I wrote a series of articles on the 6 Fundamental Principles of Insurance we all need to know. Please refer to these topics from this link. 6 FUNDAMENTAL PRINCIPLES OF INSURANCE YOU NEED TO KNOW
Today I am starting another series of articles on: How to Benefit from the 4 Parties in the Insurance Market.
A lot of people are not lettered about the concept of insurance; some have erroneous beliefs about insurance which has shielded them from enjoying the benefits of insurance. I will like to crave your indulgence to take out time to read up each article on this topic.
At the end of the series, everyone will have a better understanding of the role of each party in the insurance industry and how the Insurance market is of immense benefits to the insuring public.
The 4 PARTIES IN THE INSURANCE MARKET
These are:
THE INSURER
THE INSURED
THE INTERMEDIARY
THE REGULATOR
THE INSURER
Who is the insurer?
The insurer is an organization or an individual that is into the business of underwriting insurance risks.
What is underwriting?
Underwriting is a process of accessing a risk to determine if such risk will be insured, not insured or insured under a certain condition and at what rate of premium such risk will be insured.
From the above definition of underwriting, an insurer is usually referred to as an underwriter.
Therefore, an insurance company is an underwriting company. The insurers in the insurance industry are usually called the underwriters. The insurers are those parties in the insurance market who promise to compensate their customers for their loss on the agreement that the customers pay premium ahead before the loss occur.
COLLABORATORS WITH THE INSURERS
These are:
- THE LOSS ASSESSORS
- THE LOSS ADJUSTERS
- THE ACTUARIES
I call them collaborators because their work influence the underwriting or claim decision of the insurers.
THE LOSS ASSESSORS
The loss assessors are oftentimes referred to as The Surveyors in the insurance industry. These are the professionals who examine the risk that is brought for insurance cover. They evaluate the risk and submit the report to the insurer to take appropriate underwriting decisions on it.
Let us examine these scenarios:
- A man wants to insure his house against fire and burglary for N100 million. After the proposal has been submitted to the insurer, the insurer appoints a loss assessor to go for inspection. The loss assessor comes back with the following report.
REPORT ON THE RISK UNDER REVIEW
| NAME OF THE RISK | ADDRESS OF THE RISK | DESCRIPTION OF THE RISK | REMARKS |
| A Residential building belonging to Mr Agbaje | 4 Ajegunle Street, off Olodi-Apapa, Lagos. | The house is located in the densely populated area in Ajegunle. It is on an open street where there is history of regular robbery attack on residential buildings. There is a bear parlor down the street where the armed robbers use as a hideout whenever they want to carry out their operations. | The risk may be insured at a higher rate of premium because of the likelihood of robbery occurrence. |
- Another man wants to insure his house against fire and burglary for the same value of N100 million. The loss assessor comes back with the following report.
REPORT ON THE RISK UNDER REVIEW
| NAME OF THE RISK | ADDRESS OF THE RISK | DESCRIPTION OF THE RISK | REMARKS |
| A Residential building belonging to Mr Tony | House Number 7B. Victoria Garden City, Lekki-Lagos. | The house is located in a secured estate. The Estate gate is being manned by the security experts. Every visitor to the Estate is required to fill a visitor’s form to monitor the number of people who goes in and out of the Estate There has been no record of robbery attack in the Estate for the past 10 years. | Accept the risk with a discount in premium rate. |
From the survey reports above, the insurer will charge different premium rate to insure the same value of the risk based on the loss assessor’s reports.
THE LOSS ADJUSTERS
The loss adjusters work with underwriters during the claim processing. When a loss occurs, the insurer will conduct an investigation on the cause of the loss. i.e. The proximate cause, THE 3RD FUNDAMENTAL PRINCIPLE OF INSURANCE. please refer to this link to refresh on it.
A loss adjuster is a professional that is being appointed to conduct the investigation. They evaluate the cost of the loss and report back to the insurer to make an informed decision on the claim settlement.
THE ACTUARIES
The actuaries are the professionals who work with life insurers to calculate the premium rate which will be equitable to the risk that is being brought to the insurance pool.
The simple definition of insurance is: A pool of homogeneous risks.
In life insurance, the actuaries are the professionals that set up a rating table to calculate the premium that will be charged for all categories of ages of every individual that needs a life insurance cover. For instance, if a 50year old man is paying the same premium as a 30-year-old man for the same value of life cover, we say such premium is non-equitable to the pool. An equitable premium is paying the appropriate premium rate for similar risks.
To wrap up my discussion about the insurer as a party in the insurance market, It is my expectation that having read this article up till here, you now have a better understanding of who an insurer or an underwriter is? You are now better informed about the professionals who collaborate with the insurer to take objective decisions about underwriting.
My next article will feature The Insured and how the insured benefits from the insurer.
Engage the services of professionals @ Bimbol Consultancy Services for all your insurance needs.
Email: bimbolconsultancy@gmail.com
Mobile: 08026940605
1 comment
Howdy! This post could not be written any better!
Reading this post reminds me of my previous room mate!
He always kept chatting about this. I will forward
this write-up to him. Fairly certain he will have a good read.
Thank you for sharing!