Insurance enables those who suffer a loss, or accident, to be compensated for the effects of their misfortune. The payments come from a fund of money contributed to by all the holders of individual insurance policies. In other words, individual risks are pooled and shared, with each policyholder making a contribution to the common fund.
How does Insurance Operate?
The contribution paid by a policyholder is known as the premium. The premiums are paid to the insurers who in turn accumulate the money into a fund from which claims are paid. Insurers are professional risk takers. They know the probability of different types of risk. Then they can calculate the premiums needed to create a fund large enough to cover any likely loss payments. Clearly only a proportion of the policyholders will require compensation from the fund at any one time.
For example, in car insurance a young person with a high-powered car, or a driver with a long history of accidents, will pay a higher premium than a mature and experienced driver with a modest saloon and a claim free record.
Insurance Types
There are 2 kinds of insurance, life insurance and general insurance. When you buy a life insurance policy you enter a long-term commitment where you agree to pay a fixed premium for a set number of years.
General insurance pays out IF something happens: a car has an accident, a house is burgled, a holiday is cancelled, someone is careless and damages another person’s property. Most life insurance policies pay out WHEN an event happens, when someone dies or when someone survives beyond a certain date.
What is Insurable Interest?
Insurable interest is a fundamental insurance principle. It means that the person wishing to take out the insurance must be legally entitled to insure the article, or event, or life. The happening of the event insured against must cause the policyholder financial loss. For example; Mr Smith would not be able to insure Mr Brown’s house because its destruction would not cause Mr Smith financial loss.
General Insurance PrinciplesOther
general insurance principles apply to the loss. A loss is an event which gives rise to a claim under a policy. Insurance can provide compensation only for the actual value of the property. It cannot cover the loss of sentimental value. A loss may involve financial aspects, the loss/damage or destruction of property, be caused by death or injury or liability (se below).
There must be a large number of similar risks so that the likelihood of a claim can be spread among other policyholders. It must be possible to calculate the chance of the loss so that a premium can be set which matches the risk. Loss is the monetary value paid in order to compensate an individual for the damage caused by an incident. The loss suffered by an individual can result from damage to property, injury or death
Liability of a person is the legal responsibility to compensate others for a loss. The person whose action or lack of action is the cause of a loss being suffered is legally responsible for the consequences of the incident.
Losses must not be deliberate and not inevitable. Clearly you could not buy fire insurance for a house that was already burning. Also, there are some risks, which have financial implications so vast that they can be dealt with only by the state. These risks (mainly those arising from war or nuclear / radioactive material) are not normally insurable. Insurance takes the risk away from peoples’ lives and businesses. It brings peace of mind to the policyholder. In return for paying the premiums the policyholder knows that if the unexpected occurs and a loss is suffered, financial compensation will be available from the fund of premiums.
An Insurance Contract
A Contract is an agreement between two parties. The 2 parties to an insurance contract are the insurance company (referred to as the First Party) and the policyholder / client (referred to as the Second Party).
An insurance contract, called the Policy, becomes valid once the two parties agree on:
WHAT is to be insured, (the car and the driver)
WHAT it will cost, (the premium to be paid), and
WHAT the period of insurance will be, that is, when does it commence, and what is the expiry date.
(Monthly or Annual Policy)
Motor InsuranceMost
people know something about motor insurance. This is because any vehicle driven on public roads must have a certain level of insurance. The Road Traffic Act ensures that drivers must meet liabilities they incur should they injure other people or cause damage in an accident. The other person, not the insurer or the insured, is known as the Third Party. The third party may be a pedestrian, a passenger in the car driven by the insured person, or the driver or passenger in another vehicle.
The injured Third Party claims compensation from the driver of the offending car and the driver relies on his insurers to pay the claim.
Indemnity Insurance
The insurance Dial Direct offer is known as indemnity insurance. This means that we undertake to restore the insured to the financial position he/she was in before the loss occurred. The car insurance policy comes into existence where the client agrees to pay a premium in return for indemnity insurance. The premium is determined by the RISK, which the client represents to the insurer, RISK in turn is determined by:
The likelihood that a loss will occur, based on the characteristics of the drivers, the car and the risk address.
The probable cost involved if a loss should happen.
Cover
The law says that drivers must have insurance against third party injury or damage claims whilst being driven on a road, (a road means a highway and any other road to which the public has access). The law also states that the insurer must give to the insured a Certificate of Motor Insurance. Most motor policies provide additional cover other than a simple certificate of insurance. At Dial Direct there are 3 levels of motor insurance policy on offer, each providing indemnity against certain specified perils.A peril is an event, which can cause a loss, e.g. accidents, theft, fire, malicious damage, storm. An Insurance Company clearly indicates the perils covered by its policies and those perils, which are specifically excluded.
Third PartyThird Party Cover, sometimes referred to as Third Party Liability Insurance, is insurance cover that you have against liability to another person.
As well as covering the insured to drive on public roads, this policy provides cover when the car is being driven on private property. It covers against third party claims and provides protection against other legal liabilities.
For example, passenger indemnity, covering the possibility that a passenger in a car may cause an accident perhaps by opening the door and knocking a cyclist over. It also provides cover for certain legal costs and emergency treatment expenses, for example, when an ambulance has been called to the scene of an accident.
Third Party Fire and TheftIn addition to the protection provided by third party insurance, this type of policy covers loss or damage to the insured’s own vehicle as a result of fire, theft or attempted theft. It offers the client limited own damage cover, that is protection for loss or damage suffered by a person to his own property or person.
ComprehensiveComprehensive policies offer the widest form of own damage cover available, although it cannot protect against every conceivable risk. In addition to the covers described above, comprehensive cover protects in other valuable ways. The most important of these is accidental damage cover. This means the policyholder can have their damaged vehicle repaired or replaced after it has been accidentally damaged, for example, when the client reverses the car into his garden wall accidentally.
The additional cover that is provided includes personal accident insurance, a small amount of medical expenses cover and cover for the loss of, or damage to, the personal effects in the car.
Underwriting
UNDERWRITING is the process whereby information is collected in order to establish the RISK. Once we know the risk the client represents the decision is made as to whether we ACCEPT or DECLINE that risk. If we decline the risk the process stops. If we accept the risk then we calculate the PREMIUM the client must pay to cover the risk.
We ask the questions on behalf of the panel members and the system checks the answers against the “Underwriting Criteria” to make the decisions mentioned above.
The assessment of risk (and hence the premium) for motor insurers is based around 3 main factors:
- The Risk Address - The Car- The Driver/s
It is the inalienable right of an insurance company to reject any risk, which it may find unacceptable.
There are 2 stages to the Dial Direct underwriting process:
The Quote PhaseDuring the Quote Phase the system will determine the premium and the acceptability of the risk. After collecting the underwriting information the client is provided with a quote. A quote is the offer from the insurer to the prospective client of cover, for a premium. The client may decline the offer.
The Underwriting PhaseDuring the Underwriting or Sale Phase, the system will determine the acceptability of the risk but the premium does not usually change. Underwriting occurs during the quote and sale of the policy, at any time an amendment is made, and, at the settlement of any claim on the policy.
Non-Disclosure
The insurance industry relies entirely on the information provided by the client to decide if the client presents an acceptable risk and to determine the correct premium that should be charged. If a client provides false or incomplete information about the risk, the actual risk may be different from the one that was agreed upon. In such a case the policy would be affected and at worst may leave the client uninsured. Information deliberately withheld in response to a direct question is referred to as a non-disclosure.
Claims
In the event of a loss the client will have the option to claim. A claim is the demand for compensation under the terms of an insurance policy, following an incident in which a loss occurred. An insurance company may decide to pay a claim, or, not to pay a claim.If a client has a level of cover that provides cover for the risk causing the loss, and has paid the premium, etc, the claim will be paid (or settled).
In the event of non-payment or a specifically excluded risk, the insurance company denies responsibility for indemnifying the client. This is usually referred to as a repudiation, where the claim has been repudiated.
Any payment of a claim, except for liability claims paid to a Third Party, will be subject to an excess. The excess is the uninsured portion of a loss, or the contribution the client is expected to pay towards the cost of settling the claim.
How does Insurance Operate?
The contribution paid by a policyholder is known as the premium. The premiums are paid to the insurers who in turn accumulate the money into a fund from which claims are paid. Insurers are professional risk takers. They know the probability of different types of risk. Then they can calculate the premiums needed to create a fund large enough to cover any likely loss payments. Clearly only a proportion of the policyholders will require compensation from the fund at any one time.
For example, in car insurance a young person with a high-powered car, or a driver with a long history of accidents, will pay a higher premium than a mature and experienced driver with a modest saloon and a claim free record.
Insurance Types
There are 2 kinds of insurance, life insurance and general insurance. When you buy a life insurance policy you enter a long-term commitment where you agree to pay a fixed premium for a set number of years.
General insurance pays out IF something happens: a car has an accident, a house is burgled, a holiday is cancelled, someone is careless and damages another person’s property. Most life insurance policies pay out WHEN an event happens, when someone dies or when someone survives beyond a certain date.
What is Insurable Interest?
Insurable interest is a fundamental insurance principle. It means that the person wishing to take out the insurance must be legally entitled to insure the article, or event, or life. The happening of the event insured against must cause the policyholder financial loss. For example; Mr Smith would not be able to insure Mr Brown’s house because its destruction would not cause Mr Smith financial loss.
General Insurance PrinciplesOther
general insurance principles apply to the loss. A loss is an event which gives rise to a claim under a policy. Insurance can provide compensation only for the actual value of the property. It cannot cover the loss of sentimental value. A loss may involve financial aspects, the loss/damage or destruction of property, be caused by death or injury or liability (se below).
There must be a large number of similar risks so that the likelihood of a claim can be spread among other policyholders. It must be possible to calculate the chance of the loss so that a premium can be set which matches the risk. Loss is the monetary value paid in order to compensate an individual for the damage caused by an incident. The loss suffered by an individual can result from damage to property, injury or death
Liability of a person is the legal responsibility to compensate others for a loss. The person whose action or lack of action is the cause of a loss being suffered is legally responsible for the consequences of the incident.
Losses must not be deliberate and not inevitable. Clearly you could not buy fire insurance for a house that was already burning. Also, there are some risks, which have financial implications so vast that they can be dealt with only by the state. These risks (mainly those arising from war or nuclear / radioactive material) are not normally insurable. Insurance takes the risk away from peoples’ lives and businesses. It brings peace of mind to the policyholder. In return for paying the premiums the policyholder knows that if the unexpected occurs and a loss is suffered, financial compensation will be available from the fund of premiums.
An Insurance Contract
A Contract is an agreement between two parties. The 2 parties to an insurance contract are the insurance company (referred to as the First Party) and the policyholder / client (referred to as the Second Party).
An insurance contract, called the Policy, becomes valid once the two parties agree on:
WHAT is to be insured, (the car and the driver)
WHAT it will cost, (the premium to be paid), and
WHAT the period of insurance will be, that is, when does it commence, and what is the expiry date.
(Monthly or Annual Policy)
Motor InsuranceMost
people know something about motor insurance. This is because any vehicle driven on public roads must have a certain level of insurance. The Road Traffic Act ensures that drivers must meet liabilities they incur should they injure other people or cause damage in an accident. The other person, not the insurer or the insured, is known as the Third Party. The third party may be a pedestrian, a passenger in the car driven by the insured person, or the driver or passenger in another vehicle.
The injured Third Party claims compensation from the driver of the offending car and the driver relies on his insurers to pay the claim.
Indemnity Insurance
The insurance Dial Direct offer is known as indemnity insurance. This means that we undertake to restore the insured to the financial position he/she was in before the loss occurred. The car insurance policy comes into existence where the client agrees to pay a premium in return for indemnity insurance. The premium is determined by the RISK, which the client represents to the insurer, RISK in turn is determined by:
The likelihood that a loss will occur, based on the characteristics of the drivers, the car and the risk address.
The probable cost involved if a loss should happen.
Cover
The law says that drivers must have insurance against third party injury or damage claims whilst being driven on a road, (a road means a highway and any other road to which the public has access). The law also states that the insurer must give to the insured a Certificate of Motor Insurance. Most motor policies provide additional cover other than a simple certificate of insurance. At Dial Direct there are 3 levels of motor insurance policy on offer, each providing indemnity against certain specified perils.A peril is an event, which can cause a loss, e.g. accidents, theft, fire, malicious damage, storm. An Insurance Company clearly indicates the perils covered by its policies and those perils, which are specifically excluded.
Third PartyThird Party Cover, sometimes referred to as Third Party Liability Insurance, is insurance cover that you have against liability to another person.
As well as covering the insured to drive on public roads, this policy provides cover when the car is being driven on private property. It covers against third party claims and provides protection against other legal liabilities.
For example, passenger indemnity, covering the possibility that a passenger in a car may cause an accident perhaps by opening the door and knocking a cyclist over. It also provides cover for certain legal costs and emergency treatment expenses, for example, when an ambulance has been called to the scene of an accident.
Third Party Fire and TheftIn addition to the protection provided by third party insurance, this type of policy covers loss or damage to the insured’s own vehicle as a result of fire, theft or attempted theft. It offers the client limited own damage cover, that is protection for loss or damage suffered by a person to his own property or person.
ComprehensiveComprehensive policies offer the widest form of own damage cover available, although it cannot protect against every conceivable risk. In addition to the covers described above, comprehensive cover protects in other valuable ways. The most important of these is accidental damage cover. This means the policyholder can have their damaged vehicle repaired or replaced after it has been accidentally damaged, for example, when the client reverses the car into his garden wall accidentally.
The additional cover that is provided includes personal accident insurance, a small amount of medical expenses cover and cover for the loss of, or damage to, the personal effects in the car.
Underwriting
UNDERWRITING is the process whereby information is collected in order to establish the RISK. Once we know the risk the client represents the decision is made as to whether we ACCEPT or DECLINE that risk. If we decline the risk the process stops. If we accept the risk then we calculate the PREMIUM the client must pay to cover the risk.
We ask the questions on behalf of the panel members and the system checks the answers against the “Underwriting Criteria” to make the decisions mentioned above.
The assessment of risk (and hence the premium) for motor insurers is based around 3 main factors:
- The Risk Address - The Car- The Driver/s
It is the inalienable right of an insurance company to reject any risk, which it may find unacceptable.
There are 2 stages to the Dial Direct underwriting process:
The Quote PhaseDuring the Quote Phase the system will determine the premium and the acceptability of the risk. After collecting the underwriting information the client is provided with a quote. A quote is the offer from the insurer to the prospective client of cover, for a premium. The client may decline the offer.
The Underwriting PhaseDuring the Underwriting or Sale Phase, the system will determine the acceptability of the risk but the premium does not usually change. Underwriting occurs during the quote and sale of the policy, at any time an amendment is made, and, at the settlement of any claim on the policy.
Non-Disclosure
The insurance industry relies entirely on the information provided by the client to decide if the client presents an acceptable risk and to determine the correct premium that should be charged. If a client provides false or incomplete information about the risk, the actual risk may be different from the one that was agreed upon. In such a case the policy would be affected and at worst may leave the client uninsured. Information deliberately withheld in response to a direct question is referred to as a non-disclosure.
Claims
In the event of a loss the client will have the option to claim. A claim is the demand for compensation under the terms of an insurance policy, following an incident in which a loss occurred. An insurance company may decide to pay a claim, or, not to pay a claim.If a client has a level of cover that provides cover for the risk causing the loss, and has paid the premium, etc, the claim will be paid (or settled).
In the event of non-payment or a specifically excluded risk, the insurance company denies responsibility for indemnifying the client. This is usually referred to as a repudiation, where the claim has been repudiated.
Any payment of a claim, except for liability claims paid to a Third Party, will be subject to an excess. The excess is the uninsured portion of a loss, or the contribution the client is expected to pay towards the cost of settling the claim.
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