Awful Collection

    Insurance is catching the eyes of many people now days. People wants cover all their risk through Insurance.  Now everyone can protect the entire precious thing that they have. Let’s have a look at some of historic prospects.

                                         Historical perspective                                     

     The first mechanically propelled motor vehicle appeared on British roads in 1894 and by 1898 the Law Accident and Insurance Society Ltd. were offering policies to motor vehicle owners. The business was new and many of the early companies did not survive in the competition that ensued which reduced rates to uneconomic levels.

      The mushrooming use and development of the motor car followed the First World War during which the advantages of motor vehicles had been established. By the 1920s there were so many motor vehicles on the roads that legislation was almost inevitable and in 1930 the Road Traffic Act was passed.

                                              Compulsory insurance

        The intention of the 1930 Act, inter alia, was to ensure that funds would be available to compensate the innocent victims of motor accidents. This was to be provided by means of insurance against legal liability to pay damages to injured persons.

      The insurance requirement applied to all users of motor vehicles except where some special legal arrangement was in force. Further legislation followed in the Road Traffic Act 1960 and the Motor Vehicles (Passenger Insurance) Act 1972, so that today insurance must be in force to cover legal liability to pay damages to any person, including others in the car, arising out of injury.

                                    Types of motor insurance

                                        Private car insurance

   The minimum requirement by law is to provide insurance in respect of legal liability to pay damages arising out of injury caused to any person. A policy for this risk only is available and is termed an "Act only" policy. Such policies are not at all common and are usually reserved for a situation where the risk is exceptionally high. A "third party only" policy would satisfy the minimum legal requirements and in addition would include cover for legal liability where damage was caused to some other person's property. An addition to this form of cover is where damage to the car itself from fire or theft is included, the familiar "third party, fire and theft" policy.

       The most popular form of cover, accounting for about 66 per cent of all private car policies, is the "comprehensive policy". It covers all that has been said above with the addition of loss of or damage to the car itself. This policy also includes certain personal accident benefits for the insured and in some cases the insured's spouse. It also provides cover for loss of or damage to personal effects and medical expenses for passengers in the car.

                           Commercial vehicle policies

      All vehicles used for commercial purposes, lorries, taxis, vans, hire cars, milk floats, police cars, etc, are not insured under private car policies but under special contracts known as commercial vehicle policies.

                                              Motorcycles

     This is a growing sector of motor insurance business and may well continue to be so if petrol becomes more and more expensive. The type of policy depends upon the machine, whether it is a moped or a high-powered motorbike, and on the age and experience of the cyclist. The cover is comparatively inexpensive relative to motor car. Insurance

                                                           Motor trade

     Special policies are offered to garages and other people within the motor trade to ensure that their liability is covered while using vehicles on the road. Damage to vehicles in garages and showrooms can also be included under such policies.

                                                   Special types

      The present classification of insurance business refers to "land vehicles other than railway rolling stock" and many such vehicles fall under a category known to insurers as "special types". These will include forklift trucks, mobile cranes, bulldozers and excavators. Such vehicles may travel on roads as well as building sites and other private ground. Where special type vehicles are not used on roads, and are transported from site to site, it is more appropriate to insure the liability under a public liability policy as the vehicle is really being used as a "tool of trade" rather than a motor vehicle.

                                         MARINE AND AVIATION

                                            Historical perspective

        Much of the development of marine insurance is dealt with in Chapter Five where the history of Lloyd's is discussed. Traders from earliest times have protected their ships and cargoes by some form of insurance but the merchants from northern Italy in the twelfth century paid particular attention to this. The early forms of insurance that th

 

 

 

 

       Many of you are aware of the word insurance as it is the best to protect your life from uncertainties for a fixed period of time. But many of who has insured your life has a question that what happened about that particular period or want to know about renewal procedure so here is the answer to your question.                                  

    Insurance contracts, with the exception of life policies and other long term contracts such as permanent health insurance are usually for a period of one year only. If the parties wished to enter into another contract for the next year it would be costly to issue another policy and the practice is that the original policy makes reference, either in the preamble or in the schedule, to the fact that it can be renewed. If there is offer and acceptance the same policy document can apply to each subsequent period. The duty of disclosure (see Chapter Eight) arises at the time of renewal and although the original document is still used, each year legally creates a separate contract.

    In the case of annual policies there is no compulsion on either party to renew the contract for a further period. In the case of long-term business, on the other hand, the contract is for a specified period of years or until the occurrence of a certain event, e.g. death, but the premium is paid in annual (or more frequent) installments. The assuror must accept the "renewal" premium if tendered, but the assured need not renew, in which case the policy will lapse, become "paid-up", or the premiums will be paid out of the surrender value until it is exhausted.

    In the case of annual contracts the terms on which the companies are prepared to renew may be different from those previously applying. The increased incidence and/or cost of claims on house and motor insurance have meant that the premium will very likely be increased compared with the previous year. Sometimes it is necessary to alter the terms of cover, and in recent years there have been instances of excesses (see Chapter Seven) being increased and sometimes cover improved, e.g. by index-linking the sums insured to the cost-of-living index.

                                 Renewal documents

      In the case of both annual and long-term contracts it is the custom for the insurer to issue a renewal notice approximately two or three weeks before the expiry date of the current insurance. There is no legal requirement to issue such a reminder, but by doing so the insurer is attempting to ensure that cover does not lapse due to the insured forgetting that his policy is expiring.

    The renewal notice will show the insured's name, the policy number, the type of insurance, the sum insured and the premium at which it may be renewed. The renewal date is shown, together with the address to which the remittance should be sent, e.g. the company's local branch or the credit broker or agent if one is involved. There is usually a note on the renewal notice or on the remittance slip to the effect that any changes in the risk since inception or since last renewal must be intimated to the insurers.
 
                                    Legal status

      As already mentioned the issue of a renewal notice is a courtesy gesture; there is no legal requirement to do so. The exact legal status of the notice once issued will depend on the wording of it. If the notice merely reminds the insured that his policy expires on a certain date, it is probably just a reminder and serves no legal purpose. The insured would then offer to renew and the company could accept or reject that offer (except for long-term business where they must accept). On the other hand if the notice invites the insured to renew, it will be construed as a legal offer, only requiring acceptance by the insured.

   Whichever wording is used, the practical effect is the same, as any offer can be withdrawn before it has been accepted if further information should make the insurer wish to take this course. Special considerations arise in the case of motor insurance (see below)

                                 Days of grace

     Although renewal notices are sent out two or three weeks before the expiry date of the policy, it is customary to allow the insured fifteen days (or thirty days in the case of some life policies) after the renewal date in which to pay the premium. This concessionary period is known as "days of grace".

    If the insured pays the premium within this fifteen-day period the cover continues in full and if a loss has occurred between the renewal date and the date of payment, the insured will be able to recover. Should the insured intimate by word or action, either before renewal date or within the days of grace that he does not intend to renew, the concession is lost and the policy lapses on the renewal date.

                                       Life policies

      If the renewal premium is not paid within the days of grace, the policy does not lapse immediately. A special condition called "non-forfeiture" comes into effect and the premiums are paid out of the surrender value (if any) until it is exhausted.

 

                               

 

 

Nature and Structure of Insurance Documents

PROPOSAL FORMS  

When any contract is being created, there must be an offer made by one party to enter into a legally binding contract, and an acceptance by another party or parties of that offer. The proposal form is a document drafted by the insurance company to assist the proposer in making his request or offer to be insured. Such a form is not necessary in law as offer and acceptance in most contracts can be oral or in writing. 
  
Function of proposal forms                                     

For the sake of speed, convenience and accuracy in handling offers to be insured, it is desirable that all requests are presented in a uniform manner. For this reason insurance companies have drafted documents in the form of questionnaires for each class of insurance business. The main function of the proposal form is to record the information which is necessary to the underwriter for him to assess the nature of the risk being proposed. It was mentioned in the introductory paragraph that offer and acceptance can take place orally, e.g. over the telephone, but even if a contract has been made in this manner, it is normal for a proposal form to be completed before the policy is drafted and issued. Sometimes a proposal is completed for quotation purposes only, and . in these circumstances the legal offer will Come from the insurer, leaving the insured to complete the contract by acceptance, or to reject the offer as he wishes. Basis of the contract.
 
Many proposal forms formerly contained a  declaration that the proposal was the basis of the contract and that the insured warranted the truth of the answers contained therein, so that any misrepresentation was in breach of contract and rendered it voidable. The effect and wording of these declarations is changing and will be discussed more fully under "Utmost good faith" in Chapter Eight. Advertising. Many proposal forms also contain details of the cover available under the company's standard policy for that class of .insurance. Sometimes other types of policy available from the company are also listed. Where the form also summarises the cover it is called a "prospectus" or more correctly a "proposal and prospectus".                                        

The use of proposal forms

 In the majority of cases, insurers prefer to receive forms for the reasons already mentioned, but there are circumstances where practice or convenience demands that they are dispensed with. Marine insurance. Proposal forms are not used in marine insurance as the use of a broker's "slip" has been in the practice in both Lloyd's and the company market for many years. An exception to this is the insurance of small pleasure craft and other minor risks. Lloyd's. Most insurances at Lloyd's are proposed by completion of a broker's "slip".

In addition to the small craft exception already mentioned it is left to the syndicate to obtain proposal forms if necessary, for example in the case of motor insurance and life assurance. Fire insurance. Proposal forms are usually dispensed with for large risks. There are a number of reasons for this: there may well not be sufficient space on the form to describe all the property to be insured; the company will be carrying out a survey; and the broker will have summarised the relevant information in offering the risk. Other classes of insurance.

Proposal forms are usually required even for large risks, the only exceptions being some engineering and aviation risks where surveys will be carried out, and in some unusual or contingency risks when the preparation of a form might be difficult due to the varying information required from one type of risk to another.   

Format                                                    

Each company has its own form for each class of business and the reader is strongly advised to obtain a selection of proposal forms for each class of business and to compare their structure and questions. In recent years there has been a tendency for companies to shorten their forms and to draft questions in a form which requires a "yes" or "no" answer. Proposals forms contain general and particular questions.  

General questions 
                                                 

Proposer's name.

This is important for several reasons. Apart from identifying one of the parties to the proposed contract, the name can indicate the nature of the physical or moral hazard (see Chapter Seven). The name of a company proposing insurance may indicate the nature of their trade, or a particular name may be that of someone with whom the company does not wish to do business because of doubtful integrity. A foreign-sounding name puts the insurer on enquiry as to the insured's experience in this country. It has been found that nationals from hot climates may not be aware of the hazards of the artificial h

A definition of insurance
 •  The benefit provided by a specific type of insurance contract, called an “insurance policy”.
•  That is troubled by one of numerous kinds of legal entities (for example mutual company, stock company, Lloyd’s syndicate, and reciprocal) any of which can call an insurer.
 •   Insurance, assure to recompense a policyholder, indemnify another party, or insured.
•   Those safeguard insured against loss reasoned by those danger subjects to “indemnity in exchange” for consideration known as an “insurance premium”.          

     In current years, this sort of operational explanation proved inadequate because of bonds that had the appearance but not the   theme of insurance. The “essence of insurance” removes the risk from the indemnified to one or extra insurers. How much risk any contract essentially transfers proved to be at the spirit of controversy.                    

  This issue occurred most openly in reinsurance, where the work of “Financial Reinsurance” to insurer square sheets under “US GAAP” became modern through 1980s. The secretarial occupation raised serious apprehensions about the work of reinsurance in that any definite risk was moved, and want away on to address the subject in ‘FAS 113’, cited over. While on its look, ‘FAS 113’ is partial to secretarial for reinsurance contact, the direction contains is generally conceded to just applicable to “US GAAP” accounting for insurance dealings executed by commercial enterprises. 

Does the ‘Contract Contain’ enough risk transfer?       

    ‘ FAS 113’ contains two analyses, called the “'9a” and “9b” tests, that communally necessitate a contract create a reasonable chance of an important loss to the sponsor for it to be well thought-out insurance.           

   Indemnification of the conceding project against liability or loss connecting to insurance peril in reinsurance of short-duration agreements needs both of the subsequent, unless the situation in section 11 is meeting:
 a) The reinsure assumes important insurance risk below the reinsured portions of the fundamental insurance contracts.
 b)It is sensibly possible that the reinsure will realize a major loss from the business.       
 
  Section 10 of “FAS 113” makes obvious that the “9a” and “9b” tests are supported on evaluating the present value of all expenses to the “PV” of all profits streams. “FAS” give no leadership on the option of concession rate on which to support such a result, other than to answer that all result tested should use the same charge.        

Statement of “Statutory Accounting Principles” SSAP sixty-two, issued by the “National Association of Insurance Commissioners”, applies to supposed “statutory accounting” - the clerical for insurance scheme to conform to law. Paragraph twelve of SSAP sixty-two is near matching to the ‘FAS 113’ test, while section forty, which is or very related to section ten of ‘FAS 113’, in addition contains an explanation for the use of a single fixed rage for reducing intentions. The choice of a reasonable and appropriate concession rate is left as an issue of judgment.

Last time I told you about the advantages of insurance but it also have some disadvantages which are                 

 (a) Insurance companies which have been established overseas for many years are finding that the legislation being introduced is rapidly making it more and more difficult to continue operating with the same volume of business. The developing countries, in particular, are becoming more and more nationalistic in their outlook on insurance activity. Aggressive marketing by local and other foreign companies is reducing Britain's share of many markets. For prestige purposes it may be desirable to retain a presence, but at a cost to profits.  

(b) In certain countries there is active political prejudice against foreign companies and the rates of premium they can charge. 

 (c) The same economies of scale in operating costs are not possible as at home, or as available to the national companies in the country of operation. The result is that the foreign company is less competitive.  

(d) International development by British companies leads to the establishment of strong home-based insurers in the overseas
countries. They in turn tend to expand their interests to Britain. This can have a significant effect if overseas practices and methods of reinsurance are used here, as can be seen from the American influence on the British fire insurance market in recent years. 

 The nature of foreign development  Having weighed all the advantages and disadvantages the insurance market must have considered that foreign development should go ahead. Over a number of years insurance companies gradually expanded their level of foreign involvement. Those who have particular interest in how this took place can find the answers in a book by H.E. Rayne’s, A History of British Insurance. For our purposes we can identify four main ways.
 
Home foreign departments : Home foreign departments are the head office departments of British companies, which have been established to underwrite foreign business. Where an insured or proposer has risks outside of Britain it would be this department which would consider that aspect of the overall portfolio. This method of transacting foreign business obviates the need for, and expense of operating, a network of branches or agents overseas. In the end, however, some local expertise will be required if only to survey risks.

Overseas agencies  Another method of transacting overseas business, this time not relying on all enquiries and decisions being centralised at the UK head office, is to create a number of overseas agents. These agents could be local business or professional people who have been given authority, subject to certain limits, to issue policies and settle claims.  This system also helps to reduce the cost of establishing an overseas operation but, as with everything, there is a cost. The price the company is presumably prepared to pay is that its own qualified insurance personnel are not handling the business. Authority has been handed over to an agent.  

Overseas branches As the volume of business increases it will become less easy to handle it all through an agent, even a very efficient agent. Eventually a representation will be required in the country and this will inevitably mean a branch office.

Hey friends Insurance is a very Familiar word to all of us. Here I am talking about public policy of insurance. 

 It is a common principle in law that contracts must not be contrary to what society considers the right and moral thing to do. This applies to insurance contracts in the same way and one form of risk that is not insurable is one that is against public policy. It would not be acceptable to society at large, for instance, if a person could burn down his own factory or shop in order to recover insurance money and this form of risk has been catered for above when we said that the loss must be fortuitous as far as the person insuring is concerned.

One form of risk not mentioned earlier was the risk of being fined by the police. The fine is intended to penalise the person and while insurance may be available to meet the losses following, say, a motor ,accident it is not possible to provide insurance to pay the fine of the driver who was found guilty of some offence.

Reasonable premium

The final feature of the insurable risk is that the premium must be seen to be reasonable in relation to the likely financial loss. A risk that results in a loss with an extremely high frequency may involve a premium that would be unreasonable from the insuring person's point of view. Similarly a straightforward risk such as that caused by fire or theft may result in an unreasonable premium depending upon the object exposed. The insurance premium required to cover a ball point pen against fire or theft may be quite unreasonable in relation to the potential financial loss in view of the insurance companies' costs.

LOSS PREVENTION

The picture being built up is one of an environment in which risk is invariably present in one form or another. In spite of this life continues on both a personal and a business level but the pervasive nature of risk has resulted in a great deal of effort being directed at how losses can be prevented.  Loss prevention is sometimes referred to as risk reduction but we can look upon the terms as being synonymous. Our definition of risk was uncertainty of loss and risk reduction can therefore be viewed as a means of removing some or all of this uncertainty.

The importance of loss prevention cannot be understated. In 1983 fires caused damage in Great Britain estimated at £565.6 million. This is an extremely high figure and it is difficult to visualise what it actually means. The amount refers to fire damage, whether insured or not, but does not include other losses-such as lost profit-that flow from a fire. To try and put this figure, sometimes known as the fire waste figure, in perspective we could say that on average over the whole of 1983 fire damage cost almost £18 every single second of the year.

To reduce this high fire loss figure would be commendable on its own and certainly sufficient justification for examining methods of loss prevention but what makes these efforts all the more necessary is the fact that the loss does not end with the visible damage. Just as we noted above, fire damage results in a chain of other losses and this is true for most forms of risk.

Let us look at one risk as an example. A pure and particular risk to which almost all businesses are exposed is the one of injury to employees. When an employee is injured he may succeed in legal action against his employer for compensation and the employer will have an insurance policy to provide him with the money he requires to pay the injured employee's claim. The claim from the employee can be looked upon in the same way as the fire damage cost: it is not the end of the story.

At the time of the injury there will have been a stoppage of production and other employees may have to act as witnesses at a court case if one ensues. While the injured man is away from work there will be lost production, and another person may have to be trained to take his place. The point is that if the loss could have been prevented it would have resulted in there being no injury and no consequential stream of losses. The importance of loss prevention goes beyond the individual or firm involved in the loss as the whole of society benefits from there being fewer losses in the long run.

Elimination

Many people equate loss prevention with elimination of loss. This is natural enough as one sure way of not having a loss is to eliminate the possibility altogether.

In a domestic sense this can often be done. Where a person is really concerned over the likelihood of a motor accident then he or she could sell their car and eliminate the risk. In the same way they may be alarmed in case their pet dog causes injury to neighboring children and they could sell or otherwise dispose of the animal in order to eliminate the risk. For some risks, elimination will not be possible.

The path of international development has not always been a smooth one. The British market may have considered that advantages would result from such development and they may have designed a suitable mechanism for development, but restrictions exist and will continue to exist.

The main restriction to a company setting up operations in a foreign country is that there is often some form of state control on the establishment of foreign insurance companies. British insurers have not been nearly so successful in entering the European markets as they have others. The reasons for this are the much tighter state control which exists in European countries, the political and national changes which took place in Europe up to 1945, and keen local competition.

State control may well be desirable, and on a national basis within Europe it has been suggested that this is to protect policyholders, third party claimants, shareholders and the survival of the company. These ideas apply elsewhere in the world also. So far as foreign insurers are concerned, the controls on reserves and operations may make it impossible or impracticable for a foreign company to operate. An increasing number of countries are going further and passing legislation which prohibits the placing of insurance with companies not licensed locally. The licensing regulations may prohibit overseas companies from applying.

These latter restrictions are designed to protect and further the wellbeing of local insurers. It is most evident in the former British colonies which are rapidly developing and wish to develop a healthy insurance industry to support their domestic and foreign trade.

The system of revolving Euroterm loans is attractive to the lending bank because it can take a matching deposit, borrow funds for each interest period, and, in doing so, secure a profit margin equal to the negotiated markup over LIBOR.The system is also attractive to borrowers because they obtain medium-term money at a small markup over a short-term rate.

There are several reasons for the market to offer a lower markup than the one on an existing loan. First. there may have been a general decline in spreads charged by banks over LIB OR. This can occur either because of an increase in the amount of funds available to the market, a decline in demand for Euroloans, or a combination of both factors. Second, the lower spread may be due to the decline in the time to maturity of the loan. Initially this may have been a seven-year loan; now, in effect, it may be a three-year loan. The original loan was priced at a higher markup (which may have been even higher toward the end of the loan) because of the length of the commitment on the part of the bank. A commitment to lend for the remaining life of the loan would be for only three years. Finally, the reduction on the markup may be accounted for by a substantial improvement in the borrower's credit tanding- because of either political or economic reasons.

Whatever the reason for the opportunity to refinance the remaining portion of a loan at a lower markup over LIBOR, it is tempting for a borrower to consider such an alternative. These opportunities can offer a strong bargaining point at the end of each interest period for the borrower to renegotiate the markup over LIBOR on the existing loan. However. borrowers should keep in mind that financing usually involves a longer-term relationship which must be cultivated by both borrower and lender. An alternative to avoid negotiations to reflect market changes in the markups over LIBOR is to have a floating markup. The size of the markup then could be tied to the markups paid on new loans either by the same borrower or other identified frequent borrower, such as the World Bank.

Finally, it should be noticed that whenever there is a flat front-end fee involved in a loan. a prepayment before expiration of the commitment affects the overall yield to the bank and the cost to the borrower of the loan. In case of prepayment, this flat fee must now be spread over a shorter period of time than anticipated, and it has a greater impact on the yield and cost of the loan in terms of percentages per annum.

A finesse is an attempt to win a trick with a lesser card. Suppose you need two tricks to fulfill your contract or to set the opponents. You are coming down to the end of a hand. You hold the Ace and Queen of hearts. Your partner, who has already made his bid, leads the eight of hearts, your right hand opponent plays the nine in normal cadence (we will come to the topic of hesitations later in this section). What do you do? If you take your Ace, you will lose the Queen to the King no matter which opponent holds the monarch. Your partner probably does not hold the King as he already has made his bid and would not under lead that card. Another indication is his lead of a heart, which is probably a neutral suit. Your best chance (50 percent) is to play the Queen. If the left hand opponent has the King you would have lost it anyway. However, if your right hand opponent has the King, the Queen will win the trick, and you will score your Ace on the next round of hearts. Although 50 percent is not a guarantee, it is far better than zero percent. Should you hold the same A-Q combination in spades your like¬lihood of winning two tricks with a successful finesse is guaranteed.

Suppose you hold K x or K x x of a suit. Partner has already made his bid; you are in need of one more trick to make yours. A lead from your left hand opponent is ideal-as you will get to play the King in fourth position or duck if the Ace shows up. If your partner or right hand opponent leads this suit, and the Ace does not appear, you must play the King. If you play small your left hand opponent may win the trick with the Queen; thus, your best chance is to play the King. Why? Well, if your left hand opponent has the Ace, your King was dead anyway. If your partner has the Ace your King is the winner (it is unlikely that your partner held the Ace in this situation as he has already made his bid). The key is your right hand opponent-and ifhe holds the Ace, your King wins. If your right hand opponent leads a small card of this suit, an exception to the "second hand low" adage applies. At this point, you must play the King and hope that your left hand opponent does not hold the Ace. There are also situations in a close contract where the play of the King will promote the Queen for your partner if he happens to hold her. If the Ace and Queen are on your left, your King would be dead anyway unless your left hand opponent grabbed the Ace earlier in the hand. We cannot always expect our opponents to do our work for us. There are instances where we will win ("free" finesses) and these usually occur when the left hand opponent under leads his honor cards and allows you to score a King or A-Q combination. There is an impulse to grab your top tricks and sometimes this is correct especially if you are avoiding bags. However, there are many situations where you will need to manufacture a trick, and a finesse is a convenient way to accomplish this. Here is a table of finessing scenarios and the proper card to play. Assume that a small card has been led, and it is your turn to play.   

  More money is bet on the outcome of college and professional football games than on any other sport. Many more tens of millions of dollars are wagered on gridiron contests each Sunday during the pro- fessional football season than in anyone week of baseball, except during the World Series.

The biggest bettor on football games in 1973 was a Texas oil man who is also well known for his big casino betting in Nevada. His bets during the professional football season averaged $2 million each Sunday. He usually bet between $50,000 and $100,000 with a single bookie office, and spread his day's business among about 20-odd bookies op¬erating in widely separated cities. During the closing week of the college football season this big time bettor wagered $1,100,000 on 23 different football games. He won $50,000 on the day's play. This same big time bettor wagered $500,000 on the Minnesota Vikings to beat the Miami Dolphins in the 1973 Super Bowl game. Three sports offices booked this $500,000 losing wager.

The scouting systems and methods used by the sports services in obtaining real inside information would make any group of investigators working for a U.S. senatorial or congressional committee look like a pack of Cub Scouts. Dozens of fake injuries to football stars may be announced during the season without any change in the price line. But should a real injury occur, even though unannounced, the price line changes immediately.