise, for one’s own benefit, of
rights or remedies possessed by another against third parties. As a corollary
(i.e. a natural consequence of an established principle) of indemnity,
subornation allows proceeds of claim against third party be passed to insurers,
to the extent of their insurance payments. At common law, an insurer’s subornation
action must be conducted...
CONTRIBUTION
Equitable Doctrine of Contribution
This is a claims-related doctrine of equity which
applies as between insurers in the event of a double insurance, a situation
where two or more policies have been effected by or on behalf of the insured on
the same interest or any part thereof, and the aggregate of the sums insured
exceeds the indemnity legally allowed.
[Example: Suppose a husband and wife each...
Policy Provisions Providing More Than Indemnity
Indemnity is very logical and technically easy to
defend. However, in practice, most policyholders are ignorant of this and are
confused and offended when insurers ‘reduce’ their claims, by deducting
depreciation, wear and tear, etc. As a marketing or public relations exercise,
insurers sometimes offer or agree to grant property insurances which may be said
to give a commercial rather than a strict...
Policy Provisions Preventing Indemnity
While policies in some classes of business promise to indemnify
the insured, this has to be done subject to the express terms of the
policy, if any. Some of these terms mean that something less than indemnity is
payable. For example:
(a) Average: Most non-marine property insurances
are expressly subject to average. This means that the insurer expects
the insured property to be insured for its...
INDEMNITY
Definition
Indemnity means an exact financial compensation for
an insured loss, no more no less.
Implications
Indemnity cannot apply to all types of insurance. Some
types of insurance deal with ‘losses’ that cannot be measured precisely in financial
terms. Specifically, we refer to Life Insurance and Personal
Accident Insurance. Both are dealing with death of or injury to human
beings, and there...
Policy Modification of the Principle
It is very common for insurers to adopt policy wording
that has the effect of modifying the application of proximate cause rules. Two
examples of such practice are given below:
(a) ‘Directly or indirectly’: There are a
whole number of ways that an insurer can frame his policy wording for the
purposes of specifying what he wants to cover or not to cover. For instance, it
may use such wording...
Types of Breach of Utmost Good Faith
A breach of utmost good faith can be in the form of
either a misrepresentation (i.e. the giving of false information) or a non-disclosure
(i.e. failure to give material information). Alternatively, it can be
classified into a fraudulent breach and a non-fraudulent breach
(i.e. a breach committed either innocently or negligently, rather than
fraudulently). Both classifications combined produce a four-fold...
UTMOST GOOD FAITH
Ordinary Good Faith
At common law, most types of contracts are subject to
the principle of good faith, meaning that the parties have to behave with
honesty and such information as they supply must be substantially true.
However, it is not their responsibility to ensure that the other party obtains
all vital information which may affect his decision to enter into the contract,
or may affect the terms...
PRINCIPLES OF INSURANCE
INSURABLE INTEREST
The word ‘interest’ can have a number of meanings. In the
present context, it means a financial relationship to something or
someone. There are a number of features to be considered with ‘insurable
interest’, as below.
Definition
Insurable interest is a person’s legally recognised
relationship to the subject matter of insurance that gives them the right
to effect insurance...
Duties Owed by Agent to Principal
These may be summarised as follows:
(a) Obedience: The agent has to follow all lawful
instructions of his principal, strictly or as best as is reasonably possible.
(b) Personal performance: The agent is not
allowed to delegate his authority and responsibilities to others
(subagents) unless he has authority to do so.
(c) Due care and skill: The law does not demand
perfection, and an agent...
Legal PRINCIPLES
This and the next Chapter will concern principles of
law, but the Notes will not provide a comprehensive survey of some very complex
issues. The purpose of the Notes, as with the overall study, is to give an
insight into the important aspects of an insurance intermediary's professional
activities.
THE LAW OF CONTRACT
This is an area of law which affects every one of us,
whether in our personal...