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Chapter 7 - Nature and Structure of Insurance Documents

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39 views

Chapter 7 - Nature and Structure of Insurance Documents

Uploaded by

Tengku Hafiy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Nature and Structure of Insurance

Documents
Learning Objectives
Upon completion of this chapter, you should be able to:

• Identify some common insurance documents.


• Describe the usage and purpose of various insurance documents.
• Describe the structure of proposal forms and policy forms.
• Define some common provision contained in some of the documents.
Chapter Overview
• Proposal Form
• Policy Form
• Cover Note
• Certificate of Insurance
• Endorsement
• Renewal Notice
• Claim Form
• Completion / Satisfaction Note & Discharge Voucher
Proposal Form
• A document which is drafted by the insurer containing questions designed
to elicit material information about the particular risk proposed for
insurance.

• To be completed by the proposer and answers to questions will enable the


insurer to assess the proposed risks.
Functions of Proposal Form
• The standards type of form is likely to produce the required
Convenience
information more speedily.

• Most proposal forms contain details of the cover available


Advertising under the company’s standard policy for that class of
insurance.

• The completed proposal form constitutes an offer by the


Offer
proposer to the insurer.

• If the contract is completed, the proposal becomes the


Basis of a contract
basis on which the contract is formed.
Structure of Most Proposal Form
Items Descriptions
Proposer’s Name Questions mainly for identification and communication purposes.

Proposer’s Address Question mainly for communication and under writing purposes.

Proposer’s Occupation Proposer’s occupation may indicate physical and/or moral


hazard.

Insurance History If previous insurer(s) declined or refused to renew, details of their


experience would be important for making underwriting decision.

Loss History Information may indicate poor physical and/or moral hazard.

Subject matter of Question on description and situation of subject matter of


insurance insurance important for identification and underwriting decision.
Policy Form
• A document produced by the insurer, setting out the terms of contract.

• The policy is not the contract but merely the written evidence of it.

• A policy has to be stamped in accordance with the provisions of the Stamp


Act 1949; otherwise it cannot be used as evidence in the court.
Structure Of Scheduled Policy
The Heading This provides the full name and the registered addition of the insurance company at the top
of the front page.
The Preamble This clause is basically the introduction to the contract. It recites the circumstances in
(or Recital Clause) which the policy will operate.

The Operative Clause This clause details the insured perils for which the insured or his legal representatives are
indemnified or which the policy benefits are payable (the cover provided by the policy).
Exception The exception will indicate any restrictions / exclusions in the scope of the insurance.

Schedule This section contains all the type-written information applicable to the particular contract.
The schedule gives the policy number, the insured’s name, premium, sum insured etc.

Attestation or This makes provision for the insurer to affirm the conditions of the contract as set out. The
Signature Clause policy is signed by authorized official of the insurer.

Conditions All policies are subject to conditions. Policy conditions can be classified in two main ways:
 Express and implied conditions.
 Conditions precedent and conditions subsequent.
Classification of Policy Conditions
1. Express conditions are conditions which actually appear in the policy
document. Example: claim condition and cancellation which can be found in
the policy.

2. Implied conditions are conditions which the law reads into any contract of
insurance but which does not appear in the contract.
There are four of such conditions
• that the insured has insurable interest.
• that the parties observe the duty of utmost good haith (U.G.F).
• that the subject matter insured is actually in existence.
• that the subject matter can be identified.
Conditions Precedent and Conditions
Subsequent
Conditions precedent to the policy
• These conditions which must be fulfilled before the contract can be valid. E.g. implied
condition of U.G.F.

Conditions precedent to liability


• These are conditions which must be fulfilled before the insurer is liable for a claim. E.g.
claim condition.

Conditions subsequent to the policy


• Conditions which must be fulfilled if the contract is to continue once it has become
binding. E.g. an express condition often found in personal accident policy requiring the
insured to notify any change in occupation.
Cover note
• A document issued in advance of the policy because it may take some time before the
policy is issued.

• It may also be issued during the course of negotiations to provide cover on a provisional
basis.

• Cover notes are used quite extensively in several classes of insurance.

• Cover notes are usually issued for a limited period say,14 days or one month.

• Cover notes may be in printed form, with provision for particular details of the risk and
future policy to be issued. Cover notes are sometimes made in handwritten or typed slips.
Certificate of insurance
1. A certificate of insurance is normally issued when insurance is
compulsory.

2. The certificate certifies that the insurance is issued by an authorized


insurer in accordance with the requirements of the law.
Endorsement
• Means of recording on policy document alterations to its terms and
conditions during its currency or to vary or extend the printed wording at
the time of issue.

• In the former instance, an endorsement avoids the need to terminate the


original policy and issue a new one in replacement.
Renewal Notice
• The renewal of a policy for a further period is not a continuance of the
insurance but is in effect new contract.

• In this respect a renewal notice advises the insured to notify the insurer of
its renewal insertions.

• Renewal notices frequently contain a warning on the duty to disclose


changes affecting the policy inception or last renewal date.
Claim Form
• The purpose of a claim form is to identify the insured, the insured’s interest
in the damaged or lost property, the cause, the time, and date of loss and
also to quantify the amount of loss.

• Claim form for some classes of insurance seek information regarding any
action taken by the insured to recover from other parties responsible, as
well as the reporting of the loss to the insurance company.
Completion / Satisfaction Note &
Discharge Voucher
Completion / Satisfaction Note
• Used by the insurer to indicate that the repair had been completed and
that the insurer could pay the garage’s account.

Discharge Voucher (DV)


• DV is an acknowledgement by the person legally entitled to receive the
payment from the policy that the sum payable is in full satisfaction of all
claims at law which he may have under the policy.
Thank You
UBM588
Introduction to Risk and Insurance

MOHD FAIZOL RIZAL BIN MOHD RASID

Resource Person UBM588


Faculty of Business and Management
Universiti Teknologi MARA
Puncak Alam Campus
42300, Selangor Darul Ehsan
[email protected]
+6013-6925402

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