COLLEGE OF BUSINESSAND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

COURSE TITLE: RISK MANAGEMENT AND INSURANCE

COURSE COULD:-AcFn2081
OPERATION OF INSURANCE BUSINESS IN ETHIOPIA
IN CASE OF AWASH INSURANCE COMPANY

BY
1.MESFIN ABERA
2.ZLEKE KEBEDE
3.MARKOS TAMENE
4.TIGIST DEMELASH
5.TSIYON SEYFU
6.ZELALEM AYELE
7.PETROS DASA
8.ZEYNEB SHIKUR
9.TINSAE HAYANO
10.TIRUFAT TEFERA
11.REDET ARARSO
DILLA UNIVERSITY
12.TAMIRAT KIFLE
13.TEMESGEN KEFIALEW
14.TARIKU KIPETU
15.TSEGA PETROS
16.MIHRETU TEFERA
Acknowledgments

Words can never be enough to thank the almighty God who helped me to finish this thesisI
would like to thank manager of awash Dilla branch Mr aman for his guidance,
encouragement and kind personality.

I would like to thank friends, branch underwriters and branch managers, claim offices and
claim

managers of Awash insurance company for their support and encouragement, which gave
me

strength to successfully complete this work

Finally, I would like to thank my darling wife Mrs, Aster Tesfaye for valuable support
during my

study

Introduction to Insurance and Insurance Management

Definitions of Insurance
Insurance can be defined from economic, legal, business and social point ofviews.
In Economic Sense, insurance is a mechanism of providing certainty or predictability of loss
with regard to pure risk. It accomplishes these by policy or charity of risk. By reducing
uncertainty in the business environment, it will create peace of mind that enables businessmen

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focus on their primary activities instead of worrying about the existence of possibility of loss
so that societies can grow more.

From Legal Point of View, insurance is a contract whereby, a consideration (price) paid to a
party adequate to the risk, becomes security to the other that he shall not suffer loss, damage
or prejudice by the happening of risks specified in the contract for which he may be exposedto.
From Business Perspective insurance is defined as a cooperative device to spread the loss
caused by a particular risk over a number of persons who are exposed to and who agree to
ensure themselves against that risk.

From The Social Point of View insurance is defined as a device to accumulate funds to
meetuncertain losses of capital, which is carried at through the transfer of the risk of
manyindividual to one person or, to a group of persons.

The Functions of Insurance

Primary Functions

Insurance executes the following functions primarily.

A. Providing certainty. Insurance provides certainty of payment at the uncertainty of loss.

The uncertainty of loss can be reduced by better planning and administration. Insuranceremoves
all uncertainties and assurance is given to payment of compensation at the timeof loss. The
insurer charges premium for providing the said certainty

B. Protection. The main function of insurance is to provide protection against the

probablechances of loss. Insurance guarantees the payment of loss and this protects the
assuredfrom sufferings.

C. Risk-sharing. When the risk takes place, all the persons who are exposed to the risk share the
loss.

Secondary Functions

In addition to the aforementioned primary functions, insurance plays the following:

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A. Prevention of Loss. Insurance is primarily concerned with the financial consequences
oflosses, but it would be fair to say that insurers have more than a passing interest in losscontrol.

B. Providing Capital. Insurance companies have, at their disposal, large amounts of money.
This arises due to the fact that there is a time gap between the receipt of a premium and the
payment of a claim.

Definition of Insurance Management:

Insurance management refers to the management of insurance operations including rate making,
underwriting, production, claims management, reinsurance, and risk management.

Purpose of insurance management:

The purpose of insurance management is to effectively manage insurance operations to ensure

profitability, solvency, and regulatory compliance.

Importance of insurance management

Insurance management is essential for a insurance company as it ensures efficient and effective
management of the company's insurance operations.

Insurance operations:

Rating And Ratemaking

Ratemaking refers to the pricing of insurance and the calculation of insurance premiums. The
premiumpaid by the insured is the result of multiplying a rate determined by actuaries by the
number of exposure units, and then adjusting by various rating plans (a process called rating). A
rate is the price per unit of insurance. An exposure unit is the unit of measurement used in
insurance pricing, which varies by line of insurance. Insurance pricing differs considerably from
the pricing of other products. The person who determines rates and premiums is known as an
actuary

Rate Making In Property and Casualty Insurance

Given the competitive nature of the insurance industry, premiums charged by insurance
companies are important.

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Objectives in Rate Making

Rate making, or insurance pricing, has several basic objectives. Because insurance rates,
primarily property and casualty insurance rates, are regulated by the states, certain statutory and
regulatory requirements must be met.

Regulatory Objectives

The goal of insurance regulation is to protect the public. States enact rating laws that require
insurance rates to meet certain standards.In general, rates charged by insurers must be adequate,
not excessive, and not unfairly discriminatory.

Business Objectives

Insurers are also guided by business objectives in designing a rating system. The rating system
should meet all of these objectives: simplicity, responsiveness, stability, and encouragement of
loss control

Rate-Making Methods

There are three basic rate-making methods in property and casualty insurance: judgment, class,
and merit rating. Merit rating, in turn, can be broken down into schedule rating, experience
rating, and retrospective rating. Thus, the basic rating methods can be conveniently classified as
follows:
Judgment Rating

Judgment rating means thateach exposure is individually evaluated, and therate is determined
largely by the judgment of theunderwriter.Judgment rating is widely used in ocean marine
insurance and in some lines of inland marine insurance. Because ocean-going vessels, ports,
cargoes, and waters traveled are diverse, some ocean marine rates are determined largely by the
judgment of the underwriter.
Class Rating

The second type of property and casualty rating is class rating. Most rates used today are class
rates. Class rating means that exposures with similar characteristics are placed in the same
underwriting class, and each is charged the same rate. The rate charged reflects the average loss

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experience for the class as a whole.Class rating is widely used in homeowners insurance, private
passenger auto insurance,workers compensation, and life and health insurance

Merit Rating

The third principal type of rating in property-casualty insurance is merit rating. Merit rating is a
rating plan by which class rates (manual rates) are adjusted upward or downward based on
individual loss experience

Rate Making in Life Insurance

Life insurance actuaries use a mortality table or individual company experience to determine the
probability of death at each attained age. Theprobability of death is multiplied by the amount
the life insurer will have to pay if death occurs to determine the expected value of the death
claims for each policy year. These annual expected values are then discounted back to the
beginning of the policy period to determine the net single premium (NSP). The NSP is the
present value of the future death benefit.

Life insurance premium are influenced by the following major determinants:

1.Expected mortality rates in the insured population. The morality table can be prepared
from the census records or from the records of the first class insurance companies.
2. Investment income earned by the insurer on invested premium Income-Interest factor.
Life insurance is a long term contact and premium so received is invested in securities or
deposited in a bank yielding interest. Such income may help reduce the cost of insurance.
So interest-earning is also a factor for calculating the premium rate.

3. Expenses incurred in operating an insurance enterprise and in providing insurance –

related services. The expense includes policy expenses, commission to agents, cost of
preparing policy, administrative and local charges loaded, and other service charges.
4. Other factors required to determine premium rate include: age and sex of the insured,
period of the insurance policy, and sum assured.We will illustrate using a hypothetical example
how these determinants are incorporated intorates for life insurance coverage. But first let us
discuss the following terms.

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Net Premium: the net premium is a rate determined based on the mortality and interest
rates only. No consideration is given for expenses incurred and the future contingencies.
The net premium is an amount of money collected by the insured to meet only death
claims.
Gross Premium: gross premium includes all the insured's costs of running the business
known as loading. These costs include operating expenses, commissions, advertisement
expenses, etc. So if these expenses and the expected profit to policy issuer are added to net
premium, it becomes gross premium, also known as "the office premium." It is a premium
the policy holder actually pays to the insurer to keep the policy in force.
Gross Premium = Net premium + Loading

Loading of the premium refers to the process of adding expenses to the net premium. In
the next section of this unit, we will illustrate how to determine premium for the life
insurance using a hypothetical exercise.

Basic Assumptions for premium determinations

* Premium will be collected at the beginning of the policy period.

* Death benefit will be paid at the end of the policy period

The premium fund will be deposited in a bank and it will earn interest.Every insured will
contribute to the premium fund that is meant for the payment offuture death claims.

Premium determination for term insurance policy

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Underwriting
Underwriting refers to the process of selecting ,classifying, and pricing applicants for insurance.
The underwriter is the person who decides to accept or reject an application. Statement of
Underwriting Policy Underwriting starts with a clear statement of underwriting policy. An
insurer must establish an underwriting policy that is consistent with company objectives
Statement of Underwriting Policy
Underwriting starts with a clear statement of underwriting policy. An insurer must establish an
underwriting policy that is consistent with company objectives.

Basic Underwriting Principles

Underwriting is based on a number of principles. Three important principles are as follows:

■ Attain an underwriting profit

.■ Select prospective insureds according to the company’s underwriting standards.

■ Provide equity among the policyholders

Steps in Underwriting

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After the insurer’s underwriting policy is established, it must be communicated to the sales force.
Initial underwriting starts with the agent in the field.

Sources of Underwriting Information

The underwriter requires certain information in deciding whether to accept or reject an applicant
for insurance. Important sources of information include the following:

■ Application.The type of information required depends on the type of insurance requested. In

property insurance, the application provides information on the physical features of the building,
including type of construction, occupancy of the building, quality of fire protection, exposures
from surrounding buildings, whether the building has a sprinkler system, and other loss control
features. In life insurance, the application indicates the age; gender; weight; occupation; personal
and family health history; any hazardous hobbies, such as skydiving; and the amount of
insurance requested.

■ Agent’s Report.Many insurers require the agent or broker to give an evaluation of the
prospective insured.

■ Inspection Report.In property insurance, the company may require an inspection report by
some outside agency, especially if the underwriter suspects moral hazard.
■ Physical Inspection.In property insurance andcasualty insurance, the underwriter may
requirea physical inspection before the application isapproved.
■ Physical Examination.In life insurance, a physicalexam may be required to determine if the
applicant is overweight; has high blood pressure; orhas any abnormalities in the heart,
respiratorysystem, urinary system, or other parts of thebody
Agent as First Underwriter
This step is often called field underwriting. The agent is told what types of applicants are
acceptable, borderline, or
.Making an Underwriting Decision After the underwriter evaluates the information, an
underwriting decision must be made. There are three basic underwriting decisions with respect to
an initial application for insurance:
■ Accept the application

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■ Accept the application subject to certain restrictions or modifications
■ Reject the application
First, the underwriter can accept the application and recommend that the policy be issued. A
second option is to accept the application subject to certain restrictions or modifications. Several
examples
Production
The term production refers to the sales and marketing activities of insurers. Agents who sell
insurance arefrequently referred to as producers. This word is used because an insurance
company can be legally chartered,personnel can be hired, and policy forms printed, but no
business is produced until a policy is sold

Product Development: The process of creating new products to meet customer. Sales and
distribution: of managing the sales and of insurance products.

Agency Department
Life insurers have an agency or sales department. This department is responsible for recruiting
and training new agents and for the supervision of general agents, branch office managers, and
local agents. Property and casualty insurers have marketing departments. To assist agents in the
field, special agents may also be appointed.
Professionalism in Selling
The marketing of insurance has been characterized by a distinct trend toward professionalism
in recent years. This means that the modern agent should be a competent professional who has a
high degree of technical knowledge in a particular area of insurance and who also places the
needs of hisor her clients first. The professional agent identifies potential insured, analyzes their
insurance needs,and recommends a product to meet their needs. After the sale, the agent has the
responsibility of providingfollow-up service to clients to keep their insurance programs up to
date. Finally, a professional agent abides by a code of ethics.
Claims Settlement
Every insurance company has a claims division or department for adjusting claims. the different
types of claim adjustors, and the various steps in the claim-settlement process
Basic Objectives in Claims Settlement

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From the insurer’s viewpoint, there are several basicobjectives in settling claims.
■ Verification of a covered loss
The first objective in settling claims is to verify that a covered loss has occurred. This step
involves determining whether a specific person or property is covered under the policy, and the
extent of the coverage.
■ Fair and prompt payment of claims
The second objective is the fair and prompt payment of claims. If a valid claim is denied,
thefundamental social and contractual purpose ofprotecting the insured is defeated. Also, the
insurer’sreputation may be harmed, and the sales of new policiesmay be adversely affected.
■ Personal assistance to the insured
A third objective is to provide personal assistance to the insured after a covered loss occurs.
Aside from any contractual obligations, the insurer should also provide personal assistance after
a loss occurs. Forexample, the claims adjustor could assist the agent in helping a family find
temporary housing after afire occurs.
Types of Claims Adjustors
The person who adjusts a claim is known as a claims adjustor. The major types of adjustors
include the following:
■ Agent An often has authority to settle small first-party claims up to some maximum limit. A
first-party claim is a claim submitted by theinsured to the insurer, such as a small theft loss bythe
insured.
■ Company adjustor A company adjustor can settle a claim. The adjustor is usually a salaried
employee who represents only one company.
■ Independent adjustor Anindependent adjustor can also be used to adjust claims. An
independent adjustor is anorganization or individual that adjusts claims for a fee.
■ Public adjustorApublic adjustor can be involved in settling a claim. A public adjustor
represents the insuredrather than the insurance company and is paid a fee based on the amount
of the claim settlement.
Steps in Settlement of a Claim
There are several important steps in settling a claim:
■ Notice of loss must be given.
■ The claim is investigated.

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■ A proof of loss may be required.
■ A decision is made concerning payment
Notice of Loss The first step is to notify the insurer of a loss. A provision concerning notice of
loss is usually stated in the policy. A typical provision requires the insured to give notice
immediately or as soon as possible after the loss has occurred.
Investigation of the Claim After notice is received, the next step is to investigate the claim. An
adjustor must determine that a covered loss has occurred and must also determine the amount of
the loss. A series of questions must be answered before the claim is approved. The most
important questions include thefollowing:
■ Did the loss occur while the policy was in force?
■ Does the policy cover the peril that causedthe loss?
■ Does the policy cover the property destroyed ordamaged in the loss?
■ Is the claimant entitled to recover?
■ Did the loss occur at an insured location?
■ Is the type of loss covered?
■ Is the claim fraudulent?

The last question dealing with fraudulent claims is especially important. Insurance fraud is
widespread, especially in auto and health insurance. Dishonest people frequently submit claims
for bodily injuries that have never occurred.

Filing a Proof of Loss An adjustor may require a proof of loss before the claim is paid. A proof
of lossis a sworn statement by the insured that substantiates the loss. For example, under the
homeowners policy,the insured may be required to file a proof of loss that indicates the time and
cause of the loss, interestof the insured and others in the damaged property, other insurance that
may cover the loss, and anychange in title or occupancy of the property during the term of the
policy.
Decision Concerning Payment After the claim is investigated, the adjustor must make a
decision concerning payment. There are three possible decisions. The claim can be paid. In most
cases, the claim is paid promptly according to the terms of the policy. The claim can be denied.
The adjustor may believe that the policy does not cover the loss or that the claim is fraudulent.

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Finally, the claim may be valid, but there may be a dispute between the insured and insurer over
the amount to be paid. In the case of a dispute, a policy provision may specify how the dispute is
to be resolved. For example, if a dispute concerning the value of lost or damaged property arises
under thehomeowners policy, both the insured and insurerselect a competent appraiser. The two
appraisersselect an umpire. If the appraisers cannot agree onan umpire, a court will appoint one.
An agreementby any two of the three is then binding on all partierequirements.

Financial Management: Accounting and financial reporting: The process of recording,

analyzing, and reporting financial information related to insurance operations.

Investment Management: The management of insurance company investments in order

tomaximize returns.

Solvency Management: The process of ensuring the insurance company has enough capital to
pay claims and remain financially viable.

Premium Collection: The process of collecting insurance premiums from policyholders.

Compliance Management: The process of ensuring compliance with regulatory and industry

Marketing and Sales: Market research and analysis: The process of gathering and analyzing
information on market trends and customer needs. -

Human Resource: - Recruitment selection: The process of attracting and selecting qualified
candidates for insurance company positions.

Reinsurance
Reinsurance is another important insuranceoperation. This section discusses the meaning
ofreinsurance, the reasons for reinsurance, and thedifferent types of reinsurance contracts.

Definitions

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Reinsurance is an arrangement by which the primaryinsurer that initially writes the insurance
transfers toanother insurer (called the reinsurer) part or all of thepotential losses associated
with such insurance. Theprimary insurer that initially writes the insurance iscalled the ceding
company. The insurer that accepts

Risk Management and Risk Philosophy

The NBE Licensing & Supervision directive (2014) specify the role& responsibility to ensure the
risk management process that is identifying, measuring, monitoring& controlling risk is in
place& functioning effectively. There are three forms of assurance process that may be used in
assessing a risk management process. Those are process element approach, key principles
approach and maturity model approach. Process element approach checks whether each element
of the risk management process is in place, key principles approach checks whether risk
management process satisfy a minimum set of principles and maturity model approach checks
the quality of an organization risk management process and its improvement over time

Insurance management involves the strategic management of risks and resources by insurance
companies to ensure their financial stability and protect policyholders. Effective insurance
management requires a thorough understanding of risks and a strategic approach to managing
them.

1. Risk identification: This involves identifying potential risks that could lead to losses for the
insurance company.

2. Risk assessment: Once risks have been identified, they must be assessed to determine their
likelihood and potential impact.

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3. Risk mitigation: This involves implementing measures to reduce the likelihood or severity of a
potential loss.

4. Risk financing: This involves determining how to finance potential losses, such as through
self-insurance, reinsurance, or other contractual agreements.

5. Risk monitoring: Once risks have been identified, assessed, mitigated, and financed, they must
be continually monitored to ensure that the insurance company remains financially stable and
able to meet its obligations to policyholders.

Once risks have been identified and assessed, insurance companies can develop strategies to
mitigate them. Risk mitigation involves taking actions to reduce the likelihood or potential
impact of a risk.

Some common risk mitigation strategies used by insurance companies include:

1. Risk transfer: This involves transferring the risk to another party, such as reinsurers or other
insurance companies.

2. Risk avoidance: This involves avoiding high-risk activities or markets altogether.

3. Risk reduction: This involves taking steps to reduce the likelihood or potential impact of a
risk, such as implementing safety measures or improving underwriting practices.

4. Risk retention: This involves accepting the risk and setting aside reserves or capital to cover
potential losses.

5. Risk sharing: This involves sharing the risk with other parties, such as policyholders or
investors.

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By implementing effective risk mitigation strategies, insurance companies can reduce their
exposure to risks and protect their financial stability.

Risk reduction is a common risk mitigation strategy used by insurance companies to reduce the
likelihood or potential impact of a risk. This involves taking steps to minimize the occurrence of
a risk or its impact if it does occur. Some examples of risk reduction strategies used by insurance
companies include:

1. Implementing safety measures: Insurance companies may require policyholders to implement

safety measures, such as installing fire alarms or security systems, to reduce the likelihood of a
loss occurring.

2. Improving underwriting practices: Insurance companies may improve their underwriting

practices by conducting more thorough risk assessments and adjusting premiums accordingly.

3. Offering risk management services: Insurance companies may offer risk management services
to policyholders to help them identify and mitigate risks.

4. Providing education and training: Insurance companies may provide education and training to
policyholders to help them understand how to reduce the likelihood of a loss occurring.

By implementing effective risk reduction strategies, insurance companies can reduce the
frequency and severity of losses, which can help protect their financial stability and ensure they
can continue to provide coverage to policyholders.

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Type of Risk Faced by Insurance Company

The possibility of risk occurring varies from industry to industry. Insurance companiesusually
referred to as ‘risk intermediaries’ transfer the risk of a loss arising from acontingent event, from
the policyholder to the insurer, in exchange for premiums. In theprocess of providing services,
insurances assume various kinds.

The National Bank of Ethiopia (NBE) identified eight kind of risk as inherent& significant risk
on risk management guideline for insurance companies. Inherent risk isinherent to a business
activity and arises from exposure and uncertainty from potentialfuture events. Significant risk
refers to activities that are material to operations and/orbusiness strategies. The commonly
identified risks are credit risk, market risk, liquidityrisk, underwriting risk, technical reservesrisk,
operational & technological risk, contagion& related party risk & reinsurance risk.

Credit Risk

The IAIS defines credit risk as “the risk that a counter party to the insurer is unable orunwilling
to meet their obligations causing a financial loss to the insurer.Credit risk can be defined as “the
potential that a contractual party will fail to meet itsobligations in accordance with the agreed
terms”. Credit risk is also variously referred to asdefault risk, performance risk or counterparty
risk Altman et al., (2003).There are three characteristics that define credit risk those are
Exposure to a party that may

possibly default or suffer an adverse change in its ability to perform, the likelihood that thisparty
will default on its obligations the default probability and the recovery rate that is,how much can
be retrieved if a default takes place Altman et al., (2003).The IAIS identified investment

counterparties, policyholders (through outstandingpremiums), reinsurers, and derivative

counterparties as source of credit risk. According toNBE guideline Credit risk includes bonds
and others fixed income default risk, derivativescounter party, loans and insured debts, and trade
debtors are among others.

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Market Risk

The business of insurance usually involves a mismatch, in timing between the receipt ofpremium
income and the payment of expenses and policy benefits.market risk for insurer that it “relate to
the volatility of the market values of assets andliabilities due to future changes of asset
prices(/yields/returns).” This means it applies to allassets and liabilities and the management of
market risk should focuses on the economicvalue of net asset and liability.The IAIS define the
above concepts in a briefer definition: “The risk to an institution’sfinancial condition resulting
from adverse movements in the level or volatility of themarket prices of interest rate instruments,
equity-type instruments, currencies, or property.”IAIS (2004).

According to NBE guideline Market risk include Stocks and others variable incomeinvestments
price volatility risk, real state, changes in interest rates and reinvestment risk.Interest rate risk is
risk of exposure to losses resulting from fluctuations in interest rates.

Liquidity Risk

According to NBE Liquidity risk is Volatility and mismatch between the current resources
and current obligation of the company. Similarly the FSA defines liquidity risk as “the risk

that a firm, though solvent, either does not have sufficient financial resources available toenable
it to meet its obligations as they fall due, or can secure them only at excessive cost”.This means
firm faces liquidity risk when, in spite of holding a higher level of assets thanliabilities, these
assets are ‘illiquid’, and not easily convertible to cash. This forces it to sellits assets at a discount
to quickly raise the required cash resources. Alternatively, the firmmay borrow funds, which will
further require a payment of interest on the loan, thereforegiving rise to the ‘excessive
cost’.Liquidity risk arises from a member institution's inability to provide cash or
otherwiseobtain the necessary funds, either by increasing liabilities or converting assets, to meet
itson- and off-balance sheet obligations as they come due without incurring unacceptablelosses
or excess funding costs.

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Underwriting risk

Insurance companies assume risk through the insurance contracts they underwrite.Underwriting
risks are those associated with both the perils covered by the specific line ofinsurance (fire,
death, motor accident, windstorm, earthquake, etc.) and the risk mitigationprocesses used to
manage the insurance business.

According to NBE Underwriting risk include underpriced products risk or insufficientpremium

and weakness in subscription process (risk acceptance). The development of newproducts is
considered an increasing factor of this risk, but not a risk itself.

Technical Reserves risk

According to NBE guideline Technical Reserves risk is a risk of holding of insufficienttechnical

reserves by the company such as unearned premium provision, outstandingclaims.

Operational and Technological risk

According to NBE guideline Operational and Technological risk is risk of loss as a resultof
problems in systems, operational process and company management. It also includes ITsystem
risks.

Contagion and Related Party Risk

According to NBE guideline Contagion and Related Party Risk is risk of loss from
contagion(group’s problems) or transactions with related parties.

Reinsurance risk

.Reinsurance also introduces several risks that could threaten financial stability it introduces
Creditrisk for a primary insurer. Credit risk is the risk that a re-insurer is not willing or not able
to paythe claim to the primary insurer. Failing reinsurance cover leaves the primary insurer with
theobligation to fulfill the contract itself, possibly posing solvency and liquidity constraints

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The NBE guideline specify factors to be considered in the management process of
reinsurancerisk those are capital management, the timing of payments of reinsurance
premium,claims inliquidity management the relationship between the reinsurance program and
pricing andunderwriting management.

Minimum Paid - Up Capital Requirements

The minimum paid - up capital required to obtain a general insurance business license shall be
Birr 400 million ( four hundred million Birr ) , which ought to be fully paid - up in cash and
deposited in blocked bank account ( s ) in the name of the insurance company to be established .
The minimum paid - up capital required to obtain a long - term insurance business license
shall be Birr 100 million ( one hundred million Birr ) ,which ought to be fully paid - up in
cash and deposited in blocked bank account ( s ) in the name of the insurance company to
be established .
The minimum paid - up capital required to obtain both general and long term insurance
businesses license shall be Birr 500 million ( five hundred million Birr ) , which ought to
be fully paid - up in cash and deposited in blocked bank account ( s ) in the name of the
insurance company to be established .
Proclamation No. 746/2012.

Proclamation to Provide for Insurance Business

Licensing Insurance Business

Requirement for Obtaining License

1/ it are prohibited to transact insurance business in Ethiopia without obtaining and insurance
business license from the National Bank.
2/ No person may use the word ‘‘insurance’’ or ‘‘insurer’’ or its derivatives as part of the name
of any financial business unless it has secured a license from the National Bank. without the
prior written approval of the National Bank, no insurer may:

a) Carry on insurance business at any place other than that authorized by the National
Bank, or closes an existing place of business;

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 b) Introduce new insurance products;
c) Merge with or takeover the business of another insurer;
d) Transfer all or significant portion of its policies or enter into any agreement for the sale
or disposal, by amalgamation or otherwise, of its business, or effect major changes in its
line of business;
e) Transfer or otherwise dispose of the whole or any part of its property, whether inside or
outside Ethiopia, other than in the normal course of conducting business;

f) Redeem its own shares or effect a reduction of its capital other than reduction through
operating losses;

g) Amend its memorandum or articles of association; or

h) Alter the name under which it is licensed to carry on insurance business.

3/ Where the National Bank has a reason to believe that a person, in contravention of sub-
article (1) of this Article, is advertising for or carrying on insurance business, it may, in
order to ascertain the situation, require that all books, minutes, accounts, securities, records,
vouchers and other documents which are in the possession or custody of such person be
submitted to it and inspect same or cause same to be inspected.
4/ Where any person undertakes insurance business without obtaining license and has
received premiums or become obliged to perform under a contract of insurance, the
National Bank may apply to the Federal High Court for ordering the speedy and efficient
return of such premiums or the performance by such person of his contractual obligations.

Conditions of Licensing
1/ the following conditions shall be fulfilled to secure an insurance business license:

a) A duly completed application in the prescribed format together with other

accompanying documents as may be specified by directive shall be submitted;

b) An investigation fee, as specified by the National Bank, shall be paid at the time of
submitting the application;
c) upon filing the application with the National Bank, the founders shall, at least once a
week for a period of four consecutive weeks, publish, in a form prescribed by the National

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 Bank, a notice of intention to engage in insurance business in widely circulating
newspapers;

d) The insurer shall be formed as a company and its memorandum and articles of
association shall be approved by the National Bank before registration with the
appropriate government organ;
e) All its issued shares shall be subscribed and, at a minimum, one-fourth of the
subscribed shares shall be fully paid in cash;
f) The minimum paid-up capital prescribed by the National Bank shall be paid in cash and
deposited in a blocked bank account in the name of the prospective insurer;

Issuance of License

1/ After evaluating all the relevant information, the National Bank may decide to issue a license
to an applicant, with or without conditions or limitations, if it is satisfied that the
requirements for a license have been met.
2/ the conditions or limitations to which a license shall be subject may, amongothers,
include:
a) Limitation on the class of insurance that may be written;
b) Limitation on the validity period of the license;
c) Limitation on the amount of premium that may be written in a particular period or Class
of insurance;
d) Restriction on investments, including a prohibition on the ownership of a subsidiary or
a particular type of subsidiary; and
e) Conditions limiting the business to the reinsurance of risks.

2/ The National Bank shall decide on an application to carry on insurance business within 90
days from the last date of receipt of all information to be submitted in accordance with sub-

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article (1) of Article 4 of this Proclamation.
3/ a license issued under this Proclamation shall specify the classes of insurance in respect of
which the holder of the license is authorized to carry on.

4/ the license shall be issued upon payment of the licensing fee prescribed by the National Bank.
5/ A license granted by the National Bank pursuant to this Proclamation shall constitute final
authorization to carry on insurance business.
6/ The National Bank may, at any time, amend the license of an insurer, by imposing any
conditions or limitations thereto.
7/ The National Bank may grant license to a reinsurer and the manner of licensing of such
business may be prescribed by directive.
8/ The National Bank may issue directive prescribing the manner of licensing reinsurance broke
Technical Provisions
A) General Reinsurance Business
A reinsurance company at a minimum shall hold technical provisions as follows:
I) Unearned premium provision (UPP) on:
a) gross premium of all:.
i.Annual policies and short - term policies shall be calculated using 1 / 8th method; and
ii. long - term polices shall be calculated using 1 / 8th method on the prorate premium .

b) Cession:
i. Shall be calculated as per the agreement set out in the retrocession treaty . If the
retrocession treaty does not provide such specification, the reinsurance company shall use the
method stipulated under sub - article 5.1.3.A.I ( a ) of this Directive , and
ii. For all non - proportional treaties ( excess of loss and stop loss ) shall not be applicable unless
special agreement has been concluded with the retrocession ire.

C). Netpremium shall be the difference between sub - articles ( a ) and ( b ) of this article

Outstanding Claims
a) A reinsurance company shall keep and maintain outstanding claims provisions for every
insurance and reinsurance arrangement accepted on the basis of loss information advices

26
received from decants brokers and where such advices are not received, on an actuarial
estimation basis.
b) Provision for claims under litigation or dispute, at the date of reporting, shall be maintained at
100 % of the sum insured or amount disputed or limit of liability, as appropriate , plus the actual
or estimated legal costs , and shall be reported together with outstanding claims .
Investment of Reinsurance Funds Reinsurance
funds shall be invested in the manner prescribed hereunder:
a . Not less than 60 % ( sixty percent ) of total assets in Treasury Bills and bank deposits
provided , however , that aggregate deposits ( checking , savings and time deposits ) held with
any one bank shall not exceed 15 % of total assets ;
b . not more than 10 % ( ten percent ) of total assets in purchase or construction of buildings
exclusively or predominantly used for rent , capital appreciation ; and not exceeding 20 %
( twenty percent ) of total assets in company shares

INTRODUCTION

+251 115 570 001 [email protected]

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About Us

Awash Insurance Company History

1994

The historic establishment of Awash began in 1994, with 456 shareholders and Birr 4.8M in
paid-up capital. Within the first year alone, average return on Paid up capital rose to 20% and
subsequently, GWP showed steady growth over the period.

1997 – 1999

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Awash grew its capital from Birr 4.8M to Birr 15M and captured around 8% of market share of
the total Insurance Market in Ethiopia. Paid up capital rose to almost Birr 20M

2000 – 2003

In the new millennium, Awash diversified its produces through the introduction of life services.
With a growing number of staff and branches, net profit before tax reached over 10 M as well as
portfolio investment.

2004 – 2008

The period was brought in through awash’s 10 – year anniversary which was colorfully
celebrated and was followed with the preparation of the first strategic plan covering the period
between 2007 and 2011.

2009 – 2012

With total assets totaling 125M and GWP at 140M, Awash inaugurated its twin towers to be the
pioneer to build and own a HQ. The formulation of the second strategic plan of the company was
coupled with the implementation of the GIIS.

2013 – 2015

Awash marks its 20th anniversary surpassing net profit before tax at 50M with additional 10M in
capital invested in various sectors.

2016 – 2018

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 Dilla branch has 22 year experience

1.What is insurance, insurance management and steps in insurance management?

Insurance Defined

Insurance can be defined from two points of view.

First, insurance is the protection against financial loss provided by an insurer. It is an economic
device whereby an individual substitutes a small certain cost (the premium) for a large uncertain
financial loss which would exist if it were not for the insurance.

The primary function of insurance is the creation of the counterpart of risk, which is security.
Insurance does not decrease the uncertainty for the individual as to whether or not the event will
occur, nor does it alter the probability of financial loss connected with the event. From the
individual’s point of view, the purchase of an adequate amount of insurance on a house
eliminates the uncertainty regarding a financial loss in the event that the house should burn
down.

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 Many persons consider an insurance contract to be a waste of money unless a loss occurs and
indemnity is received. Some even feel that if they have not had a loss during the policy term,
their premium should be returned. Both view pints constitute the essence of ignorance. Relative
to the first, we already know that the insurance contract provides a valuable feature in the
freedom from the burden of uncertainty. Even if a loss is not sustained during the policy term,
the insured has received something for the premium: the promise of indemnification in the event
of a loss. With respect to the second, one must appreciate the fact that the operation of the
insurance principle is based upon the contribution of the many paying the losses of the
unfortunate few. If the premiums were returned to the many who did not have losses, there
would be no funds available to pay for the losses of the few who did. Basically then, the
insurance device is a method of loss distribution. What would be a devastating loss to an
individual is spread in an equitable manner to all members of the group, and it is on this basis
that insurance can exist.

Second, insurance is a device by means of which the risks of two or more persons or firms are
combined through actual or promised contributions to a fund out of which claimants are paid.
From the viewpoint of the insured insurance is a transfer device. From the viewpoint of the
insurer, insurance is a retention and combination device. The distinctive feature of insurance as a
transfer device is that it involves some pooling of risks; i.e., the insurer combines the risks of
many insured.

Through this combination the insurer improves its ability to predict its expected losses. Although
most insurers collect in advance premiums that will be sufficient to pay all their expected losses,
some rely at least in part on assessments levied on all insureds after losses occur.

2 Briefly develop the historical overview of insurance company as a head office and as a branch
specifically for your selected insurance company.
 Awash Insurance Company (AIC) is one of the oldest and largest insurance companies in
Ethiopia. It was established in 1994 as a subsidiary of Awash International Bank, which
was established in 1994 by 486 founding shareholders.
 In the years following its establishment, AIC grew rapidly and expanded its operations
throughout Ethiopia. It offers a wide range of insurance products, including motor

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 insurance, fire and allied perils insurance, marine insurance, personal accident insurance,
and health insurance.
 In 2008, AIC became the first Ethiopian insurance company to be awarded an ISO
9001:2000 certification for quality management. This helped to further cement its
position as a leading insurer in the country.
 Over the years, AIC has played an important role in the development of the Ethiopian
insurance industry. It has been a pioneer in introducing new insurance products and
services, and has helped to raise awareness among the public about the importance of
insurance
 The insurance business in Ethiopia is its modern application is a recent phenomenon.
 A branch of a foreign insurance company know as “ Baloise Fire Insurance company”
was opened by on Austrian in Addis Ababa in 1923 for the first time in Ethiopia.
 The company paid compensation to a client in 1929 for damage to his store caused by
fire. Beginning form this time until the Italian invasion of 1936 some foreign insurance
companies were operating through their agents.
 During the Italian occupation of Ethiopia in 1936 - 1941, Italian insurance companies
operated and non-Italian companies closed down.
A survey was undertaken by the then Ministry of Trade and Industry in 1954 to find out
he situation of the insurance industry and to indicate ways how the industry could
develop.
 The survey revealed that there were 19 insurance companies operating in Ethiopia of
which there was only one domestic company, Imperial Insurance Company ,established
in 1951).
 The companies had agents in port towns and commercial centers, namely Addis Ababa,
Asamara ,Assab, Dessie, Diredawa and Msassaw.
 A second survey on insurance companies was undertaken by the Ministry of Trade and
Industry in 1960. The survey revealed that the number of insurance companies operating
in the country increased to 33. In this survey also, Imperial Insurance Company was the
only domestic insurer.
 Due to some malpractices of insurers and companies on the insurance industry the Addis
Ababa chamber commerce conducted a survey I 1967. The survey revealed that there

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 were 30 foreign companies operating either through branches or agents and 10 domestic
companies in the insurance business. The chamber of commerce in its report
recommended that a detailed legislation to control the practice of insurance business be
enacted
 .In order to direct and control the insurance business, a low (proclamation No. 281/1970)
was passed. Prior to this low the commercial code of Ethiopia of 1960, articles 654-712
tried to define the insurance contracts and the right and duties of the contracting parties.

 Proclamation No. 281/1970 gave the responsibility of controlling the insurance business
to the Ministry of Trade and Industry. Based on the provision of the proclamation a
council was established chaired by the Minister of the Ministry of Trade and Industry and
consisting the following as members.
Minister of the Ministry of Finance and, Minster of the Ministry of communication, Head
of the planning Commission, Minister of the Ministry of Social Affairs and Environment
Development, and Governor of the National Bank of Ethiopia .
The main objective of this council was to encourage and control the insurance business
and to formulate policies that enhance insurance and investment.
 Under the council the office of the controller of Insurance was established. This office
licensed 15 domestic insurance companies, 36 agents, 7 brokers, 11 loss assessors and 3
actuaries.
Nationalization of the Insurance Companies In 1974 the military government came to
power and nationalized al the 13 insurance companies that were operating in the country.
 The boards of all the initialized companies were dissolved and a new provisional
Insurance Board was set up.
The nationalized companies were operating independently but all were required to report
to the provisional Insurance Board

 The Ethiopian Insurance corporation was established under proclamation No. 681/1975
with a paid up capital of 11 million dollars. The assets, liabilities, rights and obligation of
the nationalized private insurance companies were transferred to the Ethiopian Insurance
Corporation.
 The purpose of the corporation was:

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  To engage in all classes of insurance business in Ethiopia.
 To ensure that insurance services reach the board masses of the people and
 To promote efficient utilization of both material and financial insurance resources.
Insurance Business Since 1991 Following that change of government in 1991 a new
economic policy that increased the role of the private sector in the economy was
formulated
 A new comprehensive law to regulate the licensing operation and supervision of
insurance business was promulgated by the Transitional Government of Ethiopia under
proclamation No.86/1994.
 Under this legislation the task of the licensing and supervision of insurance business was
given to the National Bank of Ethiopia.
The law allowed private companies whose capital is wholly owned by Ethiopian
nationals and/or organizations wholly owned by Ethiopian nations and registered under
the laws of the having their head office in Ethiopia to engage in insurance business.

 Proclamation No. 86/1994 further provides that the minimum share capital is Birr 3
million for general insurance business, Birr 4 million for long term insurance business
and Birr 7 million if the business to be done is both general and long term insurance
business

 It is with this legal frame work that one public enterprise and more than 8 private
insurance companies with a total of more than 106 branches are operating at present.
 Since in dilla branch 22 year experiance

3. What are the legal foundation to found the insurance company in Ethiopia and what are the
necessary preconditions to operate insurance business in Ethiopia (discuss all related

33
proclamations ,and regulation related to insurance business in Ethiopia; use recent legal
documents)

4. What are different stakeholders of insurance business and their roles with reference
to Ethiopian

There are several stakeholders in the insurance business in Ethiopia, and their
roles are as follows:

1. Insurers: Insurers are the backbone of the insurance business in Ethiopia. They
are responsible for providing insurance policies to individuals and companies to
protect

2. Reinsurers: Reinsurers provide insurance protection to insurers. They provide

financial support to insurers in case of large claims or catastrophic events that
can potentially bankrupt the insurers.

3. Regulators: The National Bank of Ethiopia is the regulatory body for the
insurance industry in Ethiopia. The regulator sets the standards and guidelines
for insurers to operate in the country. It monitors compliance with laws,

34
regulations, and ethical standards, to ensure that insurers operate in a fair and
transparent way.

4. Customers: Customers are individuals or organizations that purchase

insurance policies to protect their assets and manage risk. They pay premiums to
insurers in exchange for insurance coverage.

5. Agents and Brokers: Agents and brokers are intermediaries between insurers
and customers. They help customers to buy insurance policies and advise them on
the best policies to suit their needs. They act on behalf of insurers to sell policies
and collect premiums.

6. Employees: Employees of insurance companies are responsible for

underwriting, claims processing, sales, marketing, and customer service. They
ensure that the insurance companies operate efficiently and deliver value to
customers.

7. Investors: Investors in the insurance business in Ethiopia provide capital to

insurers to enable them to write insurance policies and to grow their businesses.
They expect a return on their investment in the form of dividends or capital gains.

35
5.What type of insurance products are provide by your selected insurance companies and
discuss them why only this products are provided by your selected insurance companies.

General Insurance

 General Insurance (Non-Life):

 Awash Insurance Company(S.C) transacts Non-life as follows:
1. Motor Comprehensive Insurance:

 Covers loss of or damage to the insured vehicles as a result of accidental collision &/or
overturning or fire or theft or malicious acts plus third party legal liabilities as follows:-

 Third Party Liability Limit:

 A. In respect of death or bodily injury
 Emergency Medical Treatment.......Birr 2,000.00/Person
 Death......Up to Birr 40,000.00/Person
 Bodily Injury.......Not exceeding Birr 40,000.00/Person
 B. In respect of property damage ....Not exceeding Birr 100,000.00/accident
 In addition to the above Motor Comprehensive Insurance covers loss of or damage to the
insured vehicles as result of accidental collision and/or overturning or fire or theft or
malicious acts.
2. Fire and Lightning Insurance:

 Covers the insured property against loss or damage by fire or lightning. In addition, with
application of proximate cause, although not directly caused by fire or lightning the
following are also covered.
 Damage by water or other extinguishing agent used during the accident;
 Damage by fire brigade in the execution of its duties;
 Property blown up to prevent the spreading of the fire;
 Loss of or damage to property removed from the burning building caused by the process of
removal or rain provided the insured takes steps as soon as possible to protect the removed
property.
3. Consequential Loss

36
 Consequential loss coverage reimburses the insured for business costs due to damaged
facilities or equipment.

4. Burglary and Housebreaking Insurance:

 Covers the property insured against loss by theft, accompanied by actual forcible and
violent breaking into or out of the building or any attempted thereat, or if there shall arise
any damage to the property insured or the premises.

5. Marine Inland Transit

 covers the insured properties against Theft and/or Fire and/or damage directly caused by
overturning or collision or derailment of the carrying conveyance or collapse of bridges
and/or embankments.

6. Inland Transit Risk;

 Coverage against loss of or damage to the goods being transported on land.

7. Carrier's Liability;

 Covers loss of or damage in delivery of goods carried by the insured which occur during
carriage and within the period of insurance from the moment the goods are loaded on the
carrying conveyance until the time of delivery and the carriage is performed by the
carrying conveyance specified in the Schedule.

8. Workmen’s compensation Insurance:

 Covers the insured employees against death or bodily injury by accident or occupational
diseases occurring at the place assigned to them for work or arising from their work and
during the time of their work.
9. Group Personal Accident Insurance:

37
 Covers the insured against any bodily injury caused by violent, accidental, external and
visible means which injury shall independently of any other cause be the direct and
immediate cause of death or disablement of the insured.
10. Engineering:

 Boiler Insurance:
 Covers unforeseeable & sudden physical loss of or damage to the insured items,
necessitating their repair of replacement. Loss or damage covered under the policy is
mainly due to one of the following causes :
 - Faulty design, Faulty operation, lack of skill, negligence, malicious acts, shortage of
water in boilers, physical explosion, short circuit and other electrical causes.
 The risks should be surveyed before attachment of the insurance cover.

 Contractors' All Risks:
 Provides an 'all risks' cover – every hazard is covered which is not specifically excluded.
This means that almost any sudden and unforeseeable loss or damage occurring during the
period of insurance to the property insured on the building site will be indemnified. The
most important causes of losses identifiable under CAR insurance are:
 - Fire, lightning, explosion, crashing aircraft, extinguishing water or other fire fighting
measurer,
 - Flood, inundation, rain, snow, avalanche, tsunami,
 - Windstorm of any kind,
 - Earthquake, subsidence, landslide, rockslide,
 - Theft, burglary,
 - Bad workmanship, lack of skill, negligence, malicious acts or human error.
 It also covers loss of or damage to building material, construction machinery and
construction plant and equipment occurring during on-site transport, intermediate storage,
or during assembly or disassembly.

 Erection All Risks,
 Contractors' Plant and Machinery,
 Electronic Equipment Insurance:

38
 It is essentially an "Accident Insurance" on "All Risk" basis for electronic equipment. It
thus covers losses which arise suddenly enforceable and materially affect the subject matter
insured, necessitating repair or replacement.

 Machinery Breakdown.
11. All Risks Insurance:

 Covers the insured property against loss or damage caused by an accident or misfortune.

 12. Public Liability Insurance:

 Covers legal liability of the insured against bodily injury or illness of any person or loss of
or damage to property occurring within the territorial limits stated in the policy as a result
of an accident & happening or caused as described in the policy as description of risk.
13. Product Liability Insurance:

 Covers the insured against legal liability to pay damages in respect of accidental. a) Death
of or bodily injury, disease or illness to any person b) Loss of or damage to material
property caused by or arising from any goods or other property sold, supplied, installed,
delivered, repaired, erected, altered, treated or tested by the Insured in connection with the
business, after the products have ceased to be in the custody or control of the insured.
14. Professional Indemnity Insurance:

 Covers the insured against liability at law in respect of any claim or claims for breach of
professional duty.
15. Money Insurance:

 Covers loss of money sustained as a result of fortuitous circumstances including through

unlawful acts of other persons such as burglars or thieves. In addition it gives cover to loss
of or damage to any safe or strong room belonging to the insured caused by burglars or
thieves.
16. Plate Glass Insurance:

Covers loss or damage of glasses destroyed or broken by any accident or misfortune of a

fortuitous character.

39
 17. Bonds:

Bid,

 Performance,
 Maintenance, &
 Advance payment;
 18. Fidelity Guarantee Insurance:
 Covers loss sustained through any acts of fraud or dishonesty committed by an insured
employee.
19. Floriculture Insurance;

20. Political Violence and Terrorism(PVT) and many more

Life and Health Insurance:

Awash Insurance Company(S.C) transacts Life and Health Insurance as follows:

 Term Assurance:
 Individual &
 Group Life;
 Endowment Assurances:
 10, 15, 20...35 Years Endowment,
 Anticipated Endowment,
 Endowment Annuity &
 Education policy
 Whole Life (Endowment at age 85);
 Riders:
 Accident Insurances:
 Supplementary Accident Insurance (SAI)
 Comprehensive Accident Insurance (CAI)
 Waiver of Premium
 Medical Expenses Insurance
 Travelers' Health Insurance
 Mortgage Redemption Insurance (MRI)

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Travel Insurance:

 Awash Insurance Company(S.C) provides travel insurance cover to different

Geographical areas.

 1. Travel Protect Plans
 Africa : provides coverage within Africa and surrounding islands, except country of
residence.
 Asia : provides coverage within Asia & surrounding islands.
 Israel : provides coverage within the State of Israel.
 Europe : all European countries including those in the Schengen Area.
 Worldwide : provides Worldwide cover except the country of residence.
 2. Students Travel Protect Plans
 Europe : all European countries; Schengen Area included.
 Worldwide: provides Worldwide cover except the country of residence.
 3. Haji &Umrah Travel Insurance
 Haji &Umrah: provides coverage in Medina and Mecca located in Saudi Arabia.
 4. "Corporate" Plan
 Worldwide: provides worldwide cover except the country of residence.
 One Year BLANKET Policy :several employees with 30 or more people constantly
travelling throughout the year can be covered during the validity of the policy for
journeys declared before its commencement. Travelling days covered will be
deducted of the daily plan contracted by the policyholder.
 Policyholder :companies buying the annual blanket policy covering its employees
on international professional trips
 Insured: employees travelling for business, trade and professional purposes not
involving manual labour of any kind.
 Manual Labour means unskilled, semi-skilled, and/or skilled labour involving
working with your hands and/or operation of mechanical and/or non-mechanical
machinery and/or equipment.
 We have attractive tariffs for family traveling together.

41
  Definition of Family: Policyholder + Spouse + up to 3 dependent children up to 18
years of age. But in family policies, in case of a claim the economic limit is the
limit for the whole family group, it is not a limit per insured.
 Covid-19 Cover included: in case the Insured is infected and diagnosed with Covid-
19 during a trip covered by the Insurance Policy, the Travel Insurance will cover the
Medical Expenses & Hospitalization abroad as well as the ordered Compulsory
Quarantine up to the limits (€80 per day – Max.14 Days) expressed in the Cover
definition included in this policy and according to the terms and conditions of the
same.
Salaam Takaful
Introduction
Awash Insurance Company S.C. (AIC) is working hard to address the ever increasing needs
of customers. It has recently completed the customization of Salaam Takaful products and
has introduced to the market as it has already been authorized by NBE. It is Shari'ah
Compliant (insurance product). Anyone can buy Salaam Takaful Products as it is an
alternative service provided to the general public like that of conventional insurance
products although it is governed and regulated by Shari'ah law.

It is with great pleasure and satisfaction that Awash Insurance Company announces the
launching of this service. It is in AIC’s conviction and commitment to avail and render such
a product that meets its esteemed customers’ needs. Salaam Takaful products are now on
sale at selected branches in the City and at outlying branches of our company. AIC is
working hard to gradually expand the sales of Takaful products to reach all those in need
through all its branches.

What is Takaful?
 The word 'Takaful' means working together cooperatively with the spirit of
brotherhood in order to share threats.
 The first Takaful insurance company was established in Africa, Sudan in 1979.
However, the need for the service became higher and it gradually got wider
insurance market in Asia, Gulf of Arab Countries and Europe.
 3. Unique Features of Takaful covers

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  Unlike the conventional insurance, Takaful has some distinctive features with
respect to benefits, claims handling, and business regulation.
 It mainly focuses on the mutual cooperation of participants in the pool of Takaful
coverage;
 It is regulated by both the country’s law and Shari'ah principles;
 It is Shari'ahCompliant,highly dedicated to interest free ( Riba-free) investment
endeavors;
 It aims at cooperative claims handling during risks/damages experience by
customers properties for which Takaful cover has been subscribed;
 The main aim of customers to get Takaful covers is to help each other so as to
strengthen spirit of brotherhood.
Takaful Services currently availed by AIC includes:

 Motor Takaful;
 Fire & Lightning Takaful ;
 Marine Cargo Takaful;
 Inland Transit Takaful
 Carrier’s Liability Takaful
 Burglary & Housebreaking Takaful;
 Workmen’s Compensation Takaful;
 Personal and Group Personal Accident Takaful;
 Engineering Takaful;
 Public Liability Takaful;
 Money in Safe and in Transit Takaful;
 Bonds Takaful;
 Political Violence and Terrorism(PVT) and many more Takaful products.

 In dilla branch provided services are

 Fire Insurance
 Motor comphrensive
 Others

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6. What are the legal principles your selected insurers expected to provide insurance coverage to the
insured ?

6.1. Principle of Insurable Interest

A fundamental legal principle underlying all insurance contracts is insurable interest. Under this
principle an insured must demonstrate a personal loss or the insured will be unable to collect
amounts due when a loss due to the insured peril occurs. Insurable interest is always a legal
requirement because to hold otherwise would mean that an insured could collect without
personal loss. When we say that a businessman has an “interest in several companies,” we
usually imply that he has more than mere mental attraction towards them. This is also the
sense in which the term is used in insurable interest.

The essentials of insurable interest are as follows:

i) Presence of subject matter to be insured.

ii) Existence of monetary relationship between the subject matter and there would be
policyholder.
iii) The relationship existing between the policyholder and the subject matter need to be
legal.
iv) The policyholder must be economically benefited by the survival or suffer an economic-loss
from the damage or destruction of the subject matter.
An insurable interest may be applied on life property,or potential liability.
life
Self insurance. An individual has an insurable interest in his own life, and there is no limit to the
sum for which a man may insure his own life. In practice, the sum insured is restricted by the
insured’s ability to pay premium.

ii) Husband and Wife. A wife may insure the life of her husband because his continued
existence is valuable to her and she would suffer a financial loss upon his death. Likewise, a
husband may insure the life of his wife because her continued existence is valuable to him and
he could suffer a financial loss upon her death.

iii) Creditors and Debtors. A creditor stands to loss if his debtor dies without paying the debt.
Thus, he has the right to insure the debtor up to the amount of the loan.

44
iv) Partners. The death of a partner could well cause financial loss to the survivor(s), who
therefore, have a right to insure him. This could arise with a professional firm or perhaps with
theatrical performers. The amount of insurable interest would be difficult to ascertain, but
legally it is limited to the financial involvement in the person insured.

The pillars in insurance underwriting and claims are principles of insurance. Every subject or
discipline has certain generally accepted and systematically laid down standards or principles
to achieve the underlying objective

Property

Insurable interest in property may arise as follows:

i) Ownership. This is the most obvious form and in addition to full ownership, part or joint
ownership gives the right to insure. With part ownership, the insurable interest is strictly
limited to the financial involvement, but a part owner may insure the property for the full
value, as he will be deemed (believed) to be acting as an agent for the other co-owners. Any
amount he receives from the insurance, over and above his own interest, is to be held in trust
for the co-owners.
ii) Husband and Wife. A husband has an insurable interest in his wife’s property as he is
legally entitled to share her enjoyment of it, and a wife similarly has an insurable interest in
her husband’s property as their relationship is reciprocal.
iii) Administrators, Executors and Trustees. These are all persons entrusted with the estate
and affairs of others. They have a right to insure
the property for which they are responsible.
iv)Bailess. These are persons or entities legally in possession of goods belonging to others, for
example, laundries, cobblers, and the like have the right to insure for losses to goods in their
custody representing interest of the owner.
v) Agents. Provided the principal possesses an insurable interest, an agent may effect an
insurance on his behalf. The insurance must, however, be authorized or ratified by the
principal. A householder may effect a policy, which extends to cover the belongings of

45
 members of his family. Another example is with a private car insurance, which normally
extends to cover the liability of other drivers using the vehicle with the insured’s permission.
vi)Mortgagees and Mortgagors. The interest of the mortgagee is limited to the sum of money
that he has advance

Liability
Insurance of liability seldom (rarely) gives rise to any difficulty over the existence of insurable
interest. A person clearly has an interest in the sums he may be called upon to pay to third parties
as a result of accident.

When the Insurable Interest Must Exist

In property and liability insurance it is possible to effect coverage on property in which the
insured does not have an insurable interest at the time the policy is written, but in which such
an interest is expected in the future. In marine insurance a shipper often obtains coverage on
the cargo it has not yet purchased in the anticipation of buying cargo for the return trip. As a
result the courts generally hold that in property insurance, insurable interest need exist only at
the time of the loss and not at the inception of the policy. On the other hand, in life insurance
it is the general rule that insurable interest must exist at the inception of the policy, but it is
not necessary at the time of the loss. The courts view life insurance as an investment contract.
To illustrate, assume that a wife who owns a life insurance policy on her husband later obtains
a divorce
6.2. Utmost Good Faith

The insurer undertaking the risk and the person applying for insurance have a duty to deal
honestly and openly with each other in the negotiations which lead up to the formation of the
insurance contract. This duty may also continue while the contract is in force. If one party is in
breach of this duty, the other party usually has the right to avoid the insurance contract entirely.
In other words, a breach of utmost good faith renders the insurance contract voidable. The
principle of utmost good faith protects the interest of both the insured and the insurer and
imposes two duties on both parties to the insurance contract; not to misrepresent any matter
relating to the insurance, and to disclose all material facts relating to the contract.

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6.3. Indemnity

The concept of indemnity implies that the object of insurance is to provide the exact financial

compensation for the insured. It also implies that the insured should not be over-compensated
and should not “make a profit” from his loss. In other words, the principle of indemnity requires
that the insured should be fully compensated, but not over-compensated, for the loss.The
intention of the parties to the contract is that the insured, on the happening of an event insured
against, will be placed by the insurer in the same pecuniary position that he occupied
immediately before the event, subject to any limitations which may have been agreed and to take
over the rights of another (the insured)”. It is often described as “stepping into the shoes of
another” and is applicable only to contracts of indemnity. The basic premise is that where one
person, i.e. typically an insurer in this case, makes a payment on an obligation which, in law, is
the primary responsibility of another party, then the insurer making the payment is subrogated to
the claims of the insured to whom the insurer has made the payment with respect to any claims
or remedies which are exercisable against the primarily responsible party.Subrogation exists to
make sure that an insured does not get more than an indemnity, by claiming for the same loss or
damage from both the insurance policy and another source or sources. This is to say that
subrogation will arise only, where the insured has suffered a loss and has another means of
recovering for it, i.e. a claim on his insurance policy and a legal right or claim against some other
persons for the same loss. If the insured chooses the first option (a claim on his policy), then the
alternative right, i.e. the claim against another, will pass on to the insurer. The effect is to prevent
the insured from recovering twice for the same loss, so as to preserve the principle of indemnity.

6.4. Subrogation

Subrogation is the legal principle, whereby one person takes over the rights or remedies of
another against a third party. Subrogation is defined as the “right of one person (the insurer)
According to the principle of proximate cause, if an insured person lodged a claim, he is
required to justify that the loss is caused by a peril insured under the policy. In other words,
he must ensure that the loss is not caused by uninsured peril. For example, under motor
insurance, damage caused by war and war like operation is an excluded risk. Loss or damage
to the vehicle by fire, however, is covered peril. If the insured vehicle is burnt down to ash

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 due to exchange of fire between two parties at war, the insured will not be indemnified in
respect of losses incurred in this regard. Because the proximate cause for the loss is war
which is a peril not covered under the policy.

6.5. Contribution

The principle of contribution, which, like the principle of subrogation, has been described as
a corollary of indemnity, is concerned solely with the apportionment of liability as between
insurers in the event of double insurance, and the rules adopted for its application are
primarily rules of practice designed by insurers for their own guidance. (Hall, 1985). When
risk materializes in a situation where double insurance exists, the insured shall claim to one of
the insurance companies and the insurance company that received notification of claim shall
indemnify the insured and request for reimbursement proportional cost of the claim from the
other insurance company. If the insured is allowed to claim from both insurance companies,
it would be in violation of the principle of indemnity. In case the claim is reported to both
insurance companies, there is a possibility of paying their proportional cost of the claim
direct to the insured.

6.6. Proximate cause

The classic definition of proximate cause was given in Pawsey v. Scottish Union & national
(1907) “Proximate cause means the active, efficient cause that sets in motion a train of events
which brings about a result, without the intervention of any force started and working
actively from a new and independent source” (Hansell, 1974).
written into the contract(Hall, 1985).

7.what are the criterias to offer insurance policy and not to offer for whom potential
insureds? (criteria for inclusion and exclusion )

Insurance companies use a variety of criteria to determine whom to offer insurance

policies to and whom to exclude. These criteria are typically based on a

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combination of factors such as age, gender, health status, occupation, lifestyle
habits, and past insurance claims.

Some of the common criteria used for inclusion in insurance policies are:

1. Age: offer policies to individuals who are capable

2. Health status: require a medical examination before offering a policy. Individuals

with pre-existing medical conditions or a history of health problems may be
charged higher premiums or denied coverage altogether.

3. Occupation: Certain occupations may be deemed riskier than others, and

insurance companies may charge higher premiums or exclude coverage for
individuals in those occupations.

4. Lifestyle habits: Individuals who engage in high-risk activities such as smoking

or extreme sports may be charged higher premiums or excluded from coverage.

5. Claims history: Individuals with a history of making frequent insurance claims

may be charged higher premiums or excluded from coverage.

Some of the common criteria used for exclusion from insurance policies are:

1. Pre-existing conditions: exclude coverage for individuals with pre-existing

medical conditions.

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 2. High-risk occupations: Individuals in high-risk occupations

3. High-risk activities: Individuals who engage in high-risk activities such as

skydiving or bungee jumping may be excluded from coverage.

4. Criminal history: Individuals with a criminal history be excluded from coverage,

particularly for life insurance policies.

5. Age: exclude coverage for individuals who are above a certain age

8. When will be the insurance coverage denied while the insured is suffered from actual loss of
property which is register for insurance?

Insurance coverage may be denied when the policyholder suffers a loss of property that is
registered for insurance if the loss is not covered by the terms of the insurance policy. There are
several reasons why an insurance company may deny a claim, including:

 Loss occured in any work and activities that violate the law of country
 Driving with outdrivng license

1. Exclusions: Insurance policies typically have exclusions that specify what is not covered by
the policy. If the loss suffered by the policyholder falls under one of these exclusions, the
insurance company may deny the claim.

2. Policy limits: Insurance policies also have limits on the amount of coverage provided. If the
loss suffered by the policyholder exceeds the policy limits, the insurance company may only pay
up to the policy limit, leaving the policyholder responsible for the remaining amount.

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 3. Failure to pay premiums: If the policyholder fails to pay the insurance premiums, the
insurance company may deny the claim.

4. Misrepresentation: If the policyholder provides false information when applying for insurance
or filing a claim, the insurance company may deny the claim.

5. Delay in reporting the loss: Insurance policies typically require that losses be reported
promptly. If the policyholder fails to report the loss in a timely manner, the insurance company
may deny the claim.

6. Intentional acts: Insurance generally does not cover intentional acts, such as intentional
damage to property or intentional harm to others.

It's important for policyholders to carefully review their insurance policies and understand the
terms and conditions of coverage to avoid any potential denial of claims. If a claim is denied, the
policyholder may have the right to appeal the decision or seek legal recourse.

9. Do all properties are insured in your selected insurance companies, if not why all properties
are not
insured by the insurer? List some properties which are not yet covered by your insurers and the
reason for exclusion?
Not all properties are insured by Awash Insurance Companies. The decision to insure a property
depends on several factors, including the type of property, its location, its value, and the risks
associated with it. Some properties may be deemed too risky or too costly to insure, while others
may not be of significant value or interest to the insurance company.

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1. Illegal property: Any property that is obtained through illegal means or used for illegal
activities may not be insurable. For example, a house that is used as a drug lab or a stolen car
cannot be insured.

2. Immoral property: Some types of property may be considered immoral or against public
policy, and therefore, may not be insurable. For example, insurance for gambling losses or
insurance covering intentional damage to property may be deemed immoral.

3. Uninsurable risks: There are certain types of risks that are considered uninsurable, such as
risks that are too unpredictable or catastrophic in nature, like war or nuclear accidents.

Some properties that may not be covered by Awash insurance companies include:

………………………………………………………………………………….

………………………………………………………………………………….

…………………………………………………………………………………..

…………………………………………………………………………………..

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10. With regard to insurance contract from your selected insurer’s experience

10.1. Form (take hard copy format and attach as appendix for single insurance policy)

10.2.Elements of insurance contracts

1. Insurer: An insurer is a company or organization that provides insurance coverage to

individuals or businesses in exchange for a premium. Insurers are responsible for evaluating and
assessing the risks associated with the policy to determine the premium to be charged.

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2. Insured: The insured is the person or entity covered by the insurance policy. The insured pays
a premium to the insurer in exchange for the insurer's promise to pay for certain covered losses
or damages.

3. Sum insured: The sum insured is the maximum amount that an insurer agrees to pay out in the
event of a covered loss. It represents the value of the property, asset or liability that is being
insured.

4. The premium: The premium is the amount of money that an insured person or business pays to
an insurer in exchange for insurance coverage. The premium is usually paid annually, semi-
annually, or monthly and is calculated based on the risk associated with the policy.

5. Period contract: A period contract is an insurance policy that has a fixed term or duration,
typically one year. During this period, the insured is covered for the risks specified in the policy,
and the insurer agrees to pay for covered losses up to the sum insured.

6. Insurance policy: An insurance policy is a legal agreement between the insurer and the insured
that outlines the terms and conditions of the insurance coverage. The policy specifies the
coverage provided, the sum insured, the premium to be paid, the duration of the coverage, and
any exclusions or limitations to the coverage.

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10.3.Definition for insured

10.4. Inclusion criteria and exclusion criteria

………………………………………………………….

…………………………………………………………

………………………………………………………..

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………………………………………………………..

………………………………………………………..

10.5. Time to endorse or amend the insurance contract

 In awash insurance for all types of products the endorse or amend time is one year
11. With regard to premium computation

11. Objectives of premium rate making

The primary objectives of premium rate making are to ensure that an insurance company collects
enough premium revenue to cover the expected claims and expenses while also earning a
reasonable profit. More specifically, the objectives of premium rate making include:

1. . Affordability: Premium rates should be affordable for the target market of the insurance
product. This ensures that insurance coverage is accessible to those who need it.

2. Equity: Premium rates should be based on the risk characteristics of the insureds, such as their
age, gender, occupation, and health status. This promotes fairness and ensures that each
policyholder pays a premium that is commensurate with the risk they pose.

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 3 Adequate pricing: Premium rates should be set at a level that is sufficient to cover the expected
losses and expenses associated with providing insurance coverage. This ensures that the
insurance company can meet its obligations to policyholders in the event of a claim.

4. Competitiveness: Premium rates should be competitive with those offered by other insurance
companies in the market. This helps the insurance company attract and retain customers.

5. Profitability: Premium rates should generate sufficient profit for the insurance company to
remain financially stable and able to meet its obligations to policyholders and shareholders over
the long term.

b. Steps in premium rate making

…………………………………………………………..

…………………………………………………………….

…………………………………………………………..

…………………………………………………………..

C. What are the basis attributes to be considered in premium computation

The basis attributes that are typically considered in premium computation depend on the type of
insurance product being offered, but some common attributes include:

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1. Age: Insurance rates often vary based on the age of the policyholder, as older individuals are
generally considered to be at a higher risk of experiencing certain types of losses.

2. Gender: Some insurance products may differentiate rates based on gender, as certain types of
losses are more common among one gender over the other.

3. Health status: For health insurance products, rates may be based on the health status of the
individual, as those with pre-existing conditions or other health risks may be more likely to incur
medical expenses.

4. Occupation: For certain types of insurance, such as workers' compensation, rates may be based
on the risk associated with a particular occupation.

5. Location: For property insurance, rates may be based on the risk associated with the
geographic location of the insured property, such as the likelihood of natural disasters or crime in
the area.

6. Coverage limits: Premium rates may vary based on the coverage limits selected by the
policyholder, as higher limits generally result in higher premiums.

7. Deductibles: For property and casualty insurance, rates may be based on the deductible
selected by the policyholder, as higher deductibles generally result in lower premiums.

8. Claims history: Insurance companies may consider the policyholder's claims history when
determining premium rates, as those with a history of frequent claims may be considered higher
risk.

9. Driving record: For auto insurance, rates may be based on the policyholder's driving record, as
those with a history of accidents or moving violations may be considered higher risk.

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d. The formula to compute the premium

…………………………………………………………………

……………………………………………………………….
……………………………………………………………….

e. Reason to increase or decrease insurance premium

Premium increase or decrease based on a variety of factors, including:

1. Inflation: Insurance premiums may be adjusted to keep up with inflation, which can increase
the cost of providing coverage over time.

2. Market conditions: Insurance premiums can also be affected by changes in the market, such as
increased competition or changes in the regulatory environment.

3. Risk factors: Insurance premiums are typically higher for policies that cover higher-risk
activities or situations, such as driving a sports car or living in an area prone to natural disasters.
If the risk factors associated with a particular policy change, the insurance company may adjust
the premium rate accordingly.

4. Claims history: If a policyholder has a history of making claims, the insurance company may
increase their premium rates to reflect the increased risk of future claims.

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It's important to note that we are regulated by state insurance departments, which set rules and
guidelines that insurance companies must follow when setting premium rates.

f. Roles of law of large number in premium computation

The law of large numbers plays an important role in premium computation for insurance
companies. The law of large numbers is a statistical principle that states that as the number of
observations or events increases, the average of those observations or events will converge
toward the expected value or mean. In the context of insurance, this means that as the number
of policyholders increases, the actual losses experienced by the insurance company will tend to
approach the expected losses that were used to set premium rates.

This principle is important because insurance companies rely on accurately estimating the
expected losses for a particular group of policyholders in order to set appropriate premium
rates. By using historical data and actuarial models, insurance companies can estimate the
expected losses for a particular group of policyholders based on the risk characteristics of that
group. However, these estimates may not perfectly match the actual losses experienced by the
company due to the inherent uncertainty of insurance risks.

The law of large numbers helps to mitigate this uncertainty by allowing insurance companies
to spread risk across a large number of policyholders. By doing so, the actual losses
experienced by the company are more likely to converge toward the expected losses, reducing
the impact of random fluctuations in the actual losses.

In practice, insurance companies use the law of large numbers to help ensure that they collect
enough premium revenue to cover their expected losses and expenses while also earning a
reasonable profit. By spreading risk across a large number of policyholders, insurance

60
 companies can more accurately estimate their expected losses and set appropriate premium
rates, which in turn helps to ensure the financial stability of the company and the protection of
policyholders.

12. What are the preconditions to outline the insurance services

a. How many insured’s should be registered

 We don’t depend much on the number of insured ,after we get the product license we
start to give the services

b. How information are collected to review insured’s history with regard to required
insurance
policy

 we collect information from insured with our collecting mechanism

c. How to protect non-insurable interest from being included in the insurance policy

To protect an insurer's non-insurable interest from being included in an insurance policy, the
following steps may be taken:

1. By identifying the non-insurable interest: It is important to identify the non-insurable interest

that the insurer wants to protect. This could be anything from a moral or ethical consideration to
a legal or regulatory requirement.

2. By drafting clear policy language: The insurance policy should be drafted with clear language
that excludes any non-insurable interests. This can be done by including specific exclusions or
limitations in the policy that clearly state the non-insurable interest is not covered.

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 3. By train underwriters and agents: Underwriters and agents should be trained to identify and
recognize non-insurable interests and to ensure that these are not included in the insurance
policy. They should also be trained to explain the exclusions or limitations to the insured.

4. Review claims carefully: Claims should be reviewed carefully to ensure that they do not
involve any non-insurable interests. If a claim does involve a non-insurable interest, it should be
denied in accordance with the policy language.

5. Consult with legal counsel: It is always a good idea to consult with legal counsel to ensure that
the insurance policy language is clear and complies with all legal and regulatory requirements.
Legal counsel can also provide guidance on how to handle claims that involve non-insurable
interests.

By taking these steps, we ensure that the non-insurable interests are protected and not included in
insurance policies.

13. With regard to insurance claim

a. Who will fill insurance claim

1. The insured party or the policyholder is responsible for filling an insurance claim
2. Legal agent

b. How to fill insurance claim

1. with our claim form

2. with application

c. When to fill insurance claim

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  immediately, if it imposible in ten (10) days
d. What evidences should be presented to support insurance claim

 police report
 Evidence that may be required to support an insurance claim can include photos
or videos of the incident, medical reports, receipts for expenses related to the
incident, and witness statements.
e. How to analyze the filled claim is appropriate

 with our way of analyzing

f. What will be the consequence of filling fraudulent claim

 rejected from the insurance; because of the contract is brechedby insured

g. How disputes between filled claim and analyzed claim be solved

 By explaining the mater :weattempt to resolve the issue through negotiation or

mediation.

h. How business loss for covered insurance could be measured

Net loss method :Net Loss in insurance refers to the total amount of money that an insurance
company pays out in claims and related expenses, minus the total amount of premiums
collected from policyholders during a specific period of time. In other words, it is the
difference between the company's losses and its revenues from insurance policies.

14. With regard to insurance claim settlement

a. Objective of claim settlement
 . The objective of claim settlement is to compensate the insured party for losses
covered by the insurance policy. The insurance company is responsible for paying
out the claim according to the terms of the policy.

b. Conditions for claim settlements

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  The conditions for claim settlements will depend on the insurance policy.
Generally, the insured party must provide evidence to support the claim, and the
claim must fall within the terms and limits of the policy.

c. Unfair practices in claim settlements

We works with the company procedure and guidline as a result there is no unfair
practices

d. Steps in claim settlements

 The specific steps in claim settlement with Awash Insurance will depend on the type of
insurance policy and the details of the claim. However, generally, the following steps
may be involved in the claim settlement process with Awash Insurance:

 1. Notify the claim: The insured party should notify Awash Insurance as soon as
possible after an incident that may result in a claim. This can be done by
contacting the nearest Awash Insurance branch or by calling the company's claims
hotline.

 2. Submit claim documents: The insured party will need to submit the necessary
claim documents to Awash Insurance. These may include a completed claim
form, evidence to support the claim (such as photos, medical reports, or a police
report), and any other documentation required under the policy.

 3. Investigation and assessment: Awash Insurance will review the claim and may
conduct an investigation to assess the validity of the claim. This may involve
contacting

 4. Claim decision: After reviewing the claim, Awash Insurance will make a
decision on whether to accept or deny the claim. If the claim is accepted, Awash
Insurance will determine the amount owed under the policy.

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  5. Payment: If the claim is accepted, Awash Insurance will make payment to the
insured party according to the terms of the policy. Payment may be made directly
to the insured party or to a third party (such as a hospital or repair shop).


15. With regard to re-insurance
a. What is re-insurance:.
 Reinsurance is a form of insurance purchased by insurance companies to transfer
a portion of their risk to another insurance company. In other words, it is
insurance for insurers.
 Re-insurance is a process by which an insurance company transfers some or all of
its risk to another insurance company. The re-insurance company assumes part of
the risk in exchange for a premium.

b. Why to re-insurance
 We may choose to re-insure in order to reduce their exposure to
risk,increase our capacity to write more insurance policies, and to protect
against catastrophic losses.

c. What types of re-insurance

Our Reinsurance Arrangements:

 Treaty reinsurance: This involves a contractual agreement between the insurer and
the reinsurer to cede a specific portion of the risk on a particular class of business,
such as property or casualty insurance. Treaty reinsurance is typically used for
long-term and predictable risks.
AIC's Reinsurance program is one of the most highly reliable arrangement in the
industry.

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 Our Reinsurance treaties are led by:

1. The Munich Reinsurance Corporation with A+ (Excellent) rating by globally

acclaimed Rating companies like S&P and A.M Best;

2. Swiss Reinsurance Company Ltd.

3. Africa Re, also an A rated Reinsurance Co.

4. Treaty followers :

(i) Ethio Re, (ii) PTA Re. (iii) East African Re. (iv) Society Central de Reassurance,
(v) Continental Reinsurance Limited.

5. Reinsurance Brokers : Afro Asian, Nasco, Fair Insurance & Reinsurance, and Genesis
Risk Managers

d. When to have re-insurance

Insurance companies should consider purchasing reinsurance when they face risks
that are beyond their capacity to manage or when they want to reduce their exposure
to catastrophic losses. Reinsurance can also help insurers to expand their capacity to
underwrite more business and maintain their financial stability. Ultimately, the
decision to purchase reinsurance will depend on the insurer's risk appetite, financial
strength, and business goals.

16. Do you think insurance business is well promoted and operated as such its importance in
Ethiopia, if
not promoted, why not?

 The insurance business in Ethiopia is not yet well promoted and operated to the
extent of its importance. While the importance of insurance is recognized, there
are still challenges that need to be addressed in order to promote and operate the

66
 industry effectively. The lack of awareness and understanding of the benefits of
insurance among the general public, limited product offerings, and regulatory and
operational challenges are some of the main issues that need to be addressed.
 Even the contribution of the insurance industry to countries GDP is 0.003% while
in our neighbor Kenya is more than 0.04%

17. What are the common problems clearly observed from insured’s side?
 Common problems observed from the insured's side in Ethiopia include a lack of
understanding of insurance concept
 In Ethiopia still view insurance as an unnecessary expense rather than as a risk
management tool.

18. What are the common problems clearly observed from insurers’ side?

 Un able to affordable the services

 Limited access to insurance products and services in rural areas

19. What are the common problems clearly observed from different stakeholders with
insurance
environment in Ethiopia?

Different stakeholders in the insurance environment in Ethiopia face challenges such, Lack
of public awareness and understanding of insurance products and services a shortage of
skilled professionals in the industry, and limited services in rural areas. and lack of
innovation in the industry are also major issues for stakeholders.

20. What will be the potential remedies expected to be done from the side of

a. Government

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 Government: The government can play a key role in promoting the insurance industry by raising
awareness about the benefits of insurance, improving the regulatory framework, and providing
incentives for companies to invest in the industry. The government can also work to improve
access to insurance products and services in rural areas.
B. Policy Makers

Policy makers: Policy makers can help to address some of the challenges facing the insurance
industry by developing policies that encourage innovation and competition, improving the
licensing and supervision of insurance companies, and promoting financial literacy and
education. They can also work to address the issue of fraud in the industry by implementing
stronger penalties for fraudulent activities.

C. Insurers

Insurers: Insurers can work to improve the quality of their products and services, increase their
outreach efforts to potential customers, and invest in research and development to create
innovative products and services.

D. Insured’s

Insured: Insured can educate themselves about the benefits of insurance and the different
products and services available. They can also work to ensure that they provide accurate
information when applying for insurance and follow the proper procedures when making claims.

E. Community

Community: The community can play a role in promoting insurance by raising awareness about
the benefits of insurance, encouraging insurance companies to provide products and services in
their area, and working to reduce fraudulent activities in the industry.

F. Academic andResearch Centre1

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Academic and research center : Academic and research centre can conduct research to identify
the challenges facing the insurance industry in Ethiopia and develop solutions to address these
challenges. They can also provide training and education to individuals interested in working in
the insurance industry, which can help to address the shortage of skilled professionals in the
industry.

Conclusion:

In conclusion, Awash Insurance Company has shown a steady growth in the insurance market of
Ethiopia by following a strategic expansion plan. The company has actively diversified its
insurance product portfolio and is maintaining a strong financial status. However, there are
certain challenges that the company needs to address in order to sustain this growth and improve
its operations.

Recommendations:

1. Enhance customer service: The company should focus on enhancing its customer service by
investing in technology and improving the training of its staff. This could include online self-
service options, faster claims processing, and personalized customer service.

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2. Expand distribution channels: To reach a wider range of customers, Awash Insurance
Company should explore alternative distribution channels like banc assurance and digital
channels. This will help to improve accessibility and convenience for customers.

3. Strengthen risk management: The Company should implement a robust risk management
framework to monitor and manage risks in a timely and efficient manner. This will help to
ensure that the company is adequately prepared for any potential risks and able to respond
effectively.

4 service or product affordable: the company should continuously affordable to all customers

5. Review pricing strategies: The Company should continuously review its pricing strategies to
ensure they are fair and competitive. This could involve regularly monitoring market trends,
conducting competitor analyses, and conducting customer surveys.

6. Embrace digital transformation: Awash Insurance Company should embrace digital

transformation by adopting modern technologies and exploring new business models. This will
help to improve efficiency, reduce costs, and meet changing customer needs.

By implementing these recommendations, Awash Insurance Company can improve its

operations and continue to grow in the Ethiopian insurance market.

4. Properties undergoing renovation: Insurance companies may not provide coverage for
properties undergoing major renovations or construction work.

5. Properties used for commercial purposes: Insurance policies may not cover

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