4.1 Introduction FSTI
Insurance as a contract An insurance policy is a contract or agreement between two or more parties, which is legally binding. Once the proposed insured has agreed to a certain quotation it is important that one explains the terms and conditions of the cover to the client to ensure that the client fully understands what […]
3.4 Surveys
Surveys are recorded descriptions of the risk and hazards to which it is exposed. These are used to apply underwriting criteria to quote on the risk. The survey gives the underwriter the information required to make a judgement on acceptance, terms and premiums of a risk. It also assists the client in that it highlights […]
3.3 Underwriting Criteria
Underwriting criteria refers to the basic requirements, as well as additional requirements or financial loadings or discounts that an underwriter will consider in order to correctly, evaluate and rate the risk. In addition to these, other factors are also considered when setting the underwriting criteria. In doing so the underwriting criteria may result in the […]
3.2 The Purpose of Underwriting
The basic purpose to underwrite any risk is to evaluate all risks on a similar basis and then to limit the insurance company’s exposure to unacceptable risks by way of claims made against it. The process of underwriting entails a series of questions that assists to assess a risk scientifically in order to determine whether […]
3.1 Introduction FSTI
During the process of insurance, a proposer offers their assets, also called the subject matter of insurance, to an insurer who through the process of underwriting decides whether they are willing to accept the risk, at what premium and whether they want to impose certain terms and conditions. This decision is based on their experience […]
2.21 Premiums
Premiums is the amount paid by the insured for the insurer to accept the risk. The premium is set during the underwriting process depending on the risk assumed by the insurer. However, other factors that affect the premium is considered in the subsections following. A. SASRIA/NASRIA It is important to note that in South Africa […]
2.20 Reinsurance
Reinsurance is a means by which an insurance company can financially protect itself together with other insurance company(ies) against the risk of losses, which are larger than it wishes to carry for its own account. Individuals and corporations obtain insurance policies to provide protection for various risks such as hurricanes, earthquakes, lawsuits or collisions. Reinsurers, […]
2.19 Market Value, Retail Value and Replacement Value
Indemnity can be on a market, retail or replacement value basis. In the event of the insured being covered for replacement value, the insured is entitled to receive the replacement value of any item lost or damaged beyond repair. If the sum insured is lower than the replacement value the condition of average will apply. […]
2.18 Self-Insurance
Self-insurance occurs in those instances where the insured elects to bear the costs of any damage or loss to his assets himself. A common example of an individual opting for self-insurance would be by way of an additional voluntary excess. Note that self-insurance is a conscious decision rather than simply neglecting to take out cover. […]
2.17 Frequency of Risk
The frequency of risk is the average number of losses of a particular type that may occur in a year. This frequency is extracted from statistics and trends of the particular peril. Such as how many burglaries occur in a particular area in a year.