WAEC SSCE - Insurance - 2015 (Case Study and Essay)

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Meaning of the terms under marine insurance:

1. Hull policy: This is the marine policy that covers loss of or damage to the ship or vessel itself, together with its machinery, equipment and fittings, against marine perils such as sinking, collision, stranding and fire.
2. Cargo policy: This is the policy that covers loss of or damage to the goods or merchandise carried on board the vessel during the voyage, protecting the cargo owner against perils such as water damage, jettison, theft and total loss.
3. Freight policy: This is the policy that covers the shipowner against the loss of freight, that is the money payable to him for carrying the cargo, which he would forfeit if the cargo or ship were lost before the freight was earned.
4. Marine perils: These are the dangers or fortuitous events peculiar to a sea voyage against which marine insurance provides cover, for example storms, collision, stranding, fire, jettison, piracy and barratry.
5. Average: In marine insurance average means a partial loss. It is of two kinds: particular average, a partial loss falling on one interest alone, and general average, a loss deliberately and reasonably incurred for the common safety of the whole adventure, which is shared rateably by all the interests saved.

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(a) Seven contents of a certificate of insurance

1. The name and address of the insured (policyholder).
2. The registration number or particulars of the vehicle insured.
3. The effective date and time from which the cover begins.
4. The date of expiry of the insurance.
5. The persons or classes of persons entitled to drive.
6. The limitations as to use (for example social, domestic and pleasure purposes).
7. The conditions under which the policyholder may drive other vehicles.
8. A statement that the policy satisfies the requirements of the relevant Road Traffic law, with the insurer's name and signature.

(b) Four characteristics of a cover note

1. It is a temporary document issued as evidence of insurance pending the preparation of the full policy or certificate.
2. It is valid only for a short, limited period, usually about thirty days.
3. It gives the insured immediate cover from the moment of issue.
4. It can be cancelled or replaced once the formal policy document is issued, and it may be renewed if the policy is delayed.

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Three types of endowment policy

1. Pure (ordinary) endowment policy: Under this policy the sum assured is paid on the death of the life assured within the term or on his survival to the end of the fixed term, whichever comes first. It combines protection with saving and is the basic form of endowment.
2. With-profit (participating) endowment policy: This is an endowment under which, in addition to the guaranteed sum assured, the policyholder shares in the profits of the insurer through bonuses added to the policy. It pays a larger amount at maturity but attracts a higher premium.
3. Without-profit (non-participating) endowment policy: Under this policy only the fixed sum assured is payable at death or maturity, with no share in the insurer's profits. Its premiums are lower than those of the with-profit type.

Other recognised forms include the joint-life endowment, taken on two lives (for example husband and wife) with the sum payable on the first death or at maturity, and the double endowment, which pays twice the sum assured on survival to maturity but the single sum on earlier death.

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Meaning of the terms as used in insurance:

1. Re-insurance: This is an arrangement whereby an insurance company transfers part of the risk it has accepted to another insurance company. It helps to spread risks and protects the insurer from very large losses.
2. Loss adjusters: These are claims specialists appointed by insurance companies to investigate losses, determine the cause and extent of damage, establish whether the insurer is liable and recommend the amount payable as compensation.
3. Underwriters: These are individuals or companies that assess risks proposed for insurance. They decide whether to accept or reject the risk and, where accepted, determine the premium, terms and conditions of the policy.
4. Brokers: These are independent insurance intermediaries who act mainly on behalf of the insured. They advise clients on suitable insurance policies, obtain cover from insurance companies and assist clients in placing and negotiating claims.
5. Assessor: This is a person who examines insured property or damage to it in order to estimate its value or the extent of loss. The assessor helps in determining the amount of compensation or claim due to the insured.

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(a) Employer's liability insurance

Employer's liability insurance is a class of insurance that covers an employer against legal liability to pay compensation for death, bodily injury, disease or ill-health suffered by his employees in the course of and arising out of their employment. It protects the employer from claims brought by workers who are injured or fall sick because of their work.

(b) Three benefits that can be covered under employer's liability

1. Compensation for death or permanent disability of an employee arising from a work accident.
2. Medical, hospital and treatment expenses incurred by the injured employee.
3. Loss of earnings or wages during the period the employee is unable to work, and legal costs of defending claims.

(c) Three causes of business interruption

1. Fire or explosion that destroys premises, plant or stock, forcing operations to stop.
2. Breakdown of essential machinery or equipment.
3. Natural perils such as flood, storm or earthquake damaging the business premises.
4. Loss of power supply or of key raw materials halting production.

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Five principles of insurance

1. Utmost good faith (uberrimae fidei): Both parties to the contract, and especially the proposer, must disclose all material facts truthfully and completely. Concealment or misrepresentation of a material fact makes the contract voidable at the option of the insurer.
2. Insurable interest: The insured must have a legal or financial relationship with the subject matter such that he benefits from its safety and suffers loss from its damage or destruction. Without insurable interest the contract is void because it would amount to gambling.
3. Indemnity: The insurer undertakes to restore the insured, so far as money can, to the exact financial position he occupied immediately before the loss, no better and no worse. This prevents the insured from making a profit out of a loss. (It does not apply to life and personal accident.)
4. Subrogation: After indemnifying the insured, the insurer takes over the insured's legal rights and remedies against any third party responsible for the loss, so that the insurer can recover its outlay. This supports the principle of indemnity.
5. Contribution: Where the same risk is insured with more than one insurer, each insurer shares the loss rateably in proportion to the sum it insured, so that the insured recovers only the actual loss once and not more.

A further principle is proximate cause, under which the insurer is liable only where the nearest, most effective cause of the loss is a peril insured against.