Classes of Insurance


Learning Outcomes
An overview
insurance and life assurance
Classes of insurance
Compulsory classes of insurance
Chapter summary
Test your understanding
Suggested Answers

Learning Objectives
After studying this chapter you should be able to;

Differentiate between general insurance & Life Assurance

List the classes of insurance; scope of cover and their key exclusions

List the compulsory classes of insurance

Explain the key policy terms and conditions

Insurance is classified into two major classes namely: General/Non Life
Insurance and Life Assurance.
In this chapter we shall differentiate between general insurance & Life
Assurance; review the scope of cover under the different classes of
insurance; compulsory classes of insurance and common policy terms and
Various classes of insurance have continued to be developed in response to
society’s needs and in this chapter we shall look at the main classes of
insurance offered in the Uganda Insurance market.

Differences between General/Non Life Insurance & Life assurance

General insurance policies are term policies which are renewed
annually that is period of cover is usually up to 12 months unlike life
assurances which are over 5 years.
Claims are usually in the very near future, e.g. car, household effects
and so on unlike in life where claims are made after some long time
say after 5 years with the exception of natural death that can occur
anytime after the inception of the policy
General Insurance might pay out which is not the case with life
assurance. Claim materializing is a must either at the occurrence of
the insured event or policy maturity.
It is concerned with property and liability insurances while life
assurance, it is concerned with life.

Categorization of General Insurance
1. Property Insurances. Examples: Fire and Related Perils; Theft (All
Risks; Money; Goods in Transit etc); Contractors All Risks;
Engineering; Domestic Package etc
2. Liability- Public Liability; Product Liability; Professional Indemnity;
Employers Liability; Workers Compensation
3. Guarantee
Immigration/Security Bond; Court Bond; Warehouse bonds
4. Transport Insurance- Motor Insurance ( Act Only; Third Party Only;
Third Party/Fire/Theft; Comprehensive); Marine and Aviation
5. Accident- Personal





Categorization of Life Assurance
1. Ordinary
Endowment/Whole Life Assurance)



2. Industrial/Group Life Assurances- Retirement Benefits Schemes;
Group Life and Annuities/ Investment Policies such as Unit linked/
Bonds Investments

The perils under the business interruption policy are the same as those covered under the material damage policy. the cause being accidental or fortuitous .perils arising as a result of communal living for example riot. • Miscellaneous perils: For example sprinkler leakage. Loss of drifts occasioned by fire or any other peril insured is not covered under the material damage policy. Business Interruption Insurance  Many companies refer to business interruptions as consequential loss or profit interruption policy. impact. storm.Property Insurances 1. It is offered to protect future earnings of an enterprise after fire damage.There are exclusions under this peril. flood. Lightening -Any loss caused by lightning is covered under fire policy Explosions -of boilers or gases used for commercial purposes for example oxy-acetylene gas used for welding.t. • Natural Perils:.t. aircraft damages. etc. however Long Term Agreements under Fire Policies . bush fire.c • Social perils:..For example earthquakes. typhoon e.c. malicious damages e. This is in sharp contrast to the Standard Fire Policy which covers above to a limited scope. Special Perils • Chemical Perils: For example explosion. A Fire & Special perils policy provides insurance cover against the following perils:Fire -is the actual ignition of something that should not be on fire. Fire and related perils (material damage) Currently this class of insurance is yet to be embraced especially among the private individual clients save for the few organizations. however. It is covered under the business interruption policy. strike and civil commotion. The fire and related perils policy (material damage) covers a building and its contents. cyclone. tempest. spontaneous ignition or fermentation. bursting or overflowing of water tanks.

The insured is under obligation each year to renew the policy. 2. • Subrogation rights the insured passes to insurer when claim has been paid • Arbitration to resolve disputes arising from the policy. for example. This is because the landlord will be responsible for arranging buildings insurance to cover the entire block. • Contribution where more than two policies cover same property. • Any alteration to the risk • Warranties or undertakings to complied with • Reasonable care/precaution • Claims conditions are. Immediate notification in the event of a loss or police notification • Fraud when proved will forfeit benefits under the policy • Reinstatement of sum insured • Insurer’s rights to follow claim and take possession. While many homeowners buy both types of cover. same insured and all are contracts of indemnity. same period.and not all policyholders will be covered under both sections. And some policyholders obtain contents insurance from one insurer and . General conditions make the policy voidable if they are not complied with and main ones are. Home insurance or Domestic Insurance Package This class of insurance is subdivided into 5 sections as indicated below Buildings and / or contents cover • • People often use the terms "home insurance" or "household insurance" in a general way to refer to insurance that covers any aspect of their home and belongings. these policies are usually split into separate sections . Policy Conditions • Policy conditions associated with fire policies are divided into general and claims related. Typically. people who live in blocks of flats will only need to buy a policy to cover their contents."buildings" and "contents" . However. There may be a very good reason for this. some have only one. Discount is given where the insured agrees to offer to renew a policy for a term of three or five years and signs an agreement to that effect. • Average applies where underinsurance exists. It is also possible to buy a "contents-only" or a "buildings-only" policy.

except as hereinafter provided. contents insurance covers your possessions . Liability Section • Bodily Injury and Property Damage Liability and related legal expenses The Insurer will pay those sums that the Insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. for example. fitted kitchens etc.can it reasonably be removed and taken to another homeIf it can. clothes etc. because this may work out cheaper than insuring both contents and buildings together. the needs and resources of their policyholders and that the policyholders understand what they are buying. furniture. then it is part of the "contents" and it will not generally be covered by a buildings policy. lightning. Buildings policies usually include outbuildings . flood. occurring during the currency of the policy. “All Risks” Section • Sudden and accidental direct physical destruction of or damage to the property or theft whilst on the Insured’s premises directly and wholly attributable to any cause. If a worker is killed while working.your television set. Workers compensation insurance serves two purposes: It assures that injured workers get medical care and compensation for a portion of the income they lose while they are unable to return to work and it usually protects employers from lawsuits by workers injured while working. etc.. typhoon. explosion. just about everything you would take with you if you moved. • Workers receive benefits regardless of who was at fault in the accident. Nevertheless.• • • buildings insurance from another. such as fire. workers compensation provides death benefits for the worker’s dependents. the maximum compensation is 5years earnings or 60 months as per the Workers Compensation Act 2000. Workers Compensation Act • Employers are legally obligated to take reasonable care to assure that their workplaces are safe. The test is . the scope of cover may vary so that. an accidental damage claim might succeed under one section but not under the other. accidents happen. . breakage. garden sheds etc. plus permanent "fixtures and fittings" such as baths. Even if a policyholder has both contents and buildings insurance. • Here this cover is limited to domestic servants such as house helpers. In other words.garages. buildings insurance covers the structure of the building. gardeners and in case of death.

atmospheric conditions. or other specified places occasioned by robbery. Money Insurance • Money Insurance policy provides cover for loss of money in transit between the insured's premises and bank or post office. any time during policy period. • Extended to cover loss of money in hands of senior officials or at their residence • Policy issued on transit basis or annual carry • Key Clause Warrant that insurer is not liable for loss from safe/strong room opened by a key which has been left on the insured’s premises whilst closed for business .Accident Classes of Insurance 1. tear. insects etc Mechanical or electrical breakdown or derangement unless caused by accidental external means Breakage of glass and other brittle items unless caused by theft Money and related items Theft from motor vehicles unless property is contained in a locked boot or locked locker forming an integral part of the vehicle. gradual deterioration. occurring during the currency of the policy. theft or any other fortuitous cause. flood. etc. Wear. 2. • The policy also covers loss by burglary or housebreaking whilst money is retained at Insured's premises in safe(s) or strong room. 3. explosion. breakage. postal orders etc. • Loss of money to include cash. Theft Insurance • Covers items that is lost destroyed or damaged by Burglary or Housebreaking or robbery (theft following upon an actual forcible and violent entry of or exit from the premises by the person or persons committing such theft) or Hold-up (Forcible removal by actual or threatened violence against the insured or employee(s) of the Insured). “All Risks” Policy • • • • • • • • Sudden and accidental direct physical destruction of or damage to the property or theft whilst on the Insured’s premises directly and wholly attributable to any cause. bank and currency notes. vermin. Widest cover but has following exclusions. • Any damage caused to premises resulting from burglary and/ or housebreaking or any attempt threat.. such as fire. Some item require valuation to be insured. cheques. except as hereinafter provided. typhoon. lightning.

scaffolding. Single transit is issued on short period basis and cover expires when goods reach destination. Cover also includes• • • • • • • Contract works (permanent and temporary works forming part of the contract) Removable of debris Professional Fees Free issue materials Construction Equipment (Site offices. individual vehicle and declaration. Claim payment is based on current replacement of the glass Exclusions include. Individual basis is as above Declaration basis is for many consignments. Insured declare expected annual carrying. loaded or unloaded from any road train or temporary house. Cover can be insured on basis of single transit. All risks cover on damage to insured goods by fire. . loss of money from unattended vehicles and loss outside the geographical limits. shortages due to error and omission. Any damage to frames Costs of removal or replacement of any fittings or fixtures Damage by fire or explosion. theft and accidental damage while in transit. Contractors All Risk  Contractors “all risks” insurance provides “all risks” cover in respect of both temporary and permanent work in the course of their construction. premium is a provisional and adjusted at year end. utilities etc) Construction machinery (earthmoving equipment.• Escort Warranty stipulates amount to be carried with or without armed guard • Exclusions include loss from fraud by employees discovered within 3 days. site vehicles) Principal’s existing property Third party liability: Bodily injury & Property Damage Goods in Transit • • • • • • Covering against all risk of loss and/or damage to the insured goods whilst in transit by road and/or rail. cranes. Plate Glass Insurance • • • • • • Provides all risks cover to accidental breakages to fixed glass windows etc. loss of money from strong rooms due to use of a key. silos. storage sheds.

loss of market. precious metal. generators. economisers and other pressure vessels. Engine plant. Engineering Insurances • • • • • • • • The engineering insurance cover is intended to provide compensation the insured in event of an insured plant being damaged by an extraneous cause or through its own breakdown. watches dangerous goods. or if you perform work at places of work owned by third parties. Under engineering insurance. goods and service lifts. Lifting machinery for example cranes of all types. depreciation or defects in goods insured Loss due to theft or pilferage by employees Loss or damage due to confiscation by the state. It will also cover the potentially . There are several types of liability insurances and some of these include: Public Liability • • A public liability insurance policy will protect your business from claims made by third parties for injuries to the person. Loss or damage due to delay . these are covered under the boiler explosion policy. for example electric motors. or medical fees in the case of injuries. livestock Loss/damage fro wear and tear. Steam receivers. or damage to property caused as a result of your business activities. Miscellaneous plant.gas and oil engines and other plants subject to mechanical breakdown Electrical plant.• • • • • • Exclusions are. for example steam turbines and refrigerators plant Computers are covered under computer insurance policies. or any consequent loss Loss to money and other treasury notes. for example steam engine . You should consider taking out public liability insurance if members of the public visit you at your place of work. transformers and all kinds of electrical equipment either rotating plant or stationery plant. tractors and passengers. steam boilers. or property belonging to another business or individual. A typical policy will pay for the cost of putting right any damage. the plant insured is grouped into six headings: Boilers and pressure plant for example. Liability Insurance Liability Public liability insurance will protect your business if you cause an injury to a member of the public. These items are insured under crane policy or lift policy.

and the penalties for failing to comply are severe. related expenses. The policy will cover the costs of treating the injury caused to the customer. In law suits. One of your customers trips over some boxes of stock you carelessly left in an aisle. Medical practioneers. here are some classic scenarios where public liability cover will protect your business: • An electrician re-wires a building as part of a general refurbishment. He doesn’t fit the fuse box correctly. • If you offer your knowledge. • You own a shop. skills or advice as part of your profession – either as a self-employed individual or for a company – you should consider taking out professional indemnity insurance. Public liability insurance does not cover claims made by any of your employees. If you manufacture products to sell to the public it is a good idea to get product liability insurance so you can avoid unpleasant situations like a lawsuit that could possibly put you into bankruptcy or cause you to go out of business. Professional Indemnity • Professional indemnity insurance covers the cost of compensating clients for loss or damage resulting from negligent services or advice provided by a business or an individual. altering or servicing such manufactured products. Accountants. Insurance brokers etc • Professional indemnity insurance protects you against claims for loss or damage made by clients or third parties as a result of the impact . Examples of public liability insurance claims To help illustrate how public liability insurance works in practice. Architects.• • crippling costs of legally representing your business. resulting in several circuits getting burnt out. • Some professions are required to have professional indemnity insurance by their professional bodies or regulators – these include: solicitors. product liability insurance shields claims or product defects of any nature. Product Liability Insurance • Product liability insurance protects companies in the event that the products they have manufactured injure someone or cause property damage. and any damages your business is found to owe in relation to a claim. You are legally required to have this cover in place if you employ anyone. supplying. • Others covered include: losses or damages during testing.

Here. Permanent disability. during the course of work and while travelling directly back home until the employee reaches home. Temporary total disability and medical expenses • The Act does not compel employers to insure but to compensate which therefore leaves the employer with two options: Either: to retain the risk and pay from their resources the amount of compensation or to transfer the risk to an insurance company which option most employers choose. Compensation claims can be brought against you even if you provided a service or offered advice for free. Workers Compensation • According to the Workers Act it is a statutory obligation for every employer to compensate employees who sustain bodily injury by accident or disease arising out of and in course of their employment. fever etc) are not covered unless they are as a result of an occupational disease (Ref: 54 scheduled diseases) • Others benefits include: Death. stomachaches. Benefit for Death/Permanent Incapacity should be 5 years earnings plus cover for the 54 scheduled diseases) • Capital Sum Insured can be based on employees’ earnings or fixed . • Cover attaches from the time an employee sets off from home directly to work. Group Personal Accident • Scope of cover similar to Workers Compensation • Optional to Workers Compensation but needs to satisfy the requirements of the Workers Act (i.e. and in the course of the employment. headaches. • Policy also covers employees when upcountry/out of station on official duty • Policy covers employees only while in Uganda (Now modified to include all other countries) • Natural diseases (malaria. Employers Liability • • The policy protects the insured against legal liability to pay compensation. this caters for cases where an employee’s feels that the employer was negligent much as one would have been compensated under the workers compensation policy.of negligent services you provided or negligent advice you offered. claimants’ costs and expenses in respect of bodily injury sustained by employees arising out of.

hospital bed charges. surgeons and anaesthetist fees. Fidelity Guarantee • The policy covers the employer in respect of any direct financial loss which he may suffer as a result of employees’ dishonesty. . diagnostic procedures such as xrays. Guarantee Insurance These are policies which cover the failure of a party to perform a particular task or breach of trust.60 months earnings/5 years earnings Total Permanent Disablement (Unable to engage in any gainful employment) -60 months earnings/5 years earnings Partial Permanent Disablement (Not able to attend to a substantial part of one’s work permanently) . • Covers infidelity of employees/staff (theft of cash/stocks belonging to the insured by employees/staff) • Cover can be arranged on individual (named) basis or blanket basis Bonds Insurance There are several classes under this sub category and these include.%-ages of 60 months earnings as set out in the Act Temporary Total Disablement (unable to attend to work temporarily) – actual weekly earnings up to 96 months Temporary Partial Disablement (unable to attend to a substantial part of work) – percentages of actual weekly earnings up to 96 months Medical expenses including hospitalization – Limit agreed to per employee Funeral Expenses – limit agreed to per employee Transport and Incidental costs – limit agreed to per employee Artificial Appliances – limit agreed to per employee Evacuation costs – limit agreed to per employee Health Insurance • This policy covers the cost of treatment for illness and other medical conditions. It covers doctors.• Cover is on 24 Hour basis (both at work and at leisure) unlike Workers Compensation which covers employees only whilst on duty • Cover is on worldwide basis unlike Workers Compensation which is country specific • Policy is recommended for permanent employees from supervisory roles upwards Benefits: • • • • • • • • • • Death. drugs and dressings. cost of theatre and nursing costs etc.

this is not the case under . the insurance company undertakes to pay the costs of deportation / or the consequences of his/ her bad conduct.Performance bond • Performance bonds are used when a contractor fails to complete contractual work Bid / Tender bond • Bid or tender bonds ate used when the cost of new tendering has to be incurred. fire and theft level of insurance cover includes loss or damage arising from fire or theft butt only to the insured vehicle. The term comprehensive is somehow misleading. Third party only/ Enhanced Third Party  A third party is any person outside the insurance contract. Third party. Should one fail to be of good conduct. Fire and Theft  In addition to the full third party cover. as well as for the death and injury is included. however. Such cover is wider than the act only cover in that liability for property damage. though it implies that every conceivable risk is covered. Comprehensive Cover  The comprehensive insurance level provides very wide cover. Court bonds given to administer estate Customs bonds given as a guarantee to pay customs duty Warehouse bond given as a guarantee to pay taxes for goods in the warehouses Transport Insurances Motor Insurance Act Only  Act only is the minimum cover required by the insurance (motor vehicle Third party Risks) Act 1989. This level of insurance covers the insured’s legal liability towards third parties arising out of the use of a motor vehicle. should the highest bidder fail to take up an offer Immigration / security bonds • Immigration or security bonds are issued to non citizens whose conduct the insurer guarantees. the third party.

except from one part to another. In addition for full third party . • Commercial vehicle Insurance offered to goods carrying vehicles buses and taxis used for transportation of goods and passengers for commercial purposes. . • Special Types are used for specialized activities like construction ie cranes. domestic and pleasure purposes  Used by insured or representative on business  Carriage of goods for hire and reward  Usually confined to small cars used in a business Commercial Vehicles • Used for transportation of Goods and services and people and other commercial activities. They may be exempt from compulsory insurance because they are rarely used on public roads. Commercial Vehicle and Motor Cycle Private Cars Private Car policies are have restrictions to use as follows.  The most commonly known are Private Cars.  Social. Motor Cycles • • • • • Should be mechanically propelled and includes scooters and moppets Basic cover is same as private car with the following differences. it covers own damage and also malicious damage.comprehensive policies. (expand) • Agricultural and Forestry Vehicles Insurance which are normally restricted to moving in agricultural land. Theft of accessories and spare parts only covered if the MC is stolen at the same and theft cover. or medical services like ambulances fire engines etc. No additional benefits like personal accident or medical expenses are normally offered Accessories and spare parts are covered only while on machine COMESA Yellow Card • • Initiated by UNCTAD in 1976 for CEMESA countries as a scheme for Africa COMESA replaced PTA countries and established in 1994. • Motor Insurance (internal and external) offered to companies involved in selling or repairing motor vehicles.

then the cover ceases and no money is payable. Should the life assured survive to the end of the term. Lloyds supplied info to merchants on tonnage. accidents and legal liabilities. life business is being revitalized. theft and collusion Aviation Insurance • Aviation insurance is a class that requires a lot of reinsurance & technical expertise. theft.• • • • • • • • • • • Idea was to promote regional integration through trade and human resource. We have individual/individual or group life policies Term Assurance • Term assurance is the simplest and oldest form of assurance and provides for payment of the sum assured on death. life business was greatly affected. Marine covers are perils of the sea and include fire. . Inter-state traffic movements Accidents victims to be compensated promptly Act as incentive for trade facilitation Enhance greater cooperation amongst insurance companies in the trade members A national bureau govt-designated in each country is responsible for management and control of cards Handling Agency dealing with claims was established Every Underwriter to submit monthly returns National Bureaus in each country to be notified and handle all claims at handling fee of 3% of claim Handling Agency can settle claims up to US$3 000 Marine Insurance • • • • • • • Oldest form of insurance leading to the birth of Lloyds Corporation. Unlike in non life insurance. Long term business is called benefit policies. provided death occurs within a specified term. Purpose was to allow motorists passage through member countries by producing a yellow card as a proof of minimum TP motor vehicle insurance required by laws in countries to facilitate. Large aircraft are insured with established markets in Europe and most of these policies are taken to outside reinsurers with no or little participation of the local reinsurers on such risks. LIFE ASSURANCE  In Uganda. Hull and liability of the vessel Cargo that is goods carried Freight which cost of transporting or hiring a ship. It had picked up during the 1960’s and 1980’s but due to the economic turmoil. in life assurance the event being assured is to happen that is death or maturity. The policies are issued to cover the hull (the aircraft) liability to passengers and the liability to others that is fire. routes age of ship etc Marine policy has the following covers.

 Organizing a whole scheme .  managing funds of a pension scheme  Providing life assurance benefits for widows of scheme members who die before retirement. Whole Life  The sum assured is payable to the death of the assured whenever it occurs. Group Life Assurance . Although premium payment may cease at retirement. Endowment • • • An endowment policy is a contract designed to pay a lump sum after a specific term (on its 'maturity') or upon the death of the policy holder. Typical maturities are ten. Policies are usually issued insuring death in serve benefits for employees who do not reach retirement age. the policy will still be in force and if the assured dies. Some policies also pay out in the case of critical illness. Life assurance companies perform a vital role in running pension schemes by. Policies are typically include those with unitized with-profits funds Endowments can be cashed in early (or surrendered) and the holder then receives the surrender value which is determined by the insurance company depending on how long the policy has been running and how much has been paid into it.• This type of cover is cheap. Superannuation insurance businesses The term superannuation refers to retirement benefits and group life assurances and some of these include: Retirement Benefits Schemes The aim of the insured pension scheme is to ensure that some form of pension is available on retirement. fifteen or twenty years up to a certain age limit. It is suitable for young married men earning low incomes. Benefits for these eligible for the scheme relate to service and salary. later the policy will provide the benefit to the assured’s representatives. Premiums are payable throughout the life of the assured or until the retirement of the assured. inventing funds and administering the pension.receiving premium contributions. The aim is to provide reasonable sum for their wives in the event of the husbands’ deaths.

or professionals in a common group. From the above we can infer the following are the characteristics of Group Life Insurance • • • there must be a group of people to be insured which should have something in common other than the purpose of obtaining insurance there must be a Master Policy Holder who will retain the contract on the behalf of the member and the carriers Such covers are typically available at a discount to the respective individual rates. association or labor organization) to its workers or members. By purchasing coverage through a provider on a "wholesale" basis for its members. employees of a common employer. For example. Offered by an employer or large-scale entity (i.  Joint and last survivor annuity. Group life insurance is typically offered as a piece of a larger employer or membership benefit package. . usually who are the members of societies. Forms of Annuities  The annuity can start immediately ( that is immediate annuity or may start at a future date ( that is deferred annuity ) . or at any other time.e.• • Covers a group of people. if a person with a large sum of money wants to provide on income for oneself when on retirement. It is not a life assurance. payable while two people husband and wife are alive and on death of one. she or he can approach a life assurance company and purchase an annuity. will continue at the same rate or less rate on the life of survivor Investment Policies This is where insurance companies collect large sums of money some of which is used for investment purposes. Annuities  An annuity is a method by which a person can receive a yearly sum in return for payment to an insurance company for a sum of money. the coverage costs each individual worker/member much less than if they had to purchase an individual policy. it can provide an annuity for the life of the person ( the annuitant) or may be payable irrespective of death for a certain period ( annuity certain )  Guaranteed annuity provides annuity for a guaranteed period until the annuitant dies  Reversionary annuity provides for payment to annuitant that is wife or death of another named person that is husband. though life assurance companies deal with it and is based on actuarial principles.

Bonds pay out income monthly or annually or accumulates interest to make cash payment at the end of the term. The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in various markets instruments (debt and equity) depending on members appetite The sum assured payable on death or maturity will depend on returns from investment. A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes. • The idea behind this type of mandatory coverage is to protect the wellbeing of those who would otherwise be adversely affected if the events covered in the terms of the policies were to take place. it is an investment rather than insurance in the general sense. However. Compulsory Insurances • Compulsory insurance is any type of insurance coverage that is required by law before individuals or businesses may engage in certain activities. • • This is basically a combination of insurance as well as investment. They have a small element of life insurance that is paid out after your death. Terms of one to five years are common and the bond may be linked to some form of shares. • Bond Investment • • • An investment bond is generally a single premium life insurance policy. An insurance company will take the premium and invest it for income and or capital gains which accrue until a policyholder withdraws money from the policy. . property or cash fund operated by the insurer.Unit Linked These are policies where the values of policy are linked to the investment performance • Is a product offered by insurance companies that unlike a pure insurance policy gives investors the benefits of both insurance and investment under a single integrated plan.

the National Health Insurance Scheme Common Policy Terms & Conditions PREMIUM RATES • • • • • The amount paid or payable for an insurance policy It is in fulfillment of one of the conditions of a contract ( Consideration.Reasons for compulsory insurances • • • • Provision of certain forms of insurance which are compulsory. The percentage varies widely depending on coverage. It requires general insurers to file a manual for the premium rates in use with the Commissioner’s office Life premium rates have to be approved by an actuary Commission Rates • Fee paid to an agent or insurance sales-person as a percentage of the policy premium. the insurer.Benefit Vs Detriment) The Insurance Act does not impose standardized rates. the insured is availed all the expertise all the expertise of the insurer in the loss prevention. and the marketing methods. The funds must be available to compensate injured third parties. • The Act restricts the payment of commission to a portion of premiums of the business solicited by the agent.motor third party insurance and professional indemnity policy for insurance brokers. This is detailed in the 11th schedule of the Act. A few examples include Class of Business Commission Rate • Most individual life policies 50% of the 1st year premium • 20% of 2nd year premium • 5% of the 3rd to 10th year Premium . State regulation need standardization in terms of benefits to policyholders of such compulsory insurances Most of the compulsory insurances are in areas which tend to concern the public such as health and old age and these are services Governments are expected to provide services By making insurance compulsory. Examples of Compulsory insurances in Uganda • • • • • The The Motor Vehicle Insurance (Third Party Risks) Act 1989 The Workers Compensation Act 2000 The National Social Security Fund (NSSSF) Professional Indemnity for insurance Brokers Now yet to be enacted.

by whatever name called. and papers attached thereto and made a part thereof. This therefore calls for a policy document.• Motor 12. Parts of a policy document • • • • • • Heading Preamble/ Recital clause Operative clause Exclusions Conditions Policy schedule . A contract is made between the underwriter and the proposer.5% of annual premium • Liability 20% of annual premium • Theft 10% of annual premium • Personal Accident 20% of annual premium • Workmens’ Compensation 20% of annual premium NOTE: These are maximum rates and insurers are free to pay rates below to their Agents POLICY TERMS • The written contract effecting insurance. This is a statement issued by the insurer as evidence of an existing contract between the insurer and the insured. • No policy shall be issued on the life or lives of any person or persons without insurable interest Policy Document • • • • • • • After the submission of the proposal. endorsements. and including all clause. Underwriting is done and risk is accepted. or the certificate thereof. There is need for evidence of the existence of that contract. • The Act provides some of the following as the terms which have to be incorporated in policies of insurance • Sum insured. riders. premium and any other sum of money mentioned in the policies shall be in Kenya shillings except in cases of marine and aviation policies which may be stated in other currencies. They are usually pre-printed and contain standard terms but additional clauses and typed materials can be added. It includes the proposal form which is the basis for the contract. It states the terms and conditions of the contract. Cover Notes • • • The proposer should be able to read and understand all the contents of the policy Courts of law will always refer to this document in case of any dispute.

the type of losses that the insurer will not pay are stipulated. If policy conditions are not met. o Express o Implied Express conditions • These are conditions set by the insurer and they appear in the policy for example o Cancellation . duties and obligations required for coverage. o The risks are uninsurable o Inadequacy of premiums Conditions • • • • These are provisions. o Name of the insurer o Address of the place where business is conducted o Company logo Preamble/ Recital clause • • • This section emphasises that the proposal is the basis of the contract and it is included in the policy Premiums have been paid or there is an agreement to pay A brief introduction of the type of perils covered. rules of conduct.• Signature and attestation Heading • This includes. Such losses may be excluded because of. the insurer can deny the claim. It gives in detail the perils covered under the contract as well as the type of losses the insurer undertakes to pay. the insurer may not pay the claim. It is the heart of the contract. o Precedent to the contract o Subsequent to the contract o Precedent to liability In case any of them is broken. Operative clause • • • It is also known as the insuring clause. Exclusions • • Under this part/ section. They can be. They are actions that the insured must take or continue to take for the contract to be in force Conditions apply in different ways.

Implied conditions • • • • These are conditions that must be complied with but they don’t appear in the policy for example: The insured has insurable interest The parties have disclosed all material facts The subject matter of insurance can be identified Policy schedule This is where the policy is personalised. It makes the policy personal. . to cover the risk until an official insurance policy document can be prepared and delivered. Cover note • • It’s a document evidencing issuance of an insurance policy and it gives a summary of the information given in the certificate of insurance. • Name of the insured • Address of the insured • Nature of the business • Period of insurance • Sum insured • Premiums • Policy number • References to special exclusions and conditions Signature and attestation clause • In this section. It is a document used to verify that an entity is insured. usually for a month. • It entitles its holder to demand that the policy operates.o Subrogation o Resolution of a dispute regarding the amount of claim o Contribution in case of other policies on the same loss. It includes information like. an authorized official signs the document to make it legally binding. and the appropriate premium paid to the insurance company Insurance certificate • • An insurance certificate is a representation of the insurance policy taken out. In insurance a cover note is issued to an applicant.

or the insured's beneficiary. An endorsement can add coverage for acts or things that are not covered as a part of the original policy and can be added at the inception of the policy or later during the term of the policy. It is the ability for the Insured to pay up the premium Claims Process & Settlement • A demand made by the insured.limit per incident/aggregate • Excess • Deductible. • There is no obligation on either party to renew the contract • Renewal means new terms and conditions • Renewal premiums are usually required before the policy expires but some days of grace can be given Sum Insured • Maximum liability on the subject matter of insurance • Premium rate applied on the sum insured.done voluntarily with the aim of premium discount and is usually larger than excess . for payment of the benefits as provided by the policy Indemnity • Methods of providing indemnity: • Cash/Repair/Replacement/Reinstatement (New for old) • Exception to this principle are Life and personal accident contracts. addendum. Its a provision added to an existing insurance policy to modify its coverage. This is documentary evidence of a change in the wording of an existing policy or qualification of wording if the policy is written on restricted terms. (Benefit contracts). OTHER FACTORS WHICH LIMIT INDEMNITY • Policy limit. • Determination of limits of liability on policies whose exposure cannot be determined in advance eg PL • For Life Policies. Also Known As: Rider. Renewal • Most contracts are annual but can be renewed on expiry. attachment.Endorsement • • • • • An endorsement is a written document attached to an insurance policy that modifies the policy by changing the coverage afforded under the policy. Amount payable is normally agreed to/specified at inception.

Liability and Casualty Claims which involves property and personal injury are a bit complex and sometimes require specialist opinion. address. address.under insurance Claim Forms • • • • • • • • • Claim Forms Questionnaire designed to extract details of loss from insured. advise on policy liability and negotiate quantum Check if peril is covered in the policy Check on insurable interest and ensure that all conditions and warranties are complied with.e. Investigate cause of loss Circumstances and extent of loss Mitigation of loss and protection of salvage Advices way forward in settling the claim Check policy conditions. sum insured. make etc Claim file will be opened showing claim number.insurer bears whole loss provided the franchise is exceeded Average. period of insurance. Role is to investigate cause of loss.• • Franchise. negotiate and agree on quantum on large claims. Loss adjusters do the following. without admitting liability to avoid unnecessary hardship to insured Insurer can also make ex-gratia payments for commercial reasons When claim is agreed at the a Discharge Voucher is signed by insured to discharge all liabilities to the insurer Role of Loss Adjusters • • • • • • • • • • • • • An independent claims specialist engaged by the insurer to investigate. warranties Collect evidence and advise on recovery (subrogation) Verify sums insured. repair estimate Should be completed in full and signed by insured Information on claim form is compared with proposal forms to check for non-disclosure of material facts Insured may deal with on a “without prejudice basis” i. policy number. ascertain liability and confirm the policy conditions and warranties were complied with. Deal with many insurance companies therefore experience is much broader Produces various reports starting from initial interim and final recommendations. Types of Claims • • Property Claims/Material Damage are straightforward and easily measurable. estimate of cost. circumstances. They normally involve lawyers . Contains info on name.

• • Motor Third Party Liability Claims. Damage arises from two fronts. third party property damage and third party personal injury . These arise as a result to exposures to road users.