The Nature of Insurance Insurance = replace the (certainty/uncertainty) of risks with (certainty/uncertainty).

Concept of risk transfer: Insurance = a device to transfer the risk from ____________ to____________. The Nature of Insurance an individuala group

Concept of Pooling of Risks Pooling of risks is the sharing of losses by all members of a group.

Importance of Insurance 1. To the modern business world: –Enable the existing firms to continue the business –Encourage new business ventures –Help small businesses –Reduce reserve requirement –Assist in credit provision

Importance of Insurance A means of saving A means of saving Protect family income Protect family income 2. To private persons:

Importance of Insurance 3. To the whole economy: –Reduce the possibility of loss –Provide funds for the economy –Get invisible earnings

Fundamental Insurance Principles Utmost good faith Insurable interest Indemnity –Subrogation –Contribution Proximate cause

Insurable Risks and Non- Insurable Risks Within human controlBeyond human control Probability of loss: incalculable Probability of loss: calculable Against public policyConsistent with public policy Loss: no basis for computingLoss: measurable in $ Non-insurable risks Insurable risks

Insurable Risks and Non- Insurable Risks Non-insurable risks Insurable risks Risk: too small or too frequent Risk: not too small or too frequent Resulted from warNot resulted from war Insured: no insurable interestInsured: insurable interest

Insurance underwriters –Assess insurance applications –Determine premium rate Insurance agents –Sales representative of a particular insurance company Insurance brokers –Sales representative of different insurance companies Middlemen

Procedures of Obtaining an Insurance Policy 1. Making an application to insure 2. Making an offer to the insured  quotation 3. Signing of cover note or letter of acceptance 4. Payment of premium 5. Issue of insurance policy

1. Informing the insurance company 2. Providing the proof of loss 3. Investigation of claims 4. To be indemnified Procedures of Obtaining an Insurance Claim

Reinsurance Over-insurance Under-insurance Deductible clause No claim bonus Some Common Insurance Terminologies

Types of Insurance Fire Insurance Life Assurance Marine Insurance MPF Accident Insurance Aviation Insurance

Fire insurance on domestic and business premises policies Household policies Consequential loss policies Special perils policies Declaration policies Fire Insurance Fire Insurance

Whole life policies Term life policies Endowment policies Life annuities Life Assurance Life Assurance

Hull insurance Cargo insurance Freight insurance Shipowner’s liability insurance Valued policies Voyage policies Time policies Floating policies Marine Insurance Marine Insurance

Accidental damage while in flight Liability to passengers Liability to lives and properties on the ground Aviation Insurance Aviation Insurance

Motor insurance Public liability insurance Employees’ compensation insurance Credit insurance Fidelity guarantee insurance Medical and sickness insurance Accident Insurance Accident Insurance

Came into full operation on 1 st Dec, Launched under the need for retirement protection. All employees and self-employed persons aged are required to participate. Both the employer and the employee have to make a contribution. Mandatory Provident Fund Provident Fund Mandatory Provident Fund Provident Fund

Local Insurance Industry Governed by the Office of the Commissioner of Insurance Ruled by the Insurance Companies Ordinance Self-regulatory  the Hong Kong Federation of Insurers