Topic 1
Content
At the end of the lessons, students should be able to: Define insurance. Explain origin and nature of insurance.
ISB544 Topic 1
2
Definition
Nature
Origin
ISB544 Topic 1
3
Is community pooling in order to alleviate the burden of the individual. A promise of compensation for specific potential future losses in exchange for a periodic payment
Coverage by contract in which one party agrees to indemnify or reimburse another for loss that occurs under the terms of the contract
General conception: Is a provision made by a group of persons to a danger of some loss, incidence of which cannot be foreseen, that when such loss shall occur to any of them. Hence, it shall distributed over the whole group. Aim of Insurance:I. Provision against the dangers which beset of human life and dealings. II. Preventive measures against future conditional losses and to hedge the possible risks, hence loss of assumption can be minimized.
An economic device whereby the individual substitutes a small certain costs (the premium) for a large uncertain financial loss (the contingency insured against) that would exist if it were not for the insurance. (Vaughan & Vaughan, 2008)
Societies have been classified into three stages, savagery, barbarism and civilization. The evolution of group life arose in the process of civilization. With this enlargement of social groupings have led to search for the needs of insurance. Considering the loss of its individual member as its own and takes steps to cover such loss which is known as insurance.
Example of the practice in the early history where insurance have taken root:
The Bedouin inhabitants are forced to group themselves in families because of the dangers and threat from other tribes.
The Shaikh (leader) has to keep up the tribe’s dignity. When warlike situation created by raid, it is expected to pay for compensation and the loss is borne by all the man of the tribes and the Shaikh is expected to contribute handsomely.
The First Insurance Policy The first insurance policy came from ancient Babylonia. King Hammurabi established the "Hammurabi Code." This code established the practice of forgiving a debtor his loans in the event of a personal catastrophe such as death, disability or loss of property.
Guild Coverage In the Middle Ages artisans belonged to guilds. Everyone paid dues to a coffer, which served as an insurance fund. If the artisan's establishment was destroyed or if he were killed, funds were used from the coffer to pay for rebuilding or supporting the widow and children.
Lloyd's of London The origin of Lloyd's of London was in the late 1600's in the coffeehouses of London. Ship owners traveling to the Americas sought insurance for their cargo and journey. Wealthy merchants funded the trips in exchange for returns from the goods the colonists discovered or manufactured in the new world. Fire Insurance The origin of fire insurance came after the great fire of London in 1666. Survivors found themselves homeless. Groups of merchants who had previously financed the ship's journeys into America began offering fire insurance.
Auto Insurance – property, liability and medical coverage.
Home insurance Health Insurance Accident, sickness and unemployment insurance Life Insurance provides a monetary benefit to a descendant's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses
Property Insurance – including aviation, boiler (machinery), Builders, Crops, Earthquake.
Fidelity bonds - It usually insures a business for losses caused by the dishonest acts of its employees. Marine Insurance.
Early Generation
Second Generation
Modern Generation
Babylonia
• Ancient land of Mesopotamia 2100 BC. • Using regulation from Code Book of Hammurabi (1790 BC). • Origin of General Insurance.
• The origin of Property Insurance type (3000 BC).
It popular among Chinese Merchant that have Shipment trades.
●
China
In the event that a ship was lost at sea or pirate, an insuring partner will reimburse the owner of the ship and goods.
●
Roman's & Greek's
• The origins of Life and Health Insurance (600 AD). • Organized a guilds called “Benevolent Societies”. • Their job is cared for the families and paid funeral expenses of members upon death. • Interpret the law of Hammurabi from Babylon. • But each culture have it's own interesting twist on the law from Code of Hammurabi.
14th Century Italy
The earliest recorded Marine Insurance Policy. ●In 1347, Genoa, European maritime nations became the earliest company to known maritime insurance contract and made it as practice. ●The earliest marine insurance policy is made between lender and ship owner.
●
17th and 18th Century Europe & England
The Great Fire of London, 1666. ●The fire burned for 4 days and nights. ●Razed 436 acres, devouring 13,200 houses, 89 church, the Custom House and dozen of other public buildings. 6 people perished in the flames, but hundred died from shock and exposure. ●The origin of Fire Insurance. st fire ●Nicholas Barbon; opened the 1 insurance company ;“The Fire Company” (1680) to insure brick and frame houses.
●
17th and 18th Century Europe & England
An insurance begin to shows it true shape in 1688. ●Merchant, Ship-owners and Underwritters met to discuss and transact business at Llyod's Coffee House in London. th century, is the establishment ●In 18 of the 1st modern insurance company, Llyod's of London.
●
21
19th Century
In 1842, large city at fires ; Germany and Switzerland. “Hamburg City Fire Fund” suffered heavy loss. st official reinsurance ●In 1846, the 1 company was founded ; “Cologne Reinsurance”. ●The reinsurance company been created based on the fire in the both cities.
●
22
19th Century
In 1880, the 1st Public Liability Insurance making an appearance. ●In 1897, the British government created the Workmen's Compensation Act. ●The act is made mandatory for a company to insure its employee against industrial accidents.
●
23
24
December 2006 1May 1988 •Insurance Industry Regulated by BNM Involves: •Policy of development •Administration •Enforcement of the Insurance Act 1996 Total number of licenses in the industry stood at 119, comprising 42 direct insurers, 7 professional reinsures, 34 insurance brokers,36 adjusters.
These licensees are in turn required by the Insurance Act 1966 to be members of PIAM, LIAM, IBAM, AMLA.
25
1.
2. 3. 4. 5. 6.
Allianz General Insurance (Malaysia) Berhad Berjaya Sompo Insurance Berhad Kurnia Insuranced Berhad RHB Insurance Berhad Multi-Purpose Insurance Berhad AMG Insurance Berhad
Company
26
Insurance is thus a mutual coverage of accidental loss by a group of persons subject to a common danger.
Evidences: I. Sharing losses of property involved in raids was borne by all members of tribes. II. Compensation for the loss.
This mutual insurance signifies not only community enterprise, social enterprise but also economic in consequence. This is an example of mutual insurance without no profit –making in it. A pure social institution established to mitigate the burden of the individual by dividing it among its members.
In simplest aspects, it has two fundamental characteristics:i. Transferring or shifting risk from one individual to a group.
ii. Sharing losses, on some equitable basis, by all members of the group.
i.
ii.
Origin and nature of insurance. Emmett J. Vaughan and Therese Vaughan, (2008), Fundamentals of Risk and Insurance, John Wiley.
Wallahualam.. Thank you
ISB544 Introduction
At the end of the lessons, students should be able to: Define insurance. Explain origin and nature of insurance.
ISB544 Topic 1
2
Definition
Nature
Origin
ISB544 Topic 1
3
Is community pooling in order to alleviate the burden of the individual. A promise of compensation for specific potential future losses in exchange for a periodic payment
Coverage by contract in which one party agrees to indemnify or reimburse another for loss that occurs under the terms of the contract
General conception: Is a provision made by a group of persons to a danger of some loss, incidence of which cannot be foreseen, that when such loss shall occur to any of them. Hence, it shall distributed over the whole group. Aim of Insurance:I. Provision against the dangers which beset of human life and dealings. II. Preventive measures against future conditional losses and to hedge the possible risks, hence loss of assumption can be minimized.
An economic device whereby the individual substitutes a small certain costs (the premium) for a large uncertain financial loss (the contingency insured against) that would exist if it were not for the insurance. (Vaughan & Vaughan, 2008)
Societies have been classified into three stages, savagery, barbarism and civilization. The evolution of group life arose in the process of civilization. With this enlargement of social groupings have led to search for the needs of insurance. Considering the loss of its individual member as its own and takes steps to cover such loss which is known as insurance.
Example of the practice in the early history where insurance have taken root:
The Bedouin inhabitants are forced to group themselves in families because of the dangers and threat from other tribes.
The Shaikh (leader) has to keep up the tribe’s dignity. When warlike situation created by raid, it is expected to pay for compensation and the loss is borne by all the man of the tribes and the Shaikh is expected to contribute handsomely.
The First Insurance Policy The first insurance policy came from ancient Babylonia. King Hammurabi established the "Hammurabi Code." This code established the practice of forgiving a debtor his loans in the event of a personal catastrophe such as death, disability or loss of property.
Guild Coverage In the Middle Ages artisans belonged to guilds. Everyone paid dues to a coffer, which served as an insurance fund. If the artisan's establishment was destroyed or if he were killed, funds were used from the coffer to pay for rebuilding or supporting the widow and children.
Lloyd's of London The origin of Lloyd's of London was in the late 1600's in the coffeehouses of London. Ship owners traveling to the Americas sought insurance for their cargo and journey. Wealthy merchants funded the trips in exchange for returns from the goods the colonists discovered or manufactured in the new world. Fire Insurance The origin of fire insurance came after the great fire of London in 1666. Survivors found themselves homeless. Groups of merchants who had previously financed the ship's journeys into America began offering fire insurance.
Auto Insurance – property, liability and medical coverage.
Home insurance Health Insurance Accident, sickness and unemployment insurance Life Insurance provides a monetary benefit to a descendant's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses
Property Insurance – including aviation, boiler (machinery), Builders, Crops, Earthquake.
Fidelity bonds - It usually insures a business for losses caused by the dishonest acts of its employees. Marine Insurance.
Early Generation
Second Generation
Modern Generation
Babylonia
• Ancient land of Mesopotamia 2100 BC. • Using regulation from Code Book of Hammurabi (1790 BC). • Origin of General Insurance.
• The origin of Property Insurance type (3000 BC).
It popular among Chinese Merchant that have Shipment trades.
●
China
In the event that a ship was lost at sea or pirate, an insuring partner will reimburse the owner of the ship and goods.
●
Roman's & Greek's
• The origins of Life and Health Insurance (600 AD). • Organized a guilds called “Benevolent Societies”. • Their job is cared for the families and paid funeral expenses of members upon death. • Interpret the law of Hammurabi from Babylon. • But each culture have it's own interesting twist on the law from Code of Hammurabi.
14th Century Italy
The earliest recorded Marine Insurance Policy. ●In 1347, Genoa, European maritime nations became the earliest company to known maritime insurance contract and made it as practice. ●The earliest marine insurance policy is made between lender and ship owner.
●
17th and 18th Century Europe & England
The Great Fire of London, 1666. ●The fire burned for 4 days and nights. ●Razed 436 acres, devouring 13,200 houses, 89 church, the Custom House and dozen of other public buildings. 6 people perished in the flames, but hundred died from shock and exposure. ●The origin of Fire Insurance. st fire ●Nicholas Barbon; opened the 1 insurance company ;“The Fire Company” (1680) to insure brick and frame houses.
●
17th and 18th Century Europe & England
An insurance begin to shows it true shape in 1688. ●Merchant, Ship-owners and Underwritters met to discuss and transact business at Llyod's Coffee House in London. th century, is the establishment ●In 18 of the 1st modern insurance company, Llyod's of London.
●
21
19th Century
In 1842, large city at fires ; Germany and Switzerland. “Hamburg City Fire Fund” suffered heavy loss. st official reinsurance ●In 1846, the 1 company was founded ; “Cologne Reinsurance”. ●The reinsurance company been created based on the fire in the both cities.
●
22
19th Century
In 1880, the 1st Public Liability Insurance making an appearance. ●In 1897, the British government created the Workmen's Compensation Act. ●The act is made mandatory for a company to insure its employee against industrial accidents.
●
23
24
December 2006 1May 1988 •Insurance Industry Regulated by BNM Involves: •Policy of development •Administration •Enforcement of the Insurance Act 1996 Total number of licenses in the industry stood at 119, comprising 42 direct insurers, 7 professional reinsures, 34 insurance brokers,36 adjusters.
These licensees are in turn required by the Insurance Act 1966 to be members of PIAM, LIAM, IBAM, AMLA.
25
1.
2. 3. 4. 5. 6.
Allianz General Insurance (Malaysia) Berhad Berjaya Sompo Insurance Berhad Kurnia Insuranced Berhad RHB Insurance Berhad Multi-Purpose Insurance Berhad AMG Insurance Berhad
Company
26
Insurance is thus a mutual coverage of accidental loss by a group of persons subject to a common danger.
Evidences: I. Sharing losses of property involved in raids was borne by all members of tribes. II. Compensation for the loss.
This mutual insurance signifies not only community enterprise, social enterprise but also economic in consequence. This is an example of mutual insurance without no profit –making in it. A pure social institution established to mitigate the burden of the individual by dividing it among its members.
In simplest aspects, it has two fundamental characteristics:i. Transferring or shifting risk from one individual to a group.
ii. Sharing losses, on some equitable basis, by all members of the group.
i.
ii.
Origin and nature of insurance. Emmett J. Vaughan and Therese Vaughan, (2008), Fundamentals of Risk and Insurance, John Wiley.
Wallahualam.. Thank you
ISB544 Introduction
