Introduction to insurance

THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Module 7: Introduction to Insurance

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LEARNING OBJECTIVES
This course aims at helping you the student to,
• Gain a broader understanding of risk and insurance as a
means to manage it.
• Appreciate the role of insurance to our economy and
how it operates
• Have a balanced, systems – oriented view of how the
insurance industry players work together to protect and
meet the needs of consumers.

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LEARNING OUTCOMES
After completion of this study you should be able to:
• Describe the role insurance plays in our economy
• Explain how insurance is used to manage or diversify risk
• Understand the fundamental principles of insurance
• Recognize the various categories of insurance and the
underwriting procedure
• Define the key insurance terms
• Explain the roles of the insurance players in the industry
• Explain how insurance claims are administered

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What is Insurance?
Risk Management and Responding to Risk
The Purpose of insurance
How does Insurance work?
Players in the Insurance Industry
Insurance Underwriting and Categories of Insurance
Fundamental Principles of Insurance
Some commonly used Insurance terminologies
Settlement of Insurance Claims
MODULE COVERAGE

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What is insurance?
Insurance is defined as a form of risk management in which the
insured transfers the cost of potential loss to another entity in
exchange for monetary compensation known as premium
Insurance is a contract between two parties whereby one party
agrees to undertake the risk of another in exchange for
consideration known as premium and promises to pay a fixed
sum of money to the other party on happening of an uncertain
event (like property loss, destruction, accident or death) or after
the expiry of a certain period.
The party bearing the risk is known as the 'insurer' or 'assurer' and
the party whose risk is covered is known as the 'insured' or
'assured'

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What is Insurance?
Risk Management and Responding to Risk
The Purpose of insurance
Insurance Underwriting and Categories of Insurance
Fundamental Principles of Insurance
Some commonly used Insurance terminologies
Settlement of Insurance Claims

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Risk is the possibility of loss or damage, or a combination of
hazards, the uncertainty of loss, the dispersion of actual from
expected results, the probability of any outcome being
different from the one expected or a condition in which losses
are possible.
Risk can be managed in a number of ways
Avoiding risk: E.g. do not borrow money, do not lend, do not
acquire an ATM card, do not travel, do not buy expensive
assets, do not open up businesses, do not drive on a busy
road etc.
Reducing risk: E.g. do not use an ATM at night, do not travel
with or withdraw huge sums of money, do not sit in the front
seat of a public vehicle, save money for emergencies etc.
Risk definition, management

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Risk management
Retaining the risk: All risks that are not avoided or transferred
are retained. One may not be able to appropriately deal with
the consequences.
Transferring the risk: Through insurance.
Who is the typical insurance client in Uganda?

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Characteristics of Insurable risks
• Fortuitous in Nature: The happening of the insured event must
be accidental
• Monetary Value; The risk must lead to a loss capable of being
measured in financial terms.
• Insurable Interest; In order for a person to insure any property,
one must have insurable interest in it.
• Homogeneous Exposure: There must be a large number of
similar exposures to enable insurers to forecast expected losses.
• Public Policy: The contract of insurance must not be contrary to
what the society considers just and moral.

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How do we respond to risk?
There are two major steps people take in responding to risk; some do
so before (protection steps) and others after (reaction steps);
(i) Protection Steps are actions we take before a crisis or emergency
occurs to help us respond. These may include;
- Buying Insurance
- Employing Security Guards
- Having security Dogs
(ii) Reaction Steps are actions we take in response to something that
happens after the crisis. E.g. Calling the Police to intervene in case
of a problem

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The Purpose of Insurance
Insurance provides several benefits to individuals,
governments and the society at large. These
benefits can be classified as either economic or
social;
1. Peace of Mind
2. Savings
3. Investment of Funds
4. Preservation of source of Income

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Insurance works by pooling risk or creation of a common
pool. The insurance Company gathers together people
who want insurance protection and sets itself up to
operate a pool. It takes contributions in the form of
premiums from many people exposed to the same
risks and pays a few who incur losses.
Insurers use past experience to determine the losses
that may occur in a year. These losses are expected to
be generally in line with their prediction for the year.

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Fundamentals of Insurance
Utmost Good Faith
Refers to the full and truthful disclosure, by the insured, of all
relevant material facts about the risk being proposed for
insurance. Material facts are facts that would influence the
mind of a prudent underwriter to accept or reject a risk.
Material facts may include; types of material used in
construction in fire insurance, use of the car in motor
insurance, type of stock in burglary insurance, state of health
of the proposer in health insurance.

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Indemnity
Refers to placing the insured in the same monetary position
he was in just before the loss occurred. The insured’s
position is restored, i.e. the insured is not supposed to
benefit from insurance; he/she is simply reinstated.
This is only applicable to property and liability insurance but
not life and personal accident policies. These are benefit
policies because they contain agreements to pay a specified
sum of money when the loss occurs. The methods of
providing indemnity include; cash, repairs, replacement ad
reinstatement.

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Subrogation refers to the right of the insurance company
to recover the insured’s loss which was the subject of
the relevant claim paid under the policy up to the
amount of that paid claim
Contribution is the right of an insurer to call on other
insurers similarly, but not necessarily equally, liable to
the same insured to share the loss of an indemnity
payment. It also applies to indemnity policies only. This
principle normally applies to large risks

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Insurable Interest – An insurance contract is legally binding
only if the insured has an interest in the subject matter of
insurance, hence, there must be a legal relationship between
the person buying insurance and the asset being insured.
Proximate Cause - the loss must be directly attributed to an
insured peril/risk and must be accidental or not intentional.
In other words, if the insured risk is fire, the insurance
company will not pay for a loss caused by theft. If customer
X insures his car against accident only, and it gets burnt or is
stolen, then the insurer is not liable.

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Underwriting and categories of Insurance
Insurance Underwriting
An insurer will require a proposal to be prepared which answers
both general and specific questions about the proposer. When
the proposal has been completed, the underwriter goes
through it to determine whether the risk is acceptable or not.
This process is called underwriting.
The underwriting process begins after the proposal form has
been completed and presented to the underwriter. The
underwriter will consider both the moral and physical hazard.
The physical hazard relates to the physical characteristics of the
subject matter of insurance while the moral hazard relates to
the attitude of the proposer.

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General Questions
• Name of the proposer
• Address of the proposer
• Occupation of the proposer
• Details of past claims
• Other insurance of the
same risk
• Period of insurance
• Description of the risk or
subject of insurance
Specific Questions (fire)
• What construction material
was used in the building
• Use of the building and the
processes which take place
there
• Whether fire extinguishing
appliances have been installed
• The distance from the nearest
fire brigade
• Surrounding fire risks

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Categories of Insurance
1. Non Life Insurance / General Insurance
Basically, it is insurance for assets and liabilities e.g. vehicles,
buildings, computers. Also referred to as indemnity policies,
they are short – term policies, usually up to one year and are
renewable.
COMMON CLASSES INCLUDE:
a. Fire and Special Perils
This policy provides indemnity for loss of and/or damage to
buildings, Plant and machinery, Stock in trade, etc. Resulting
from Fire, Lightening, Explosion of Gas or Boilers used for
domestic purposes, Earthquake, Subsistence and landslip,
Impact by moving objects, Aircraft damage, Riots, Strikes
and Malicious damage, Water damage by burst pipes or
apparatus.

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b. Business Interruption
This policy provides protection against loss of profits following
damage at the insured locations by fire and/or any of the
Special Perils.
c. Burglary
The burglary policy provides protection against loss of movable
items by theft accompanied by violent entry into and/or
exist from the premises.
d. All Risks
This policy provides protection for your various portable
valuable items e.g. Mobile phones, Telephone systems, Fax
machines, Switchboard, Fans, Office, Fittings and Equipment
etc.

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e. Electronic Equipment Insurance (Computers)
Noting the operational hazards to which electronic equipment is exposed, we
recommend this cover for your computers, Air conditioning Plant and
accessories to provide indemnity for losses resulting from:
1.Physical Breakdown, actual breaking, distortion whilst in use or at Rest;
2. Accidental damage i.e. any other sudden and unforeseen loss including fire
and Lightning, theft, earthquake, malicious damage, riots, strikes and civil
commotions.
This cover would additionally provide:
1. Indemnity for damage to other data carrying media e.g. diskettes, tapes
and cables resulting from any of the above perils.
2. Reimbursement of additional expenses incurred to reproduce lost data and
records following damage to the insured equipment by any of the above
perils.

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f. Workers’ Compensation/Employer’s Liability
It is a statutory obligation for every employer to take out insurance for compensation
to his employers for death and/or permanent incapacity from accident sustained
whilst at work.
g. Group Personal Accident
Whereas the workmen’s compensation cover provides protection for your legal
liability to compensate employees for injuries resulting from accidents at work, the
Group Personal Accident cover is a benefit policy for your employees on a 24 hours
basis.
h. Public Liability
Public Liability To provide protection against your legal liability to compensate third
parties for injuries and/or damage to their property resulting form accident s or
events at any premises owned, occupied, hired or leased for your operations
anywhere in the country.

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i. Fidelity Guarantee
Provides protection against loss of cash and/or stock by fraudulent means (involving
staff)
j. Money/Cash In Transit
This cover would be required for indemnity against “All Risks” of physical loss and/or
damage to money whilst in transit to and from the premises and whilst in the
premises during and after working hours.
k. Motor Comprehensive
Comprehensive cover to provide indemnity for:
• All Material Damage: i.e. the risk of accidental loss, fire and theft, including
damage caused by fold, hurricane storm and tempest, earthquake, riots, strikes
and civil commotions and malicious damage.
• Windscreen Extension: i.e. Reimbursement of costs incurred to replace or repair
windscreen following damage or loss other than involving total loss of the vehicle.

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Third Party Liability: i.e. compensation to third parties for bodily injury or death
caused by the use of your motor vehicles as required by statute.
Medical Expenses to Insured/Driver: Up to a limit of Ushs.300,000/= per person per
incident.
Towing/Wreckage Removal: Up to a limit of Ushs.300,000/=.
Classes of vehicles to be insured:
A: Private: To cover Saloon wagons and small vehicles used for official, social,
domestic and pleasure purposes.
B: Commercial: To cover Pick-Ups, Trucks, Lorries, Vans and Minibuses used for your
operations.
C: Motor Cycle: Motor Cycles used for official, business, social and domestic
purposes.

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l. Domestic Package
This proposal is for a comprehensive insurance cover for residential buildings owned
by yourselves and/or hired for your executive and household contents therein
against loss of and/or damage resulting from fire, lightning, earthquake,
subterranean fire, flood, storm, hurricane, impact with moving objects, aircraft
damage, riots, strikes and malicious damage, landslip, water damage etc.
This package also extends to cover:
i. Liability for injury to third parties and damage to their property.
ii. Liability to compensate domestic servants.
iii. Loss of Gold equipment, Golfer’s liability and Breakage of clubs.
iv. Personal Accident to occupiers.
v. Loss of rent or costs of alternative accommodation.
vi. Pedal cycle and other equipment for domestic use.

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m. Marine
This cover is recommended for business whose operations involve regular
importation of Raw materials, packaging materials, spares, etc and/or
exportation of finished products. The indemnity provided under this
policy is for “All Risks” of physical loss and/or damage to the goods whilst
in transit form one country to another.
n. Insurance Bonds or Financial Guarantees
Bonds are also referred to as Financial Guarantees. The purpose of an
insurance bond is to compensate the third party in respect of loss suffered
as a result of a failure of the insured to perform a task described in the
insurance contract.

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Peculiar features of insurance bonds:-
1. A bond once issued, is non-cancellable before its expiry
date.
2. All bonds issued to contractors for government projects are
demand bonds and are worded in such a way that they can
be invoked by the holder of the bond without any reason
and explanation.
3. The Insurer is obliged to pay upon demand notwithstanding
any dispute or protest by the contractor or insurer or any
third party.

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Types of bonds
a. Bid or Tender Bonds:
These are guarantees required in connection with the submission of tenders
for contract jobs with Public Authorities or Private Principals where
relevant. The bond value is usually a fixed amount determined by the
Principal. The main objective of this bond is to guarantee that the
contractor who is awarded the contract will accept the Contract according
to the terms that was submitted by him to the principal. If he is unable to
maintain his quotation, the Bond will be liquidated and the principal will
request the surety to pay for the damages sustained up to the amount of
the bond.

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b. Performance bonds
Performance bonds are surety bonds issued by an insurance
company (surety) or a bank to guarantee satisfactory
completion of a project by a contractor.
c. Advance payment bonds (mainly for government
contracts)
This is required when a contractor applies for an advance
payment from the Principal to help in the funding of the
preliminary costs and mobilization works of the contract.
The bond value ranges from 15% to 25% of the total contract
value.
d. Immigration or Security Bonds
These bonds are issued to non – citizens, whose conduct
insurers guarantee. Should one fail to be of good conduct, an
insurance company undertakes to pay the cost of
deportation or the consequences of their bad conduct.

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e. Court Bonds
These are used when a court has the responsibility of administering
the affairs of persons unable to do so for themselves for some
reasons, that is, mental incapacity. The court appoints a receiver to
administer the affairs of the estate or the person. The court will ask
the receiver to provide a bond that will take care of
maladministration that might take place.
f. Customs or Importation Bonds
These ensure that dutiable goods on which no duty has been paid do
not find their way into the Ugandan market. Should the goods find
their way into the market, the insurer will meet the duty the
insured has not paid.
g. Warehouse Bonds
Warehouse bonds guarantee payment of duty when goods leave a
warehouse.

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Categories of Insurance
2. Life Assurance
Life Insurance or Assurance products are also referred to as benefit policies.
They are normally long – term policies i.e. over five years. Life assurance
policies can be grouped into Individual life and Group life.
Individual Life Policies include; Endowment plans, Personal Insurance Plan
and Dividend plus Plan. Group life assurance policies include:
a. Group Life and Income Replacement Benefit
This is a tailor-made Life insurance product that covers death, disability,
critical illness, including income replacement and retirement funds for
employer groups and retirement funds aiming to meet the risk
management needs.
b. Group Life Assurance Benefit
This is a death in service benefit taken out by the employer on behalf of its
employees. The benefit is paid out to the beneficiaries in the event of the
member’s death.

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c. Income Replacement Benefit
This is a benefit taken out as a rider on either Deposit Administration
Plan or Group Life to cater for one’s financial status in the event
he/she is absent from work as a result of critical illness through
accident or natural illness for more than six months and may suffer
from financial hardship as a result. Income Replacement Insurance is
sometimes known as Permanent Health Insurance (PHI) or Income
Protection.
It's called permanent because the insurer may not cancel the policy no
matter how often you claim for benefit, although policies usually
expire when the policyholder reaches 60 or 65.
• To enable us quote, the following will be required;
• A detailed list of eligible members
• Gender
• Dates of birth
• Monthly salaries

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d. Deposit Administration Pension Plan
This is similar to NSSF, whereby the employer contributes 10%
and the employee 5% of the gross salary. These contributions
are normally made on a monthly basis. The benefits are paid
out with interest at retirement or when the employee resigns
from the job or in the event of death.

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Micro insurance
This is a mechanism used to protect low income earners
against risk (accident, illness, death in the family,
natural disasters, etc.) in exchange for insurance
premium payments tailored to their needs, income and
level of risk.
Micro Insurance policies may include; Credit Life or Loan
Protection Insurance, Group or Community Funeral
Insurance and Weather Index Insurance

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1. Credit Life or Loan Protection Insurance
Proposition.
• The loan protection Insurance protects the Banks,
Microfinance Institutions and SACCOs against
unexpected loss following the death, total permanent
disability, and catastrophic loss of business property
(stock) due to identified perils like fire among others.
• The product also offers a funeral benefit to the client in
the event of accidental death of a pre-identified spouse
and children.

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CATEGORY SCOPE OF COVER BENEFIT (AMOUNT)
A Client Death (Both Natural and Accidental) Outstanding loan amount
and interest due.
B Total Permanent Disability (due to illness or bodily
injury)
Outstanding loan amount
and Interest
C Catastrophic loss of physical property/stock
detailed in the proposal (Fire/earthquake,
explosion, storm, flood). Single property loss is also
covered (valid documentation required).
Outstanding loan amount
and interest
D Funeral Benefit - Death (Accidental) of borrower Specified Amount
E Funeral Benefit - Death ( Accidental only) of a Pre-
identified Spouse
Specified Amount
F Funeral Benefit - Death (Accidental) of a pre-
identified Child (Maximum of 4 children)
Specified Amount
Group insurance benefits- Example

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2. Group/Community Funeral Insurance
Coverage/beneficiaries: Group member, one pre-
identified spouse and up to two children. The spouse
and children are identified by putting their full names
on the policy form. Names cannot be changed once
they are written on the form.
The policy is active only after payment of premium and
expires a year from the date of commencement.
Benefit/Pay outs are made in cases of; Death of Group
member, Death of pre-identified spouse and Death of
pre-identified child.

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Group/Community Funeral Insurance claims:
All claims under this insurance shall be lodged with
the Company by submitting at least three of the
following supporting documents:
• Certified Letter from Local Council & Institutional letter
from the Microfinance Institution or branch
• Death Certificate or a certified copy of the same.
• Police Report for accidental deaths
• Letter from local pastor/imam
• Letter from Group Chairman

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Weather Index Insurance
• Weather index insurance contracts are policies linked to the
fluctuation of a weather variable. The weather variable is
measured and indexed according to the specific objective of the
insurance policy.
• Insurance payouts are based only on the performance of the
weather index and not on actual damage incurred or actual losses
suffered on the ground.
• This kind of insurance is most suitable for farmers’ groups or
associations; however, premium rating is based on the amount of
loans taken from the bank or financial institution. Payouts in the
event of loss are made to the financial institution which disbursed
the loans.
• Examples of weather variables used in index insurance are Rainfall,
Temperature, Wind speed, Soil moisture, Growing degrees days,
and Sea surface temperature

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Advantages and Limitations of Weather Index Insurance
Weather Index Insurance eliminates most of the asymmetric information
problems of traditional insurance products (moral hazard and adverse
selection. For weather index insurance the advantage is that;
• No loss assessment is required
• It is objective and transparent
• It has a simplified claims process
• It provides timely payout
• It reduces administrative costs
• It facilitates risk transfer outside of the local community (international
reinsurance)
Limitations
“Basis risk”: when the actual losses suffered by the insured and the payouts
of the contract don’t match perfectly
By definition, weather index insurance does not cover non weather sources of
risk: in a multi-risk environment this can be a limitation for the end user

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The insurance industry is composed of sellers of insurance, regulators,
intermediaries and other service providers. All these insurance players
must be licensed by the Insurance Regulatory Authority, for them to
operate legally. They are indicated here below;
1. Insurance companies
Insurance companies are financial institutions that sell insurance. They carry
the risk and are responsible for compensating in case of losses. Insurance
companies can sell insurance direct, through Brokers and Insurance
Agents. They sell both life and non – life insurance.
2. Insurance Brokers
These are insurance intermediaries incorporated and licensed to transact
business on behalf of insurance companies. They are independent and
deal with all insurance companies. The insurers pay commissions to
insurance brokers. These should more professional in insurance than the
insurance agents

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3. Insurance Regulatory Authority
The Authority’s functions include:
• Establishing standards for the conduct of insurance and reinsurance
business;
• Licensing all persons involved in or connected with insurance business
including insurance and reinsurance companies, insurance and
reinsurance intermediaries, loss adjusters and assessors;
• Safeguarding the rights of policyholders and insurance beneficiaries to any
insurance contract;
• Providing a bureau to which complaints may be submitted by members of
the public;
• Promoting a sound and efficient insurance market in the country;
• Supervising and controlling transactions between insurers and reinsurers;
• Ensuring strict compliance with the provisions of the Insurance Act and
regulations made under it and any other law relating to insurance; etc.

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4. Insurance Institute of Uganda
The Insurance Institute of Uganda is the training arm of the insurance
industry in Uganda whose articles and memorandum of association mainly
mandates it to provide and maintain a central organization for the
promotion of efficiency, progress, welfare, knowledge and general
development among persons engaged or employed in the insurance
business.
The institute has the following objectives:
– To promote and assist the study of subjects and conduct trainings bearing on
any branch of insurance
– To advise on academic standards, qualifications and skills development of
members in the insurance industry
– To offer prizes and awards on the results of examinations for essays or
research in any subject bearing insurance
– To promote excellence, enterprise and integrity in the insurance profession
and to provide members with access to relevant high quality information
research and knowledge including library for use by members of the institute
and other interested individuals

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5. Uganda Insurers’ Association
The Uganda Insurers Association is an umbrella trade organization
founded in 1965 by Insurance Companies to meet the challenges of
an emerging competitive and growing industry its membership is
composed of corporate insurance and reinsurance companies
incorporated and licensed to operate in Uganda. Membership to
the Association is mandatory for all licensed insurance companies.
6. Uganda Brokers’ Association
The Uganda Association of Insurance Brokers is a body of all insuring
broking persons, firms, companies, corporations or cooperative
societies carrying on business of insurance broking in Uganda. The
main objective of the Association is to protect and promote the
general welfare and interests of the insurance brokers who are
members of the Association.

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7. Loss Adjusters
These are qualified to assess, investigate, negotiate and settle losses of
big magnitude on behalf of the insurer. Before they can be licensed
by the Insurance Regulatory Authority, they should be qualified
professionals in loss assessment.
8. Loss Assessors
These are appointed by insurance companies after a loss has taken
place to quantify the magnitude of the loss and advise on the
method of compensation. They are used mostly in general classes
of insurance.
9. Insurance Surveyors
These survey risks and advise on rates, terms and conditions of
premiums and make suggestions for improvement of risks.
10. Insurance Agents
These are insurance intermediaries just like brokers, but unlike brokers,
they represent one business for Chartis Insurance.

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What to do in case a claim arises;
The insured is required to act always as if they are not insured. This means
that one should do everything within one’s power to prevent further
damage. In other words, the insured should not be careless with the
insured property just because it is insured. In fact, insurers will only
compensate genuine and accidental claims.
When a loss occurs, the insured should;
• Report the incident to the insurer immediately
• Report to the police if malicious persons are involved or in case of big
accidents
• Deliver the necessary information required by the insurer within a
stipulated period
• The insurer will immediately go and inspect the scene of the accident or
occurrence and make his report as well. They will then provide the insured
with a claim form to fill in.

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Claim Forms:
When a report about a claim has been made to the insurer, a blank claim form is
issued to the insured for completion. The claim form, which is in form of a
questionnaire, is designed by the insurer for the purpose of extracting details
about the loss from the insured.
Claims Processing:
If the details in the claim form are acceptable, the insurer will open a claim file. The
details in the claim file include;
• Name and address of the insured
• Claim number
• Policy number
• Period of insurance
• Sum insured or the limit of liability
• Estimate of loss or the claim reserve
In the claim form, the insured will give an estimate of the loss. The amount being
claimed determines how insurers will deal with the claim. Small claims like
windscreens are replaced immediately while bigger ones may take about two
weeks to a month.

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Common Insurance terminologies
• Insurer – a company that accepts the risk of loss and compensates the
insured in the event of loss in exchange for a premium payment.
• Insured – person or company transferring the risk of loss to a third party
through a contractual agreement (Insurance policy). This is a person/entity
that will be compensated for loss by an insurer under the terms of the
insurance policy.
• Premium – amount of money charged by an insurer and paid by the
insured for insurance
• Commission – amount of money paid by an insurer to its agent for
business transacted. It is a percentage of the premium brought in.
• Claim – loss or injury suffered by the insured, which must be settled by
the insurer in monetary terms
• Excess – part of the claim that the insured bears, e.g, for motor insurance,
the insurance company pays 90% of the claim the insured meets the 10%.

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• Insurance Policy – a document binding the insurer and insured, and
contains details of the asset insured, the terms and conditions, and
exclusions to the policy. It is the evidence of the contract setting out the
terms and conditions of insurance. This is general to all clients who have
bought a particular policy, e.g. all private motor policies are the same for
all clients-
• Policy Schedule – this is a document that makes the policy personal to the
insured. The information typed on this document is generated from the
proposals form.
• Proposal Form – a form containing questions about the details of the
client and the asset being insured, and which is filled in by the insured.
• Claim Form – a form containing questions about the details of the
occurrence of the loss, which should be filled in by the insured.
• Endorsement – any writing on a policy, in addition to its normal wording,
which supplements or modifies the terms of the policy. It is normally
made when the insured requires a wider or extra cover, e.g if the insured
wants to add more vehicles on the fleet that has already been insured.
This document is added when or after the policy is issued.

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• Renewal Notice – a document issued to bring to the attention of the
insured that the policy is about to expire. It is issued one month before the
expiry date.
• Cover Note – an interim document evidencing the grant of insurance
cover, states that the cover is in force and gives brief details of the cover. It
is given to the insured in cases of urgency, i.e. when the policy document
is not yet ready. It is therefore a temporary document and will be
superseded once the policy is ready.
• Sum Insured – the value of the risk that is being insured, e.g value of a
building, stock, motor vehicles, from which premium is charged. It is also
referred to as the insurer’s maximum liability, i.e. the maximum amount
compensation by the insurer to any one client or insured.
• Underwriter – an officer in the insurance company who assesses and
determines whether or not the risk is acceptable. The underwriter also
inputs all the information given by the insured in the company system.
• Exclusions – conditions that are excluded from the normal policy
documents, e.g. coverage for terrorism, floods and smuggling.

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END

Introduction to insurance

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Introduction to insurance

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