GROUP MEMBERS

NOUMAN JAVED KHAN

SYED GHILMAN HAIDER

MUHAMMAD ADEEL HASHMI

SYED AHSAN HAIDER

WHAT IS INSURANCE

A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss.

Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event.

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

HISTORY OF INSURANCE In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: natural or non-monetary economies (using barter and trade with no centralized nor standardized set of financial instruments). More modern monetary economies (with markets, currency, financial instruments and so on). The former is more primitive and the insurance in such economies entails agreements of mutual aid.

SCENERIO OF INSURANCE SECTOR IN PAKISTAN

At the time of independence, our country had 5 domestic and 77 foreign insurance companies. These companies were regulated under the Insurance Act of 1938. The government established the Department of Insurance in 1948 within the domain of Ministry of Commerce to supervise the affairs of insurance industry as well as to safeguard the interests of the insured. An amendment was made in the act in 1958 for the first time keeping in view the requirements of domestic market and to have effective control over the insurance premium rates. Since then, various amendments have been made in the Act. The Department of Insurance further created the Controller of Insurance for the same purpose that was abolished in 2000 when SECP was made responsible for supervising insurance business in the country.

The life insurance business (that grew very rapidly from a total sum assured of only Rs. 130 million in 1949 to Rs. 51.7 billion in 1972) was nationalized in 1972. Life Insurance Management Board managed the affairs of these newly nationalized life insurance companies. By consolidating the business of 41 nationalized insurance companies in 1973, the government created State Life Insurance Corporation with a purpose of encouraging life insurance business and to safeguard the interests of policyholders. The initial benefits were the reduction in premium rates by 33 percent and resolution of various outstanding disputes between the policyholders and the insurers.

SECURITY AND EXCHANGE COMMISSION OF PAKISTANROLE IN INSURANCE INDUSTRY

The Securities and Exchange Commission of Pakistan has been regulating the Insurance industry, since January 2001 after it took over from the Controller of Insurance operating under Ministry of Commerce, Government of Pakistan.

The SECP regulates and monitors the Insurance Sector in the country through powers vested in the Insurance Ordinance, 2000 and the Companies Ordinance, 1984.

SECPS EFFORTS

Protection of the interest of insurance policyholders. Amendments in the regulatory framework to strengthen SECPs role as an apex insurance regulator. Enhancement of regulatory framework for Takaful Insurance. Availability of insurance protection to less privileged segment of the society (Microinsurance). Insurance Awareness Programs. Enhanced public image of the insurance industry.

INSURANCE DIVISION IN SECP

Insurance Division has been divided into two main departments:

Policy, Regulation and Development Department Supervision Department

Policy, Regulation and Development Department Responsible for policy reform, actuarial work, re-insurance treaty, facultative reinsurance approval, NOC for purchasing insurance policy from abroad, registration and deregistration. Supervision Department Responsible for centralized function of On-site Inspection, Off-site Surveillance and enforcement.

I. Public sector 1. National Insurance Corporation 2. Pakistan Reinsurance Company Ltd. 3. Postal Life Insurance 4. State Life Insurance Corporation Ltd.

II. Private sector

a) Incorporated in Pakistan 1. Adamjee Insurance Company Ltd. 2. Agro General Insurance Company Ltd. 3. Allianz EFU Health Insurance Company Ltd. 4. Alpha Insurance Company Ltd. 5. Amercian Life Insurance Company Ltd. 6. Asia Insurance Company Ltd. 7. Asian Mutual Insurance Company Ltd. 8. Askari General Insurance Company Ltd. 9. Beema Insurance Company Ltd. 10. Business & Industrial Insurance Company Ltd. 11. Capital Insurance Company Ltd. 12. Central Insurance Company Ltd. 13. Century Insurance Company Ltd.

14. Commercial Union Life Assurance Company 15. Co-operative Insurance Society of Pakistan Ltd. 16. Credit Insurance Company Ltd. 17. Crescent Star Insurance Company Ltd. 18. Dadabhoy Insurance Company Ltd. 19. Delta Insurance Company Ltd. 20. E.F.U.General Insurance Company Ltd. 21. E.F.U.Life Insurance Company Ltd. 22. East West Insurance Company Ltd. 23. Excel Insurance Company Ltd. 24. Gulf Insurance Company Ltd. 25. Habib Insurance Company Ltd. 26. Indus International Insurance Company Ltd. 27. International General Insurance Co. of Pak 28. Ittefaq General Insurance Company Ltd. 29. Jupiter Insurance Company Ltd. 30. Metropoliton Life Assurance Company Ltd.

31. Muslim Insurance Company Ltd. 32. National General Insurance Company Ltd. 33. New Jubilee Insurance Company Ltd. 34. North Star Insurance Company Ltd. 35. Orient Insurance Company Ltd. 36. Pakistan General Insurance Company Ltd. 37. Pakistan Guarantee Insurance Company Ltd. 38. Pakistan Mutual Insurance Company Ltd. 39. Platinum Insurance Company Ltd. 40. Premier Insurance Company Ltd. 41. Prime Insurance Company Ltd. 42. Raja Insurance Company Ltd. 43. Reliance Insurance Company Ltd. 44. Seafield Insurance Company Ltd.

45. Security General Insurance Company Ltd. 46. Shaheen Insurance Company Ltd. 47. Sliver Star Insurance Company Ltd. 48. Union Insurance Company of Pakistan Ltd. 49. United Insurance Company of Pakistan Ltd. 50. Universal Insurance Company Ltd.

b) Incorporated abroad
1. ACE Insurance Aid Pacific Ltd. 2. CGU Assurance Company Ltd. 3. New Hampshire Insurance Company Ltd. 4. New Zealand Insurance Company Ltd. 5. Royal & Sun Alliance Assurance plc.

TYPES OF INSURANCE COMPANY ACCORDING TO OWNERSHIP

MUTUAL COMPANIES This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders. STOCK COMPANIES Stockholders (who may or may not own policies) own stock insurance companies CAPTIVE INSURANCE COMPANIES These companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups.

OTHER TYPES OF INSURANCE COMPANIES

DOMESTIC INSURANCE COMPANIES This type of insurance company is incorporated and formed under the laws of the state in which it is domiciled. FOREIGN INSURACE COMPANIES

This type of insurance company is also domestic company as it is domiciled in one state but it is licensed to do business in another state. ALIEN INSURANCE COMPANIES
This type of insurance company is often confused with a Foreign insurance company. The Alien Company is the one that is formed under the laws of a country other than the United States.

AUTHORIZED AND UNAUTHORIZED INSURANCE COMPANIES Upon applying for approval to do business in a state, the insurance company receives a certification of authority from the state Insurance Department (Division). Once they receive this certificate they become known as an admitted, or authorized, company. Companies without a certificate of authority are known as unadmitted, or unauthorized, companies.

ASSESSEMENT INSURANCE COMPANY Non-incorporated associations of individuals or business, called subscribers, engage in cooperative insurance programs. Each policyholder is insured by all others, and each insures the others. FRATERNAL BENEFIT SOCIETY This type of social organization has by laws allowing it to sell insurance to its members.

TERMS RELATING INSURANCE

SUM ASSURED

An amount payable to the assured (agreed in advance),at an agreed time.

LIMIT OF INDEMNITY

An amount payable to the insured, commence rating with his loss or damage subject to the maximum limit agreed in advance.
INTERMEDIARY/BROKER A person or firm who arranges a cover with the Insurer/Assurer on behalf of the Insured in consideration of a commision,payable by the Insurer.

POLICY Policy is a document which shows that a contract has been made between the Insurer and Insured. It is not called a contract in itself. PROPOSAL FORM Through Proposal Form Insured presents various type of information to the Insurer for obtaining a cover for risk. PREMIUM An amount paid by the insured in consideration of accepting the risk by the insurer/assurer.

UNDERWRITER

Underwriter is a person working in an insurance company, who evaluate the risk presented by the insured/assured as to whether to accept or reject the risk and if it is accepted on what premium and terms and conditions.
CLAIMS MANAGER Claims manager is called the watch dog of the funds of the policy holders being managed by the insurance company. ARBITRATOR Arbitrator is a person who resolves dispute if arising between the insurer and insured .Its decision is final and binding under the law.

RE-INSURANCE COMPANY

A company from where insurer seeks cover over and above the amount which he can bear in case of claims as per resources available with him. CLAIM
An occasion which on trigging the operative clause of the policy, is notified by the insured to the insurer for payment of agreed sum assured or indemnity according to loss sustained. ABSOLUTE LIABILITY A legal doctrine causing one party always to be responsible for payment of damage claims, regardless of circumstances causing the loss.

ACTUARY

An insurance company mathematician, who complies statistics of losses, develops insurance rates calculates dividends, and evaluates the financial standing of insurance company.
CAPTIVE INSURANCE An insurance company operated by a main company or group of companies, to insure its own risks. A part of self-insurance plan. CASH VALUE

The saving feature associated with permanent life insurance. The result of a initial period when premium payments exceed mortality and other charges.
INSURABLE INTEREST The ability to demonstrate that the insured event is capable of causing a financial loss to the person owing the insurance. To collect from a property insurance contract, the insurable interest must be demonstrated at the time of the loss. In life insurance the insurable interest must exist when the policy is begun.

CLASSES OF INSURANCE
The insurance is mainly divided in following 3 major classes of business. 1. GENERAL INSURANCE 2. LIFE INSURANCE 3. RE INSURANCE GENERAL INSURANCE General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event LIFE INSURANCE

Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person.

REINSURANCE Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.

INSURANCE VS ASSURANCE

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In general, in jurisdictions where both terms are used, "insurance" refers to providing cover for an event that might happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that is certain to happen.

4 Is of Insurance Service

INTANGIBILITY

Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible. Hence, insurance rightly come under services, which are intangible. INCONSISTENCY
Service quality is often inconsistent. This is because service personnel have different capabilities, which vary in performance from day to day.

INSEPARATABILITY
Services are produced and consumed simultaneously. Consumers cannot and do not separate the deliverer of the service from the service itself.

INVENTORY
No inventory can be maintained for services. Inventory carrying costs are more subjective and lead to idle production capacity.

PRINCIPLES OF INSURANCE
In every sort of contract there are some principles which must be followed in order to accomplish the contract. Following are the principles of every insurance contract.

LEGALITY
When a company insures an individual entity, there are basic legal requirements. Several commonly cited legal principles of insurance include PRINCIPLE OF UTMOST GOOD FAITH An insurance contract is one of utmost good faith. What this means is that all material facts about an insured risk must be disclosed to the insurers at the time of completing the proposal form, or subsequently if the facts change. PRINCIPLE OF INDEMNITY Indemnity means that the insurers agree to compensate in the event of loss such that the insured is left substantially in the same position financially after the loss as she was before it but the insured cannot profit from a loss.

PRINCIPLE OF CONTRIBUTION If more than one policy covers the same risk it is not possible for the insured to claim on both and make a gain. PRINCIPLE OF SUBROGATION In the event of a claim and where the insurers have fully indemnified the insured, the insured's original interests can be taken over by the insurers - this is known as the principle of subrogation. INSURABLE INTEREST You must have an interest (insurable interest) in the thing insured.

INDEMNIFICATION
To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, life insurance is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally two types of insurance contracts that seek to indemnify an insured: 1. An "indemnity" policy, and 2. A "pay on behalf" or "on behalf of policy 1.An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party. 2.Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner in the above example) would not be out of pocket for anything