Research Proposal For Insurance Companies in Ethiopia
Research Proposal For Insurance Companies in Ethiopia
Research Proposal For Insurance Companies in Ethiopia
ABSTRACT
Chapter 1
Introduction
PROPOSAL 4
LITERATURE REVIEW 7
DATA ANALYSIS AND INTERPRETATION 4
CONCLUSION AND RECOMMENDATION 2
COMPILATION OF THE PAPER 1
1.9. Budget
1.9.1. Financial Budget
ACTIVITIES TIME REQUIRED
Chapter 2
1.10. Related Literature Review
DEFINITION OF INSURANCE
Insurance is a financial device for transferring shifting risk from an individual
or entity to a large group with the same risk.
Pooling of Resources
When people facing a common risk pool their resources, they create an
accumulation of funds from which individual losses can be paid. Such an
arrangement transfers risk
From the individual to the group because the group shares the cost of the risk
among all of its members.
All insurance, no matter what type or sold by which company, is a form of
this kind of
arrangement.
The products and services the insurance industry provides offer many
benefits to society. Today's insurance provides protection by reimbursing
people when their property is damaged or they suffer some other loss.
Payment of Losses
Economic Growth
Loss Prevention
The life insurance industry also educates individuals and businesses on the
need
To develop financial plans in the event of a premature death of a breadwinner
or key executive. Helping clients to eliminate or reduce the amount of loss
and human suffering has long been a part of the insurance industry.
Credit Support
Banks and credit institutions rely on insurance to make sure they can
recovern loans if
disaster occurs. Insurance allows borrowers to guarantee creditors that their
investment is protected against disasters.
Insurance protects
Cost to Society
In other words, without insurance, arson for profit would not exist. In a less
sinister but equally damaging way, some people aren't as careful to prevent
losses when they have insurance. insurance." They don't cause the loss
intentionally, but are indifferent as to whether it occurs. This indifference to
loss leads to damage and injury that could have been prevented, and it also is
considered a cost of insurance.While insurance provides significant benefits
our society depends on, it is not without its costs.
Insurance protects us all against unforeseen events that could cause financial
hardship.The protection insurance provides allows us to
• purchase cars;
• purchase homes and businesses;
and
• safeguard our families' financial futures. Overall, insurance is what helps us
have
Peace of mind in an uncertain world.
There are six basic principles that create a insurance contract
between the insured and the insurer:
1. Utmost Good Faith
2. Insurable Interest
3. Proximate Cause
4. Indemnity
5. Subrogation
6. Contribution
7. Loss Minimization
The principles of Insurance
The Principle of Utmost Good Faith
Both parties involved in an insurance contract—the insured (policy
holder) and the insurer (the company)—should act in good faith
towards each other.
The insurer and the insured must provide clear and concise information
regarding the terms and conditions of the contract
This is a very basic and primary principle of insurance contracts because the
nature of the service is for the insurance company to provide a certain level
of security and solidarity to the insured person’s life. However, the insurance
company must also watch out for anyone looking for a way to scam them into
free money. So each party is expected to act in good faith towards each other.
If the insurance company provides you with falsified or misrepresented
information, then they are liable in situations where this misrepresentations of
falsification has caused you loss. If you have misrepresented information
regarding subject matter or your own personal history, then the insurance
company’s liability becomes void (revoked).
3) Combination:
According to the third school of thought, Prof. Willet defines Insurance as a
social device for making accumulations to meet uncertain losses of
capital,which is carried out through the transfer of risks of many individuals
to one person or to a group of persons.Wherever there is accumulation for
uncertain losses, or wherever there is transfer of risk, there is one element of
Insurance, only when these are joined with the combination of risk in a
group is the Insurance complete.
PURPOSE OF INSURANCE
Every human being has fear in his mind. The fear whether he will be able to
meet the basic needs of the life i.e. Food, Clothing and Housing (Roti, Kapda
and Makkan). He has fear not only for himself but also for his dependents.
The source of income to meet his basic needs may be through service or
business. If he is able to meet his basic needs then he acquires the assets
i.e.vehicles, property or jewellery etc. Then he gets additional fear of saving
the assets from destruction. (The assets may be destroyed through accident,
fire or earthquake etc. and the income may be cut off due to certainty i.e. old
age and death or uncertainty i.e. accident, illness or disability.) As you know,
the old age and death is certain for every humanbeing while the accident,
illness, disability and destruction of assets may be by random. The number of
accidents will take place but with whom is uncertain. Therefore, to overcome
this problem, the Insurance plays a very important role.The principal source
of income of an individual comes from the compensation for work performed
by him. If this source of income gets cut off then: - Family will make social
and economic adjustments like: Wife may take employment at the cost of
home making responsibilities Children may have to go for work at the cost of
education.Family members might have to accept charity from relatives,
friends etc. at the cost of their independence and self-respect. Family standard
of living might have to be reduced to a level below the essentials for health
and happiness.
The basic threats which all of us may encounter to varied extent and which
result in cut off of income or sudden increase in - uncalled for expenses
(beyond our means or higher than our earnings) i.e. dislocates the human life,
are: -
ILLNESS (malnutrition, environment, chronic) –
ACCIDENT – (uncertain)
Disability – Permanent or Temporary (uncertain)
OLD AGE – (certain)
DEATH – (certain)
LIFE INSURANCE
Is an arrangement through which a person can plan for the continuation of
income when uncertainties and certainties (i.e.) illness or Accident and death
or old age disrupt or destroy his ability to earn his livelihood. Therefore the
Insurance is
1.The business of insurance is related to protection of human life, human
created assets, human disability and business liabilities possessed by human
beings which have a definite value, and
2.Assets and human life generate benefit and income for the owner and
his/her family members, and
3.Loss of assets / human life for any reason stops thebenefits and income to
the owner and family members respectively, and
4.Results in falling of living standards in the family, quality of life and future
growth of the associated family members,and
5.Insurance is a mechanism that helps to reduce such adverse consequences
through pooling, spreading and sharing of risk. Thus life insurance business
is complimentary to the Government efforts in social management.
NEED OF INSURANCE
(a) To provide Security and Safety The Life Insurance provides security
against premature death and payment in old age to lead the comfortable life.
Similarly in general Insurance, the property can be insured against any
contingency i.e. fire, earthquake etc.
(b) To provide Peace of Mind The uncertainty due to fire, accident, death,
illness, disability in the human life, it is beyond the control of the human
beings. By way of Insurance, he may be compensated financially but not
emotionally. The financial compensation provides not only peace of mind but
also motivates to work more and more.
Uncertainty is as to who will die or get disabled during day to day high
risk prone fast life. Although, number is known, but name, age, time, place
and extent is not known. If it is known that 200 persons are prone to
accidental death in a year, it is not known which 200 individuals?
Due to this certainty, that 10,000 people will die in an accident, or get injured
and disabled or die natural death or die of disease; All 1 lakh people will fear
accident, possibility of injury or death and its consequences to varying degree
as per their age, behavior, nature of work, environment hazards and many
other factors.
Grown ups and breadwinners may fear more and dependents may fear less. If
in a city of 1 lakh houses & shops, there are about 1000 thefts every year,
though some particular 1000 people are affected by the theft, all others (may
be more than 90,000) will fear theft, and will like some solution to this
problem. Human life is a unique income generating asset. When other assets
depreciate with age, it appreciates. Creator of all these assets is a human
being, whose efforts have gone a long way in owning them.
By passing this act the liability of employer was fixed and he is now required
by law to pay compensation to victims of accidents while on duty. The
amount of compensation has been fixed in accordance with the extent of
injury, disability and linked to the workers salary and age on the date
accident.
(b) Employee State Insurance Act 1948:
The purpose behind this legislation was to provide medical aid to workers
and their families working in industries located in certain notified areas.
Under this act a part of the salary a small amount (at present 1.75%) is
deducted from the workman’s salary and some part is contributed by the
Employer (at present 4.75%) and the same is deposited with the Employee
State Insurance corp.
With the funds thus collected and with more contributions from the state and
Central Govt., Dispensaries and Hospitals have been set up all over the
country where the worker members and their families are provided health
care free of cost. Under this scheme regular periodic payment are made to
workers if they are unable to attend duty due to illness and there is provision
for payment of pension in the case of permanent partial disability or death.
The Motor Vehicle Act was amended in 1988 to make Third Party Liability
Insurance compulsory thus no uninsured vehicle is allowed to ply the roads
or in any public place in India.
The need of this enactment was felt due to the growing number of vehicles
and the increasing number of accidents causing injury and death of the people
involved in the accident and not being able to get relief from the owner/
driver of the vehicle because of long protracted legal battle involved, which
many victims could not afford.
The Act now provides that irrespective of the fact that the fault was of the
driver/ owner or not (No- fault) the victim of an accident will be entitled to a
payment of Rs. 50,000/- in case of death and Rs. 25,000/- in the case of
grievous bodily injury.
Motor Accident Claim Tribunals (MACT) have been set up by the State
Government to provide speedy redressal of Third Party claims. Damage to
property of Third party is also covered and the limit is Damage to property of
Third party is also covered and the limit is Rs.6,000/-. Motor Vehicle Act
also provides for the creation of a “Solatium Fund” to cater to the victims of
Hit and Run cases. The fund is created by the contribution from Insurance
companies, state and central Government and the victims of Hit & Run cases
are entitled to receive Rs.25,000/- in case of death and Rs.12,500/- in the case
of grievous bodily injury.
The Bhopal Gas tragedy of 1984, which resulted in many deaths and caused
untold suffering to lakhs of people prompted the enactment of this legislation.
To recap the incident, poisonous gas escaped from the manufacturing plant of
Union Carbide leading to one of the worst industrial disasters of recent times.
The victims even now; 17 years later are yet to get adequate relief and
continue to suffer.
The public liability act now makes it compulsory for all individual
companies, industries involved in handling of hazardous substances to insure
against any untoward happening so that immediate succor is made available
to the victims from the Insurance companies. Other than passing legislations
to improve social security the Government also initiated certain schemes
under which Insurance is provided to the economically and socially backward
people and workers of the unorganized sector at highly subsidized rates.Some
of the schemes introduced by the Govt. of India are -
RKBY (Rashtriya Krishi Bima Yojna )introduced in 1999 with the objective
of providing Insurance coverage and financial support to farmers in the event
of failure of crops as a result of calamities, pests and diseases. The premium
is low and 50% subsidy in premium is allowed to small & marginal farmers
which are shared by the Central and State Government.
(g) Hut Insurance Scheme:
Introduced in 1988, for the benefit of very poor families (i.e. those whose
annual income does not exceed Rs.4,800/-p.a.). The scheme provides that in
case of destruction of Hut due to fire, compensation of Rs.1,000/ - for hut &
Rs.500/- for belongings shall be paid. The premium is borne by the Central
Government.
In addition, to the above schemes the Government has also introduced
insurances at subsidized rates for farmers (cattle Insurance), for women (Raj
Rajeshwari Mahila Kalyan Yojna), for the girl child (Bhagyashree child
welfare policy) and Gramin Personal Accident policy etc. for the benefits of
the common people. These shall be discussed later on in the course (under
GIC Products) but all this goes to show how through legislations or through
Govt.
Chapter 3
The insurance companies should increase the third party premium fee in
order to give great attention on the lives of third party who have faced
car accident it has to take in to consideration that human beings are the
most important resources of the country.
The should create awareness about the importance of insurance and the
different services that they provide to the society in an appropriate
manner.
The insurance companies should work with the insured entities in an
integrated manner through assigning personnel to the insured entity in
order to prevent possible risks of pre and post accidents .