What is Insurance

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance; an insured is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium.

Today there are numbers of risks involved in the lives, properties of private and public sectors alike. Especially after the advancement of technology; which is said to be brought worries than advantages, to each and every sector of the society?

If somebody questions, what is the most important trade in the world, there is no doubt that the answer should be ‘Insurance’, because no other trade can survive without insurance, and all of them rely on this most important business since almost all activities are involved with risks.

In the insurance market, instead of products, services are offered to the customers. Unlike products, services are intangible. Therefore, service quality is an essential feature in customer services. Today’s customers are demanding a quality service at a competitive price. If we can respond to the total satisfaction of the customer, we can presume that the service is of good quality.

With the improvement of the quality of life standard of living and the improvement in technology, customer demands are becoming more complex and competitive.

 In this scenario, retention of existing customers and attracting new customers, are mainly depending on the quality of customer service. Therefore maintaining and improving service quality in the respective areas are very important.

This service quality is ever evolving process. In organizations like insurance companies, they should not be limited to cater to one segment of society. They should cater to the basic expectations of the rural customer to the sophisticated needs of the corporate customer in the urban. The solution has to be tailor made according to the needs of the customer.

Periodically the insurance companies should do surveys in various regions to check whether they match the customer expectations, using the services of an external service provider and get the feed back on the quality of service provide by them.

Further, honesty is absolutely important. Promise what you can deliver and never over promise and under deliver. Focus on what you want to achieve.

Insurer's study area

Insurance, or peace of mind, is entirely intangible. Its spares physical forms are:

• Firstly the pieces of paper - the contracts or insurance policies which define the details and conditions of the service that being sold; and
• Secondly any claims payments, replacements goods or bonuses paid out to policyholders.

The intangibility of insurance should be confused with the tangibility of some of the things that can be insured. As a example, even though a car is physical and can therefore be insured against loss of damage, that car’s insurance – the peace mind associated with knowing that it is insured – is intangible. The customer statement: ‘those repairs will be paid by my insurer’ makes the difference clear. The repair are tangible, but insurance intangible.

The challenge of making an intangible service like insurance is to give existing and potential customers intangible as well as tangible clues are;

• Quality
• Reliability
• Value
• Security

History of Motor Insurance

By the end of the First World War (1918) people were returning from the conflict with an interest to continue their driving experience. Even at this stage in time, no compulsory requirement for motor insurance existed.

1920s’ there were so many motor vehicles on the land that legislation was almost invisible and in 1930 the Road Traffic Act 1930 was passed. The intention of the act, inter alias, was to ensure that funds would be available to compensate the innocent victims of motor accidents. This was to be provided by means of insurance against legal liability to pay damages to injured persons. The insurance requirement applied to all users of motor vehicles, except where some special legal arrangement is in force. Further legislation followed in the Road Traffic act 1960, the Motor vehicles Act 1972 and the Road Traffic Act 1974 so that today insurance must be in force to cover legal liability to pay damages to any person, including others in the car, arising out injury. The compulsory insurance requirement was extended under the Road Traffic Act 1998 to include the owners of property damaged in road accidents









http://www.talkonce.co.uk/the-history-of-motor-insurance

History and Development of Insurance in Sri Lanka

Insurance business in Sri Lanka commenced with the advent of the Coffee and Tea Industry. During this period, the Insurance Office Ltd., Royal Assurance, New India Assurance Co. Ltd., and Ocean Accident and Guarantee Corporation Ltd., were few of many with Edward Lumley underwriting business for Lloyds of London. The primary entrants to Insurance business in Sri Lanka were the Agency Houses which managed plantations and were acting as Agents of Overseas Insurance handling mainly their in-house plantation business. In the early part of the 20^th century, Life Insurance Companies too were established. E.g. Original Insurance Co, Pearl Assurance etc.

It is only after the passing of the Companies Act of 1938; Sri Lanka Insurance Companies were established. Ceylon Insurance Company that was established followed by other Companies like Colombo Insurance, Lanka Life etc.. who endeavored to serve the needs of the local populace. The indigenous community became more aware of Insurance only after the promulgation of the Motor Traffic Act 1938, which made Party Insurance compulsory. At that time, there was no specific legislative framework to authorize, supervise or control the Insurance business in Sri Lanka.

The Insurance Industry was nationalized in line with the prevailing economic policy of the then socialist Government in Sri Lanka. At the time of Nationalization in 1961 there were more than 60 local and Foreign Insurance companies and Agency houses. With the promulgation of the Insurance Corporation Act, No.2 of 1961, the Insurance Corporation of Sri Lanka (ICSL) was established in 1961 as the sole insurer authorized to transact Life Insurance business in Sri Lanka. Thereafter with the enactment of the Control of Insurance Act, No.25 of 1962, the insurance of the state to regulate and control the activities of Lanka Companies. In the best interest and protection of insuring public were made very clear.

In 1964, General Insurance was nationalized as provided in the Finance Act of 1963 and ICSL was authorized to be the sole Insurer to transact both Life and General Insurance business in Sri Lanka. The Insurance Corporation of Sri Lanka was initially incorporated to underwrite Life Insurance, enjoyed monopoly status from 1964 in all classes of Insurance. The existing private companies were precluded from underwriting new business, but were liable to service old policies. General Insurance policies posed little problems companies faced difficulty in serving the long term Life Insurance policies. Many companies had liquidity problems and some policyholders lost money. A period of a prolonged state run monopoly commenced and lasted for 18 years.

In 1979, the insurance (special provisions) Act, No.22 was enacted providing for the establishment of subsidiary Corporation of ICSL or Independent Corporation to carry on the business of any type of insurance.

In 1980, another State Insurer, the National Insurance Corporation (NIC) was incorporated with the objective of crating competition after 18 years of monopoly by the ICSL. But state monopoly still continued. The NIC structure provided for eight Principle Agents, seven of whom were from the private sector was selected on the basis of prior experience in the industry. The principle agents were:

·        Acland Finance and Investment Ltd.

·        Aitken Spence and Co. Ltd.

·        Carsons Cumberbatch and Co. Ltd.

·        Ceylinco Ltd.

·        James Finlay and Co. (Colombo) Ltd.

·        Mercantile Credit Ltd.

·        Protection and Indemnity Ltd.

·        Whittall Boustead Ltd.

These principle agents were functioning as underwriters for the NIC in a controlled environment. They were authorized to underwrite and settle claims on behalf of NIC up to limits specified in their respective agreements.

In  1986, the Control of Insurance Act. No.25 of 1962 was amended opening the doors for the private sector to venture into the field of Insurance as Insurance. Control of Insurance (amendment) Act. No.42 of 1986 permitted public companies too to carry on insurance business in Sri Lanka after 25 years of state dominance. Three companies listed below registered and obtained license in terms of the amended legislation and commenced insurance operations in competition with the two state corporations in 1988.

• Ceylinco Insurance Co. Ltd
• CTC Eagle Insurance Co. Ltd.
• Union Assurance Ltd.

In 1993, both ICSL and NIC were converted to Limited liability companies. ICSL changed its name to Sri Lanka Insurance Corporation Ltd., (SLICL) and NIC to National Insurance Corporation Ltd.,(NICL), which was taken over by Janashakthi Insurance Co. Ltd., in 2001.

In the latter part of 1994 and 1995 two more companies Janashakthi Life Insurance Company Ltd., and Janashakthi General Insurance Company Ltd., commenced operations handling exclusive Life Insurance business and General Insurance business respectively and subsequently in 2000 these two companies merged as Janashakthi Insurance Co. Ltd.

In 1999, Co-operative Insurance Company Ltd., commenced operations. In June 1999, CTC Eagle Insurance Company Ltd., changed the name as Eagle Insurance Company Ltd., consequent to the company becoming a member of Zurich Financial Services Group and then being absorbed by the Aviva Group. December 1999, another new Insurance Company, Asian Alliance Insurance Co. Ltd., commenced operations transacting General Insurance business and since March 2000, they have started transacting Life Insurance business too.

Hayleys AIG Insurance Co. Ltd., a joint venture between American International Group (AIG) and Hayles Group also commenced operations transacting General Insurance business and since March 2000, they started transacting Life Insurance business. Six more Insurance companies are now competing in the local market having established since 2001.

Nature of Motor Insurance Policy

A person must have motor insurance before he can drive his vehicle in a public place. Motor insurance protects the insured, his vehicle and other motorists against liability in the event of any accident. It provides financial compensation to cover any injuries caused to people or their property.

Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.

Vehicle insurance can cover some or all of the following items:

• The insured party
• The insured vehicle
• Third parties (car and people)

Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.

An excess payment, also known as a deductible, is the fixed contribution insured must pay each time his car is repaired through the car insurance policy. Normally the payment is made directly to the accident repair "garage" (The term "garage" refers to an establishment where vehicles are serviced and repaired) when you collect the car. If one's car is declared to be a "write off" or "total loss"("write off" is commonly used in motor insurance to describe a vehicle the worth of which is less than the cost of repair), the insurance company will deduct the excess agreed on the policy from the settlement payment it makes to the insured.

If the accident was the other driver's fault, and this is accepted by the third party's insurer, the insured will be able to reclaim the excess payment from the other person's insurance company.

A compulsory excess is the minimum excess payment the insurer will accept on the insurance policy.

In order to reduce the insured’s insurance premium, He may offer to pay a higher excess than the compulsory excess demanded by the insurance company. The voluntary excess is the extra amount over and above the compulsory excess that the insured agree to pay in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by the insurer, the insurer is able to offer you a significantly lower premium.

Types of Insurance Cover

Third party only

This cover is the legal requirement. This level of cover ensures that compensation is available in respect of injury to other people (including your passengers) or damage to other peoples' property resulting from a motor accident. It doesn't cover any costs incurred by the insured as the result of an accident.

Most insurance companies offer additional levels of insurance cover that go beyond the legal requirement. The precise nature of cover will vary from company to company.

Third party fire and theft

This provides the same cover as third party only and also insures you should your vehicle be damaged by fire or stolen.

Comprehensive

This provides the same cover as third party fire and theft. However, it also covers the insured and his vehicle damaged in an accident. Many additions to this level of cover are available from insurance companies including:

• Providing a courtesy car while your car is being repaired
• Roadside assistance service
• Vehicle repairs in case of breakdown

Additional Covers

On payment of an additional premium, there are additional covers for a motor vehicle that can be obtained along with the above main comprehensive insurance cover. What are the steps to be taken when making an accident claim? As explained, you must follow certain procedures to protect yourself if an accident occurs.

In the event you are making a claim, you should get all the necessary details including the name and address of the other driver involved their vehicle registration number and their insurance company or policy or certificate number among other details. Once you have reported an accident, your insurance company, depending on the policy conditions, will send a loss adjuster to the site of the accident or to the nearest Police Station or work shop if it has been towed or to a place arranged after discussion with the insurance company in order to assess the damage to your vehicle and identify the circumstances of the accident. A loss adjuster is a specialist whose job is to find out what really happened and how it happened. He will recommend to the insurance company the quantum of the claim. In certain circumstances, the insurance company may appoint an investigator to check on the circumstances surrounding the claim.