Policy Provisions Preventing Indemnity

Policy Provisions Preventing Indemnity

While policies in some classes of business promise to indemnify the
insured, this has to be done subject to the express terms of the policy, if any.
Some of these terms mean that something less than indemnity is payable. For
example:
(a) Average: Most non-marine property insurances are expressly subject to
average. This means that the insurer expects the insured property to be

insured for its full value. If it is not, in the event of a loss the amount
payable will be reduced in proportion to the under-insurance. For
example, if the actual value of the affected property at the time of a loss
was $4 million and it was only insured for $1 million, we may say that the
property was at the time of the loss only 25% insured. Therefore, by the
application of average, only 25% of the loss is payable.
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In view of this penalty for under-insurance, it is very important for
insurance intermediaries to do their best to ensure that their clients will
arrange full value insurance.
Note: In marine insurance, ‘average’ has a totally different meaning.
Here it means partial loss, a loss other than total loss. Average in
marine insurance is complex and beyond the needs of this present
study.
(b) Policy excess/deductible: An excess or deductible is a policy provision
whereby the insured is not covered for losses up to the specified amount,
which is always deducted from each claim.
Suppose a motor policy is comprehensive, with a $4,000 excess for
damage to the insured vehicle. If an accident occurs and the repair bill for
the car amounts to $14,000, the insurer is only liable for $10,000. On the
other hand, with a minor accident and repairs costing $3,000, the insurer
would have no liability more...

Classification of Risk

Classification of Risk

To simplify a complex subject, we may classify risk under two broadheadings (each having two categories) according to:(a) its potential financial results; and(b) its cause and effect.(a) Financial ResultsRisks may be considered as being more...

1. The Concept of Advanced Cooperative Insurance

1. The Concept of Advanced Cooperative Insurance

The purposes for Cooperative Insurance in its advanced form are that the number of the Insured in Simple Cooperative Insurance will be limited, and that each person will know one another. If their number increases and the insured risks become of several types , then 

another body or company should run the insurance operations as an agency for fixed fees. This body should be the insurance companies. Because the contracts which constitute Cooperative Insurance are of several types and intertwined, it is justly called Advanced Cooperative Insurance.
Accordingly, Advanced Cooperative Insurance can be defined as "a collective insurance contract, whereby its more

Meaning of Risk

 Meaning of Risk

There have been many attempts to define ‘risk’. Probably, to most of us,

‘risk’ contains a suggestion of loss or danger. We may therefore define it as

‘uncertainty concerning a potential loss’, a situation in which we are not sure

whether there will be loss of a certain kind,

 or how much will be lost. It is this

uncertainty and the undesirable

 element found with risk that underlie the wish and more...

INTERNATIONAL DEVELOPMENTS IN THE INSURANCE SECTOR: THE ROAD TO FINANCIAL INSTABILITY?

INTERNATIONAL DEVELOPMENTS IN THE INSURANCE SECTOR: THE ROAD TO FINANCIAL INSTABILITY?

International activity related to the regulation and supervision of financial services has exploded since the global financial crisis. The crisis exposed weaknesses in the structure for regulating internationally active banks, and motivated a number of work streams aimed at strengthening standards (most notably, significant revisions to the Basel capital standard for internationally active 

banks, now known as Basel III). The insurance sector was also stressed by the meltdown in financial markets that occurred in 2007–2008, albeit far less than the banking sector, and, with the exception of AIG, it is generally recognized that insurers played little role in the financial crisis, and that traditional insurance activities do not pose a systemic risk to the financial system .1,2 Nonetheless, the insurance sector has also b more...

4. Characteristics of Simple Cooperative Insurance

4. Characteristics of Simple Cooperative Insurance
In light of the previous section which discussed definitions of this kind of insurance, we can summarize its characteristics as follows:

1.
It is a consensual contract, which includes obligations and acceptance. Each policyholder has two qualities: as a policyholder and as an insurer to his colleagues in the Cooperative Insurance Fund. He is an insurer to others through the amount of money he pays when he participates in the insurance. He is a partner and a shareholder in the amount of money from which indemnity is paid. He himself is a policyholder because by participating in the insurance, he becomes a beneficiary. Thus, he has the right to receive an indemnity for the loss he more...

5. Legitimacy of Simple Cooperative Insurance

5. Legitimacy of Simple Cooperative Insurance

There is no disagreement among Moslem Sharia scholars regarding the permissibility of this kind of insurance and the legitimacy of practicing it.

 The second Moslem Scholars Conference held in Cairo in the year 1385 A.H. (1965 AD), the seventh Moslem scholars conference held in 1392 A.H. (1972 AD), and the Islamic Jurisprudence Council in its first session held in Mecca on 10 Shaban 1398 A.H. have all given a legal advisory opinion permitting this kind of insurance. The latter stated: "The Council has unanimously approved the decision of the High-Ranking    more...

2. Applicable Forms of Simple Cooperative Insurance

2. Applicable Forms of Simple Cooperative Insurance

Simple Cooperative Insurance has two forms:
The first: Simple Cooperative Insurance based on participation .
 Persons who are exposed to similar risks form a society with the aim of helping one another in distributing the financial loss which one of them may incur during the period of the agreement. In this case, members who have subscribed to this insurance do not pay any premium or amounts of money except expenses required to establish the society.
 These expenses are paid in the form of membership fees.

The second: Simple Cooperative. more...

3. History of Simple Cooperative Insurance

3. History of Simple Cooperative Insurance
Cooperative Insurance in its simple form, which was mentioned above, is very old. Necessity required it as one means of cooperation for good deeds. It is the oldest kind of insurance, and it is the closest kind of insurance to the concept of Takaful and cooperation.
Studies related to insurance have mentioned that this type is the oldest form which 
appeared in the tenth century B.C. when the first  more...

Insurance

Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier (often called an "insurance company), is sells the insurance policy to customers. The customers, who are called the insured or policyholder, are the person or entity (which may be a private company or other organization) buying the insurance policy. The amount of money to the customer pays for a certain amount of insurance coverage is called the "premium". Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.more...

1. The Concept of Simple Cooperative Insurance

1. The Concept of Simple Cooperative Insurance

Cooperative Insurance is generally based on the concept that the negative impact of a specific incident is distributed among a group of persons instead of making the person who experienced the loss to bear its results alone.
The means to achieve this is to establish a common fund to which everyone exposed to a specific risk may contribute in such a way that indemnity will be paid from that fund. In this type of insurance, the Insured seeks guarantee from a group of persons who are more....

Risk Management

 Risk Management

‘Risk management’ is a term which is used with different meanings:

(a) in the world of banking and other financial services outside insurance, it is

probably used with reference to investment and other speculative risks (see

(a) above);

(b) insurance companies will probably use the term only in relation to pure

risks, but they may well restrict it even further to insured risks only. Thus,

when insurers talk about ‘risk management’, they could well be referring

to ways and means of reducing or improving the insured loss potential of

the ‘risks’ they are insuring, or being invited to insure;

(c) as a separate field of knowledge and research, risk more...

FUNCTIONS AND BENEFITS OF INSURANCE

FUNCTIONS AND BENEFITS OF INSURANCE
Insurance has many functions and benefits, some of which we may describe as

primary and others as ancillary or secondary, as follows: (a) Primary functions/benefits: Insurance is essentially a risk transfer mechanism,removing, for a premium, the potential financial loss from the individual andplacingit upon the insurer.The primary benefit is seen in the financial compensation made available toinsured victims of the various insured events. On the commercial side, thisenables businesses to survive major fires, liabilities, etc. From a personal point ofview, the money is of great help in times of tragedy (life insurance) or other timesof need.(b) Ancillary functions/benefits:more...