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Introduction to insurance unit1
- 1. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED Module 7: Introduction to Insurance
- 2. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED LEARNING OBJECTIVES This course aims at helping you the student to, • Gain a broader understanding of risk and insurance as a means to manage it. • Appreciate the role of insurance to our economy and how it operates • Have a balanced, systems – oriented view of how the insurance industry players work together to protect and meet the needs of consumers.
- 3. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED LEARNING OUTCOMES After completion of this study you should be able to: • Describe the role insurance plays in our economy • Explain how insurance is used to manage or diversify risk • Understand the fundamental principles of insurance • Recognize the various categories of insurance and the underwriting procedure • Define the key insurance terms • Explain the roles of the insurance players in the industry • Explain how insurance claims are administered
- 4. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED What is Insurance? Risk Management and Responding to Risk The Purpose of insurance How does Insurance work? Players in the Insurance Industry Insurance Underwriting and Categories of Insurance Fundamental Principles of Insurance Some commonly used Insurance terminologies Settlement of Insurance Claims MODULE COVERAGE
- 5. THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES UIBFS ISO 9001:2008 CERTIFIED What is insurance? Insurance is defined as a form of risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation known as premium Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (like property loss, destruction, accident or death) or after the expiry of a certain period. The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'
Editor's Notes
- INTRODUCTION In this module, we shall be discussing the concept of risk and the techniques of identifying, measuring and managing it. In this context, insurance as a risk management tool is discussed with reference to its role, functions, and the fundamental principles as applicable to the different classes. Now, we realize that in one form or another, insurance is part of our day to day lives, whether it is auto, medical, liability, disability, fire etc. Insurance serves as an excellent risk management and wealth – preservation tool. Having the right kind of insurance is a critical component of any good financial plan. All businesses should not operate without insurance, for it allows owners to minimize the risk of loss from circumstances beyond their control. Therefore, the risks that need to be covered should be identified.
- Insurance is a risk transfer mechanism. It is a form of protection against the threat or possibility of loss, a mechanism that helps to reduce the effects of adverse situations in the most economical way. It promises to pay the insured in case a loss occurs. Insurance transfers the financial consequences of the disaster insured against from the person by buying insurance from the insurance company. It is also a form of management/minimization of risk. The Insurance Contract is designed to have legal consequences, between two or more parties; this agreement has legal consequences and therefore, is legally enforceable.