DILLA UNIVERSITY

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 TEMESGEN
4.TIGIST DEMELASH
5.TSIYON SEYFU
6.ZELALEM AYELE
7.PETROS DASA
8.ZEYNEB SHIKUR
9.TINSAE HAYANO
10.TIRUFAT TEFERA
11.REDET ARARSO
12.TAMIRAT KIFLE
13.TEMESGEN KEFIALEW
14.TARIKU KIPETU
15.TSEGA PETROS
16.MIHRETU TEFERA
INTRODUCTION
+251 115 570 001 [email protected]
AIC Logo
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
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
 Dilla branch has 22 year experiance
1.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
 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:

 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:
 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.

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)
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.
 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
 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'ah Compliant,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

2. Basic Principles of Insurance

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

1. Insurable Interest
Insurable interest in property may arise through ownership, possession or contract and in
certain cases it may be created or modified by statute. (Hall, 1985). A property owner has
insurable interest in his property because damage or loss sustained by the property would
result in financial loss to the owner. On the other hand, if a person has no financial interest
on the subject of insurance (property, vehicle, and etc.), such a person is said to have no
insurable interest. Thus, any one person that has no insurable interest on a particular property would not
be allowed to insure such property.

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.

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.

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
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.

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. 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).

3.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 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.
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

4. 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 out drivng 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.

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.

5. 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.
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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7.With regard to insurance contract from your

selected insurer’s experience
a. Form (take hard copy format and attach as appendix for single insurance policy)

b. 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.

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.

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 properties used for
commercial purposes, such as rental properties or businesses.

It's important to note that the specific exclusions and limitations of insurance policies can vary between
insurers and policies. It's always advisable to carefully review the policy terms and conditions to
understand what is covered and what is excluded before purchasing an insurance policy.

c. Definition for insured

d. Inclusion criteria and exclusion criteria
……………………………………………………….

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e. Time to endorse or amend the insurance contract

 In awash insurance for all types of products the endorse or amend time is one year

8. With regard to premium computation

a. 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.

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:

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.

d. The formula to compute the premium

…………………………………………………………………

……………………………………………………………….
Insurance companies typically increase or decrease their premiums
based on a variety of factors, including:
1. 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.

2. 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.

3. Market conditions: Insurance premiums can also be affected by

changes in the market, such as increased competition or changes in the
regulatory environment.

4. Inflation: Insurance premiums may be adjusted to keep up with

inflation, which can increase the cost of providing coverage over time.

5. Underwriting results: Insurance companies may adjust their

premiums based on their underwriting results, which is the process of
evaluating the risk of insuring a particular policyholder or group of
policyholders.

It's important to note that insurance companies are regulated by state

insurance departments, which set rules and guidelines that insurance
companies must follow when setting premium rates.

……………………………………………………………….

e. Reason to increase or decrease insurance premium

Premiumincrease 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.

It's important to note that weare 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 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.

8. 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.
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.

9. 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

 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.

10. 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

 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.

 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).

11. 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 arrangment in the industy.
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) SocieteCentrale 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

- d. 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.

12. 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 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%

13. 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.


14. 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

15. 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 servicesa 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.

16. What will be the potential remedies expected to be

done from the side of
a. Government
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
. Insureds: Insureds 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 and research centre1

Academic and research centres: Academic and research centres 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.