Académique Documents
Professionnel Documents
Culture Documents
OVERVIEW
Overview
1.1. Introduction
1.2. Importance of Insurance
1.3. How Insurance Works
1.4. What is Insurance?
Importance of Insurance
1.5.
Functions of Insurance
What Insurance Is
1.6.
1.7.
Classes of Insurance
Functions of Insurance
Classes of Insurance
1.8.
1.1. INTRODUCTION
Pooling of Risks
It is not possible for an individual to predict or
prevent such occurrences but through insurance,
arrangements can be made to provide against
their financial effects, i.e. loss of property and /
or earning.
Insurance in its various forms aims at
safeguarding the interest of the individuals
who are insured. This is achieved by having
losses experienced by the unfortunate few
compensated by the contributions, i.e. the
premium, of the many that are exposed to the
same risk.
The Concepts of Insurance Explained
The concept of insurance is illustrated in
Figure 1.1 in relation to a house owner or a
term life insurance portfolio. For the purpose
of illustration, it is assumed that the portfolio
consists of 1000 houses of identical value, say
RM100,000 each or 1000 life assured with
identical capital sum, and a premium of RM200
is charged for each or life assured per year.
House owners
or term life
Premiums
Claims
#1
#2
RM 200
#3
RM 200
RM 200
1000
x
RM200
=RM200,000
# 999
# 1000
Expenses
and other
Outgoes
Profits
RM 200
RM 200
Shipwreck at sea;
It is an economic institution.
ii.
An endowment insurance is a
combination of protection plus savings.
The investment part of the contract is a
savings accumulation. By combining the
two features in a single plan, endowment
assurance provides both protection and
savings to the insured.
Stabilization of Costs
Through the purchase of insurance,
business enterprises avoid the necessity
of having to freeze capital to provide for
financial protection against losses. This
provides a means of stabilizing the costs
involved in managing risks.
Stimulation of Business
Enterprise
The risk transfer mechanism provided
by insurance has made possible
the present-day large-scale commercial
and industrial enterprises. These largescale enterprises would not have started
Reduction of Losses
Insurers help to reduce losses (both
in frequency and security) through
their actions and recommendations in
rating, survey, inspection services and
salvage.
Market Structure
1.Insurers
2.Insurance Brokers
3.Adjusters
4.Registered Life Agents
5.Registered General Agents
No. of Personnel
Employed
20,600
1,162
1,844
78,587
39,165
Premature death
Sickness or disability
of
the
Which of the following statements is NOT true about the law of large numbers?
a.
b.
c.
d.
2.
3.
4.
a.
b.
c.
d.
The secondary functions of insurance will include all of the following, EXCEPT
a.
b.
c.
d.
Life insurance contracts can be arranged to provide cover against the following
forms of risk:
I.
II.
III.
IV.
bank loans.
premature death.
sickness or disability.
continuous stream of income during retirement (i.e. old age).
a.
b.
c.
d.
I and II.
I, II and IV.
III and IV.
All of the above.
6.
Amongst many other risks, general insurance contracts will cover the following,
EXCEPT:
7.
property.
accident.
natural death.
legal liability.
8.
a.
b.
c.
d.
a.
b.
c.
d.
emotional losses.
sentimental losses.
financial losses.
non-financial losses.
Which ONE of the following facts is NOT true about both life and general
insurance?
a.
b.
c.
d.
Life insurance policies are subject to the principle indemnity whereas general
insurance policies are not.
General insurance policies are subject to the principle of indemnity whereas life
insurance policies are not.
Life insurance policies and general insurance policies will both pay when a person
suffers permanent disablement due to an accident.
Life assurance is a long-term contract whereas general insurance is a yearly
renewable contract.
10
The operation of the principle of the law of large numbers will ensure
10.
a.
b.
c.
d.
I.
II.
III.
IV.
It is economic institution.
It is based on the principle of mutuality or co-operation.
Its objective is to accumulate funds to pay for claims that arise as a result of the
operation of specific risks.
Only certain risks can be insured against, namely those, whose occurrence can be
confidently estimated with a certain degree of accuracy.
a.
b.
c.
d.
I and II.
II and IV.
II, III and IV.
All of the above.
11
Overview
OVERVIEW
Characteristics of Risk
Concepts Related to Risk
The Measurement of Risk
The Management of Risk
The Characteristics of Insurable Risks
12
Whose Responsibility?
Risk can be
categories:
classified
into
two
major
14
Examples:
i.
ii.
Loss
Pure Risk
No Loss
Loss
Speculative Risk
Break-even
Gain
Risk avoidance
Loss control
Risk retention
Risk transfer
Loss Prevention
Loss prevention refers to reducing the
frequency of loss, say for example, by
the use of fire resistant material in the
construction of a building to help prevent
fire losses.
Loss Minimization
Loss minimization refers to reducing
the severity or amount of loss, say
for example, by the installation of an
automatic fire sprinkler system to help
reduce the amount of fire losses when
a fire occurs.
15
Evaluation
Selection
Avoidance
Loss Control
Transfer
Retention
Implementation
Control
Insurance Contract
liability lawsuits;
Financial Measurement
i. Damage to Property
Cost of Repairs
Court Awards
17
2.
a.
b.
c.
d.
3.
a.
b.
c.
d.
Which of the following is NOT a loss prevention and loss reduction technique in fire
insurance?
4.
a.
b.
c.
d.
Which of the following is NOT a loss prevention and loss reduction technique in life
and health insurance?
5.
a.
b.
c.
d.
a.
b.
c.
d.
Fire.
Flood.
Theft.
Operating a supermarket.
19
7.
a.
b.
c.
d.
When a person stops playing football because he does not want get hurt, the risk
control method used is known as
8.
a.
b.
c.
d.
loss prevention.
risk avoidance.
risk transfer.
risk retention.
9.
a.
b.
c.
d.
Which of the following determines the total amount of loss under the loss control
method of handling pure risk?
I.
II.
III.
IV.
frequency.
severity of loss.
physical hazard.
moral hazard.
a.
b.
c.
d.
I and II.
II and III.
III and IV.
All of the above.
20
21
Overview
3.1. Principles of Insurance
3.2. Takaful
3.3. Shariah Supervisory Council
3.4.
3.5.
OVERVIEW
Insurable Interest
Utmost Good Faith
Indemnity
Subrogation
Contribution
Proximate Cause
An Introduction to Takaful
The Shariah Supervisory Council
Takaful and Insurance
Principles of Takaful Operation
Aspects of Takaful Operation
Types of Takaful Business
Embodied
in
Insurable Interest,
Utmost Good Faith,
Indemnity,
Subrogation,
22
Contribution, and
Proximate Cause
23
b.
his employee; or
c.
3.1.2. Assignment
3.1.2.2.
24
Marine policies
They are freely assignable by statutory
provision in the Marine Insurance Act
1906. In practice, only cargo policies
are freely assignable while hull policies
usually contain a clause which prohibits
the assignment of policies without the
insurers consent.
Cargo policies are freely assignable
because they are important documents
of overseas trade and provide collateral
security to the banks which finance the
overseas trade.
Life policies
Life policies are assignable by statutory
provision under the Policies of Assurance
Act 1867, subject to the conditions
outlined in section 23.3. of Chapter 23.
Name,
b.
Date of birth,
c.
d.
Address.
25
b.
is of common knowledge;
c.
d.
b.
26
Non Disclosure
Misrepresentation
3.1.4. Indemnity
27
NO
Insured Claims
from Insurer
YES
Insured Cannot Claim
from Insurer
Insurer Acquires
Subrogation
Matter is Settled
Matter is Settled
29
30
Points to remember:
1.
a.
b.
2.
a.
b.
31
3.2. TAKAFUL
32
Piety
or
individual
purification:
People are accountable to Allah and
their success in the hereafter
depends on their performance in this
life on earth.
Brotherhood via taawun or mutual
assistance: Policyholders cooperate
among themselves for their common
good.
Charity through tabarru or donation:
Every policyholder pays his contribution
to help those that need assistance.
Mutual guarantee.
Self-sustaining
operations
as
opposed
to
profit
maximization:
Losses are divided and gains are
spread according to an agreed
takaful model.
2.
2.
3.
3.5.
PRINCIPLES OF TAKAFUL
OPERATION
The
takaful
operator
provides
various takaful plans to cover risks,
namely business risks and pure risks,
which are allowable by Shariah.
Those who enter the plans are called
takaful participants.
2.
3.
4.
5.
35
2.
to
earn
investment
returns
in
accordance with Islamic principles; and
3.
36
2.
a.
b.
c.
d.
3.
a.
b.
c.
d.
4.
a.
b.
c.
d.
5.
a.
b.
c.
d.
a.
b.
c.
d.
37
The contribution condition requires the insured to claim from each underwriter
involved
7.
a.
b.
c.
d.
proportionally.
in instaments.
periodically.
annually.
8.
a.
b.
c.
d.
insured perils.
excluded perils.
uninsured perils.
exception perils.
Which of the following does NOT constitute a breach of Utmost Good Faith?
9.
a.
b.
c.
d.
10.
a.
b.
c.
d.
a.
b.
c.
d.
38
Overview
4.1. The Insurance Market
4.2. Other Market Components
4.3. Organization Structure
4.4. Centralization Versus
Decentralization
4.5.
4.6.
OVERVIEW
4.7.
Other Associations
4.8.
Market Services
4.9.
Insurance Educational
Institutions
Other Associations
Market Services
39
Buyers
Sellers
Intermediaries
4.1.1.1. Buyers
4.1.1.2. Sellers
b.
c.
Underwriter
42
4.2.1. Reinsurers
43
Hospitals
Where a life applicant has received treatment for
a condition, insurers may request directly from
the hospital reports of the treatment to assist
the insurers in the assessment of the risk.
Engineers
Technical engineering firms are generally
retained by insurance companies (who do not
have such specialists of their own) to report on
risk or claims on boilers, presses, lifts, cranes,
etc.
Administration Department
The administration department provides
and handles services commonly used
by many departments. These include
office services, building services and
personnel administration.
Accounting Department
The
accounting
department
is
responsible for billing and collecting
premium once the policy is issued. In
addition, the department is responsible
for the companys general accounting
records, the preparation of financial
statements, the control of receipts and
disbursements, and the maintenance of
budgetary controls over departmental
expenses. This department is also
concerned with compliance with relevant
government regulations and tax laws.
44
Investment Department
The main function of the investment
department is to invest all available
funds in a manner which ensures that
all investments yield sufficient return,
satisfy the companys requirement for
liquidity and security, and comply with
relevant regulations. The investment
portfolio of an insurance company
comprises
government
securities,
shares and debentures, fixed deposits
with banks and finance companies, and
investments in land and buildings.
Marketing Department
The marketing activities conducted by
the marketing department are usually
restricted to providing support to the
sales department in bringing in business.
These include the development of sales
promotion programmes, sales literature
and kits, as well as the training of the
sales force.
Actuarial Department
In the actuarial department, the work
done is mainly related to life insurance.
The design and pricing of new products,
calculation of surrender values, paidup policy values and the bonus rate for
participating policies, and provision of
other advice of an actuarial nature are
the main functions of this department
Underwriting Department
The underwriting department sets the
underwriting guidelines and selection
criteria, selects the risks and determines
the premiums, terms and conditions
of new business and renewals. The
department is also responsible for fixing
the amount for the insurers retention
and reinsurance.
Claims Department
personnel.
45
Outsourcing
4.3.3. Personnel
Board of Directors
Company Secretary
General Managers
4.4.1. Centralization
4.4.2. Decentralization
47
4.5.1. Roles And Functions
CONSUMER
(CEP)
EDUCATION
PROGRAMME
The
Consumer
Education
Programme
(CEP) on insurance and takaful is known as
InsuranceInfo and is a joint effort between
Bank Negara Malaysia and the insurance and
takaful industry. InsuranceInfo is designed as
a long-term programme to provide educational
information to enable consumers to make wellinformed decisions when purchasing insurance
or takaful products. InsuranceInfo aspires for
consumers to be in a better position to select
48
providing
and
disseminating
information on insurance and takaful
products and services, important
terms and conditions as well as
exclusions of insurance policies, and
the rights and responsibilities of
consumers, in a clear and simple
manner;
giving useful tips to consumers when
deciding to obtain insurance or
takaful products and services; and
The
information
channels
InsuranceInfo
include
following:
-
General Information
General Insurance
Life Insurance
General Takaful
Family Takaful.
of
the
Market Services
The following services are available for the
insurance market:
Objectives
Technical Services
The companys business objectives are:
50
Energy
Risks
Consortium
Market Training
Malaysian Re has and will always continue
to conduct various courses and seminars on
insurance and reinsurance subjects for the staff
of insurance companies to instil a higher degree
of professionalism in the industry.
Scheme for Insurance of
Specialized Risks (SILSR)
Large
and
51
5%
(without
any
52
on
General
aviation
or
maritime
2.
3.
This
means
that
compensation
payable to third parties will be
decided by MIB based on the merit
of each case. However, the claimant
still retains his legal rights to pursue
his case against the tortfeasor(s) to
its logical conclusion.
56
a.
b.
c.
d.
e.
i.
ii.
f.
g.
Fraud Alert
interaction
59
provide
an
infrastructure
of
databases and reporting to support
a liberalized pricing environment;
build
competencies
in
technical
areas of non-life insurance pricing
and reserving;
Increasing utilization of
in insurance operations,
information
60
The Chartered
(CII,UK)
Insurance
Institute
University of Indonesia
Oriental
Life
Insurance
Development Centre (Japan)
Cultural
Core Values
1.
Resourceful
We are solution-oriented by exploring
possibilities to achieve objectives.
2.
Customer
We benchmark against best practices
to meet and exceed the needs of our
customers.
Vision
To be the preferred insurance institute for
human capital development and professional
standards in insurance in Malaysia and
emerging markets.
Speed
4.
Integrity
We inspire trust and confidence among
customers and partners by upholding
good corporate governance.
Mission
5.
Strengthening the industry and adding value as
strategic partners with the insurance community
by:
raising the
standards
level
of
Learning
We play a more effective role by
continuously striving for knowledge and
skills enhancement.
professional
International Award
capital
promoting
insurance
knowledge and information
related
62
1.
Which of the following association does NOT deal with life insurance?
2.
a.
b.
c.
d.
The department that concentrates its efforts on identification of field officers and
recruiting of the sales force is the.
a.
b.
c.
d.
3.
a broker.
a reinsurer.
a life insurance agent.
a general insurance agent.
5.
EDP Department.
Agency Department.
Underwriting Department.
Claims Department.
4.
NAMLIFA.
LIAM.
ASM.
PIAM.
64
I.
II.
III.
IV.
7.
a.
b.
c.
d.
9.
I and II.
II and III.
III and IV.
All of the above.
8.
a.
b.
c.
d.
They are generally employed by the insured to assess the extent of the
damage or loss settlement.
They frequently assists the insured in the preparation and negotiation of
the claim.
They carry on the adjusting business of investigating the cause and
circumstances of a loss and ascertaining the quantum of the loss either for
the insurer or the policyowner or both.
They are independent parties appointed usually by an insurer when a loss
occurs.
65
to regulate and control the conduct and activities of every person engaged
in general insurance business.
to regulate and control the conduct and activities of every insurer engaged in
general insurance business.
to regulate and control the conduct and activities of every insurer engaged in
life insurance business.
to regulate and control the conduct and activities of all PIAM members.
66
Overview
5.1. Insurance Industry and the
Consumer
5.2.
Self-Regulation
OVERVIEW
Consumer Protection
67
poor service;
lack of professionalism.
68
Part I: Preliminary
Part X deals with matters relating to the windingup of insurers, including the provision that
liabilities of policyowners and claimants shall
have priority over all unsecured liabilities other
than preferential debts under the Companies
Act 1965, to the extent that they are apportioned
to the insurance fund.
a.
b.
c.
d.
e.
f.
g.
h.
Part I: Preliminary
74
75
76
subsidiary
77
1.
2.
3.
a.
b.
c.
d.
4.
a.
b.
c.
d.
agents.
brokers.
loss adjusters.
insurance companies.
If BNM is satisfied that an insurer is not conducting his business in accordance with
the provisions of the Insurance Act, the authority can
a.
b.
c.
d.
78
6.
I, II and III.
II, III and IV.
I, III and IV.
All of the above.
7.
a.
b.
c.
d.
8.
a.
b.
c.
d.
9.
a.
b.
c.
d.
a.
b.
c.
d.
RM 50 million.
RM 150 million.
RM 100 million.
RM 200 million.
79
a.
b.
c.
d.
motor insurance.
marine insurance.
personal accident insurance.
miscellaneous accident insurance.
80
Overview
6.1. Law of Contract
OVERVIEW
81
6.1.2.3. Consent
Consideration
6.1.2.4. Consideration
82
Illegal Contracts
An agreement should be created for a legal
purpose. It should not promote things that
are either illegal or against public policy. An
agreement which is illegal or against public policy
would not be legally binding. Illegal contracts
include, for example, an agreement to commit
robbery and share the loot, or an insurance
policy effected on a ship engaged in smuggling,
or a person insuring on the life of another for
wagering. An example of an agreement against
public policy is an insurance policy providing
indemnity against fines imposed by a statute or
court of law.
84
2.
a.
b.
c.
d.
3.
4.
a.
b.
c.
d.
85
5.
6.
7.
a.
b.
c.
d.
I.
II.
III.
IV.
a.
b.
c.
d.
8.
a.
b.
c.
d.
The law holds them to be no contracts at all, a nullity from the beginning.
They are totally invalid and are nothing more than mere agreements.
Void contracts are not enforceable in a court of law.
They are contracts which have consideration.
86
9.
Before a contract can be considered valid, an offer must be matched with ____
10.
a.
b.
c.
d.
acknowledgement.
consideration.
acceptance.
conditions.
87
Overview
7.1. Legal Provisions Governing the
Law of Agency
7.2. Duties of an Agent
7.3. Rights of an Agent
7.4. Obligations of the Principal
7.5. Termination of Agency
7.6. Characteristics of Insurance
Agents
7.7.
Conclusion
OVERVIEW
Agent, Principal
Intermediaries
Agency
Relationships
ii.
iii.
89
An
investment
manager
with
instructions to sell has a usual
authority to sign a memorandum
of the contract of sale on behalf of
the vendor.
A property agent
to sell property
principal has a
sign a contract
owner.
Special Agent
General Agent
Universal Agent
7.3.
RIGHTS OF AN AGENT
TERMINATION OF AGENCY
by mutual agreement;
7.6.3.
Premium Collections
93
Cash-Before-Cover Regulations
The Insurance (Assumption of Risk and
Collection of Premium) Regulations 1980
(incorporated under the Insurance Act 1963,
now Insurance Act 1996), is commonly known
as CBC Regulations and was enforced on 1
November 1980.
For the motor insurance business, it has been
prescribed by law that motor insurance cover
can only be issued by insurers or their agents
on a cash-before-cover basis. This means that
the premiums must be paid before a motor
insurance cover note or policy can be issued.
Section 141 of Insurance Act 1996
Assumption of Risk:
No licensed general insurer shall assume any
risk in respect of such description of general
policy as may be prescribed unless and until
the premium payable is received by the general
insurer in such manner and within such time as
may be prescribed.
Pursuant to section 141 of the Insurance Act
1996 regarding assumption of risk, Part XV
Regulation 65 of the Insurance Regulations
1996 identifies the policies of motor insurance
as that which an insurer or its insurance agent
shall not assume unless the premium for the
policies has been paid (cash-before-cover)
by express appointment;
1.
2.
by subsequent ratification
unauthorized act;
of
an
95
b.
b.
shall
fraudulently
material fact; or
c.
conceal
7.7.
CONCLUSION
96
2.
3.
4.
express appointment.
implication of the law.
subsequent ratification.
all of the above.
the proposer/policyholder.
the insurance company.
both a and b .
none of the above.
let his own interest conflict with his obligation to the principal.
take any secret profit or bribe from any party with whom he deals on behalf
of the principal.
disclose confidential information obtained in the course of his duties as an
agent to other parties except the principal insurance company.
delegate his duties to a sub-agent without authority, expressed or implied.
a.
b.
c.
d.
I and II only.
II and IV only.
III and IV only.
All of the above.
Under the Agency Agreement, agents are allowed to do the following, EXCEPT
a.
b.
c.
d.
97
6.
The insured is required to pay the premiums charged for the insurance
within 60 days from the effective date of insurance cover.
If the premium is not paid by the 60th day, the insurance cover will be
cancelled from the 61st day.
The insurer shall be entitled to short period premium for the period they have
been on risk.
Any payment received by the appointed agent shall be deemed to be
received by the insurer.
The relationship of insurer and insurance agent may be created in the following
ways:
I.
II.
III.
IV.
by express appointment.
by implication of the law, which may arise from the conduct of the parties
or from the necessity of the case.
by subsequent ratification of an unauthorized act.
by statute (section 151, Insurance Act 1996).
I and II.
II and III.
III and IV.
All of the above.
a.
b.
c.
d.
7.
8.
a.
b.
c.
d.
insurance associations.
policyholders.
reinsurers.
insurers.
An agent who is authorized to assess a risk, and impose terms and conditions for
the acceptance of that risk on behalf of his principal is known as
a.
b.
c.
d.
a special agent.
a general agent.
a universal agent.
an underwriting agent.
98
The relationships which have connection with an agency are as follows, EXCEPT
10.
a.
b.
c.
d.
99
Overview
8.1. Sales
8.2. After-Sales Services
8.3. General Features of General
Insurance Renewal Process
8.4.
OVERVIEW
Marketing
After-Sales Services
Policy Register
8.1. SALES
Market Identification
Product Development
Pricing
Promotion
101
Sales Goal
Objectives
-
-
-
-
-
b.
-
-
-
-
Sales Strategy
103
Purchase
Problem Recognition
Post-Purchase Evaluation
Handling Objectives
Order Processing
Creative Selling
Missionary Selling
8.2.
AFTER-SALES SERVICES
105
and
the reputation of
a service-oriented
enhanced.
the insurer as
organization is
Bankers Order
Home Service
108
2.
a.
b.
c.
d.
3.
a.
b.
c.
d.
4.
a.
b.
c.
d.
A sales strategy is a way of achieving the sales goal. The following is NOT an
example of such a strategy:
a.
b.
c.
d.
5.
a.
b.
c.
d.
109
7.
I.
II.
III.
IV.
a.
b.
c.
d.
I, II and III.
II, III and IV.
I, III and IV.
All of the above.
Under what circumstances would the agent use the creative selling technique?
a.
b.
c.
d.
9.
10.
pricing ability.
product knowledge.
market knowledge.
selling techniques.
Among others, the factors which may influence the consumer buying decision will
include the following EXCEPT
8.
a.
b.
c.
d.
The agent will have a better chance of securing the loyalty of his client at the
time of renewal.
The agent will understand the needs of his client better.
The agent can recommend the right cover for his clients.
None of the above.
Instalment premiums are helpful to the insurers cash flow and are cost
effective.
Instalment premiums tend to improve the retention rate of the insurer.
A charge is made by the insurer for offering instalments.
Instalment premiums and annual premiums are the same.
YOU WILL FIND THE ANSWERS AT THE BACK OF THE BOOK.
110
OVERVIEW
Overview
9.1
9.2.
9.3.
9.4.
9.5.
9.6.
Non-Termination of Coverage
with Claim Payment
9.7.
9.8.
9.9.
c.
Policy processing
d.
Claim administration
e.
Reinsurance
Insurable interest
b.
c.
Proximate cause
d.
Indemnity
e.
Contribution
f.
Subrogation
b.
Underwriting
2.
3.
112
b.
c.
d.
e.
dental insurance.
113
Explanation to Customers
a.
b.
Policy benefits,
Pre-existing conditions,
Specified illnesses,
Qualifying period,
Deductibles,
Co-insurance,
Residence overseas,
Exclusions and limitations of
benefits,
Premiums
Checklist
114
a.
he knows to be relevant to
decision of the licensed insurer
whether to accept the risk or
and the rates and terms to
applied; or
b.
a
reasonable
person
in
the
circumstances could be expected to
know to be relevant.
2.
the
on
not
be
a.
b.
is of common knowledge;
c.
d.
3.
4.
a.
b.
c.
5.
2.
2.
2.
3.
Lifetime limit
Inner limits
2.
3.
4.
116
6.
Deductibles
7.
Panel of hospitals
117
1.
Which of the following does NOT come under medical and health insurance?
2.
a.
b.
c.
d.
a.
b.
c.
d.
3.
Insurers who launch new medical and health insurance products must lodge the
actuarial certificate for the products with BNM at least _______ days before the
products are offered to the public.
4.
a.
b.
c.
d.
31 days.
30 days.
60 days.
90 days.
Medical and health insurance is usually divided into the following two categories:
a.
b.
c.
d.
118
A hospitalisation cash benefits policy is _____________ because its pays a predetermined sum of money if an insured event occurs during the period of
coverage.
6.
a.
b.
c.
d.
an indemnity policy.
a benefit policy.
a hospital and surgical policy.
disability income policy.
A medical and health insurance policy claims payment limit could be a combination
of the following:
I.
II.
III.
IV.
a.
b.
c.
d.
I and II.
I and III.
I, III and IV.
All of the above.
7.
In medical and health insurance, the payment of a claim does not result in a
termination of the policy except in the event of a
a.
b.
c.
d.
8.
a.
b.
c.
d.
119
Methods used by Insurer to contain costs and abuses arising from escalated
medical claims comprise the following:
I.
II.
III.
IV.
deductibles.
file and claim reimbursement.
schedule of surgical procedures.
co-payment for upgraded rooms.
a.
b.
c.
d.
I and II.
I and III.
I, III and IV.
All of the above.
10.
A hospital and surgical policy that places the insured in the same financial position
as before the occurrence of the insured risk, subject to maximum limits of the
insured amount is known as.
a.
b.
c.
d.
120
Overview
OVERVIEW
121
3.
4.
2.
Dental Insurance
3.
Maternity Insurance
2.
3.
4.
Anaesthetists Fees
5.
Surgeons Fees
6.
7.
8.
9.
Pre-Hospitalisation Specialist
Consultation
10.
Post-Hospitalisation Treatment
11.
12.
Ambulance Fees
2.
3.
4.
Organ Transplant
5.
122
2.
3.
a.
b.
c.
2.
Co-payments:
Co-payment
refers
to a sharing of expenses between
the policyholder and the insurer.
With co-payment, the insured pays
a specified percentage of all the
eligible
medical
expenses.
For
example,
co-payment
for
an
upgraded
room
requires
the
policyholder to share a percentage
of all eligible expenses if treatment
is received while staying in a more
expensive room than that provided
by the policy.
RM
300
400
4,000
600
31,000
600
200
600
Ambulance Fees
250
124
a.
b.
his relationship
insurer; and
c.
with
the
licensed
1.
2.
2.
a.
b.
his relationship
insurer;
c.
d.
3.
4.
a.
b.
his employee; or
c.
with
the
licensed
Critical
illnesses
insurance
is
also
known as dread diseases insurance. The
policy pays a lump sum upon the insured
person being diagnosed as having any
one of the specified critical illness. The
insurance may be sold as a stand-alone
policy or as a rider to a life insurance policy.
126
2.
a.
b.
c.
d.
3.
a.
b.
c.
d.
The four main classes of medical and health insurance policies generally sold by
Insurers would include
a.
b.
c.
d.
4.
Some of the supplementary covers insurers may incorporate into their medical
insurance policies are
I.
II.
III.
IV.
a.
b.
c.
d.
I and II.
I, II and IV.
II, III and IV.
All of the above.
127
The two most common expense participation methods found in major medical
expenses insurance policies are:
6.
a.
b.
c.
d.
7.
The parties to the contract under a group health and medical insurance scheme
are
8.
a.
b.
c.
d.
___________ pay a lump sum assured upon the insured person being diagnosed
as having any one of the specified critical illness stated in the policy schedule.
a.
b.
c.
d.
Investment-linked policies.
Permanent health insurance policies.
Permanent disability insurance policies.
Dread disease insurance.
9.
Premium for individual medical and health insurance policies are usually
a.
b.
c.
d.
128
a.
b.
c.
d.
129
Overview
OVERVIEW
Anti-Selection
Adequacy of Premiums
Medical Underwriting
Sources of Underwriting
Information
Underwriting Decisions
Payment of Premium
Termination of Policy
130
2.
Medical
factors:
Medical
considerations
are
important
in
underwriting both disability income
and medical expense coverage.
Medical
history
and
current
physical conditions such as height
and weight are basic indicators of
the probability of future problems
that may cause disability or result
in
medical
expenses
for
hospitalisation
and
treatment.
2.
3.
Occupational
factors:
The
likelihood
of
occupational
injury
helps to determine premium rates
on disability, accident and medical
expense
insurance
coverage.
Occupational
disability
resulting
from relatively minor impairments
is a factor in evaluating disability
income applications.
131
possibility of recurrence;
2.
3.
4.
normal
progression
impairments; and
5.
of
any
Application form,
2.
Agents statement,
3.
Medical or paramedical
examinations,
4.
5.
134
11.7.3. Declined
1.
2.
sub-substandard/modified (issued
on other-than-applied-for basis)
3.
declined
Exclusion Endorsements
2.
3.
135
exclusion
1.
2.
Instead
of
charging
an
extra
premium, an exclusion may be
imposed.
2.
Some
medical
conditions,
such
as
cardiovascular disorders, are too broad in
scope and too difficult to define to be extended
cover adequately by an exclusion rider.
Many other conditions, such as high blood
pressure, diabetes or obesity, have too many
complications that would have to be excluded.
For such conditions the rider would be too
broad to protect the insured or too narrow
to protect the insurer. The solution to the
dilemma of using exclusion riders too broad or
too narrow in scope is to give the policyholder
full protection through the use of the extrapremium approach.
2.
3.
4.
Non-Cancellable Policies
136
an exclusion endorsement or a
special-class premium because of a
given impairment;
b.
c.
Some medical and health policies are nonrenewable only for stated reasons, such as:
1.
2.
change
to
occupation;
3.
4.
an
unacceptable
Some policies may be issued on cash-beforecover basis, whereas other policies may be
subject to the 60 days premium warranty.
For guaranteed renewable policies, conditional
renewal policies and non-cancellable policies, a
grace period may be allowed for the payment
of premium. If payments are made during the
grace period, the insurer will not consider the
policy as having lapsed. Although the policy is
considered as having been renewed, any claim
occurring during the grace period is not payable.
If the premium is not paid before the end of the
warranty period or the grace period, the policy
lapses, that is it ceases to be effective.
2.
on
the
policy
anniversary
immediately following the insureds
maximum eligibility age;
3.
138
1.
2.
more standard risks are accepted for insurance resulting in a less favourable
underwriting result.
more sub-standard risks are accepted for insurance resulting in a less
favourable underwriting result.
more standard risks are accepted for insurance resulting in a more
favourable underwriting result.
more sub-standard risks are accepted for insurance resulting in a more
favourable underwriting result.
What are the common factors that medical and health insurance underwriters
usually look into while performing risk selection?
I.
II.
III.
IV.
medical factors.
financial factors.
age and sex factors.
occupational factors.
a.
b.
c.
d.
I and II.
I and III.
I, III and IV.
All of the above.
3.
4.
a.
b.
c.
d.
a.
b.
c.
d.
friends.
age.
sex.
financial status.
139
6.
the quoting of premium rates and terms, and issuance of the policy.
the assessment and selection of risks, and the determination of premium,
terms and conditions.
the determination of premium rates only.
the assessment of the possibility of recurrence of an illness.
The most drastic underwriting action of a medical and health insurance underwriter is
7.
a.
b.
c.
d.
8.
a.
b.
c.
d.
Medical and health insurers have long used ___________ as a mean of issuing
coverage to person whom would otherwise have to be declined.
9.
a.
b.
c.
d.
exclusion endorsements.
premium loadings.
modified benefits.
waiting period.
a.
b.
c.
d.
an optional renewable.
a guaranteed renewable.
a conditional renewable.
a non- cancellable.
140
11.
a.
b.
c.
d.
Three methods use by medical and health insurance underwriters to address substandard risks are:
12.
a.
b.
c.
d.
a.
b.
c.
d.
preferred risks.
subjective risks.
objective risks.
impaired risks.
141
OVERVIEW
Overview
12.4. Endorsements
Endorsements
Renewal Notices
Proposal Form
2.
Policy
3.
Endorsement
4.
Renewal Notice
5.
142
2.
a.
b.
c.
3.
4.
Specific
questions
relating
to
medical
and
health
insurance:
These would
include the following:
a.
b.
c.
Hazardous Pursuits/Avocation
d.
AIDS-Related Questions
5.
Declaration:
The
majority
of
proposal forms used by insurers
contain a declaration clause which
requires the proposer to
a.
b.
c.
d.
2.
a.
b.
premium
c.
policy number
3.
d.
date of issue
e.
agency
f.
g.
period of insurance
h.
4.
i.
j.
6.
7.
Conditions:
Conditions
express or implied.
5.
may
be
145
Condition
Precedent
to
Contract
Conditions Subsequent to
Contract
12.4. ENDORSEMENTS
a.
b.
c.
8.
d.
e.
cancellation of insurance;
f.
146
b.
c.
147
1.
2.
a.
b.
c.
d.
3.
a.
b.
c.
d.
4.
a.
b.
c.
d.
Which of the following conditions fall under the category of implied conditions?
I.
II.
III.
IV.
a.
b.
c.
d.
I and II.
I, II and III.
II, III and IV.
All the above.
148
The clause that specifies the perils insured under the policy and the circumstances
in which the insurer will become responsible to make payment is known as
a.
b.
c.
d.
6.
Which of the following clause introduces or recites the parties in the contract?
7.
a.
b.
c.
d.
a.
b.
c.
d.
8.
a.
b.
c.
d.
9.
___________ are policy conditions which require the insured to inform the insurers
of any changes or alterations in the risk.
a.
b.
c.
d.
149
a.
b.
c.
d.
11.
12.
a.
b.
c.
d.
The full name and the registered address of the insurance company are contained
in.
a.
b.
c.
d.
150
OVERVIEW
Overview
Notification of Loss
Proof of Loss/Claim
Checking Coverage
Claim Investigation
13.8. Disputes
Disputes
151
a.
b.
c.
d.
e.
been
2.
3.
given
involves
1.
a.
b.
c.
d.
2.
Claims
Documentation
Claim
forms are documents drafted by
insurers
to
gather
information
relevant to assessing claims. In
general
all
claim
forms
seek
information on the identity of the
insured, the insureds interest in
the loss, the circumstances of and
the extent of loss.
c.
b.
13.8. DISPUTES
a.
b.
Negotiation
and
Compromise
Settlement:
When
there
is
a
dispute, the claimant is usually
seen by a claim official who will try
to
settle
the
dispute
through
discussion. If the dispute relates to
a claim that has been rejected by
the insurer, the claim official will
try to explain why the claim was
rejected. On the other hand, if the
dispute is on the quantum of loss,
the official may try to negotiate for
an amicable compromise.
discussion/negotiation
with
the
claim official, he may take court
action against the insurer. The
insurer normally considers litigation
as a last resort and therefore
would try to bring about an outof-court
settlement
unless
it
involves a huge claim or an
important
point
of
principle.
c.
Arbitration:
In
practice,
most
general insurance policies have an
arbitration clause which may either
provide that all disputes or disputes
relating to quantum only will have
to
be
referred
for
arbitration
before court action can be taken by
the insured. Generally arbitration
is preferred to litigation because
the former is speedier and less
costly
than
court
action,
and
hearing is in private rather than in
an open court.
Ali bought a medical insurance policy on 2
January 2004. He was admitted into hospital
on 28 December 2004. He was discharged
from hospital three days later. His total hospital
bill amounted to RM 2,780. Ali had not been
admitted into hospital prior to this date. His
medical insurance policy provides for an
annual limit of RM 100,000 and a lifetime limit
of RM 300,000. Alis medical insurance policy
provisions also stipulate a 20% co-payment
requirement.
d.
155
2.
The reasonable timeframe for notification of loss under a medical and health
insurance claim is usually between
a.
b.
c.
d.
3.
14 days to 60 days.
14 days to 30 days.
14 days to 45 days.
14 days to 90 days.
The following conditions have to be met before a medical and health claim can be
paid, EXCEPT
a.
b.
c.
d.
4.
policy lapse.
no outstanding premium.
the loss was caused by the insured peril.
notification of loss was given without undue delay.
156
6.
7.
a.
b.
c.
d.
The issuance of a medical and health insurance claim form by the insurer does not
constitute
8.
a.
b.
c.
d.
The validity of a claim under the claim investigation process involves determining
the following, EXCEPT
9.
a.
b.
c.
d.
a.
b.
c.
d.
Usually disputes between claimants and insurers generally arise due to the
question of
a.
b.
c.
d.
157
11.
a.
b.
c.
d.
Proof of documentation.
Proof of hosptialisation.
Proof age admission.
The proof of loss provision.
The medical and health insurance claim form usually comprises a claimants
statement and
12.
a.
b.
c.
d.
_____________ will usually result in the insurer paying something more than its
interpretation of the facts would warrant and the claimant accepting payment for
less than that claimed.
a.
b.
c.
d.
Arbitration.
Litigation.
Mediation.
A compromise settlement.
158
Overview
14.1. Introduction
14.2. Characteristics of General
Insurance Products
14.3. The Basic Principles of
Insurance as Applied to General
Insurance
OVERVIEW
14.1 INTRODUCTION
159
Other implications
The short-term nature of the contracts has
other implications for the conduct of this class
of business.
a. Premium charged may vary.
At the end of the period of the contract, the
insurer reassesses the risk. Based on this
reassessment, a possibly different premium
rate may be charged. The difference in the rate
could be due to two basic causes:-
contracts
are
wide
160
Chapter
section
3.1.4.-
Insurable Interest
Subrogation
Contribution
Proximate Cause
161
Which of the following facts is true about life and personal accident policies?
2.
a.
b.
c.
d.
3.
a.
b.
c.
d.
I and II.
II and III.
II and IV.
I and IV.
4.
a.
b.
c.
d.
On the payment of a claim, which of the following type of insurance policies will
terminate automatically?
a. property.
b. liability.
c. marine.
d. life.
162
6.
a.
b.
c.
d.
the insured.
the insurer.
the proposer.
the insured and the insurer.
7.
For life insurance contracts, the mortality risk ________with age and hence with
the duration of the contract.
8.
a.
b.
c.
d.
decreases.
increases.
diminishes.
enhances.
Which of the following statement is NOT true about general insurance contracts?
a.
b.
c.
d.
163
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Overview
15.1. Marine Insurance
15.2. Fire Insurance
15.3. Motor Insurance
15.4. Miscellaneous Accident
Insurance
15.5. Types of General Takaful
Business
OVERVIEW
Marine Insurance
Fire Insurance
Motor Insurance
Liability Insurance
Engineering Insurance
Aviation Insurance
Scope of Cover
Exclusions
Extensions
164
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
15.1 MARINE INSURANCE
165
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Clauses
Perils
A
Table 15.2. Insured () and Excluded Perils (X) under the Various Cargo Clauses
166
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Summary
15.2.
FIRE INSURANCE
Fire Policy
Houseowners Insurance
Householders Insurance
167
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
15.2.1. Policy Details
nuclear risks.
ii.
Fire
Lightning and
Explosion of gas used for illuminating
and domestic purposes only
Exclusions
The fire policy excludes the following:
i.
warlike risks;
subterranean fire;
explosion other
gas used for
than
explosion
of
iii.
explosives.
its
own
168
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
iv.
ii.
Loss of rent
iii.
removal of debris,
sprinkler leakage.
Extensions
Property can be damaged in other ways, and
to meet this need a number of additional or
special perils can be added on to the basic
policy. The fire policy can be extended to
cover one or more of the following at additional
premiums:
i.
explosion;
bush/lallang fire;
storm, tempest;
aircraft damage;
impact damage by
horses and cattle;
Basic cover
A houseowners insurance policy is specially
designed for those who wish to insure their
private dwellings (houses, flats or apartments).
The policy provides cover against several
risks:
i.
road
vehicles,
fire,
lightning,
subterranean fire;
explosion;
subsidence or landslip;
spontaneous combustion;
flood; and
electrical installation.
thunderbolt
and
road
vehicles,
169
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
ii.
iii.
Exclusions
This policy excludes the following:
contamination by radioactivity;
ii.
Extensions
i.
construction,
metal
smoke
stacks,
awnings,
blinds, signs and other outdoor
fixtures and fittings including gates
and fences;
170
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
15.2.3. Householders Insurance
Policy
Basic cover
The householders insurance policy is designed
for those who wish to insure their home contents
against loss or damage. The policy provides
cover against several risks:
i.
fire,
lightning,
subterranean fire;
explosion;
thunderbolt,
road
vehicles,
loss
of
rent
(similar
to
houseowners insurance policy).
iii.
iv.
v.
vi.
theft
accompanied
by
actual
forcible and violent breaking into
or out of a building, or any attempt
thereat. (In the event of the building
being left unoccupied for more
than 90 days, the insurance against
this peril will be suspended unless
agreed otherwise in writing by the
insurer);
nuclear risks;
the
Exclusions
This policy excludes the following:
i.
171
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Extensions
The policy may be extended to include the
following perils at additional premiums:
Basic cover
Business interruption insurance provides cover
for the following which may be suffered as a
result of an interruption to the insureds business
following damage at the insured premises
by fire, lightning or explosion of gas used for
illuminating and domestic purposes:
i.
ii.
additional
minimizing
expenses
the loss
incurred
in
of turnover.
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
standing charges are those expenses which
continue to apply even though the manufacturing
or trading activities have been disrupted, for
example rates, rent wages, salaries, interest on
loans, insurance premiums and auditors fees.
Exclusions
Extensions
computer
risks.
damage
and
breakdown
i.
ii.
arising from
on
others
customers/
Summary:-
173
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
15.2.5 Minimum Premium
Commercial vehicles
Types of vehicles
For insurance purposes, motor vehicles have
been classified under the Motor Tariff as
follows:
Private cars
ii.
Goods-Carrying Vehicles
1.
2.
iii.
1.
2.
3.
174
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
iv.
Buses
iii.
1.
iv.
Motorcycles trade.
2.
3.
Act only;
Special Types
Motorcycles
Private motorcycles;
ii.
Commercial motorcycles;
and
Comprehensive.
175
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
This is normally the lowest policyholder option
and the cover will not be provided for loss or
damage to the insured vehicle and is restricted
to:
-
Private Car
a.
b.
c.
d.
e.
f.
g.
by malicious act;
h.
2.
Commercial Vehicle
The cover for this policy is similar to that of a
private car policy.
3.
Motorcycle
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
4.
Motor Trade
1.
e.
on the road or
f.
temporarily
garaged
during
the
course of a journey elsewhere than
in or on any premises owned by or
in the
occupation of the Insured.
2.
g.
the failure or inability of any equipment
or any computer
programme to
recognise or correctly to interpret or
process any data as the true or correct
data or to continue to function correctly
beyond that data.
Motorcycle
The policy exclusions for a motorcycle policy
are similar to that of a private car policy.
15.3.5. Exclusions
Commercial Vehicle
The following are exclusions to Section A (cover
explained above), which are found in almost all
motor policies:
Private Car
a.
b.
the loss
vehicle.
c.
d.
of
use
of
the
insured
1.
2.
Motor Trade
The motor trade policy has similar policy
exclusions to that of a private vehicle policy with
three additional exclusions as follows:
1.
2.
malicious act.
3.
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Summary:
Act Cover
Third Party
Comprehensive
Burglary Insurance,
Theft Insurance
Liability Insurance
Money Insurance.
Engineering Insurance
Aviation Insurance
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15.4.1.1. Burglary Insurance (Business
premises)
Basic Cover
A burglary insurance policy provides cover
against loss of or damage to the contents on
a business premises (for example, stocks and
materials-in-rade, furniture, office equipment,
plants and machinery, household goods and
personal effects of employees) following theft
involving entry to or exit from the insured
premises by forcible and violent means.
In addition to the theft losses, the policy covers
damage to the insured building and contents
consequent upon such theft or attempt thereat.
Types of cover available:
Full Value Basis The total value of
the
property/goods
will
be
declared as the sum insured. This
basis is adopted when there is a
possibility of the entire property
being stolen at any one time.
2.
loss or
caused;
damage
1.
by
fire
however
nuclear risks.
Basic Cover
Uncertainty of losses is restricted neither to
events brought about by fire or theft nor are
they limited to events occurring on the insureds
premises. This realisation led to the development
of a wider form of cover known as all risks.
The scope of cover for an all risks policy is very
wide and it covers against all risks, namely fire,
theft and all accidental causes other than those
excluded from the policy.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
The all risks policy is normally issued to cover
for valuables such as jewelleries, watches,
cameras, paintings and works of art. The
amount to be insured should be based on the
market value or an agreed value.
The term all risks is unfortunate in the sense
that it does not provide cover against all risks as
there are a number of exceptions/exclusions.
Exclusions
The common exclusions are:
nuclear risks.
insureds
premises
during
2.
a.
b.
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
c.
d.
e.
f.
nuclear risks;
g.
h.
15.4.1.4. Goods in Transit
Basic Cover
A goods in transit policy provides cover on an
all risks basis, indemnifying the insured for loss
of or damage to goods by fire, accident, theft
or pilferage while being loaded on, carried by,
or unloaded from the motor vehicles and their
trailers, and while temporarily garaged during
transit anywhere in Malaysia.
radioactive contamination;
war, riot and civil commotion;
earthquake
and
subterranean
fire;
involves
commercial
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
15.4.2.1. Workmens Compensation
Insurance
Exclusions
1.
2.
3.
4.
5.
6.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Basic Cover
5.
6.
7.
Any
liability
caused
by
or
contributed to by nuclear weapon
materials,
ionising
radiations
or
radioactivity contamination
Basic Cover
An employers liability policy provides protection
to the insured against his legal liability at
common law of damages and costs for bodily
injury or diseases to employees arising out of
and in the course of their employment.
lung
Exclusions
1.
2.
3.
4.
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
the compensation laid down by the Workmens
Compensation Ordinance.
Basic Cover
Exclusions
The common exclusions include:
The common exclusions are:
a.
b.
contractual liability;
c.
d.
e.
f.
nuclear risks.
a.
b.
c.
d.
i.
184
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
ii.
e.
professional liability;
f.
contractual liability;
g.
nuclear risks;
Exclusions
h.
i.
sonic boom.
a.
b.
c.
and
d.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Liability may arise out of lack of care or skill
in the performance of the duties, for example
negligent advice or misstatement, particularly in
the context of a merger or takeover when failure
to understand economic trends results in a poor
forecast of the companys performance.
As with other liability policies, this policy pays
only for damages and for defence costs in
relation to claims.
Exclusions
a.
injury to employees;
b.
c.
d.
Claims
arising
from
improper
personal gain, profit or advantage;
Basic Cover
An exception on most business public liability
policies is one relating to liability arising out
of goods sold. This is a very onerous liability
and one that insurers would prefer to deal with
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
expenses arising from the injury. (See Table
15.6)
Exclusions
The policy does not cover:
There can be no
from
any
other
compensated payment.
There is
recovery.
no
contribution
policy
or
subrogated
right
of
a.
death,
disablement
expenses caused by:
or
medical
and
b.
death,
disablement
or
medical
expenses sustained by the insured:
to
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Basic Cover
A fidelity guarantee policy provides cover to
an employer against loss of money or stocks
resulting from dishonest or fraudulent acts of
any of his employees.
Fidelity guarantees relate to situations where
employees handle their employers money or
other property, for example either by way of
handling cash (for example, cashiers or sales
assistants) or being involved in record-keeping
(for example, accountants, computer operators
or purchase managers).
b.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
c.
the
discovery
period,
i.e.
discovered up to six months after the
resignation,
death,
dismissal,
retirement
of
the
guilty
party/
employee or after the termination
of the policy, whichever happens first
Exclusions
In general, exclusions are rarely found in a
fidelity guarantee policy.
Types of Fidelity Policies
The types of fidelity policies issued by insurers
are as follows:
a.
b.
15.4.4.2. Bonds
Individual Policy
Collective Policy
Named
Collective:
This
policy
incorporates a schedule containing
names and duties of guarantee
individuals. The amount of guarantee
is set against each name, and this
can be an individual sum or a floating
sum over the whole schedule.
c.
Blanket Policy
A blanket policy covers employers
against loss arising from dishonest or
fraudulent acts of all employees, without
showing names or positions.
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
2.
3.
Electronic Equipment/Computer
Policies
Basic Cover
The cover afforded by a boiler explosion policy
is intended to provide compensation to the
insured in the event of the insured plant being
damaged by some extraneous causes or its
own breakdown.
The policy incorporates an inspection service
and provides cover against:
a.
b.
c.
steam boilers;
ii.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
b.
c.
d.
e.
b.
c.
d.
failure of insulation;
e.
f.
g.
g.
h.
f.
civil
a.
b.
at work or at rest; or
2.
c.
nuclear risks.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
15.4.5.3. Electronic Equipment/Computer
Insurance
equipment
as
body
deductibles;
b.
loss by theft;
c.
Basic Cover
earthquake,
hurricane,
volcanic
cyclone or
eruption,
typhoon,
atmospheric conditions;
d.
maintenance costs;
e.
f.
g.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
15.4.5.4. Contractors All Risks (CAR)
Insurance
Contractors all risks insurance is a form of
insurance that has been developed to meet
the specific needs of the construction industry.
When new buildings are being constructed or
civil engineering projects such as motorways or
bridges are being undertaken, a great deal of
money is invested before the work is finished.
The risk is that the particular building or bridge
may sustain severe damage at some point
during construction, prolonging the construction
time and delaying the eventual completion date.
The risk is all the more acute as the completion
date draws near, and there are many examples
of buildings and other projects sustaining severe
damage and even total destruction, only days
before they are due to be handed over to the
new owners.
Basic Cover
The contractors all risks policy provides a
wide coverage for civil and structural projects,
usually one-off in nature. It covers the duration
of the project, including the maintenance, and is
divided into two sections, namely:
Section 1 Material Damage
clearance of debris
Maintenance Visits
Extended Maintenance
b.
cost of
material
c.
d.
e.
f.
g.
replacement of defective
and/or
workmanship;
corrosion,
and
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
h.
i.
consequential loss;
3.
j.
k.
l.
Basic Cover
An erection all risks policy provides cover
against accidental damage to actual works being
installed and any temporary works carried on
in connection with the erection, testing of plant
and machinery.
The Third Party Liability Section of the EAR
policy, like that of the CAR policy, provides
cover against liability for property damage and
bodily injury to third parties.
Briefly, the EAR insurance policy provides cover
for:
1.
Complete
power
facilities
and
production plants where the abovesaid items are used.
2.
equipment
Property
located
on
the
site,
belonging to or held in care, custody
or control of the insured;
Expenses incurred for the clearance
of debris following a loss;
Additional expenses incurred for
overtime, as well as for express freight;
Legal liability arising out of property
damage or bodily injury suffered by
third
parties
and
occurring
in
connection with the erection work
or near the erection site.
Exclusions
The principal exclusions are quite similar to
those found in a CAR Policy.
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CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Following are the types of policies and coverage
available connected with aviation insurance:
1.
Aircraft Hull and Liability Insurance
Basic Cover
An aviation hull and liability policy indemnifies
the insured to pay for, replace or make good
accidental loss or damage to aircraft (including
disappearance) and his legal liability to third
parties and passengers.
Exclusions:
General exclusions
The common exclusions include the following:
contractual liability;
nuclear risks.
and
pollution
and
other
2.
Aviation Products Liability Insurance
There are two main coverages under an aviation
products liability insurance policy:
Coverage A Bodily Injury and Property
Damage Liability
The policy indemnifies the insured for sums that
they become legally liable to pay as damages for
bodily injury, damage, or prejudice to property,
arising out of the use of any aircraft or aviation
product manufactured by them.
Product in this context means whatever the
insured makes, handles or sells, whether it is
a complete aircraft or a component for use in
aircraft or work done on an aircraft (e.g. repairs
or servicing).
Manufacture extends to include assembly,
repair and design activities.
195
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Coverage B Grounding Liability
The policy further will indemnify the insured for
the loss of use of completed aircraft caused by
grounding resulting from an occurrence of event
or accident that arises out of the product hazard
under Coverage A.
Grounding means when an accident to a
particular aircraft reveals a defect in all aircraft
of the same design so serious that the civil
aviation authority requires all of them to be
grounded until the defect is rectified.
Exclusions
General exclusions
The common exclusions are similar to those of
an Aircraft Hull and Liability insurance policy.
Exclusions applicable to Category A:
3.
Airport Owners and Operators
Liability Insurance
Basic cover:
The risks under an airport owners and operators
liability policy are normally associated with
airport operation. The policy provides cover
for bodily injury to any person on or about the
airport or to passengers or crews in aircraft who
are injured in circumstances in which the airport
operator is liable.
The policy also includes cover for damage to the
property of others. This may be aircraft parked
at or using the airport or under the control of
airport services or under the control of the airport
owner for shelter, maintenance or repair.
Below, in brief, is the coverage afforded under
the respective policy type and the specific
exclusions applicable:
Section 1 (Premises Liability)
Under this section, the policy covers the insureds
liability for bodily injury and property damage to
any person caused by the fault or negligence
of the insured or any of their employees or by a
defect in the insureds premises or machinery,
Exclusions:
196
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
Exclusions:
4.
Aviation Hull War and Allied Perils
Basic Cover
The policy provides hull cover (i.e. write-back
parts of the exclusion) for some of the excluded
perils, namely war, hijacking, strike and
malicious damage and other perils.
Exclusions:
War between the five major powers;
Any debt;
Repossession
(or
attempted
repossession) by any title-holder or
arising out of a contractual agreement;
197
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
a.
Basic Cover
b.
c.
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
2. Major Medical Insurance
Pre-existing conditions;
2.
3.
Plastic/Cosmetic surgery,
circumcision, and eye examination;
4.
199
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
5.
6.
7.
8.
9.
10.
11.
Basic Cover
There are four main sections under a golfers
insurance policy, namely:
Terrorism risk.
Introduction
General takaful business comprises all takaful
insurance under the heading of general
insurance business excluding family takaful.
The general takaful scheme is basically a shortterm tabarru contract that provides cover to
participants against loss or damages due to a
200
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
catastrophe or disaster, usually inflicted upon
their properties or assets.
5.
a.
machinery breakdown,
b.
c.
boiler,
d.
pressure vessel,
1.
e.
a.
basic fire,
f.
bonds.
b.
houseowners,
c.
householders, and
d.
2.
3.
a.
personal accident,
b.
c.
all risks,
d.
workmens compensation,
e.
public liability,
f.
money,
g.
h.
employers liability.
4.
201
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
2.
a.
b.
c.
d.
Which of the following are the revised new Marine Cargo Clauses?
3.
a.
b.
c.
d.
4.
a.
b.
c.
d.
lightning damage.
war and its kindred perils.
fire caused by negligence of employees.
fire as a result of the explosion of a domestic boiler.
A personal accident policy does not cover death, disablement and/or medical
expenses caused
5.
a.
b.
c.
d.
by suicide.
while committing an unlawful act.
by childbirth, miscarriage, or pregnancy.
all of the above.
The houseowners insurance policy can be extended to include the following perils
at additional premiums, EXCEPT
a.
b.
c.
d.
202
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
6.
A business interruption policy will pay for all the following losses, EXCEPT
a.
b.
c.
d.
7.
The motor third party fire theft policy will provide additional protection against
fire and theft to
8.
a.
b.
c.
d.
The standard theft/burglary policy will compensate for the following loss and
damages:
a.
b.
c.
d.
9.
The money insurance policy provides cover for loss or money against all risks,
whilst
I.
II.
III.
IV.
in transit between the insureds premises and the bank and vice-versa.
on the insureds premises during business hours.
in a locked safe or strongroom on the insureds premises out of business
hours.
in the private residence of any principal or director of the insured.
a.
b.
c.
d.
203
CHAPTER 15 THE CLASSES OF GENERAL INSURANCE BUSINESS AND GENERAL TAKAFUL BUSINESS
10.
a.
b.
c.
d.
204
Overview
16.1. Underwriting
16.2. The Underwriting Process
16.3. Determination of Premium,
Terms and Conditions
16.4. Confirmation of Acceptance
16.5. Reinsurance and Co-insurance
16.6. Rating
16.7. Minimum Premium
16.8. Payment of Premiums
16.9. Refund of Premium
16.10. Using the Fire Tariff
16.11. Using the Motor Tariff
16.12. The Workmens Compensation
Tariff
OVERVIEW
Underwriting
Confirmation of Acceptance
Rating
Minimum Premium
Payment of Premiums
Refund of Premium
16.1. UNDERWRITING
205
16.1.2. Anti-Selection
type of construction,
height of building,
nature of flooring,
type of occupancy,
situation of risk.
206
type of vehicle,
cubic capacity,
use of vehicle,
modification of vehicle,
occupation of policyholder/driver.
Carelessness
Unreasonableness
Fraud
Burglary Insurance
nature of stock,
situation of risk,
security precautions.
age of person,
type of occupation,
hobbies.
207
Warranties
Risk Improvement
Exclusion
Restricted Cover
Excess
Franchise
208
RM 10,000.000
profit margin.
211
Class of Insurance
Fire Insurance
Dwelling
RM60
Non-Dwelling
RM75
Houseowners/Householders
RM60
Motor Insurance
Private Car and Commercial Vehicle
RM50
Motorcycle
RM20
RM35
212
or
214
16.10.1. An Example:
Premium Calculations:
# Five (5) per cent Service tax is only applicable to insurance effected on business firms.
215
b.
c.
216
217
218
a.
provide
compensation
to
their
employees according to the scales
stated in the relevant Workmens
Compensation Laws, and
b.
b.
219
ii.
iii.
Proposer
: Ahmad Ali
Address
: No.15 Jln Selamat,
Section 2, Shah Alam
Trade/Occupation
: Retailer (Sundry Shop)
Particulars of Work : Retailing foodstuff and
other sundry items
Place of Employment : Same as above
Period of Cover
: 1/10/07 30/9/08
Premium Calculations
300.00
Service Tax
15.00
10.00
325.00
Stamp Duty
Total Premium
220
2.
a.
b.
c.
d.
3.
a.
b.
c.
d.
4.
a.
b.
c.
d.
5.
a.
b.
c.
d.
a.
b.
c.
d.
221
6.
Which of the following is NOT a factor in the underwriting of a fire insurance risk?
7.
a.
b.
c.
d.
situation of risk.
type of construction.
nature of goods stored.
correspondence address.
Which of the following is NOT a desirable physical risk factor for fire insurance?
8.
a.
b.
c.
d.
sprinkler system.
fireproof doors.
fire extinguishers.
open fire burning in the vicinity.
9.
a.
b.
c.
d.
carelessness.
ignorance.
unreasonableness.
fraud.
If policies are issued or renewed for less than one year, the premium payable is to
be calculated based on a
a.
b.
c.
d.
10.
The rating of fire and motor insurance is governed by their respective tariffs
formulated by
a.
b.
c.
d.
222
11.
The underwriter will determine the class rate and adjust it upwards or
downwards depending on merits of rating.
When there is a large number of risks to be insured under a class of
insurance it is possible to classify the risks by certain merits into various
classes.
The underwriter determines the rate to be charged on each risk separately
without referring to a manual.
The rating is governed by respective tariffs formulated by Persatuan Insuran
Am Malaysia.
223
Overview
17.1. Proposal Form
17.2. The Cover Note
17.3. The Certificate of Insurance
17.4. The Policy Form
17.5. Endorsements
17.6. Renewal Notice
17.7. Renewal Certificate
17.8. Claim Form
17.9. Discharge Form
OVERVIEW
Endorsement
Renewal Notice
Renewal Certificate
Claim Form
Discharge Form
17.1.
PROPOSAL FORM
224
a. Proposers Name
This is required for identification purposes
but it may also indicate an aspect of the risk
proposed. For example, the name of a company
may indicate the nature of their trade. Further,
the name of a person who is known to be
disreputable may prompt the insurer to decline
the risk.
b. Proposers Address
This is required for correspondence purposes.
c. Risk Address
form
generally
contains
the
d. Proposers Occupation
Occupation is an important risk factor.
The proposers occupation is of special
importance because certain occupations
present higher risk than others. For instance, a
plastic manufacturer is considered a high risk
225
3. Insurance-Related Questions.
Fire Insurance
-
Motor Insurance
-
year of manufacture,
g. Sum Insured
driving offences,
cover required.
method of packing;
port of discharge;
cover required.
h. Subject Matter
226
hazardous pursuits;
4. Declaration
The majority of the proposal forms used by
general insurers contain a declaration clause
which requires the proposer to:
-
17.2.
Period of insurance;
Sum insured;
227
Date of issue;
17.2.1. E Cover
2.
Policyowners
would
receive
a
confirmation slip from their insurers/
takaful operators/agents as proof of
insurance/takaful
purchase
(confir
mation of purchase of insurance).
3.
17.4.
228
17.4.1.1. Heading
17.4.1.4. Exclusions
premium
policy number
date of issue
agency
risk covered
period of insurance
229
property insured
sum insured
warranties applicable
230
ENDORSEMENTS
The Practice
Insurance
In
Relation
to
General
change in risk;
231
17.7.
RENEWAL CERTIFICATE
1.
2.
The Declaration Section of the Discharge
Form
The discharge form issued in respect of
settlement with an insured in respect of an
insured loss would include a declaration stating
that the insured claimant:
the
repair,
reinstatement
and/or
replacement has been effected by a
person (on behalf of the insurer), and
it has been carried out to the satisfaction
of the claimant.
and
place of loss,
parties affected,
233
2.
a.
b.
c.
d.
amount to be insured.
name of the proposer.
situation of the risk to be insured.
number of family members of the insured.
3.
a.
b.
c.
d.
4.
a.
b.
c.
d.
Insurance Act.
Malaysian Penal Code.
Road Transport Act.
Office of the Director General of Insurance.
5.
a.
b.
c.
d.
a.
b.
c.
d.
234
7.
a.
b.
c.
d.
arbitration.
the duty of utmost good faith.
the existence of insurable interest.
the existence of subject matter of insurance.
8.
a.
b.
c.
d.
Notification condition.
Subrogation condition.
Contribution condition.
Cancellation condition.
9.
a.
b.
c.
d.
Which of the following is NOT required when assessing the hazards that are
commonly associated with the life proposed?
10.
a.
b.
c.
d.
The majority of the proposal forms used by general insurers contain a declaration
clause which requires the proposer to
I.
II.
III.
IV.
a.
b.
c.
d.
I, II and III.
I III and IV.
II,IIIand IV.
All of the above.
Overview
18.1. Claims Procedure
18.2. Claim Documents
18.3. Settlement of Claims
18.4. Recoveries from Reinsurers,
Co-Insurers, Subrogation and
Contribution
18.5. Repudiation of Liability by
Insurers
18.6. Average
18.7. Claims Settlement: Market
Agreements
18.8. Disputes
18.9. Post-Settlement Action
OVERVIEW
Claims Procedure
Claims Documentation
Claims Settlement
Average
Disputes
Post-Settlement Action
236
involves
238
18.2.
CLAIM DOCUMENTS
Fire Insurance
photographs
i.
Burglary Insurance
police report
medical report
salary slip
ii.
Death Claims
post-mortem report
death certificate
photographs
239
burial certificate
police report
letter of employment
Motor Insurance
i.
police report
iii.
adjusters report on
recommendation of cost of
repairs
adjusters report on
circumstances of accident and
other relevant details for fatal or
serious injuries
iv.
photographs of damage
police report
satisfaction note
ii.
keys
240
v.
adjusters recommendation
based on report forwarded by
third party
knock-for-knock confirmation
and approval (where applicable)
police report
adjusters report
18.3.
CLAIMS SETTLEMENT
repair, or
replacement,or
reinstatement.
to
241
18.6. AVERAGE
Amount of Loss
2.
3.
4.
244
18.8. DISPUTES
245
18.8.3. Arbitration
negotiation,
litigation,
arbitration, or
mediation.
18.8.4. Mediation
18.8.1. Negotiation
18.8.2. Litigation
246
18.9.
POST-SETTLEMENT ACTION
18.9.1.
or
18.9.3.
Termination Of Policy
A policy is automatically terminated when an
insurer has paid:
247
2.
3.
a.
b.
c.
d.
a.
b.
c.
d.
a solicitor.
the agent.
the adjuster.
the underwriter.
Under a motor policy, the insurer can repudiate liability for a third party property
damage claim if
a.
b.
c.
d.
5.
Arbitration is concerned with dispute between the claimant and the insurer over
4.
a.
b.
c.
d.
248
7.
a.
b.
c.
d.
8.
a.
b.
c.
d.
I.
II.
III.
IV.
a.
b.
c.
d.
9.
a.
b.
c.
d.
249
The Motordata Research Consortium Sdn Bhd has enhanced the way motor claims
are settled in the following ways, EXCEPT
a.
b.
c.
d.
250
Overview
19.1. Fire Policy
19.2. Private Motor Car Policy
OVERVIEW
19.1.
FIRE POLICY
Heading
This consists of the insurance companys name
and the address of its registered office.
Recital Clause
The wording in the recital clause is not prescribed
by the tariff and may state the following:
1.
2.
3.
251
states,
among
others,
the
property insured; or
3.
5.
252
manuscripts,
plans,
drawings,
design,
patterns,
models
and
moulds;
securities,
obligations,
documents
of any kind, stamps, money, cheques,
business books including books of ac
counts, and computer systems records;
6.
a.
b.
explosives;
c.
d.
8.
The
following
property
is
not
covered unless expressly stated in
the policy:
bullion,
unset
precious
stones;
a.
b.
253
10.
12.
notify
the
company
immediately;
254
14.
-
-
-
16.
255
22.
23.
Schedule
This section contains the following particulars:
19.
20.
21.
a.
b.
c.
d.
e.
f.
g.
256
Attestation
This has the effect of binding the insurer.
b.
c.
d.
a.
b.
c.
d.
malicious act;
e.
i.
ii.
burglary,
257
pay cash,
ii.
repair,
iii.
replace, or
iv.
reinstate.
Exceptions to Section A
The insurer will not be liable for:
a.
b.
c.
Date of registration
Year of manufacture
Year of manufacture
258
e.
f.
Section B
Liability to Third Parties
1.
a.
i.
ii.
iii.
b.
i.
ii.
a.
b.
the
personal
representative
(if
either the insured or any authorized
driver is deceased).
Exceptions to Section B
The insurer shall not be liable to pay for:
a.
b.
259
No Claim Discount
This section states the percentage discount
granted on renewal where no claim is made
under the policy. The discount ranges from 25%
to 55%.
Avoidance of Certain Terms and Right of
Recovery
The Road Transport Act 1987 makes it
compulsory for any motorist to insure against
liability in respect of death or bodily injury to
third parties caused by or arising out of the use
of a motor vehicle. If the insured has committed
or omitted something which invalidates the
policy or claim, the insurer will still be liable for
the liability spelt out in the Act. When the insurer
makes a payment under such circumstances,
he can recover the amount from the insured.
from
flood,
typhoon,
hurricane,
storm, tempest, volcanic eruption,
earthquake, landslide, landslip or
other convulsion of nature.
b.
General Exclusions
a.
is used
in
the
c.
d.
Nuclear risks.
260
Duty of Disclosure
a.
b.
c.
d.
e.
f.
g.
h.
i.
1.
Cancellation
a.
b.
c.
2.
Other Insurance
Arbitration Clause
Other Matters
b.
c.
d.
Schedule
The insured must give the insurer a written
notice if there is other insurance covering the
same vehicle. If there is subsisting insurance,
the insurer is liable only for his rateable
proportion of any loss, damage, compensation
costs or expenses.
3.
Subrogation
name of insurer;
2.
3.
period of insurance;
4.
262
5.
cover granted;
6.
excess applicable;
7.
geographical area;
8.
legislation;
9.
authorised driver;
10.
limitations as to use;
11.
premium; and
12.
Attestation
registration mark,
make,
type of body,
engine number,
chassis number,
cubic capacity,
year of manufacture,
263
Exclusions are inserted into policies for the following reasons, EXCEPT
2.
a.
b.
c.
d.
A claim notification from the insured under a fire policy must be done
a.
b.
c.
d.
3.
immediately.
immediately, and in writing.
immediately,and followed by a notice in writing within 15 days.
immediately, followed by a written notice with all relevant details of the
claim.
The following persons are covered under a motor third party policy:
4.
a.
b.
c.
d.
any drivers.
the insured.
the insured and any authorized drivers.
none of the above.
The wording in the recital clause of a fire policy is not prescribed by the tariff and
may state the following, EXCEPT
a.
b.
c.
d.
264
Failure to notify the company of any other insurance effected on the same property
before or after effecting the policy will allow the insurer to
6.
7.
a.
b.
c.
d.
policy jacket.
policy schedule.
exclusions.
conditions.
The item that is not covered under the Preamble of a motor policy is
8.
a.
b.
c.
d.
9.
a.
b.
c.
d.
a.
b.
c.
d.
265
266
Overview
20.1. The Essentials of the
Inter-Company Agreement
on General Insurance Business
20.2. Commission
20.3. Cash-Before-Cover
20.4. Guidelines on Claims Settlement
Practices
OVERVIEW
267
b.
c.
d.
e.
f.
committed or to be committed by
any registered agents or any other
person or persons;
g.
h.
268
Restriction on Payments
Scope of Agency
Information
maintain
proper
and
accurate
accounts
showing
the
amounts
of commission paid by them to their
agents;
269
1.
2.
1.
2.
General Regulations
3.
3.
4.
4.
5.
6.
7.
8.
Endorsements
9.
Warranties
b.
c.
270
Hire Purchase
Change of or Additional Vehicles
Transfer of Interest in a Policy and
Transfer Fee
Cancellation of Policies (inclusive of
Extra Benefits)
No Rebate or Discounting
No member of PIAM, agent or broker shall give
to any insured or policyholder, any discount or
rebate whatsoever on any commission paid
or payable or on part or parts thereof under a
motor insurance policy.
Cover Notes
Certificate of Insurance - Original Issue,
Return, Cancellation or Duplicates
No Claim Discount
Fleet Ratings
Joint Policies (Policies Issued in Joint
Names)
Vehicles Laid Up in a Public or Private
Garage
Strike, Riot and Civil Commotion
Minimum Premium
Warranty on Overloading of Vehicle
Notification of losses
Submission of statistics
Floating policies.
Basis of settlement
Special perils
Temporary removal
Removal of debris
Architects, surveyors and consulting
engineers fees
Other contents
Capital additions
and
trade/occupation
Mortgagees/ Chargees
20.1.4. General Insurance Agents
Registration Regulations (GIARR)
Term of insurance
Reinstatement
Declaration policies
Building in the course of construction
Stamp duties
Rates and special rating
Electrical plant and installations
Short period insurance
Long-term insurances and agreements
Cancellation
i.
ii.
272
iv.
v.
vi.
vii.
viii.
The
compliance
with
the
enforcement of the Cash-BeforeCover (CBC) Regulations) issued by
Bank Negara Malaysia in relation to
any agent, including any requirement
by Bank Negara Malaysia for the
suspension or cancellation of a
Certificate or Registration issued to
an agent;
ix.
x.
273
xi.
xii.
b.
c.
the
Minimum
Maintenance
Requirement shall apply to all
agents
registered
or
whose
Certificate
of
Registration
is
renewed
after
the
amendments
to GIARR to incorporate the Minimum
Maintenance Requirement;
d.
274
a.
b.
c.
d.
e.
f.
xiv.
a.
to to his
into a
by the
principal,
collected
275
aa.
bb.
cash-before-cover
motor
policies,
all premiums must be collected in
full
before the commencement of
the assumption of risk and remitted
to his principal within seven (7)
working days from the date of
collection or inception of the policy,
whichever is earlier;
cc.
b.2.
cash-before-cover
for
individual
personal accident and individual
travel
insurance,
all
premiums
must be collected in full before the
commencement of the assumption
of risk and remitted to his principal
within fifteen (15) calendar days
from the date of receipt of the
premium or inception of the policy,
whichever is earlier;
aa.
bb.
monitor
compliance
with
CBC
Requirements by their agents on a
quarterly basis (Reporting Quarters)
in respect of each period of two (2)
calendar years (Period). The first
of such two (2) calendar year periods
shall commence from 1 July 2005
and expire on 31 December 2006.
The monitoring of compliance with CBC
Requirements shall start afresh for each
Period;
cc.
dd.
ee.
ff.
276
aa.
bb.
b.4.
The
Board
shall
notify
and
require the principal or all the other
principals of the agent who has
committed the Suspension Event to
effect
the
Suspension
within
fourteen (14) days from the date of
issue of the notification by the Board.
b.5.
b.6.
b.7.
b.8.
xivi.
Effective
1
January
2005,
all
practitioners in the general insurance
agency force must comply with the
Guidelines on Continuing Professional
Development
(CPD)
Programme.
The objective of the CPD Programme is
to raise the standard of competency and
professionalism of the general insurance
agency force. The CPD will serve as a
guide as to what training programme the
agency force should pursue in order to
stay updated and continuously upgraded,
keeping the agency force abreast of the
latest development and demands of the
financial services industry.
277
iv.
Personal Development
v.
General Knowledge
Technical Training
60% (12 hours)
ii.
- minimum of
programmes
Technical Subjects
i.
Property/Engineering
ii.
Liability
iii.
Marine
iv.
Healthcare/Medical
v.
Miscellaneous
vi.
Motor
Non-Technical Subjects
i.
ii.
Computer Literacy
iii.
People Management
are
Seminars/Congresses and
Conferences
ii.
iii.
iv.
v.
Technical
Courses
provided
by
relevant
institutions,
e.g.
The
Inland Revenue Board, Actuarial
Society, MIA, ACCA, ICMA, MICPA,
etc.
vi.
278
279
Section 4
Compliance
The individual insurers shall be responsible to
monitor the compliance with, to keep track of and
to record all CPD requirements of their agents,
and to submit them annually in a prescribed
form to the PIAM Agency Board.
First
time
offence:
Letter
of
Warning to be issued to the agent
by the insurer.
a.
The
following
general
sales
principles are to be abided by an
intermediary :-
It is to be an overriding obligation
of an intermediary at all times to
conduct business with the utmost
good faith and integrity.
Penalties
i.
where
appropriate,
make
prior
appointment to call. Unsolicited or
unarranged calls shall be made
280
ii.
identify himself;
iii.
iii.
iv.
v.
v.
ii.
i.
ii.
iii.
iv.
if
necessary,
obtain
specialist
advice from the insurance company
in relation to ii) and iii) above; and
v.
not
to
impose
any
additional
charges to those of the premiums
required by the insurance company
without disclosing the amount and
purpose of such charges.
281
take
that
are
by
-
d.
keep
proper
accounts
of
all
financial
transactions
with
his
prospective
policyholders,
which
involve transmission of money in
respect of insurance;
e.
g.
inform
the
insurance
company
without delay (i.e. within three working
days);
282
pass
the
information
received
from
the
policyholder
to
the
insurance company without delay.
ii.
20.2. COMMISSION
20.3. CASH-BEFORE-COVER
The Guidelines to Control Operating Costs
of General Insurance Business issued by
BNM, revised on 31 December 1993, provide
amongst other matters for the maximum
gross commissions and agency-related
expenses for the following classes of insurance
business written within Malaysia to be limited
to the following percentages of gross direct
premiums:
283
Claims procedures
Notification of claims
Verification of facts
Assessment of claims
Settlement
Payment of claims
284
iv.
Subrogation agreements
v.
Knock-for-Knock Agreement
Excess clause
Settlement
ii.
Loss of use
iii.
Theft claims
Notification
Notification of claim
Settlement
Investigation of claim
285
2.
a.
b.
c.
d.
4.
3.
a.
b.
c.
d.
286
I II and III.
II, III and IV.
I, III and IV.
All of the above.
6.
7.
a.
b.
c.
d.
Members of PIAM shall NOT permit or authorize their agents to do the following,
EXCEPT
8.
a.
b.
c.
d.
a.
b.
c.
d.
Insurers or their agents shall not resume cover unless premium is collected.
Insurers or their agents can resume cover once the promise to pay is made
by proposer.
If premium of a commercial vehicle exceeds RM5,000, risk may be assumed
once 30% of premium is paid.
Insurance agents receiving payment of premium for a motor policy shall pay
the amount into the insurers account within 7 working days from date of
assumption of risk.
287
Persatuan Insurans Am Malaysia directs the way that insurers do their business by
implementing guidelines, agreements and manuals, which include the following,
EXCEPT the
10.
a.
b.
c.
d.
They must keep a complete and up-to-date record of all their agents,
including their corporate agents the directors, shareholders and corporate
nominees.
They must maintain proper and accurate accounts showing the amounts of
commission paid by them to their agents.
They must provide the Board with any information concerning any of their
agents as and when requested.
They may conceal information about CBC breaches by agent to PIAM.
288
Overview
21.1. Introduction
21.2. Characteristics of Life Insurance
Products
21.3. Basic Principles of Insurance as
Applied to Life Insurance
21.4. Risks Covered By Life Insurance
Policies
OVERVIEW
21.1. INTRODUCTION
289
mortality
expenses
tax
INSURABLE INTEREST
Existence of insurable interest is a prerequisite
for a life insurance contract. To have an insurable
interest, the purchaser of a life insurance policy
must stand to suffer a financial loss on the death
of the person on whose life the life insurance
policy has been bought.
To elaborate the above, we have the following
situations where insurable interest exists:-
TERMINATION OF CONTRACT
PAYMENT OF A CLAIM
WITH
291
Insurable Interest,
Indemnity,
Subrogation,
Contribution, and
Proximate Cause.
Premature Death
Old Age
293
1.
Which section of the Insurance Act 1996 elaborates the principle of insurable
interest?
2.
a.
b.
c.
d.
The earliest life insurance contract was found in England in 1583 on the life of
a.
b.
c.
d.
3.
5.
Edmund Halley.
William Gybbon.
William Cybban.
William Halley.
4.
premature death.
financial guarantees.
permanent disability.
uberrima fides (utmost good faith).
The basic assumptions that are used in the life insurance premium rate calculations
are
a.
b.
c.
d.
294
7.
8.
Life insurance policies which were issued on a short-term basis in the past had
many disadvantages. What was/were they?
a.
b.
c.
d.
10.
retirement benefit.
premature death.
financial loss.
permanent disability.
9.
insurable interest.
indemnity.
subrogation.
b and c.
295
Overview
22.1. Introduction
22.2. Types of Life Insurance Policies
22.3. Description of Life Insurance
Contracts
22.4. Types of Family Takaful Business
OVERVIEW
Endowment Policies
Annuities
Investment-Linked Policies
Miscellaneous Policies
22.1. INTRODUCTION
ordinary;
group insurance.
Non-Participating Contracts
Non-participating contracts are mainly
for protection purposes. The main
benefit, i.e. sum assured, is generally
guaranteed. Non-participating contracts
are often simple and easily compared;
this means competition on premium
rates is keen.
Participating Contracts
Participating contracts are mainly used
for saving. The benefit is generally
made up of guaranteed benefits such as
sum assured and cash value, projected
bonuses and a projected final bonus.
Thus, the final benefit payable depends
to a great extent on the investment policy
and its success or otherwise, pursued
by the insurer. In the following sections,
we shall look with greater detail at the
characteristics of the main products
offered by insurers in Malaysia.
297
298
299
Options
Other Features
Premiums
Benefits
Guarantees
subjected
to
strict
300
Under the terms of the limited payment wholelife policy, the sum assured is payable only
upon death, but premiums are payable for a
limited number of years only, after which the
policy becomes paid-up for its full amount. The
limitation may be expressed in terms of the
number of annual premiums or the age up to
which the annual premiums must be paid. The
objective is to appeal to the assured with the idea
of paying up the premiums during his working
lifetime. It naturally follows that the annual level
premium under this plan must be larger than
that payable when premium payment continues
throughout the life of the policy. The purpose
of the plan is to have the policyholder pay an
extra amount annually during the fixed premium
paying period so that after the expiry of this
period, the policy may remain in force and be
carried to successful completion without further
financial obligation on the part of the assured.
Owing to the higher premium, the limited
payment plan may not be convenient to those
whose income is small and who are in need
of a high insurance protection rather than the
accumulation of a fund with the company.
However, this disadvantage of higher premium
is offset by the availability of a large savings or
investment element. The greater cash value
Premiums
Benefits
Guarantees
Options
Uses
302
Policy
Benefits
Usually
a
minimum
guaranteed
surrender value available, typically after
three years.
Minimum guaranteed paid-up values
available.
Guarantees
Options
304
Deferred Annuity
Reversionary Annuity
Annuity Certain
305
Benefits
Guarantees
Options
Features
Benefits
waived
during
306
Paralysis/paraplegia
Multiple sclerosis,
Blindness
Loss of hearing/deafness
Surgery to aorta
Loss of speech
Options
Other Features
for
different
Major burns
Coma
Terminal illness
Parkinsons disease
Heart attack
Stroke
Aplastic anaemia
Cancer
Muscular dystrophy
Kidney failure
Encephalitis
307
Poliomyelitis
Brain surgery
Bacterial meningitis
Appallic syndrome
expense-related,
investments-related.
308
309
Evidence of Insurability
If individual amounts of insurance are less than
the Free Cover Limit, no medical underwriting
is necessary. Free Cover is the amount of
insurance that can be applied for and for which
insurance cover is given by the insurer without
medical evidence. If an employee does not
join the plan within 31 days from the date of
eligibility, evidence of insurability satisfactory to
the insurer must be furnished by the employee
at his own expense when he decides to join
the scheme at a later date. The free cover limit
is determined each year and is revised when
necessary.
Amount of Insurance
Minimum Requirements
The minimum number of employees to
be covered must be 10, although special
consideration may be possible in certain cases
where the number is between five and 10.
If the employer pays all the cost or, in other
words, the plan is non-contributory, 100% of
all eligible employees must join the plan. If the
employer and employees share the cost (or the
plan is contributory), at least 75% of all eligible
employees must join the plan.
Eligibility
All full-time employees between the ages of
16 and 55 and actively at work on the effective
date of the plan are eligible to join the plan.
Sometimes the maximum age for joining the
plan may be extended to 59. Those who are not
actively at work on the effective date shall be
eligible to join the plan on the first day of the
month after their return to active work.
New employees will be eligible to join the plan
on the first day of the month following the
completion of a period called the waiting period.
The employer will decide on the length of the
waiting period.
Group endowment.
311
Class 2
Persons engaged in wholesale or retail trade,
sales, marketing or work of a supervisory
nature and whose duties involve travelling in
connection with their profession or business
purposes but not involving manual labour or the
use of tools and machinery or exposure to any
special hazard.
Class 3
Persons either occasionally or generally
engaged in manual work not of a particularly
hazardous nature but involving the use of tools
and machinery.
Common exclusions for personal accident
covers are:
a.
b.
Suicide;
self-injury;
diseases,
parasitic, bacterial or viral infection;
pre-existing
physical
or
mental
defect
or
infirmity;
pregnancy;
childbirth;
miscarriage
or
any
complications of pregnancy; HIV
and or related HIV-related illness
including AIDS; provoked murder or
assault;
drugs; and alcoholism.
c.
Professional
or
semi-professional
sports, flying as a pilot or air crew
member
of
any
aircraft,
mountaineering,
skiing,
polo,
sledging, racing of any kind or
steeple chasing, boxing, wrestling,
parachuting,
hang-gliding,
skydiving, sea-angling , boating or
yachting, motor sports rallies or
competitions,
speed
testing,
reliability trials or racing of any
kind other than on foot.
d.
Disability Benefits
b.
Sickness Benefits
Hospitalization Benefit
This supplementary benefit provides the insured
some protection from financial loss arising from
confinement to a hospital due to illness or injury
and is usually available to those who are free
from any physical defect or infirmity at the time
when the insurance is effected.
Some offices limit the payment of such benefit
to the actual expenses incurred, i.e. on a
reimbursement basis, while others offer this
benefit at daily or weekly rates, subject to certain
maximum limits which depend on the age of the
life assured and the sum assured of the basic
life policy.
313
b.
Childrens Insurances
ii.
a.
2.
Personal Accident
3.
Hospitalization Benefit
1.
2.
3.
4.
a.
ten years,
b.
fifteen years,
c.
twenty years,
d.
twenty-five years,
e.
thirty years,
f.
thirty-five years.
2.
3.
4.
5.
316
Table 1
Amount of Tabarru for Family Takaful Plan
(per RM1,000 Family Takaful Death Benefit)Term in Years
317
2.
death benefit
maturity benefit
surrender value
318
An option that allows the insured of a term assurance to convert the policy into permanent
assurance like whole life or endowment assurance without evidence of insurability but subject
only to proper adjustment in the premium charged is known as
a.
b.
c.
d.
2.
3.
4.
Payment of the sum assured is only in the event of death, there is no surrender or maturity
value and it provides cheap guaranteed protection.
Payment of the sum assured is at the end of the said term if the life assured is living,
surrender or maturity value is applicable and premiums are reviewable.
Payment of the sum assured is only in the event of death, the suicide exclusion is
uncommon and premiums are reviewable.
Payment of the sum assured is at the end of the said term if the life assured is living,
paid-up value is applicable and premiums are not normally reviewable.
An agreement under which the life office, in return for the payment of a certain sum of
money known as the purchase price, makes a series of payment at regular intervals from a
fixed date until the death of the annuitant or at some other specified time is known as
a.
b.
c.
d.
a superannuation scheme.
an annuity.
a family income benefit.
an endowment insurance.
319
Under the group insurance scheme the parties to the contract are the ______
a.
b.
c.
d.
6.
The type of policies that provides for an income during periods of sickness or
disability on a long-term basis are known as __________
a.
b.
c.
d.
7.
An education policy must satisfy the following conditions so as to eligible for the tax
relief, EXCEPT
a.
b.
c.
d.
9.
8.
The coverage provided by the group insurance department of life insurer does not
include the following;
a.
b.
c.
d.
320
The maximum amount allowed as basic insurance premium for protection under the
investment-linked policy is limited to _________ a year for each policyholder.
a.
b.
c.
d.
RM 4,000.
RM 5,000.
RM 6,000.
RM 7,000.
321
Overview
23.1. Definition of Life Policy
23.2. Privileges and Conditions
23.3. Policy Transactions
23.4. Policy Alterations
OVERVIEW
Definition of Policy
Policy Transactions
Policy Alterations
322
ii.
Those
limiting
the
scope
of
assurance.
These
are
called
restrictive conditions and generally
involve those risks which are not
taken into account in the calculation
of premium rates;
iii.
Days of Grace
Thirty days (or one calendar month) are allowed
as days of grace for the payment of the yearly,
half yearly, quarterly and monthly premiums.
The cover under the policy continues during the
days of grace for the full sum assured, but if
the renewal premium is not paid within the days
of grace, the policy ceases to have any further
cover, subject to any non-forfeiture provisions,
if applicable.
Surrender Value
Surrender value is the value which attaches to
a policy of life insurance after premiums have
been paid for a certain minimum number of
years.
Non-Forfeiture Conditions
The non-forfeiture conditions constitute a very
valuable privilege to the assured who overlooks
the payment of the premium or is temporarily
unable to meet it.
The non-forfeiture provision comes into play
only after the policy has acquired a cash value.
It is the cash value which is used to provide the
non-forfeiture benefit.
Section 156 of the Insurance Act 1996 provides
that where a life policy has been in force for three
years or more, it shall not lapse or be forfeited
by reason of non-payment of premiums but shall
have effect subject to such modification as to
the period for which the policy is to be in force,
or of the benefits receivable under it, or both.
Although the three years period is imposed by
law, the Act does give insurers the option to
reduce the period the policy has to be in force
to less than three years, as this would benefit
the policyowner more.
The following plans are generally in use as nonforfeiture provisions:
Paid-Up Policy
324
325
Suicide Clause
Admission of Age
Misrepresentation of Age
If the age of the life assured is not admitted at
entry, proof of age will be required before any
payment can be made by a company under the
policy.
326
23.3.
POLICY TRANSACTIONS
DUPLICATE POLICY
When a policy document is lost, a replacement
policy may be issued by the life insurance
company. The insurer would normally require
from the insured, amongst other things, the
following before issuing the replacement
policy:i.
a letter of request;
ii.
327
change in beneficiary;
329
2.
The period after the due date, which allows the policyholders of an ordinary life
policy to pay premium without any forfeiture or penalty is known as the
a.
b.
c.
d.
3.
an extended policy.
a paid-up policy.
a term policy.
a fees policy.
5.
days of privileges.
days of grace.
days of non-forfeiture.
days of renewal.
A policy under which the surrender value is used as a single premium to provide for
an assurance on the original terms, but for a reduced sum assured is known as
a.
b.
c.
d.
4.
a trust policy.
a CLA Section 23 policy.
an assignment.
a free policy.
330
Which of the following documents are generally acceptable to the insurer as proof
of age of the life assured?
a.
b.
c.
d.
7.
8. In general, the loans are granted up to _______ of the acquired cash value of a life
policy.
a.
b.
c.
d.
9.
85 %.
90 %.
92 %.
95 %.
What is the document most commonly used as an evidence of proof of age and is
acceptable to life insurers?
a.
b.
c.
d.
identity card.
international passport.
school leaving certificate.
birth certificate.
10. Which section of the Insurance Act 1996 states that an insurer shall not dispute
liability by reason only of a misstatement of the age of the life assured?
a.
b.
c.
d.
Overview
24.1. Introduction
24.2. Risk Management
24.3. New Business Premium
Accounting
24.4. Life Insurance and Income Tax
OVERVIEW
Premium Accounting
24.1. INTRODUCTION
24.2.
RISK MANAGEMENT
Quantifying risk;
Costing risk;
The major factors which influence mortality are:age, sex, occupation, social status, ethnicity,
geographical location, marital status, personal
habits, avocation, and foreign residence.
We shall provide a brief discussion of each of
the factors.
Age
333
Sex
Female mortality
mortality
lower
than
male
Occupation
It is obvious that an executive and an oilrig worker are exposed to different levels of
occupational risk and thus it becomes essential
to categorize insured lives according to their
occupations. This will enable the office to
charge a premium commensurate with the risk
undertaken.
As a simplified example, an office could adopt
the following categories of employment:Managerial, Executive, Clerical and Manual,
and probably load its premiums for the Manual
334
Social Status
Ethnicity
Geographical Location
Marital Status
Avocation
Foreign Residence
Financial Underwriting
Medical Underwriting
form to
height,
history,
of the
Non-Medical Underwriting
336
d.
Objective of Selection
b.
c.
337
iii.
i.
Bonus Adjustment
Increasing Premium
338
b.
c.
by bankers order;
ii.
LOADING LETTER
iii.
METHODS OF PAYMENT
Premium payments of single premium policies,
and yearly and half-yearly payment policies
may be by
a.
PREMIUM RECEIPT
The insurer will issue an official receipt upon
receiving the premiums. An official receipt
will often bear the printed reproduction of
the signature of the Chief Executive or any
other authority with the counter-signature of
the cashier, etc. The official receipt provides
the policyholder with evidence of premium
payment.
POLICY REGISTER
It is a legal requirement in terms of section 47
of the Insurance Act 1996 that every insurer
shall maintain an up-to-date register of all
policies issued and none of these policies shall
be removed from this register as long as the
insurer is still liable for these policies. The policy
register serves as an official record of policies
issued by the insurer.
The policy register could be kept in either a card
form, or ledger sheet form or even in computer
printout form, since the Insurance Act has not
indicated any specific form for this purpose.
339
b.
c.
Taxable/Assessable Income
salary;
leave pay;
commissions;
bonuses/dividends;
gratuity;
Allowable Deductions
For businesses and those who are selfemployed, the allowable deductions are
generally those items of expenses incurred
in the course of running the business. Thus,
for an employer contributing to a group life
insurance, the premiums towards this policy will
be considered as an allowable deduction.
For those gainfully employed, the allowable
deductions are generally:-
personal relief;
Chargeable Income
341
Example:
The following example illustrates the tax benefits of purchasing an approved life insurance policy
for an individual whose personal details are as below:
Age
30 years
Annual Income
RM 42,000
Dependents
Approved Contributions
i)
ii)
342
343
a.
b.
c.
d.
2.
a.
b.
c.
d.
3.
Which of the following methods is not used by insurers when dealing with
sub-standard lives?
a.
b.
c.
d.
4.
a.
b.
c.
d.
5.
In respect of income tax for gainfully employed individuals, which are not
allowable deductions?
a.
b.
c.
d.
age.
sex.
friends.
avocation.
contributions to EPF.
life insurance premium.
dependent childrens support.
personal medical bills.
344
a.
b.
c.
d.
7.
What is the allowable deduction for savings under the National Education
Saving Scheme (SSPN)?
a.
b.
c.
d.
8.
a.
b.
c.
d.
9.
For married couples under combined assessment in the basis year, the total
tax relief allowable for life insurance premiums and EPF contribution is
a.
b.
c.
d.
10.
a.
b.
c.
d.
RM 2,000.
RM 3,000.
RM 4,000.
RM 5,000.
leave pay.
commissions.
gratuity.
all of the above.
RM 5,000.
RM 6,000.
RM 8,000.
RM 12,000.
3 months.
4 months.
6 months.
8 months.
Overview
25.1. Quantifying the Risk
25.2. Costing the Risk
25.3. Calculation of Premium Rates
25.4. Other Considerations
25.5. The Adjustments to Gross
Premiums in the Rate Book
25.6. Numerical Rating System
Conclusion
OVERVIEW
Quantifying Risk
Costing Risk
Other Considerations
346
347
348
349
25.2.1. Mortality
of
ignoring
investment
25.2.3. Expenses
350
Initial expenses
advertising costs;
Renewal expenses
25.2.5. Other Factors
renewal commissions;
financing costs;
reinsurance costs;
Termination expenses
litigation expenses.
351
Level Premiums
Most of the individual insurance policies sold
nowadays provide for the payment of a level
amount of premium over a predetermined term.
The contracts issued now are usually long-term
contracts but the premium remains constant
throughout. However, the basic principle of the
Risk Premium varying with age is behind the
concept of level premium.
Let us assume that a level premium life
insurance policy is to be given to a person
aged 37 years for a period of five years and
the sum assured amount is RM5,000. With the
Risk Premium method, the insurance company,
using the mortality table (Table 25.1.), would
have charged the following varying amounts of
basic premium at the beginning of each of the
five years.
25.4. OTHER CONSIDERATIONS
Adequate:
Competitive:
Equitable:
Consistent:
Profitable:
Instalment Premiums
True Premiums
355
357
CONCLUSION
358
a.
b.
c.
d.
2.
a.
b.
c.
d.
3.
advertising costs.
medical examination expenses.
policy issue expenses.
expenses of servicing the policy.
a.
b.
c.
d.
4.
a.
b.
c.
d.
5.
a.
b.
c.
d.
net premiums.
loading for expenses.
profit from the share market.
expenses for contingencies.
359
a.
b.
c.
d.
7.
a.
b.
c.
d.
8.
a.
b.
c.
d.
9.
adequate.
profitable.
competitive.
all of the above.
advertising costs.
medical examination test.
renewal commission.
litigation expenses.
True premium.
Instalment premium.
One- off premium.
Full premium.
initial expenses.
renewal expenses.
termination expenses.
profit share expenses.
a.
b.
c.
d.
Arthur H. Hunter .
Dr Decar H. Rudger.
William Gybbon.
a and b.
Overview
26.1. Introduction
26.2. Valuation of Liabilities
26.3. Valuation of Assets
26.4. Surplus
OVERVIEW
Valuation of Liabilities
Valuation of Assets
26.1. INTRODUCTION
361
OF
VALUATION
362
26.4. SURPLUS
Loans to policyholders;
Furniture, fittings, motor cars and
other office equipment.
Market Value
Cost Price
SOURCES OF SURPLUS
Book Value
Interest:
Mortality:
363
Expense:
Miscellaneous:
364
Cash Bonus
365
Interim Bonus
Guaranteed Bonus
366
a.
b.
c.
d.
2.
The investment that a life office has made from the premiums it has received
after meeting its outgoes in the form of claims and expenses is called
a.
b.
c.
d.
3.
What type of bonus is only paid on in-force policies, which result in claims
either by maturity or death?
a.
b.
c.
d.
4.
a.
b.
c.
d.
5.
Identify the main feature(s) of a life insurance policy which provides for a
guaranteed bonus each year.
a.
b.
c.
d.
book value.
surplus.
assets.
liability.
interim bonus.
terminal bonus.
cash bonus.
guaranteed bonus.
loans to policyholders.
motor cars and office equipment.
cash in hand.
guaranteed bonus.
367
a.
b.
c.
d.
7.
a.
b.
c.
d.
8.
a.
b.
c.
d.
9.
I.
II.
III.
Cost price.
Book price.
Market price.
a.
b.
c.
d.
I and II.
II and III.
I and III.
All of the above.
10.
The portion of the surplus that may be passed to the shareholders in the
form of dividends is in the region of __________ of the divisible surplus.
a.
b.
c.
d.
Jan 1 2008.
July 1 2008.
Jan 1 2009.
July 1 2009.
with-profit policy.
participating policy.
non-participating policy.
b and c.
10 % - 15 %.
10 % - 20 %.
10 % - 25 %.
15 % - 25 %.
Overview
27.1. Sources of Information for Risk
Assessment
27.2. The Proposal Form
27.3. The Medical Report/Special
Examinations
27.4. Policy Form and Its Structure
27.5. Endorsements
OVERVIEW
Proposal Form
Medical Report
Policy Form
Endorsements
personal particulars:-
1.
name in full;
2.
address;
3.
occupation or profession;
4.
5.
6.
details of insurance:-
1.
2.
term of policy;
3.
sum insured;
4.
participating or non-participating;
5.
additional benefits/riders;
6.
1.
2.
provision
of
full
particulars
of
intention as to flying other than
as a fare-paying passenger, or other
hazardous pursuits;
3.
provision
of
full
particulars
of
intention as to engaging in sporting
activities which involve additional
risk of death by accident.
1.
2.
3.
4.
5.
6.
i.
ii.
iii.
or
370
v.
vi.
rheumatism or arthritis
vii.
viii.
condition of the:
i.
heart,
ii.
lungs,
ix.
iii.
iv.
urine analysis.
declaration
that
the
above
statements are, to the best of his
knowledge, true and complete and
that he has not withheld any material
information;
2.
371
THE HEADING
27.4.
THE PREAMBLE
The preamble is the section which introduces
the parties to the contract and states that the
proposer has submitted an application for
insurance including statements concerning the
health of the life assured and that the assured
has paid the first premium and agrees to pay
subsequent premiums as they fall due.
THE OPERATIVE CLAUSE
The purpose of the operative clause is to state
the event(s) upon which the policy becomes
operative, i.e. when a claim is initiated.
Thus, it usually mentions that the insurance
company agrees to make payment of the sum
stated in the schedule (referred to as the Sum
Assured) upon the happening of the insured
event mentioned in the operative clause, to the
proper claimant or beneficiaries.
The insurer will usually require the claimant to
furnish proof of death to the insurers satisfaction
before they meet the claim.
The Heading
The Preamble
The Proviso
The Schedule
Attestation
THE SCHEDULE
THE PROVISO
Date of proposal;
27.5.
Types of insurance;
Date of maturity;
ATTESTATION
This refers to the final portion of the policy.
The policy is signed by certain officers of the
company authorized to do so.
CONDITIONS AND PRIVILEGES
The conditions and privileges of a life policy can
be divided into the following categories:
a.
b.
c.
ENDORSEMENTS
373
These give effect mainly to changes in the
types of insurance;
surrender of bonus.
374
a.
b.
c.
d.
2.
a.
b.
c.
d.
3.
No life policy after the expiry of two years from the date on which it was effected be
called in question by an insurer on the ground that there is a misrepresentation
made in the proposal for insurance, or in a medical report or in a document which
led to the issue of the policy. The above description is recited under the
a.
b.
c.
d.
4.
Name, age, sex, occupation and address of the life assured are contained in
a.
b.
c.
d.
operative clause.
suicide clause.
incontestability clause.
provisos.
the preamble.
the schedule.
the heading.
attestation.
375
This embodies the answers to the questions in the proposal form and the personal
statements as the basis of contract. It also subjects the policy to the conditions and
privileges printed in the policy document. What does this refer to?
a.
b.
c.
d.
6.
a.
b.
c.
d.
7.
a.
b.
c.
d.
8.
a.
b.
c.
d.
9.
the preamble.
the proviso.
the operative clause.
conditions and privileges.
suicide.
days of grace.
cash surrender.
revival of lapsed policies.
agents report.
proposal form.
medical report.
police report.
The agents report furnishes the agents impression about the life proposers
a.
b.
c.
d.
character.
financial status.
habits and appearance .
all of the above.
376
Which Section of the Insurance Act 1996 provides for the control by and
lodgement of proposal forms, policies and brochures of insurers with BNM?
a.
b.
c.
d.
Section 147.
Section 148.
Section 149.
Section 150.
377
Overview
28.1. Introduction
28.2. Death Claims
28.3. Maturity Claims
28.4. Total Permanent Disability
Claims
28.5. Claims Arising Under Personal
Accident,
Sickness
and
Permanent Health
Insurance
Policies
OVERVIEW
Death Claims
Maturity Claims
Claims
Arising
under
Personal
Accident, Sickness and Permanent
Health Insurance Policies
28.1. INTRODUCTION
378
28.2.
DEATH CLAIMS
28.2.1. Notification Of Death
a death certificate;
a coroners report;
a deed of assignment;
a probate of the will obtained from
a court of law;
a letter of administration issued by
a court of law;
for a policy effected under section
23 of the Civil Law Act, the money
would be paid to the trustees.
28.2.6. Interest On Claim Amount
28.3.
MATURITY CLAIMS
1.
proof of age;
2.
proof of survival;
3.
4.
1.
2.
2.
380
4.
certified
report.
true
copy
of
the
life
police
1.
Documents
required
for
total
permanent disability claim due to
natural causes or illness are:
medical certification to be completed
by the attending doctor after the
life assureds disability;
2.
381
382
a.
b.
c.
d.
2.
a.
b.
c.
d.
3.
Where a person has disappeared without trace for more than seven years,
the Courts may presume death in the light of inquiries made in likely
places of interested people who could be expected to have heard of him.
This refers to
4.
a.
b.
c.
d.
5.
Before paying the maturity claim under an endowment insurance, the life
office requires the following basic proofs, EXCEPT
a.
b.
c.
d.
a.
b.
c.
d.
medical certificate.
certificate of death.
coroners inquest.
Commissioner of Oaths.
a.
b.
c.
d.
7.
A claim can arise under any one of the following situations, EXCEPT
a.
b.
c.
d.
8.
What is the interest rate payable by the insurer on the claim amount if a claim upon
the death of the policyholder is not paid within 60 days of receipt of intimation of the
claim?
a.
b.
c.
d.
9.
The following documents are required for a total permanent disability claim due
to accidents, EXCEPT
a.
b.
c.
d.
10.
Which of the following is not required for settling maturity claim when
the policyholder is the life insured?
a.
b.
c.
d.
birth certificate.
baptism certificate.
passport.
all of the above.
4 % per annum.
5 % per annum.
6 % per annum.
8% per annum.
proof of age.
proof of survival.
death certificate.
policy document.
Overview
29.1. Calculation of Age
29.2. Using the Rate Book for Premium
Calculations
29.3. Interest Charges
29.4. Guaranteed Surrender Value
Calculations
OVERVIEW
Interest Charges
29.1.
CALCULATION OF AGE
Reference Date
(Date of submission of the
proposal)
Last Birthday
20 May 2005
21 March 2005
2005 -1965 = 40
1 January 2005
21 March 2004
2004 1965 = 39
31 December 2006
21 March 2006
2006 1965= 41
Reference Date
(Date of submission of the
proposal)
Nearest Birthday
20 May 2005
21 March 2005
2005 1965 = 40
1 January 2005
21 March 2005
2005 1965 = 40
31 December 2006
21 March 2007
2007 1965 = 42
386
2.
3.
4.
5.
6.
387
388
389
390
RM
Due 27 March 2005
Interest 650 x 6% x 1
Due 27 March 2006
29.3.
INTEREST CHARGES
Policy revival.
650.00
39.00
689.00
650.00
1339.00
77.69
1416.69
RM 100,000
Policy Type
Whole Life
Annual Premium
RM 650
Premium Payment
Dates
27 March
27 March 2004
Application for
Reinstatement
15 March 2007
Interest Charge
6% per annum
391
Among other factors, the premiums charged for life insurance policies usually
vary in relation to
a.
b.
c.
d.
2.
What is the age last birthday, if the life assured was born on 21 March 1965 and
the date of the proposal submitted was 1 January 1998?
a.
b.
c.
d.
3.
What are the outstanding premium charges for the following situation?
31 years old.
32 years old.
33 years old.
30 years old.
Sum Assured
Policy Type
Half-yearly premium
Premium Payment Dates
Last Premium Paid
Application for Reinstatement
Interest Charge
a.
b.
c.
d.
:
:
:
:
:
:
:
RM100,000
Whole life
RM600.00
1 April and 1 October
1 October 1993
1 July 1995
6% per annum
RM1,882.58.
RM1,889.86.
RM1,890.40.
RM1,908.93.
392
4.
The proposers particulars:
Sex
:
Date of Birth
:
Cover to commence
:
Policy Details :
Term
:
Sum Assured
:
Male
14 July 1970
31 December 1995
25-Year Endowment
RM30,000
RM1,035.00.
RM1,095.00.
RM1,140.00.
RM1,200.00.
5.
The proposers particulars:
Sex
:
Date of Birth
:
Cover to commence
:
Policy Details :
Term
:
Sum Assured
:
Female
30 March 1968
31 January 1996
25-Year Endowment
RM5,000
RM192.50.
RM197.50.
RM206.25.
RM218.00.
393
:
:
:
Male
3 November 1969
31 December 1995
:
:
25-Year Endowment
RM50,000
7.
Life insurance companies adopt the following bases for arriving at the age
of the proposer:,
a.
b.
c.
d.
8.
9.
RM1,850.00.
RM1,875.00.
RM2,000.00.
RM2,025.00.
sub-standard lives.
standard lives.
outstanding lives.
a and b.
394
outstanding premium.
policy loan.
service fees.
a and b.
395
Overview
30.1. Part I: Guidelines on the Code of
Conduct
30.2. Part II: Life Insurance Selling
30.3. Part III: Statement of Life
Insurance Practice
30.4. Sales Materials/Advertisements
OVERVIEW
We acquainted ourselves with the need for selfregulation in Chapter 5: Consumer Protection
and Statutory Regulations. In this chapter, we
shall look at the self-regulatory aspects of the life
insurance industry in Malaysia. The guidelines
on this subject matter are formulated by the Life
Insurance Association of Malaysia (LIAM) under
the following headings:
Coverage
Monitoring Devices
396
1.
2.
30.1.2. Coverage
3.
4.
5.
ii.
iii.
iv.
v.
vi.
ii.
iii.
iv.
vii.
ii.
iii.
30.2.
To
ensure
confidentiality
of
communication and transactions
between the life insurance company
and its policyholders and clients;
vi.
Introduction
398
30.2.1. Introduction
Home Service
Annuities
Pension Contracts
ii.
iii.
iv.
v.
i.
ii.
iii.
iv.
399
vi.
render continuous
policyholder.
2.
i.
ii.
service
to
the
b.
c.
d.
The
suicide
clause
and
the
incontestible clause (if any) begin
anew in a new policy being denied
by the company which would have
been paid under the policy which
was replaced.
1.
i.
ii.
iii.
400
3.
4.
ii.
ii.
401
Introduction
Claims
Proposal Forms
30.3.1. Introduction
30.3.2. Claims
i.
ii.
iii.
iv.
a.
i.
ii.
b.
402
a.
b.
The
policy
and
accompanying
documents must indicate whether
there are rights to a surrender value.
If the policy carries a right to a
surrender value then this right must
be indicated.
ii.
403
1.
The following are the principles underlying the guidelines on the Code of Ethics
and Conduct, EXCEPT
a.
b.
c.
d.
2.
The following statements are true pertaining to the Code of Conduct, EXCEPT
a.
b.
c.
d.
3.
4.
404
6.
Who are the parties involved in the case of a complaint from a policyholder
that an intermediary has acted in breach of the Code of Conduct?
I.
II.
III.
the policyholder.
the intermediary.
the life insurance company.
a.
b.
c.
d.
I and II only.
I and III only.
II and III only.
I, II and III only.
make it clear that the projected benefits shown in the sales illustrations are
not guaranteed.
make clear the different characteristics of each policy in making
comparisons.
treat all information supplied by the prospective policyholder as completely
confidential to himself and the life office which he represents.
all of the above.
405
CHAPTER 1
Answers : 1-D, 2-A, 3-D, 4-A, 5-D, 6-C, 7-C, 8-A, 9-A, 10-D
CHAPTER 2
Answers : 1-C, 2-D, 3-D, 4-D, 5-D, 6-D, 7-B, 8-B, 9-A, 10-D
CHAPTER 3
Answers : 1-A, 2-A, 3-C, 4-A, 5-D, 6-A, 7-A, 8-D, 9-C, 10-A
CHAPTER 4
Answers : 1-D, 2-B, 3-B, 4-D, 5-D, 6-D, 7-C, 8-B, 9-C, 10-D
CHAPTER 5
Answers : 1-B, 2-B, 3-A, 4-D, 5-D, 6-D, 7-B, 8-B, 9-C, 10-A
CHAPTER 6
Answers : 1-D, 2-D, 3-C, 4-D, 5-A, 6-A, 7-A, 8-B, 9-B, 10-D
CHAPTER 7
Answers : 1-D, 2-C, 3-D, 4-B, 5-C, 6-D, 7-B, 8-C, 9-D, 10-C
CHAPTER 8
Answers : 1-A, 2-D, 3-D, 4-D, 5-D, 6-A, 7-D, 8-A, 9-A, 10-D
CHAPTER 9
Answers : 1-B, 2-B, 3-B, 4-D, 5-B, 6-C, 7-C, 8-B, 9-C, 10-B
CHAPTER 10
Answers : 1-A, 2-D, 3-B, 4-C, 5-C, 6-D, 7-C, 8-D, 9-A, 10-A
CHAPTER 11
Answers : 1-B, 2-D, 3-A, 4-D, 5-B, 6-B, 7-C, 8-A, 9-B, 10-C, 11-A, 12-D
CHAPTER 12
Answers : 1-B, 2-A, 3-B, 4-D, 5-A, 6-B, 7-B, 8-B, 9-C, 10-D, 11-A, 12-C
CHAPTER 13
Answers : 1-C, 2-B, 3-A, 4-D, 5-C, 6-D, 7-A, 8-B, 9-C, 10-D, 11-A, 12-D
CHAPTER 14
Answers : 1-C, 2-B, 3-C, 4-D, 5-D, 6-A, 7-B, 8-D
CHAPTER 15
Answers : 1-D, 2-A, 3-B, 4-D, 5-D, 6-B, 7-C, 8-D, 9-A, 10-A
CHAPTER 16
Answers : 1-C, 2-D, 3-D, 4-D, 5-D, 6-D, 7-D, 8-B, 9-A, 10-A, 11-A
406
CHAPTER 17
Answers : 1-D, 2-D, 3-C, 4-B, 5-B, 6-A, 7-A, 8-B, 9-C, 10-D
CHAPTER 18
Answers : 1-C, 2-B, 3-C, 4-D, 5-A, 6-D, 7-B, 8-B, 9-B, 10-C
CHAPTER 19
Answers : 1-B, 2-D, 3-C, 4-A, 5-B, 6-B, 7-D, 8-D, 9-A, 10-C
CHAPTER 20
Answers : 1-D, 2-A, 3-C, 4-A, 5-A, 6-A, 7-D, 8-B, 9-B, 10-D
CHAPTER 21
Answers : 1-B, 2-B, 3-C, 4-D, 5-A, 6-A, 7-C, 8-D, 9-C, 10-D
CHAPTER 22
Answers : 1-B, 2-C, 3-A, 4-B, 5-C, 6-C, 7-C, 8-A, 9-C, 10-B
CHAPTER 23
Answers : 1-A, 2-B, 3-B, 4-C, 5-B, 6-D, 7-C, 8-C, 9-A, 10-C
CHAPTER 24
Answers : 1-C, 2-C, 3-D, 4-C, 5-D, 6-A, 7-B, 8-D, 9-B, 10-C
CHAPTER 25
Answers : 1-D, 2-D, 3-C, 4-C, 5-A, 6-D, 7-C, 8-A, 9-D, 10-D
CHAPTER 26
Answers : 1-D, 2-C, 3-B, 4-D, 5-A, 6-C, 7-C, 8-D, 9-D, 10-C
CHAPTER 27
Answers : 1-A, 2-D, 3-C, 4-B, 5-B, 6-A, 7-D, 8-D, 9-D, 10-C
CHAPTER 28
Answers : 1-B, 2-D, 3-B, 4-C, 5-B, 6-D, 7-A, 8-A, 9-D, 10-C
CHAPTER 29
Answers : 1-C, 2-B, 3-A, 4-C, 5-B, 6-B, 7-D, 8-B, 9-D, 10-D
CHAPTER 30
Answers : 1-C, 2-B, 3-C, 4-A, 5-D, 6-D
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