FUNDAMENTAL OF INSURANCE.pdf
Content
FUNDAMENTAL OF INSURANCE (INS 312/210)
TITLE
BUSINESS PROPOSAL OF PRUDENTIAL ASSURANCE MALAYSIA BERHAD
PREPARED BY
Muhammad Hisyamuddin Amin
Muhammad Adib b Azizan
Muhammad Shazarul Hafiz b Ghazali
Muhd Zul Amirul Amin b Che Mohd Zohari
Muhd Aliff Omar b Shamsudin
2012653284
2012299106
2012607112
2012619246
2012245998
PREPARED TO
EN HADZLI B ISHAK
LECTURER OF BUSINESS MANAGEMENT DEPARTMENT
UiTM KEDAH
SUBMISSION DATE
24 MARCH 2015
TABLE OF CONTENTS
NO
PARTICULAR
PAGE
1
Table of Contents
2
2
Vision, mission and Core Value
3
3
Risk and Nature of Risk
4
4
Principle of Insurance
8
5
Type of Insurance and Coverage
13
6
Example of Claim Form
19
REMARKS
2
1.0 HISTORY OF PRUDENTIAL ASSURANCE MALAYSIA
Prudential has a long history in Asia, having maintained a presence in the region for over
eighty years. Today, we are one of Asia's leading life insurers and one of the region's largest
asset management companies. With our significant portfolio of businesses, multi-channel
distribution capabilities, strong strategic partnerships, customer-centric products and services,
and considerable brand equity, Prudential maintains an unrivalled position for continued growth
in Asia.
Prudential Assurance Malaysia Berhad (PAMB) was established in Malaysia in 1924. For
the financial year ended 31 December 2014, it achieved RM1.12 billion in new business annual
premium equivalent (APE). New business sales include both life insurance sales and Takaful
contributions. Takaful products distributed by PAMB’s Wealth Planners and agents are
underwritten by Prudential BSN Takaful Berhad.
As a leading and innovative insurer, PAMB serves the savings, protection and investment
needs of Malaysians by offering a full range of financial solutions through its 45 branches
nationwide. With more than 1,500 employees, PAMB is committed to helping people achieve
their hopes and dreams for a brighter and financially secure future.
PAMB is an indirect wholly owned subsidiary of UK-based Prudential plc. Established in
London in 1848, Prudential plc is incorporated in England and Wales, and its affiliated
companies constitute one of the world's leading financial services groups. It provides insurance
and financial services through its subsidiaries and affiliates throughout the world. Prudential plc
has been in existence for 167 years, and has £496 billion in assets under management as at 31
December 2014.
Prudential Assurance Malaysia Berhad is not affiliated in any manner with Prudential
Financial, Inc, a company whose principal place of business is in the United States of America.
3
2.0 VISION, MISSION AND CORE VALUE OF PRUDENTIAL
Our Vision
The No.1 Insurer in the Hearts and Minds of our People and Customers.
Our Mission
Financial Freedom and Peace of Mind for All Malaysians.
Innovate & Create
Opportunities
Demonstrate Care
& Understanding
We pursue new
initiatives and
challenge ourselves to
create opportunities
We understand and care about the needs
and expectations of our employees,
customers, agents, partners and
shareholders
Collaborate
We encourage
openness, mutual trust,
and teamwork
throughout the
organization.
Deliver Excellence
We fulfill our promises and deliver on a
clear set of expectations, maintaining our
integrity at all times
4
3.0 RISK AND NATURE OF RISK
Risk can be defined as the uncertainty which concerning the occurrence of a
loss. The uncertainty refers to a state of mind characterized by doubt which is based on
a lack of knowledge about what will or will not happen in the future. The probability
refers to an area or study which measure the chance of occurrence of a particular
event.
The probability theory can be divided into three which is:
I.
Priori probability
Which can be determined when the total numbers of possible event are
known.
II.
Empirical probability
III.
Can be determined by the basis of historical data.
Judgmental probability
Is determined based on the person predicting the outcome.
The other related concept that relate with the risk is:
1. Hazard
Hazard is conditions that increase the chance of loss. It can be divided
into three which is physical hazard, moral hazard and morale hazard. For
physical hazard is a physical condition that’s increase the condition of
loss. For moral hazard, it is a character defect in an individual that
increase the chance of loss. And finally is morale hazard that is
carelessness or indifferent to loss because of existing of insurance.
2. Peril
Peril can be determined as the cause of loss.
3. Loss
Loss is a reduction or disappearance of economic value.
5
Classification of risk
Can be divided into three which is:
A. Pure and speculative risk
Pure risks exist when there is either possibility of loss or no loss.
Speculative risks exist when there is possibility of profit, loss or no
loss.
B. Fundamental risk and particular risk
Fundamental risk is a risk that affects the entire economy or large
number of persons or groups within the economy.
Particular risk is a risk that effect only individual not the entire
economy or community.
C. Financial risk and no financial risk
Financial risk is when the outcome can be measured in monetary
terms.
Non-financial risk is when the outcome cannot be measured
financially
Type of Pure risk.
a) Personal risk
Contain the risk of premature death, risk of old age, risk of poor health,
risk of unemployment.
b) Property risk
Contain the direct loss, indirect loss and extra expense.
c) Liability risk
Under our legal system, you can be held legally liable if you do something
that result in bodily injury or property damage to someone else.
6
d) Risk arising from failure of others
When another person agrees to perform a service for you, he/she
undertakes an obligation that you hope will be met. When the person’s
failure meet this obligation would result in your financial loss.
Type of risk exposure
i.
Physical asset exposure
ii.
Financial asset exposure
iii.
Liability exposure
iv.
Human asset exposure
Burden of risk
Financial loss
Larger emergency fund
Loss of certain goods and services
Worry and fear
7
4.0 PRINCIPLE OF INSURANCE
Nature of contract is a fundamental principle of insurance contract. An insurance contract comes
into existence when one party makes an offer or proposal of a contract and the other party
accepts the proposal. A contract should be simple to be a valid contract. The person entering into
a contract should enter with his free consent.
There are 6 type of Principle of Insurance which is
Principle of Insurable Interest
Principle of Utmost Good Faith
Principle of Indemnity
Principle of Subrogation
Principle of Contribution
Principle of Proximate Cause
Principle of Insurable Interest
The principle of insurable interest states that the person getting insured must have insurable
interest in the object of insurance. A person has an insurable interest when the physical existence
of the insured object gives him some gain but its non-existence will give him a loss. In simple
words, the insured person must suffer some financial loss by the damage of the insured object.
For example, the owner of a boat has insurable interest in the boat because he is getting income
from it. But, if he sells it, he will not have an insurable interest left in that boat.
From above example, we can conclude that, ownership plays a very crucial role in evaluating
insurable interest. Every person has an insurable interest in his own life. A merchant has
insurable interest in his business of trading. Similarly, a creditor has insurable interest in his
debtor.
Terminology of Insurable Interest
The insured must have insurable interest in the subject matter of insurance.
In life insurance it refers to the life insured.
8
In marine insurance it is enough if the insurable interests exist only at the time of
occurrence of the loss.
In fire and general insurance it must be present at the time of taking policy and also at
the time of occurrence of loss.
The owner of the party is said to have insurable interest as long as he is the owner of the
it.
It is applicable to all contracts of insurance.
Principle of Utmost Good Faith
Principle of Utmost Good Faith is a very basic and first primary principle of insurance.
According to this principle, the insurance contract must be signed by both parties (i.e insurer and
insured) in an absolute good faith or belief or trust.
The person getting insured must willingly disclose and surrender to the insurer his complete true
information regarding the subject matter of insurance. The insurer's liability gets void (i.e legally
revoked or cancelled) if any facts, about the subject matter of insurance are either omitted,
hidden, falsified or presented in a wrong manner by the insured.
The principle of Utmost Good Faith applies to all types of insurance contracts.
Terminology of Utmost Good Faith
Both the parties i.e. the insurer or the insured should a good faith towards each other.
The insurer must provide the insurer complete, correct and clear information of subject
matter
The insurer must provide the insurer complete, correct and clear information regarding
terms and conditions of the contract.
This principle is applicable to all contracts of insurance i.e. life, fire and marine
insurance.
Principle of Indemnity
Indemnity means security, protection and compensation given against damage, loss or injury.
According to the principle of indemnity, an insurance contract is signed only for getting
protection against unpredicted financial losses arising due to future uncertainties. Insurance
9
contract is not made for making profit else its sole purpose is to give compensation in case of any
damage or loss.
In an insurance contract, the amount of compensations paid is in proportion to the incurred
losses. The amount of compensations is limited to the amount assured or the actual losses,
whichever is less. The compensation must not be less or more than the actual damage.
Compensation is not paid if the specified loss does not happen due to a particular reason during a
specific time period. Thus, insurance is only for giving protection against losses and not for
making profit.
However, in case of life insurance, the principle of indemnity does not apply because the value
of human life cannot be measured in terms of money.
Terminology of Indemnity
Indemnity means a guarantee or assurance to put the insured in the same position in
which he was immediately prior to the happening of the uncertain event. The insurer
undertakes to make good the loss
It is applicable to fire, marine and other general insurance.
Under this the insurer agrees to compensate the insured for the actual loss suffered.
Principle of Subrogation
Subrogation means substituting one creditor for another.
Principle of Subrogation is an extension and another corollary of the principle of indemnity. It
also applies to all contracts of indemnity.
According to the principle of subrogation, when the insured is compensated for the losses due to
damage to his insured property, then the ownership right of such property shifts to the insurer.
This principle is applicable only when the damaged property has any value after the event
causing the damage. The insurer can benefit out of subrogation rights only to the extent of the
amount he has paid to the insured as compensation.
For example, Mr. Jalal insures his house for RM 1 million. The house is totally destroyed by the
negligence of his neighbour Mr. Amir. The insurance company shall settle the claim of Mr. Jalal
for RM 1 million. At the same time, it can file a law suit against Mr. Amir for RM 1.2 million,
the market value of the house. If insurance company wins the case and collects RM 1.2 million
10
from Mr. Amir, then the insurance company will retain RM 1 million (which it has already paid
to Mr. Jalal) plus other expenses such as court fees. The balance amount, if any will be given to
Mr. Jalal, the insured.
Terminology of Subrogation
As per this principle after the insured is compensated for the loss due to damage to
property insured, then the right of ownership of such property passes on to the insurer.
This principle is corollary of the principle of indemnity and is applicable to all contracts
of indemnity.
Principle of Contribution
Principle of Contribution is a corollary of the principle of indemnity. It applies to all contracts of
indemnity, if the insured has taken out more than one policy on the same subject matter.
According to this principle, the insured can claim the compensation only to the extent of actual
loss either from all insurers or from any one insurer. If one insurer pays full compensation then
that insurer can claim proportionate claim from the other insurers.
For example, Mr. John insures his property worth RM 100,000 with two insurers "Prudential
Insurance" for RM 90,000 and "Kurnia Insurance" for RM 60,000. John's actual property
destroyed is worth RM 60,000, then Mr. John can claim the full loss of RM 60,000 either from
Prudential Insurance or Kurnia Insurance, or he can claim RM 36,000 from Prudential and RM
24,000 from Kurnia Insurance.
So, if the insured claims full amount of compensation from one insurer then he cannot claim the
same compensation from other insurer and make a profit. Secondly, if one insurance company
pays the full compensation then it can recover the proportionate contribution from the other
insurance company
Terminology of Contribution
The principle is a corollary of the principle of indemnity.
It is applicable to all contracts of indemnity.
Under this principle the insured can claim the compensation only to the extent of actual
loss either from any one insurer or all the insurers.
11
Principle of Proximate Cause
Principle of Proximate Cause, means when a loss is caused by more than one causes, the
proximate or the nearest or the closest cause should be taken into consideration to decide the
liability of the insurer.
The principle states that to find out whether the insurer is liable for the loss or not, the proximate
(closest) and not the remote (farest) must be looked into.
For example, a cargo ship's base was punctured due to rats and so sea water entered and cargo
was damaged. Here there are two causes for the damage of the cargo ship - (i) The cargo ship
getting punctured because of rats, and (ii) The sea water entering ship through puncture. The risk
of sea water is insured but the first cause is not. The nearest cause of damage is sea water which
is insured and therefore the insurer must pay the compensation.
However, in case of life insurance, the principle of proximate cause does not apply. Whatever
may be the reason of death (whether a natural death or an unnatural death) the insurer is liable to
pay the amount of insurance
Terminology of Proximate Cause
The loss of insured property can be caused by more than one cause in succession to
another.
The property may be insured against some cause and not against all cause
In such an instance, the proximate cause or nearest cause of loss is to be found out.
If the proximate cause is the one which is insured against the insurance company is
bound to pay the compensation and vice versa.
12
5.0 TYPE OF INSURANCE AND COVERAGE
5.1 Crisis Cover Plus.
Comprehensive coverage covering critical illness and more.
Crisis Cover Plus is a level term assurance that provides protection upon death, total and permanent
disability and upon diagnosis of any of the 36 critical illnesses which is:
4. AIDS as a result of a blood transfusion
5. Alzheimer’s Disease
6. Aorta Surgery
7. APALLIC Syndrome
8. Aplastic Anemia
9. Bacterial Meningitis
10. Benign Brain Tumor
11. Blindness
12. Brain Surgery
13. Cancer
14. Chronic Liver Disease
15. Chronic Lung Disease
16. Coma
17. Coronary Artery Disease Requiring Surgery
18. Deafness
19. Encephalitis
20. Full Blown AIDS
21. Fulminant Viral Hepatitis
22. Heart Attack
23. Heart Valve Replacement or Repair
24. Kidney Failure
25. Loss of Limbs
26. Loss of Speech
27. Major Organ Transplant
28. Major Burns
29. Major Head Trauma
13
30. Motor Neuron Disease
31. Multiple Sclerosis
32. Muscular Dystrophy
33. Other Serious Coronary Artery Disease
34. Paralysis
35. Parkinson’s Disease
36. Poliomyelitis
37. Primary Pulmonary Arterial Hypertension
38. Stroke
39. Terminal Illness
This plan also has the flexibility to allow you to add on optional benefits such as medical & health
optional benefits to enhance your protection.
Benefit
Crisis Cover Plus is a level term assurance. This plan will pay out a lump sum benefit upon the event of
death or total permanent disability or diagnosis of any of the 36 critical illnesses.You can choose to
enhance your protection by add on optional benefits.
Crisis Cover Plus pays:
1.
Death benefit
2.
Total and permanent disability before 60 years old or age 60 next birthday
3.
Critical illnesses upon diagnosis of one of the 36 critical illnesses.
Who can apply:
Anyone between the ages of 1-60 years on their next birthday can take up this plan.
14
5.2 Crisis Defender & Early Crisis Protector
Shield yourself with Prudential's comprehensive critical illnesses coverage.
Crisis strikes from time to time. With increasing healthcare cost, even a minor incident can
change one’s lifestyle. Introducing the Crisis Defender and Early Crisis Protector, riders designed to offer
financial support right from the early stages of critical illnesses. Crisis Defender is an optional benefit
that is designed to pay a lump sum benefit upon diagnosis of any of the 36 critical illnesses. Any claims
on this benefit will not affect the coverage of your basic plan. Early Crisis Protector is an optional benefit
under Crisis Defender that provides Early Stage Critical Illness Benefit and Special Benefit.
Benefit
Crisis Defender and Early Crisis Protector provide you:
1) The Shields that cover 85 illnesses, conditions and medical procedures in total.
With Crisis Defender and Early Crisis Protector, you are widely covered for a range of 46 Low and
Medium Severity illnesses/conditions/medical procedures, and 36 High Severity Critical Illnesses. The
benefits don't stop there! Early Crisis Protector also covers 3 specified diabetic complications.
2) Claim up to 6 times
You can claim up to 6 times under Crisis Defender and Early Crisis Protector.
3) No waiting in between claims
There is no waiting in between claims. We will pay the subsequent claims immediately if you develop
other covered illness or the illness deteriorates further.
Early Crisis Protector also provides additional one-off lump sum benefit for the following specified
diabetic’s complications:
a) Surgery for Type 2 Diabetic retinopathy;
b) Limb amputation due to Type 2 Diabetic Complications; or
c) Severe diabetic nephropathy resulting in kidney failure.
15
Application of Crisis Defender
We will pay you the benefit if you are diagnosed with a critical illness covered under Crisis Defender. In
the event of critical illness before age 5 next birthdays, the proportion of the Crisis Defender sum
assured payable is 20%, 40%, 60%, 80% and 100% for age 1, 2, 3, 4 and 5 next birthday respectively.
Early Crisis Protector
We will pay you the benefit if you are diagnosed with the illnesses, conditions or medical procedures
covered under Early Crisis Protector. You are allowed to make multiple claim as long as the sum assured
has not been fully paid. Once we have paid a claim, a subsequent claim of the same or lower severity
within the same category will no longer be covered.
However, for a subsequent claim of higher severity within the same category, we will pay you:
i. The difference between the relevant amount for the subsequent claim and the amount we paid to you
for the previous claim(s); or
ii. The reduced amount of benefit at the time the subsequent claim is made; whichever is lower.
For a subsequent claim from a different illness category, we shall pay you:
i. The relevant amount for the subsequent claim; or
ii. The reduced amount of benefit at the time the subsequent claim is made; whichever is lower.
Note: We will pay your claims as long as you have survived 30 days after being diagnosed with the
illnesses or conditions covered under Crisis Defender and Early Crisis Protector.
Premium Information
The premium that you need to pay will depend on your age, gender and smoking status. You would have
to pay premiums throughout the duration of the benefits.
Premiums can be paid yearly, half-yearly, quarterly or monthly via Auto Debit, Credit Card, Cash or
Cheque.
16
Who can Apply :
Crisis Defender: Anyone between 1 to 70 years old on their next birthday.
Early Crisis Protector: Anyone between 19 to 70 years old on their next birthday.
56.3 PRUhealth
PRUhealth is a regular premium medical rider plan that reimburses medical expenses incurred in
the event of hospitalisation. Not only does this plan reward policyholders with No Claims Bonus (NCB)
for those who do not make any claims for the year, you now have the option to choose the level of
deductible (the fixed amount you must pay out of the total medical fees, excluding cost of daily room &
board, for any one disability during a 90-day period) of RM3,000 or RM10,000 other than the default
coinsurance option.
5.4 PRUmultiple crisis cover
PRUmultiple crisis cover -A plan that allows you to bounce back after a critical illness...again and
again.PRUmultiple crisis cover is a term plan that recognizes the need for enhanced protection and
peace of mind. This plan not only covers you against death, Total and Permanent Disability (TPD), it also
protects you against a wide range of critical illnesses and allows you to make MULTIPLE critical illness
and cancer claims.
But not only that, you may also add on supplementary benefits that will further enhance your
PRUmultiple crisis cover plan, which means you can customize this plan with features that would best
suit your needs
5.5 PRUcancer plan
PRUcancer plan is a regular premium non-participating plan that provides coverage up to age
80. This plan provides comprehensive coverage against early stage cancer, cancer, as well as
compassionate benefit upon death. Upon maturity of the policy, a lump sum benefit will be payable.
17
5.6 PRUflexi med
Enjoy greater flexibility with a medical card that lets you choose what you want.
PRUflexi med is a regular premium investment-linked medical rider that reimburses medical expenses
incurred in the event of hospitalization.
5.7 PRUlady
PRUlady is a regular premium non-participating life insurance plan that provides you with
protection against the financial impact arising from female illnesses, death or disability up to expiry age
of 70 years old. In addition, it also pays Life Change Benefit for various life events. Upon maturity, 100%
of total premiums that you have paid (excluding extra premium charged for sub-standard life and
service tax, if applicable) will be refunded to you. Furthermore, it protects all mothers-to-be against
pregnancy complications and their child against congenital anomalies.
5.8 PRUvalue med
Get MORE with PRUvalue med.
Wouldn’t it be great if there is a medical plan that not only promises you a lifetime of assurance for all
your medical needs, but also helps you save with more benefits?
Introducing, PRUvalue med, a medical plan that combines extraordinary values and savings. With
PRUvalue med, you will never have to choose between your health and finances as your healthcare
needs are what matters most to us.
18
6.0 CLAIM PROCESS
How to submit a claim
19
20
TITLE
BUSINESS PROPOSAL OF PRUDENTIAL ASSURANCE MALAYSIA BERHAD
PREPARED BY
Muhammad Hisyamuddin Amin
Muhammad Adib b Azizan
Muhammad Shazarul Hafiz b Ghazali
Muhd Zul Amirul Amin b Che Mohd Zohari
Muhd Aliff Omar b Shamsudin
2012653284
2012299106
2012607112
2012619246
2012245998
PREPARED TO
EN HADZLI B ISHAK
LECTURER OF BUSINESS MANAGEMENT DEPARTMENT
UiTM KEDAH
SUBMISSION DATE
24 MARCH 2015
TABLE OF CONTENTS
NO
PARTICULAR
PAGE
1
Table of Contents
2
2
Vision, mission and Core Value
3
3
Risk and Nature of Risk
4
4
Principle of Insurance
8
5
Type of Insurance and Coverage
13
6
Example of Claim Form
19
REMARKS
2
1.0 HISTORY OF PRUDENTIAL ASSURANCE MALAYSIA
Prudential has a long history in Asia, having maintained a presence in the region for over
eighty years. Today, we are one of Asia's leading life insurers and one of the region's largest
asset management companies. With our significant portfolio of businesses, multi-channel
distribution capabilities, strong strategic partnerships, customer-centric products and services,
and considerable brand equity, Prudential maintains an unrivalled position for continued growth
in Asia.
Prudential Assurance Malaysia Berhad (PAMB) was established in Malaysia in 1924. For
the financial year ended 31 December 2014, it achieved RM1.12 billion in new business annual
premium equivalent (APE). New business sales include both life insurance sales and Takaful
contributions. Takaful products distributed by PAMB’s Wealth Planners and agents are
underwritten by Prudential BSN Takaful Berhad.
As a leading and innovative insurer, PAMB serves the savings, protection and investment
needs of Malaysians by offering a full range of financial solutions through its 45 branches
nationwide. With more than 1,500 employees, PAMB is committed to helping people achieve
their hopes and dreams for a brighter and financially secure future.
PAMB is an indirect wholly owned subsidiary of UK-based Prudential plc. Established in
London in 1848, Prudential plc is incorporated in England and Wales, and its affiliated
companies constitute one of the world's leading financial services groups. It provides insurance
and financial services through its subsidiaries and affiliates throughout the world. Prudential plc
has been in existence for 167 years, and has £496 billion in assets under management as at 31
December 2014.
Prudential Assurance Malaysia Berhad is not affiliated in any manner with Prudential
Financial, Inc, a company whose principal place of business is in the United States of America.
3
2.0 VISION, MISSION AND CORE VALUE OF PRUDENTIAL
Our Vision
The No.1 Insurer in the Hearts and Minds of our People and Customers.
Our Mission
Financial Freedom and Peace of Mind for All Malaysians.
Innovate & Create
Opportunities
Demonstrate Care
& Understanding
We pursue new
initiatives and
challenge ourselves to
create opportunities
We understand and care about the needs
and expectations of our employees,
customers, agents, partners and
shareholders
Collaborate
We encourage
openness, mutual trust,
and teamwork
throughout the
organization.
Deliver Excellence
We fulfill our promises and deliver on a
clear set of expectations, maintaining our
integrity at all times
4
3.0 RISK AND NATURE OF RISK
Risk can be defined as the uncertainty which concerning the occurrence of a
loss. The uncertainty refers to a state of mind characterized by doubt which is based on
a lack of knowledge about what will or will not happen in the future. The probability
refers to an area or study which measure the chance of occurrence of a particular
event.
The probability theory can be divided into three which is:
I.
Priori probability
Which can be determined when the total numbers of possible event are
known.
II.
Empirical probability
III.
Can be determined by the basis of historical data.
Judgmental probability
Is determined based on the person predicting the outcome.
The other related concept that relate with the risk is:
1. Hazard
Hazard is conditions that increase the chance of loss. It can be divided
into three which is physical hazard, moral hazard and morale hazard. For
physical hazard is a physical condition that’s increase the condition of
loss. For moral hazard, it is a character defect in an individual that
increase the chance of loss. And finally is morale hazard that is
carelessness or indifferent to loss because of existing of insurance.
2. Peril
Peril can be determined as the cause of loss.
3. Loss
Loss is a reduction or disappearance of economic value.
5
Classification of risk
Can be divided into three which is:
A. Pure and speculative risk
Pure risks exist when there is either possibility of loss or no loss.
Speculative risks exist when there is possibility of profit, loss or no
loss.
B. Fundamental risk and particular risk
Fundamental risk is a risk that affects the entire economy or large
number of persons or groups within the economy.
Particular risk is a risk that effect only individual not the entire
economy or community.
C. Financial risk and no financial risk
Financial risk is when the outcome can be measured in monetary
terms.
Non-financial risk is when the outcome cannot be measured
financially
Type of Pure risk.
a) Personal risk
Contain the risk of premature death, risk of old age, risk of poor health,
risk of unemployment.
b) Property risk
Contain the direct loss, indirect loss and extra expense.
c) Liability risk
Under our legal system, you can be held legally liable if you do something
that result in bodily injury or property damage to someone else.
6
d) Risk arising from failure of others
When another person agrees to perform a service for you, he/she
undertakes an obligation that you hope will be met. When the person’s
failure meet this obligation would result in your financial loss.
Type of risk exposure
i.
Physical asset exposure
ii.
Financial asset exposure
iii.
Liability exposure
iv.
Human asset exposure
Burden of risk
Financial loss
Larger emergency fund
Loss of certain goods and services
Worry and fear
7
4.0 PRINCIPLE OF INSURANCE
Nature of contract is a fundamental principle of insurance contract. An insurance contract comes
into existence when one party makes an offer or proposal of a contract and the other party
accepts the proposal. A contract should be simple to be a valid contract. The person entering into
a contract should enter with his free consent.
There are 6 type of Principle of Insurance which is
Principle of Insurable Interest
Principle of Utmost Good Faith
Principle of Indemnity
Principle of Subrogation
Principle of Contribution
Principle of Proximate Cause
Principle of Insurable Interest
The principle of insurable interest states that the person getting insured must have insurable
interest in the object of insurance. A person has an insurable interest when the physical existence
of the insured object gives him some gain but its non-existence will give him a loss. In simple
words, the insured person must suffer some financial loss by the damage of the insured object.
For example, the owner of a boat has insurable interest in the boat because he is getting income
from it. But, if he sells it, he will not have an insurable interest left in that boat.
From above example, we can conclude that, ownership plays a very crucial role in evaluating
insurable interest. Every person has an insurable interest in his own life. A merchant has
insurable interest in his business of trading. Similarly, a creditor has insurable interest in his
debtor.
Terminology of Insurable Interest
The insured must have insurable interest in the subject matter of insurance.
In life insurance it refers to the life insured.
8
In marine insurance it is enough if the insurable interests exist only at the time of
occurrence of the loss.
In fire and general insurance it must be present at the time of taking policy and also at
the time of occurrence of loss.
The owner of the party is said to have insurable interest as long as he is the owner of the
it.
It is applicable to all contracts of insurance.
Principle of Utmost Good Faith
Principle of Utmost Good Faith is a very basic and first primary principle of insurance.
According to this principle, the insurance contract must be signed by both parties (i.e insurer and
insured) in an absolute good faith or belief or trust.
The person getting insured must willingly disclose and surrender to the insurer his complete true
information regarding the subject matter of insurance. The insurer's liability gets void (i.e legally
revoked or cancelled) if any facts, about the subject matter of insurance are either omitted,
hidden, falsified or presented in a wrong manner by the insured.
The principle of Utmost Good Faith applies to all types of insurance contracts.
Terminology of Utmost Good Faith
Both the parties i.e. the insurer or the insured should a good faith towards each other.
The insurer must provide the insurer complete, correct and clear information of subject
matter
The insurer must provide the insurer complete, correct and clear information regarding
terms and conditions of the contract.
This principle is applicable to all contracts of insurance i.e. life, fire and marine
insurance.
Principle of Indemnity
Indemnity means security, protection and compensation given against damage, loss or injury.
According to the principle of indemnity, an insurance contract is signed only for getting
protection against unpredicted financial losses arising due to future uncertainties. Insurance
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contract is not made for making profit else its sole purpose is to give compensation in case of any
damage or loss.
In an insurance contract, the amount of compensations paid is in proportion to the incurred
losses. The amount of compensations is limited to the amount assured or the actual losses,
whichever is less. The compensation must not be less or more than the actual damage.
Compensation is not paid if the specified loss does not happen due to a particular reason during a
specific time period. Thus, insurance is only for giving protection against losses and not for
making profit.
However, in case of life insurance, the principle of indemnity does not apply because the value
of human life cannot be measured in terms of money.
Terminology of Indemnity
Indemnity means a guarantee or assurance to put the insured in the same position in
which he was immediately prior to the happening of the uncertain event. The insurer
undertakes to make good the loss
It is applicable to fire, marine and other general insurance.
Under this the insurer agrees to compensate the insured for the actual loss suffered.
Principle of Subrogation
Subrogation means substituting one creditor for another.
Principle of Subrogation is an extension and another corollary of the principle of indemnity. It
also applies to all contracts of indemnity.
According to the principle of subrogation, when the insured is compensated for the losses due to
damage to his insured property, then the ownership right of such property shifts to the insurer.
This principle is applicable only when the damaged property has any value after the event
causing the damage. The insurer can benefit out of subrogation rights only to the extent of the
amount he has paid to the insured as compensation.
For example, Mr. Jalal insures his house for RM 1 million. The house is totally destroyed by the
negligence of his neighbour Mr. Amir. The insurance company shall settle the claim of Mr. Jalal
for RM 1 million. At the same time, it can file a law suit against Mr. Amir for RM 1.2 million,
the market value of the house. If insurance company wins the case and collects RM 1.2 million
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from Mr. Amir, then the insurance company will retain RM 1 million (which it has already paid
to Mr. Jalal) plus other expenses such as court fees. The balance amount, if any will be given to
Mr. Jalal, the insured.
Terminology of Subrogation
As per this principle after the insured is compensated for the loss due to damage to
property insured, then the right of ownership of such property passes on to the insurer.
This principle is corollary of the principle of indemnity and is applicable to all contracts
of indemnity.
Principle of Contribution
Principle of Contribution is a corollary of the principle of indemnity. It applies to all contracts of
indemnity, if the insured has taken out more than one policy on the same subject matter.
According to this principle, the insured can claim the compensation only to the extent of actual
loss either from all insurers or from any one insurer. If one insurer pays full compensation then
that insurer can claim proportionate claim from the other insurers.
For example, Mr. John insures his property worth RM 100,000 with two insurers "Prudential
Insurance" for RM 90,000 and "Kurnia Insurance" for RM 60,000. John's actual property
destroyed is worth RM 60,000, then Mr. John can claim the full loss of RM 60,000 either from
Prudential Insurance or Kurnia Insurance, or he can claim RM 36,000 from Prudential and RM
24,000 from Kurnia Insurance.
So, if the insured claims full amount of compensation from one insurer then he cannot claim the
same compensation from other insurer and make a profit. Secondly, if one insurance company
pays the full compensation then it can recover the proportionate contribution from the other
insurance company
Terminology of Contribution
The principle is a corollary of the principle of indemnity.
It is applicable to all contracts of indemnity.
Under this principle the insured can claim the compensation only to the extent of actual
loss either from any one insurer or all the insurers.
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Principle of Proximate Cause
Principle of Proximate Cause, means when a loss is caused by more than one causes, the
proximate or the nearest or the closest cause should be taken into consideration to decide the
liability of the insurer.
The principle states that to find out whether the insurer is liable for the loss or not, the proximate
(closest) and not the remote (farest) must be looked into.
For example, a cargo ship's base was punctured due to rats and so sea water entered and cargo
was damaged. Here there are two causes for the damage of the cargo ship - (i) The cargo ship
getting punctured because of rats, and (ii) The sea water entering ship through puncture. The risk
of sea water is insured but the first cause is not. The nearest cause of damage is sea water which
is insured and therefore the insurer must pay the compensation.
However, in case of life insurance, the principle of proximate cause does not apply. Whatever
may be the reason of death (whether a natural death or an unnatural death) the insurer is liable to
pay the amount of insurance
Terminology of Proximate Cause
The loss of insured property can be caused by more than one cause in succession to
another.
The property may be insured against some cause and not against all cause
In such an instance, the proximate cause or nearest cause of loss is to be found out.
If the proximate cause is the one which is insured against the insurance company is
bound to pay the compensation and vice versa.
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5.0 TYPE OF INSURANCE AND COVERAGE
5.1 Crisis Cover Plus.
Comprehensive coverage covering critical illness and more.
Crisis Cover Plus is a level term assurance that provides protection upon death, total and permanent
disability and upon diagnosis of any of the 36 critical illnesses which is:
4. AIDS as a result of a blood transfusion
5. Alzheimer’s Disease
6. Aorta Surgery
7. APALLIC Syndrome
8. Aplastic Anemia
9. Bacterial Meningitis
10. Benign Brain Tumor
11. Blindness
12. Brain Surgery
13. Cancer
14. Chronic Liver Disease
15. Chronic Lung Disease
16. Coma
17. Coronary Artery Disease Requiring Surgery
18. Deafness
19. Encephalitis
20. Full Blown AIDS
21. Fulminant Viral Hepatitis
22. Heart Attack
23. Heart Valve Replacement or Repair
24. Kidney Failure
25. Loss of Limbs
26. Loss of Speech
27. Major Organ Transplant
28. Major Burns
29. Major Head Trauma
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30. Motor Neuron Disease
31. Multiple Sclerosis
32. Muscular Dystrophy
33. Other Serious Coronary Artery Disease
34. Paralysis
35. Parkinson’s Disease
36. Poliomyelitis
37. Primary Pulmonary Arterial Hypertension
38. Stroke
39. Terminal Illness
This plan also has the flexibility to allow you to add on optional benefits such as medical & health
optional benefits to enhance your protection.
Benefit
Crisis Cover Plus is a level term assurance. This plan will pay out a lump sum benefit upon the event of
death or total permanent disability or diagnosis of any of the 36 critical illnesses.You can choose to
enhance your protection by add on optional benefits.
Crisis Cover Plus pays:
1.
Death benefit
2.
Total and permanent disability before 60 years old or age 60 next birthday
3.
Critical illnesses upon diagnosis of one of the 36 critical illnesses.
Who can apply:
Anyone between the ages of 1-60 years on their next birthday can take up this plan.
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5.2 Crisis Defender & Early Crisis Protector
Shield yourself with Prudential's comprehensive critical illnesses coverage.
Crisis strikes from time to time. With increasing healthcare cost, even a minor incident can
change one’s lifestyle. Introducing the Crisis Defender and Early Crisis Protector, riders designed to offer
financial support right from the early stages of critical illnesses. Crisis Defender is an optional benefit
that is designed to pay a lump sum benefit upon diagnosis of any of the 36 critical illnesses. Any claims
on this benefit will not affect the coverage of your basic plan. Early Crisis Protector is an optional benefit
under Crisis Defender that provides Early Stage Critical Illness Benefit and Special Benefit.
Benefit
Crisis Defender and Early Crisis Protector provide you:
1) The Shields that cover 85 illnesses, conditions and medical procedures in total.
With Crisis Defender and Early Crisis Protector, you are widely covered for a range of 46 Low and
Medium Severity illnesses/conditions/medical procedures, and 36 High Severity Critical Illnesses. The
benefits don't stop there! Early Crisis Protector also covers 3 specified diabetic complications.
2) Claim up to 6 times
You can claim up to 6 times under Crisis Defender and Early Crisis Protector.
3) No waiting in between claims
There is no waiting in between claims. We will pay the subsequent claims immediately if you develop
other covered illness or the illness deteriorates further.
Early Crisis Protector also provides additional one-off lump sum benefit for the following specified
diabetic’s complications:
a) Surgery for Type 2 Diabetic retinopathy;
b) Limb amputation due to Type 2 Diabetic Complications; or
c) Severe diabetic nephropathy resulting in kidney failure.
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Application of Crisis Defender
We will pay you the benefit if you are diagnosed with a critical illness covered under Crisis Defender. In
the event of critical illness before age 5 next birthdays, the proportion of the Crisis Defender sum
assured payable is 20%, 40%, 60%, 80% and 100% for age 1, 2, 3, 4 and 5 next birthday respectively.
Early Crisis Protector
We will pay you the benefit if you are diagnosed with the illnesses, conditions or medical procedures
covered under Early Crisis Protector. You are allowed to make multiple claim as long as the sum assured
has not been fully paid. Once we have paid a claim, a subsequent claim of the same or lower severity
within the same category will no longer be covered.
However, for a subsequent claim of higher severity within the same category, we will pay you:
i. The difference between the relevant amount for the subsequent claim and the amount we paid to you
for the previous claim(s); or
ii. The reduced amount of benefit at the time the subsequent claim is made; whichever is lower.
For a subsequent claim from a different illness category, we shall pay you:
i. The relevant amount for the subsequent claim; or
ii. The reduced amount of benefit at the time the subsequent claim is made; whichever is lower.
Note: We will pay your claims as long as you have survived 30 days after being diagnosed with the
illnesses or conditions covered under Crisis Defender and Early Crisis Protector.
Premium Information
The premium that you need to pay will depend on your age, gender and smoking status. You would have
to pay premiums throughout the duration of the benefits.
Premiums can be paid yearly, half-yearly, quarterly or monthly via Auto Debit, Credit Card, Cash or
Cheque.
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Who can Apply :
Crisis Defender: Anyone between 1 to 70 years old on their next birthday.
Early Crisis Protector: Anyone between 19 to 70 years old on their next birthday.
56.3 PRUhealth
PRUhealth is a regular premium medical rider plan that reimburses medical expenses incurred in
the event of hospitalisation. Not only does this plan reward policyholders with No Claims Bonus (NCB)
for those who do not make any claims for the year, you now have the option to choose the level of
deductible (the fixed amount you must pay out of the total medical fees, excluding cost of daily room &
board, for any one disability during a 90-day period) of RM3,000 or RM10,000 other than the default
coinsurance option.
5.4 PRUmultiple crisis cover
PRUmultiple crisis cover -A plan that allows you to bounce back after a critical illness...again and
again.PRUmultiple crisis cover is a term plan that recognizes the need for enhanced protection and
peace of mind. This plan not only covers you against death, Total and Permanent Disability (TPD), it also
protects you against a wide range of critical illnesses and allows you to make MULTIPLE critical illness
and cancer claims.
But not only that, you may also add on supplementary benefits that will further enhance your
PRUmultiple crisis cover plan, which means you can customize this plan with features that would best
suit your needs
5.5 PRUcancer plan
PRUcancer plan is a regular premium non-participating plan that provides coverage up to age
80. This plan provides comprehensive coverage against early stage cancer, cancer, as well as
compassionate benefit upon death. Upon maturity of the policy, a lump sum benefit will be payable.
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5.6 PRUflexi med
Enjoy greater flexibility with a medical card that lets you choose what you want.
PRUflexi med is a regular premium investment-linked medical rider that reimburses medical expenses
incurred in the event of hospitalization.
5.7 PRUlady
PRUlady is a regular premium non-participating life insurance plan that provides you with
protection against the financial impact arising from female illnesses, death or disability up to expiry age
of 70 years old. In addition, it also pays Life Change Benefit for various life events. Upon maturity, 100%
of total premiums that you have paid (excluding extra premium charged for sub-standard life and
service tax, if applicable) will be refunded to you. Furthermore, it protects all mothers-to-be against
pregnancy complications and their child against congenital anomalies.
5.8 PRUvalue med
Get MORE with PRUvalue med.
Wouldn’t it be great if there is a medical plan that not only promises you a lifetime of assurance for all
your medical needs, but also helps you save with more benefits?
Introducing, PRUvalue med, a medical plan that combines extraordinary values and savings. With
PRUvalue med, you will never have to choose between your health and finances as your healthcare
needs are what matters most to us.
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6.0 CLAIM PROCESS
How to submit a claim
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