- What are the objectives of insurance?
Insurance a risk transfer mechanism that facilitates transfer of financial consequences from an individual/institution to the insurer. Insurance provides protection to those exposed to risks. One of the objectives of insurance is to pool the risk of a sufficiently large number of policyholders. By collecting premiums from many individuals or organizations, insurers can pay out relatively few claims each year while collecting premiums from the majority of policyholders who don’t file claims over that same period.
A second key objective of insurance is to compensate policyholders following predetermined catastrophic events. For example, auto insurance policyholders are reimbursed for part or all of the damages sustained by their vehicle in a collision.
A third objective of insurance is to satisfy policyholders that insurers are financially stable and solvent. This is important because if any policyholders weren’t compensated for eligible losses it would undermine society’s confidence in the system
- What is the difference between Insurance Company and a reinsurance company?
An insurance company is an institution that that carries the risks and pays out claims. It is referred to as the insurer or an assurer. Where an insurer assumes risks which are beyond their retention, part of the risk will be passed over to a reinsurer. Reinsurance is insurance for insurers.
- What is the difference between Assurance and insurance?
Assurance is a type of financial coverage that provides compensation for an event that is certain to happen. Assurance is similar to insurance, but insurance specifically protects policyholders from events that might happen and provides compensation to the insured if and when a financial loss occurs.
- What does Reinsurance mean?
Reinsurance, also known as insurance for insurers, is the practice of insurers transferring portions of risk they have assumed to other parties by some form of agreement to reduce the likelihood of having to pay a large amount resulting from an insurance claim.
- Who is an agent?
An agent is a person who represents an insurance firm and sells insurance policies on its behalf. The insurer being the principal is liable for the actions of the agent.
- What is the difference between insurers, brokers, MIPs and agents?
Insurance agents generally represent insurance companies and assist insurers in selling their products. Insurance brokers on the other represent insurance buyers. As representatives from the buyer’s side, insurance brokers are independent professionals and take responsibility for their negligent acts. Medical insurance providers act as brokers for medical insurance business only. MIPs may also manage funds on behalf of their clients.
- Why are most insurance company policies the same?
Most Insurance Policies are similar because the risks faced in each class of business are the same. The benefits are therefore similar except where an insurer modifies the policy to give extra benefits. IRA has also taken steps to standardize the policies and ensure that the language used is understood by policyholders.
- Can I buy insurance policies online in Kenya?
Insurance policies are available for purchase online for example marine, motor, personal accident among others. Premiums are payable online and claims settled online.
- What is receivership in insurance?
Circumstances may arise where an insurer is facing liquidity problems or other challenges that may cause it not to honour their obligations to clients. The company is placed in the custodial responsibility for the property of others in this case, IRA. This is because a company cannot meet financial obligations or enters bankruptcy and can subject its policyholders, claimants and other creditors to greater than normal financial risk; including the possibility the company may not maintain compliance with the applicable statutory capital and/or surplus requirements.
- How does an individual identify a suitable insurance policy?
- Identify your risks and insurance needs
- Discuss your risks with an insurance company, broker or an agent near you
- Match the products and choose the one that better suits your needs and at a cost that is affordable.
- Prioritize your needs
- Who can be insured?
Any person with an insurable risk and is able and willing to transfer the risk to an insurance company. It can be an individual or a body corporate. Such person however must have insurable interest in the subject matter of insurance.
- Can a girlfriend insure a boyfriend?
The insurance Act specifies various relationships where insurable interest may arise. One can therefore insure when there is insurable interest. The existence of a legally binding relationship e.g. that of a wife and a husband. So boyfriend cannot insure girlfriend. This may be possible in other jurisdictions for example the USA.
- Are persons with disabilities (PWD) insurable?
PWDs can take an insurance cover like any other person. What is required of the person is full disclosure to the answers in the proposal form.
- What is the difference between short and long term insurance policies?
The major but not defining difference would be that with a long term insurance policy, one takes a policy whose term is more than one year. This will mainly be in life insurance policies that are intended to protect dependants in case of untimely death of the bread winner, investment or saving. Long term policies provide payment in case of death or maturity. Short term insurance are policies that run for a period of one year. They are referred as general insurance and is aimed at indemnifying the policyholder in case they suffer a financial loss during the term of the policy.
- How many types of insurance products are there in the market?
Broadly, there are two types of insurance that is, Long term and general or short term insurance. Long term insurance is those insurances which are for a period more than one year. These are life and retirement benefit policies. The products under these include:
- Term insurance;
- Endowment; and
- Whole life.
General insurance on the other hand, are those insurances that are of a period of one year or less. Examples of products under general insurance include.
- Fire Insurance
- Motor vehicle insurance,
- Theft Insurance,
- Marine insurance,
- Aviation insurance,
- Agricultural insurance,
- Education Insurance
- Medical Insurance.
- Goods in Transit
- Can someone take cover for the same risk/subject matter with two different companies?
This may not be possible for indemnity contracts. An insurance cover is meant to indemnify a person, in other words restore you to the financial position before a loss is experienced. Otherwise an individual will gain from the loss. However, this is possible in life insurance policies as one cannot place a value for human life.
- What is the maximum age for buying insurance?
Most life insurance companies encourage one to buy insurance at an early age as this is a determinant of the premium amount charged. Risk generally increases with age. In this respect, some companies have a maximum age limit for medical and life policies. It is however advisable for one to inquire this from individual insurance companies as some have introduced certain products for persons of advanced age.
- Why do older people pay more premiums than the young people for the same cover?
The older people may be pay higher premiums compared to the young as risk increases with age. Some companies limit the age for persons qualifying for medical or life insurance due to the risks involved or would charge very high premiums.
- Are insurance companies allowed to invest the money they collect as premiums?
The insurance companies are in business and the shareholders expect returns from their investments. Life insurances policyholders also expect returns in terms of bonuses. These premiums they collect if invested puts them in a more able position to pay claims and grow the company for the good of policyholders. The Insurance Act provides for areas where insurers can invest the premiums.
- In case an employer takes cover for its employees, can an employee exit the cover?
Employees cannot individually exit from the cover because the contract is between the insurer and the employer. This kind of policy is a master policy where the employee is only enjoying as beneficiaries. However, where a contract of employment ends, the employee will not enjoy the benefits under the policy and may organize insurance personally.
- Can insurance be taught in primary and secondary schools?
The financial regulators in collaboration with Kenya institute of curriculum development have developed and piloted a financial literacy curriculum for primary and secondary schools. Insurance is included in the financial literacy curriculum. Children will grow in the school system with insurance knowledge.
- Why do insurance companies take long to pay claims when a loss occurs or upon maturity of a policy?
The Insurance Act provides that claims be settled within 90 days from the date of admission of liability. The responsibility of ensuring prompt processing of a claim is on both the insurer and the insured. The insured must provide documentation in support in a timely manner. The insurer on the other must process within their set timelines. Delays may be caused by poor documentation, investigations especially where liability is disputed or fraud is suspected. However, most insurers are keen on ensuring good customer service during the claims process with intent to customer retention. Customers who feel aggrieved may seek assistance from IRA, consumer protection department.
- Why do courts award higher amounts to older people compared to children.
There are various factors considered by courts in awarding damages for injury/death claims. Some the factors include age, level of income, marital status/dependency among others. In terms of income or dependency, this may not be considered causing lower sums to be awarded.
- What is the importance of a policy document?
This is the evidence of the existence of an insurance contract between you and an insurance company. It details all terms and conditions of the insurance contract. It case of a claim, you can refer to this document to know your rights as a policyholder in the contract and also use it legally to claim in case of a dispute between you and the insurer. A life insurance policy document can be used as evidence of security where one is taking a loan from the bank.
- Why can’t insurers pay the surrender value for policies which have been held for less than three (3) years?
The premium paid during that period takes care of the following:
- Agent Commissions
- Administrative expenses (policy documents etc.)
- Penalty for breach of contract
- What is the procedure of getting a tax-relief where one has a life policy?
Tax relief is allowed for life insurance policyholders with the intention of encouraging Kenyans to buy these policies. Where one is filing tax returns, the life policy needs to be reflected. The policyholder seeking a refund should obtain a certificate from the insurance company and submit the same to KRA for consideration.
- What happens when a client is aggrieved by an insurance agent?
Insurance agents are required to obtain a license from IRA to enable them engage in insurance business. They are representatives of the insurance companies. They are required to adhere to the market conduct guidelines issued by the regulator. Where one is aggrieved by the actions of an agent, such cases can be reported to IRA or the insurance company which the agent represents, and the necessary action will be taken against the agent. It may even involve revoking of licensing or any other remedy the regulator may deem appropriate depending on the nature of the misconduct.
- What kind of products do insurance companies have for the church?
A church like any other institution may have assets, employees and may incur liabilities to third parties. They may therefore require fire insurance, motor, group personal insurance, public liability, medical insurance among others.
- How do policyholders who do not suffer loss during the period of cover benefit in insurance?
Insurance collects premiums from a large number of people exposed to similar risks thus creating a common. It is out of the pool that the unfortunate few who suffer losses are paid. The premium payable by individual policyholders is relatively small compared to claim amount payable. Those who do not make claims may enjoy premium discounts.