SECP Insurance Guide

of 47

DISCLAIMER This is a general guide booklet developed by the Securities and Exchange Commission of Pakistan, mainly focusing on the most common insurance products available in the market. Nothing in this booklet is intended to be, or should be construed as an invitation, offer or inducement to any person to enter into an insurance contract or an advice on the merits of or a recommendation in relation to, any particular product or service provider. The purpose of this guide book is to help policyholders and the end users identify and address basic insurance issues with a better understanding of the subject. The guide book complements the SECP's Methodology tools for policyholder’s education and financial literacy. This guide book is not intended as a comprehensive reference work on the subject of insurance. Nor is it a substitute for the individualized advice that may be provided by qualified business and legal professionals. Rather, we intend it to be a concise and practical description of essential Insurance components together with suggested approaches to understanding the products. Further details on the topics covered by this guide book can be found in the extensive literature that exists on this subject. Any questions or comments on the content of this guide book should be addressed to: Insurance Division Securities and Exchange Commission of Pakistan 4th Floor, State Life Building No.2 Wallace Road, I. I. Chundrigar Road Karachi‐74000, PAKISTAN.

of 47

TABLE OF CONTENTS INTRODUCTION.............................................................................................................................................5

INDUSTRY OUTLOOK.....................................................................................................................................6

THE ROLE OF SECP ........................................................................................................................................7

1. UNDERSTANDING INSURANCE..............................................................................................................8

1.1 HOW INSURANCE WORKS.............................................................................................................8

1.2 INSURANCE BASICS .....................................................................................................................10

2. INSURANCE INTERMEDIARIES.............................................................................................................13

2.1 TYPES OF INSURANCE INTERMEDIARIES.....................................................................................13

3. INSURANCE SURVEYORS .....................................................................................................................13

4. REINSURANCE .....................................................................................................................................14

4.1 METHODS OF REINSURANCE ......................................................................................................14

4.2 BENEFITS OF REINSURANCE........................................................................................................14

4.3 REGULATION OF REINSURANCE..................................................................................................15

5. REGULATION OF THE INSURANCE SECTOR.........................................................................................16

5.1 COMPLAINTS AND GRIEVANCES .................................................................................................16

6. FEDERAL INSURANCE OMBUDSMAN..................................................................................................18

6.1 JURISDICTION, FUNCTIONS AND POWER ...................................................................................18

6.2 PROCEDURE FOR MAKING COMPLAINTS....................................................................................19

7. INSURANCE TRIBUNALS ...................................................................................................................... 20

7.1 INSURANCE TRIBUNALS IN PAKISTAN.........................................................................................20

7.2 POWERS OF THE INSURANCE TRIBUNAL ....................................................................................20

7.3 APPEAL AGAINST THE INSURANCE TRIBUNAL ............................................................................21

8. GUIDE TO THE COMMON INSURANCE PRODUCTS.............................................................................22

8.1 AUTO INSURANCE .......................................................................................................................22

of 47

8.2 FIRE INSURANCE..........................................................................................................................24

8.3 MARINE INSRURANCE.................................................................................................................25

8.4 MISCELLANEOUS INSURANCE .....................................................................................................26

8.5 HEALTH INSURANCE....................................................................................................................26

8.6 LIFE INSURANCE ..........................................................................................................................28

9. LIST OF ACTIVE INSURANCE/REINSURANCE COMPANIES...................................................................32

10. GLOSSORY OF INSURANCE TERMS..................................................................................................36

of 47

INTRODUCTION The insurance sector in Pakistan, until end of year 2000, was under the regulatory purview of

the Federal Ministry of Commerce, Government of Pakistan. Empirical results show that during

that period, the private sector insurance industry was fragmented and suffered operational

inefficiencies due to lower Paid‐up Capital and Equity requirements, while the public sector

insurance companies enjoyed their privileged status due to captive business.

During the regulatory regime of the former law, the archaic Insurance Act, 1938, the insurance

industry was infested with various issues. Capital adequacy requirements for general insurance

companies were grossly inadequate, registration and supervision fees for insurers were

modest, and the statutory solvency margins were based on outmoded principles.

A new insurance law was introduced in 2000 when the Insurance Act, 1938 was repealed and

replaced with the Insurance Ordinance, 2000. The new law primarily aimed to ensure the

protection of insurance policyholders’ interest and to promote sound development of the

insurance industry. In the year 2001, the regulatory and supervisory responsibilities of the

insurance sector were shifted from the Ministry of Commerce to the Securities and Exchange

Commission of Pakistan (SECP).

of 47

INDUSTRY OUTLOOK As of October 20, 2010 forty nine (49) insurance and takaful companies are transacting

insurance business in Pakistan along with one government owned reinsurance company PRCL.

Non‐life (general) Insurance Companies

Out of the total, Thirty‐seven (37) companies are transacting non‐life (general)

insurance business, including the government owned National Insurance Company

Limited and the government owned reinsurance company, Pakistan Reinsurance

Company Limited (PRCL).

Life Insurance Companies

Six (6) insurance companies are transacting life insurance business, including the

government owned State Life Insurance Corporation of Pakistan.

Health Insurance Companies

Two (2) Insurance companies (one life and one non‐life insurance company) are

dedicatedly providing health insurance services.

Takaful Operators

Five (5) Takaful operators are currently providing Islamic Insurance to the masses of

which 2 operators are transacting family (life) takaful business and 3 are transacting

non‐life (general) takaful business.

Reinsurance Company

There is one reinsurance company operating in Pakistan, the government owned

Pakistan Reinsurance Company Limited (PRCL).

The total premium underwritten by the insurance industry in 2009, amounts to Rs. 87 billion.

Non‐life (general), life and Health insurance companies contributed Rs. 42.5 billion, Rs. 41.8

billion and Rs. 1.2 billion respectively. The premium underwritten by takaful operators (family

and General) amounted to Rs. 1.4 billion.

The statistics shows that the country’s total insurance premium remains at 0.7% of total

economic output (Insurance Penetration), with per head expenditure on insurance at US$6

of 47

(Insurance Density) since the year 2001, one of the lowest in the world, mainly due to lesser

awareness about the insurance in the masses.

THE ROLE OF SECP The SECP, being the apex regulator of the insurance industry, has a strategic priority and

commitment to strengthen and maintain an effective regulatory environment in which

insurance and takaful business can flourish and prosper. To strengthen SECP’s role as an

effective facilitator for sound development of the insurance and takaful industry and to achieve

the underlying objective of raising the insurance penetration level, the following key areas have

been in focus of SECP’s efforts:

• Protection of the interest of insurance policyholders; • Amendments in the regulatory framework to strengthen SECP’s role as an apex

insurance regulator;

• Enhancement of regulatory framework for Takaful Insurance;

• Availability of insurance protection to less privileged segment of the society (Microinsurance);

• Insurance Awareness Programs;

• Enhanced public image of the insurance industry.

The SECP is cognizant of its responsibilities for developing the insurance industry and is now

making efforts to make the general public understand the importance and mechanics of

insurance. This "Insurance Guide" booklet is one of the steps that it is taking to educate the

general public about Insurance and various products available in the market in a simplified

manner.

of 47

QUICK FACTS The law of large numbers states that as the size of the sample (insured population) increases, the actual loss experience will more and more closely approximate the true underlying probability.

1. UNDERSTANDING INSURANCE Insurance can be defined in many different ways, from many different points of view. For example, from an economic viewpoint, insurance is a system for reducing financial risk by transferring it from a policy owner to an insurer. The social aspect of insurance involves the collective bearing of losses through contributions by all members of a group to pay for losses suffered by a few group members. From a business viewpoint, insurance achieves the sharing of risk by transferring risks from individuals and businesses to financial institutions specializing in risk. The insurer is not in fact paying for the loss. The insurer writes the claim check, but is actually transferring funds from individuals who as part of a pool, paid premiums that created the fund from which the claims are paid. Lastly, from a legal standpoint, an insurance contract or the policy, transfers a risk, for a premium or consideration, from one party to another party. The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'. 1.1 HOW INSURANCE WORKS Insurance is based on a mechanism called “risk pooling”, or a group sharing of losses. People exposed to a risk agree to share losses on an equitable basis. They transfer the economic risk of loss to an insurance company.

Insurance collects and pools the premiums of thousands of people, spreading the risk of losses across the entire pool. By carefully calculating the probability of losses that will be sustained by the members of the pool, insurance companies can equitably spread the cost of the losses to all the members.

The risk of loss is transferred from one to many and shared by all people who are insured in the pool. Each person pays a premium that is measured to be fair to them and to all based on the risk they impose on the company and the pool. Let’s take some examples to understand how insurance actually works:

of 47

Example 1 Example 2

SUPPOSE

a. Houses in a village = 1000 b. Value of 1 House = Rs. 40,000/- c. Houses burning in a year = 5 d. Total annual loss due to fire = Rs. 200,000/- e. Contribution of each house owner = Rs. 300/-

a. Number of Persons = 5000 b. Age and Physical condition = 50 years &

Healthy c. Number of persons dying in a year = 50 d. Economic value of loss suffered by family of

each dying person = Rs. 100,000/- e. Total annual loss due to deaths = Rs. 5,000,000/- f. Contribution per person = Rs. 1,200/-

UNDERLYING ASSUMPTION

All 1000 house owners are exposed to a common risk, i.e. fire

All 5000 persons are exposed to common risk, i.e. death

PROCEDURE

All owners contribute Rs. 300/- each as premium to the pool of funds

Everybody contributes Rs. 1200/- each as premium to the pool of funds

Total value of the fund = Rs. 3,00,000 (i.e. 1000 houses x Rs. 300)

Total value of the fund = Rs. 60,00,000 (i.e. 5000 persons x Rs. 1,200)

5 houses get burnt during the year 50 persons die in a year on an average

Insurance company pays Rs. 40,000/- per head out of the pool to all 5 house owners whose house got burnt

Insurance company pays Rs. 100,000/- out of the pool to each family of all 50 persons dying in a year

EFFECT OF INSURANCE

Risk of 5 house owners is spread over 1000 house owners in the village, thus reducing the burden on any one of the owners.

Risk of 50 persons is spread over 5000 people, thus reducing the burden on any one person.

of 47

QUICK ADVICE To avoid repudiation of your claim, cooperate with your insurer by disclosing all the material facts associated with the risk to be insured, as and when required by the insurer.

QUICK FACT With contracts of indemnity, a claim must not exceed the actual loss. Even further to that, a claim cannot exceed the extent of your insurable interest in the insured asset.

1.2 INSURANCE BASICS Following are the basic essentials or requirements of insurance, irrespective of the type of insurance involved.

‐ Principle of Utmost good faith It is the name of a legal doctrine which governs insurance

contracts. This means that all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal. A material fact is a fact which would influence the mind of a prudent underwriter in deciding whether to accept a risk for insurance and on what terms.

Thus, the insured must reveal the exact nature and type of the risks that he / she passes on to the insurer, while at the same time the insurer must make sure that the underlying contract fits the needs of, and benefits the insured.

Where either the Insurer or the Insured fails to follow the principle of utmost good faith, the insurance contract is deemed null and void.

‐ Principle of Insurable Interest

The law states that in order for an insurance policy to be valid, the policyholder must have a sufficient interest in the subject matter of the insurance. Broadly speaking, the doctrine requires that a policyholder must gain a benefit from the preservation of the subject matter of the insurance or suffer a disadvantage should it be lost.

People who are policyholders but not the owners of the insured substances, from deliberately causing loss to the substances in order to claim compensation and deriving undue benefits from insurance business..

‐ Principle of Indemnity

Indemnity is monetary compensation that aims to return

the insured to the same financial position he enjoyed before the loss occurred. Life insurance and personal accident policy are therefore not contracts of indemnity. A monetary value cannot be easily placed on life and limb. However, the idea behind

of 47

QUICK EXAMPLE Suppose you own a building which burns down due to the negligence of a third party. Normally you could sue the negligent third party for causing your building to burn down. If your fire insurance company pays off your claim, however, the insurance company is then subrogated to your claim against the negligent third party. This means your claim against the negligent third party is treated as having been assigned to the insurance company, which may sue him to recover, the amount it paid you on account of the fire loss.

QUICK FACT Proximate Cause is also known as “Legal Cause”.

QUICK FACT The principles of subrogation and contribution are not essential to bring in the knowledge of a common man.

indemnity is used for financial underwriting where life insurance is concerned. As such life insurers limit the amount of coverage you can have, based on your income.

‐ Principle of Subrogation

Simply stated, the right of subrogation is the right to pursue someone else's claim. If you are subrogated to someone's claim, it sounds as though you are somehow subordinated to it ‐‐ but that's not what it means. It means that you may pursue it as though it were your own. It can arise by the express agreement of the parties, or automatically by operation of law.

‐ Principle of Proximate Cause

Proximate cause is an act from which an Injury or a property loss results as a natural, direct and uninterrupted consequence and without which the injury or loss would not have occurred.

Proximate cause is the primary cause of an injury or loss. It is not

necessarily the closest cause in time or space, or the first event that sets in motion a sequence of events leading to an injury or loss. Proximate cause produces a particular consequence without the intervention of any independent or outside force.

‐ Principle of unforeseen event

The insured events causing the losses should not be speculative, predicted or expected but they must be sudden, unanticipated and out of the blue.

of 47

QUICK EXAMPLE Let's say a building is insured for Rs. 1,000,000. It is insured for the same amount with two different insurers. The entire sum insured is therefore Rs. 2,000,000. A loss occurs that is estimated at Rs. 600,000. According to the principle of contribution, each insurer is liable for half of the damage (1 million/ 2 million). This would amount to an indemnity payment of Rs. 300,000 by each insurer. If one insurer pays the full claim, that insurer can make a subsequent claim on the other insurer to address the imbalance. Contribution thus ensures that the principle of indemnity is enforced. The amount it paid you on account of the fire loss.

QUICK FACT According to the principle of indemnity, the loss should not exceed the replacement value.

‐ Principle of Contribution

It is based on the premise that no one should gain from a loss, since an insurable risk is a pure risk. Contribution is essentially "the right of an insurer to call upon others similarly, but not necessarily equally, liable to the same insured to share the cost of an indemnity payment."

Following is the simple way to calculate the contribution amount.

Contribution Amount for A = Sum Insured by A x Loss Amount

Total Sum Insured

Contribution Amount for B = Sum Insured by B x Loss Amount Total Sum Insured

of 47

QUICK FACT The working of all Insurance companies and intermediaries is governed by the Insurance Ordinance, 2000.

QUICK FACT Insurance surveyor is a qualified professional in one or more fields and is licensed by the Insurance Division of Securities and Exchange Commission of Pakistan.

QUICK ADVICE Always pay your insurance related payments to your Insurance Agents, through crossed checks, in favor of the Insurance Company.

2. INSURANCE INTERMEDIARIES Insurance intermediaries form the feeding line for the insurance companies. They are essentially matchmakers who match the insurance needs of policyholders with the insurers who have the capability of meeting those needs. Their services include record keeping and modeling for insurers, providing advice to clients on selecting insurers, and assisting with claims settlement. They play a key role in providing underwriting information to insurers. The intermediaries play a vital role in soliciting quotations for complex risks and in helping clients make comparisons on the basis of price, coverage, service and the financial strength of the insurer. Moreover, the intermediary ensures increased price and quality competitiveness, by providing the insured access to a wider range of possible insurers. 2.1 TYPES OF INSURANCE INTERMEDIARIES Generally, there are three types of insurance intermediaries;

‐ Insurance Broker Insurance brokers facilitate prospective clients in placing

insurance business with an insurance company. They assess the terms and negotiate on behalf of their clients.

‐ Insurance Agent An insurance agent is a representative of an insurance company who solicits, negotiates or effects contracts of insurance and provides service to the policyholders.

3. INSURANCE SURVEYORS Insurance surveyors are appointed specialists who assess loss, verify compliance of terms and conditions as mentioned in the policy and accordingly assess the claim. In case of an insured event the insurance company can nominate one or more surveyors (depending on the size of a claim), who are required to visit the site of loss in order to analyze the extent of damage, the compliance of terms and conditions and assess the quantum of loss as well as to inspect the property and report on the causes of the accident.

of 47

QUICK EXAMPLE Assume an insurer sells one thousand policies, each with a Rs. 1 million policy limit. Theoretically, the insurer could lose Rs. 1 million on each policy – totaling to Rs. 1 billion. It may be better to pass some potential risk to a reinsurance company (reinsurer) as this will minimize the insurer's risk.

QUICK FACT Almost all insurance companies have a reinsurance program.

4. REINSURANCE Reinsurance is insurance that is purchased by an insurance company (insurer) from a reinsurer as a means of risk transfer, that is, transfer of risk from the insurer to the reinsurer.

The reinsurer and the insurer enter into a reinsurance agreement which details the conditions upon which the reinsurer would pay the insurer's losses. The reinsurer is paid a reinsurance premium by the insurer in return for taking the stake. 4.1 METHODS OF REINSURANCE There are two basic methods of reinsurance:

‐ Facultative Reinsurance This is a specific reinsurance covering a single risk. The reinsurer is reinsuring one risk insured on a specific reinsurance policy. Each facultative risk is submitted separately by the insurer to the reinsurer.

‐ Treaty Reinsurance

This is a method of reinsurance requiring the insurer and the reinsurer to formulate and execute a reinsurance contract. The reinsurer then covers all the insurance policies coming within the scope of that contract.

There are two basic types of treaty reinsurance:

‐ Proportional, and ‐ Non‐proportional

4.2 BENEFITS OF REINSURANCE

‐ Risk transfer With reinsurance, the insurer can issue policies with higher limits than it would otherwise be allowed, therefore, being permitted to take on more risk because some of that risk is now transferred to the reinsurer.

of 47

‐ Income smoothing

Reinsurance can help to make an insurance company’s results more predictable by absorbing larger losses and reducing the amount of capital needed to provide coverage.

‐ Surplus relief

An insurance company's underwriting liabilities are limited by its balance sheet (this test is also known as the solvency margin). When such limit is reached, an insurer can do one of the following: stop underwriting new business, or increase its capital, or buy "surplus relief" reinsurance. Buying reinsurance is an efficient way of not having to turn clients away or raise additional capital.

‐ Reinsurer's expertise

The insurance company may want to avail of the expertise of a reinsurer in regard to a specific (specialized) risk or want to avail of their rating ability in such risks.

‐ Creating a manageable and profitable portfolio of insured risks

By choosing a particular type of reinsurance method, the insurance company may be able to create a more balanced and homogenous portfolio of insured risks. This would lend greater predictability to the portfolio results on net basis (after reinsurance) and would be reflected in income smoothing.

4.3 REGULATION OF REINSURANCE The reinsurance requirements chalked out by SECP for the sector are very stringent. A minimum of 80% treaty reinsurers must be “A” rated by internationally reputable rating agencies and only 20% can be “BBB” rated. In addition, non‐life Insurance Companies are required to offer a government owned reinsurer, Pakistan Reinsurance Company Limited, up to 35% share in the treaties.

of 47

5. REGULATION OF THE INSURANCE SECTOR The Securities and Exchange Commission of Pakistan has been regulating the Insurance industry, since January 2001 after it took over from the Controller of Insurance operating under Ministry of Commerce, Government of Pakistan. The SECP regulates and monitors the Insurance Sector in the country through powers vested in the Insurance Ordinance, 2000 and the Companies Ordinance, 1984. 5.1 COMPLAINTS AND GRIEVANCES The SECP plays a facilitating role by taking up complaints with the respective insurers. Following points should be taken into account before lodging a complaint with the SECP. Policyholders who have complaints against insurers are required to first approach the Grievance/ Claims/ Complaints Cell of the concerned insurer. If they do not receive a response from insurer within a reasonable period of time or are dissatisfied with the response of the company, they may then approach the SECP for the resolution. The complaints need to be forwarded to the address given below: The Executive Director, Insurance Division, Securities & Exchange Commission of Pakistan 4th Floor, State Life Building No.2, Wallace Road, off I.I. Chundrigar Road, Karachi, Pakistan. Or alternatively, they may be emailed to [email protected] Only cases of delay/non‐response regarding matters relating to policies and claims are taken up by the SECP with the insurers for speedy disposal. As claims/policy contracts in dispute require adjudication and the SECP does not carry out any adjudication, the insurance policyholders are advised to approach the available quasi‐judicial or judicial channels i.e. the Insurance Ombudsman, Consumer Protection Forum or the Civil courts for such complaints. The details regarding Insurance Ombudsmen are provided in the following section of this guide booklet. Only complaints from the insurance policyholders themselves are entertained. The SECP does not entertain complaints written on behalf of policyholders by advocates or agents or any third parties.

of 47

Where complaints are being sent through e‐mail, complainants are requested to submit complete details of the complaint with history of correspondences with the insurer and their outcome, without which the SECP will not be in a position to take up the complaint with the insurer.

of 47

QUICK FACT The Insurance Ombudsman may condone the delay and entertain the complaint, if the ombudsman is convinced that there were reasonable grounds for the delay.

6. FEDERAL INSURANCE OMBUDSMAN The appointment of the Insurance Ombudsman by the Federal Government is required under section 125 of the Insurance Ordinance, 2000 with the purpose of quick disposal of the grievances of the insured. This office is of great importance and relevance for the protection of interests of policy holders and also in building their confidence in the system. The office of the Insurance Ombudsman is an autonomous national dispute resolution body which independently and impartially resolves insurance disputes, between insurance policyholders and participating companies, absolutely free of cost. The office of the Insurance Ombudsman is fully operational since May 2006. 6.1 JURISDICTION, FUNCTIONS AND POWER The Section 127, of the Insurance Ordinance, 2000 formulates operational parameters of the Office of the Insurance Ombudsman. The jurisdiction, functions and powers of the Insurance Ombudsman are summarized as under: On request/ complaint of the aggrieved person, the Insurance Ombudsman may undertake any investigation into any allegation of maladministration, on part of any insurance company, provided that the matter is not with the Wafaqi Mohtasib (Federal Ombudsman), court of competent jurisdiction, tribunal or board in Pakistan. Mal‐administration is defined by the Insurance Ordinance, 2000 as corruption, nepotism, neglect, inattention, inordinate delay, incompetence, inefficiency and ineptitude in the administration or discharge of duties and responsibilities. The complaints brought in by the Insurance Companies, which relates to the contract of reinsurance or such sort, are not accepted by the Insurance Ombudsman office for investigation. The Insurance Ombudsman office does not accept for investigation, any complaint by or on behalf of an employee of an insurance company, concerning any matter relating to the insurance company in respect of any personal grievance relating to his service with the company. For ascertaining the root causes of corrupt practices and injustice, the Insurance Ombudsman is empowered to arrange studies/ research and may recommend appropriate steps for their eradication.

of 47

QUICK FACT The Insurance Ombudsman may reject a complaint summarily or he may accept the same or pass any other order he deems fit.

6.2 PROCEDURE FOR MAKING COMPLAINTS The procedure as laid down under Section 129 of the Insurance Ordinance, 2000 and is summarized as follows:

‐ Before making a complaint the complainant is required to intimate in writing to the concerned insurance company his intention of filing a complaint.

‐ If the insurance company either fails to respond, or makes a reply which is

unsatisfactory to the complaint, within a period of one month, the complainant may file a complaint at any time after that within a further period of three months.

‐ A complaint should be made on solemn affirmation or oath in writing addressed to the

Insurance Ombudsman. The complaint shall set out the full particulars of the complaint matter and the name and address of the complainant.

Copy of the notice sent to the insurance company along with postal / courier receipt should also be attached with your complaint. In all cases, three (03) complete sets of complaint are required to be filed with the Ombudsman, the address and phone numbers are mentioned as under: Federal Insurance Ombudsman’s Secretariat 6th Floor, State Life Building No.2, Wallace Road, Off I.I. Chundrigar Road Karachi, PAKISTAN. Phone: 021‐99211674, 99211698 Fax: 021‐99211945

of 47

7. INSURANCE TRIBUNALS Insurance Tribunal in the general sense is a body, constituted under the Insurance Ordinance by the Federal Government, with the authority to judge, adjudicate on, or determine claims or disputes. In essence it is a specialized court formed for the disposal of cases pertaining to the Insurance business. According to the Insurance Ordinance, 2000 the Tribunal consists of a Chairperson who is a serving or retired judge of the High Court, with two or more members having ability and integrity to enable them to discharge the duties and functions of the Tribunal. 7.1 INSURANCE TRIBUNALS IN PAKISTAN In October, 2006, the Federal Government, in consultation with the Chief Justices of Sindh High Court, Lahore High Court, Peshawar High Court and Balauchistan High Court, conferred powers in each province on the District and Session Courts to exercise territorial jurisdiction specified: S.No. Name of Sessions Court Territorial Limit 1. District & Session Judge Lahore Whole Province of Punjab 2. District & Session Judge Karachi (Central) Whole Province of Sindh 3. District & Session Judge Peshawar Whole Province of Khyber Pakhtunkhwa 4. District & Session Judge Quetta Whole Province of Balauchistan

7.2 POWERS OF THE INSURANCE TRIBUNAL The Insurance Ordinance, 2000 confers following powers to the Tribunal:

‐ The Tribunal has all the powers vested in a civil Court under the Code of Civil Procedure, 1908.

‐ In its criminal jurisdiction, the Tribunal has the same powers as are vested in the Court

of Sessions under the Code of Criminal Procedure, 1898.

‐ The jurisdiction of a Tribunal shall not extend to appeals to the Appellate Bench and Courts, as mentioned in the section 33 and 34 of the SECP Act 1997.

of 47

7.3 APPEAL AGAINST THE INSURANCE TRIBUNAL The decision of the Tribunal on any application is final and can not be questioned in any Court or before any other authority. If the amount of the claim is not less than one hundred thousand rupees, the aggrieved may file an appeal to the High Court, within a period of thirty days from the date of such decision. An appeal is heard by a Bench of more than two judges of the High Court, having territorial jurisdiction over the relevant Tribunal.

of 47

QUICK FACT

It may be fun to drive but that sports car will raise your premiums.

QUICK FACT Act Only Policy Insurance is the most basic and cheapest form of cover which you need to have to be legal on the roads.

8. GUIDE TO THE COMMON INSURANCE PRODUCTS 8.1 AUTO INSURANCE

‐ Need and Importance If you own a car, you probably already know a little about car insurance. There is a legal requirement that you must have at least some kind of third party liability insurance to be legal on roads. The scope of this cover is to pay compensation for death of or bodily injuries to third parties, while the Insured is treated as the first party and the Insurance Company second party, all others would be third parties. Before purchasing auto insurance, you must consider a variety of factors including what kind of car you have, your driving record and the amount of money you are willing to pay. Understanding the simple basics of auto insurance will make you confident that the car insurance policy you choose will take care of your needs in the event of an accident.

‐ Types of Insurance

There are three basic types of cover;

o Comprehensive Insurance This is the widest form of cover; the policyholder is protected against financial losses of all kinds, accidental loss to vehicle, theft of car and third party liability claims.

o Third Party Motor Vehicle Insurance

This cover protects the policyholder from all financial losses arising due to accidental damage liability of all forms to third party, property damage or bodily injury, death or both.

o Act only Liability Insurance

This cover meets the minimum legal insurance requirement. In this cover the policyholder is protected against financial losses due to liability of accidental bodily injury or death to third party.

of 47

QUICK FACT As a rule of thumb, anytime any of your employees are performing their daily duties and they get injured, you will be responsible as the employer.

List of coverage for each type of policy

Coverage Act Only Liability Policy

Third Party Motor Policy

Comprehensive Policy

Third Party Personal Injury & Death

Third Party Property Damage

Theft / Own Damage, Constructive Total Loss

‐ Tips on Buying Right: What to look for before purchasing a Car Insurance Policy

Firstly as soon as a car is purchased, the owner must buy an insurance cover. If a used car is purchased, the new owner needs to know that the cover of the previous owner is null and void, as it is non‐transferable. The insured value or sum insured depends on the market value of the vehicle. Underinsurance or over‐insurance occurs when this value is not correctly mentioned.

Over insurance occurs when sum insured is higher than the market value, maximum compensation is the market value of the vehicle. Under insurance occurs if sum insured is less than the market values, you are as self‐insuring the difference. In the event of a loss, you will only be partially compensated.

Average clause is applied when you suffer damage to your vehicle which is under insured. Your claim will be reduced proportionately by the uninsured portion, e.g. if you have insured your vehicle up to 70% of the market value, the insurance company will only pay 70% of total repair cost.

‐ Comprehensive Insurance

Comprehensive insurance, besides covering accidental damage & collision it also covers overturning, fire, theft and natural disaster including earthquake & hail. If you have special concerns about the safety of your vehicle in the face of Mother Nature’s wrath, contact your insurer for information on catastrophic coverage.

‐ Reporting an Accident

After an accident, you should inform your insurer as quickly as possible, to help you complete a claim form, determine what exactly happened and evaluate any damages or injuries. Your insurer then will contact and appoint insurance surveyor, whose job is to work with you to fix the problem. While compensating you for auto repairs or medical expenses is easy and immediate, determining liability is more complicated. The surveyor will begin the settlement process, the length of which will depend on the cooperation of the other party.

of 47

The amount of compensation for your loss can vary according to the surveyor’s analysis of the damage. You do not have to accept the first amount of money you are offered, if it is lower than the cost of your repair or recovery. While you may have to do some homework to prove your reported loss is valid, it's worth it to be certain your insurer lives up to the provisions of your policy.

8.2 FIRE INSURANCE Fire insurance is a form of property insurance which protects people from the costs incurred by fires. When a structure is covered by fire insurance, the insurance policy will pay out in the event that the structure is damaged or destroyed by fire. Some standard property insurance policies include fire insurance in their coverage, while in other cases, fire insurance may need to be purchased separately. Property owners should check with their insurance companies if they are not sure whether or not fire insurance is part of their policies, and if fire insurance is not included, it should be purchased. Depending on the terms of the policy, fire insurance may pay out the actual value of the property after the fire, or it may pay out the replacement value. In a replacement value policy, the structure will be replaced in the event of a fire, whether it has depreciated or appreciated: in other words, if homeowners purchase a home and the value increases, as long as it is covered by a replacement value policy, the insurance company will replace it. An actual cash value policy covers the structure, less depreciation. Most accounts come with coverage limits which may need to be adjusted as property values rise and fall. Depending on the terms of the policy, the contents of the home as well as the structure may be covered in the event of a fire. Some policies also provide a living allowance which allows the victims of a fire to rent temporary housing while their homes are repaired. These clauses in an insurance policy typically cause the policy to become more expensive, since they will represent additional costs to the insurance company in the event of a fire. However, they can be extremely useful if a fire occurs. The cost of fire insurance varies widely. The use of fire alarms, sprinkler systems, and other safety measures can decrease the cost of the policy, and may even be required for some policies. The existence of a property in a region / area prone to this risk will increase the cost of the insurance, as the risk of a payout is greatly increased. When purchasing fire insurance, people should be aware that some types of fires may not be covered. For example, a fire caused by an earthquake might be excluded from a fire insurance policy, as might a fire caused by an act of God. It is important to read the terms of the policy carefully, and to ask for clarification from the insurance representative if the terms are not clear. If a policy does not appear to meet the need, it should be renegotiated until it is satisfactory.

of 47

8.3 MARINE INSRURANCE Marine Insurance covers the loss or damage of ships, cargo, terminals, and any transport by which property is transferred, acquired, or held between the points of origin and final destination. Marine also includes Onshore and Offshore exposed property (container terminals, ports, oil platforms, pipelines); Hull; Marine Casualty; and Marine Liability.

‐ Common Products Following products are commonly available from the insurers:

o Marine Hull Coverage This policy covers losses / damages to the shell and machinery of the vessel caused by maritime perils. This insurance policy may cover the following perils,

• Perils of the seas, rivers, lakes or other navigable waters, • Fire and explosion, • Violent theft by outside persons: Jettison or Piracy, • Contact with land conveyance, dock or harbor equipment or installation, • Earthquake, Volcanic eruption or lightning, • Accidents in loading, discharging or shifting cargo or fuel, • Bursting of boilers, breakage of shafts or any latent defect in the

machinery or hull, • Negligence of Master Officers, Crew or Pilots, • Negligence of repairers or charterers, • Barratry of Master Officers or Crew Contact with aircrafts, helicopters or

similar objects, or objects falling there from, • Salvage charges when general average is declared.

o Marine Cargo Coverage

Marine Cargo coverage provides protection against losses or damages pertaining to cargo / freight during transit by sea, air, road and rail. The policy may provide all risks coverage as well as coverage for limited risks depending upon the needs of the customers.

o Marine Umbrella Coverage

Marine Umbrella Liability is a broad spectrum cover offering protection against liabilities to shipping / logistics and transport related companies. This insurance could be of substantial benefit to Ship or vessel Operators, Freight Forwarders, Road Transport Operators, NVOC, Railway Operators, Carriers by Air, Ware house Depot operators, Ship agents, Brokers and the services associated with

of 47

QUICK ADVICE Don't grudge your time and shop around properly in order to find an appropriate health insurance plan and health insurance coverage which will meet your health care needs and your budget.

shipping transportation, Terminal Operators, Stevedores Operators, Operators of Container/Trailer, Storage and Repairers, Port Harbors or Port Authorities.

8.4 MISCELLANEOUS INSURANCE This class of insurance business encompasses various types of insurance coverage including but not limited to the following:

‐ Cash Insurance The cash policy is designed to cover Cash in Safe, Cash in Transit and Cash in Counter.

‐ Fidelity Guarantee Insurance

This policy covers misappropriation or embezzlement committed by a permanent employee of the organization during the course of his employment.

‐ Householder's Comprehensive

This insurance policy is available to provide cover to building of a bungalow or an apartment. It covers the entire furniture, fixture, electronic items, carpets, etc.

‐ Neon Sign

The advertisement neon sign can be covered under insurance against perils like fire, accidental damage and others.

‐ Plate Glass

The expensive plate glass may be covered under insurance against perils like fire, accidental damage, burglary, riot and strike and others.

‐ Travel Insurance Travel Insurance covers medical expenses and financial (such as money invested in nonrefundable pre‐payments) and other losses incurred while traveling, either within one's own country, or internationally.

‐ Others Others may include Workman Compensation, General Public Liability, Product Liability, Aviation Insurance and Baggage Insurance etc.

8.5 HEALTH INSURANCE Health insurance is an inevitable part of modern life due to extremely expensive medical care. However health insurance costs rise day by day and the majority of the population still have neither health insurance nor any other type of insurance. This is actually the reason why all

of 47

QUICK FACT All advantages of health insurance are obvious but still the main disadvantage is high rates which can easily damage your budget. So shop around!

reputable and reliable health insurance companies do their best to provide various health insurance plans and programs which will make health insurance more available to various people with varied incomes. It is advisable that everyone who can afford health insurance should have it. In many cases health insurance can be a vital source of funds while waiting for a personal injury claim to be processed. Undoubtedly it's not an easy task to find affordable health insurance and low cost health insurance but still this is the aim which can be reached.

‐ Types of Health Insurance There are three basic types of health insurance:

o Individual health insurance, o Family health insurance and o Group health insurance.

Higher health insurance premiums which you have to pay every month and the process of purchasing individual health insurance are the main differences between this type of insurance and family and group health insurance. While purchasing individual health insurance you will have to pass medical examinations and answer certain set of questions concerning your state of health whereas the rest of health insurance types don't require anything like this. Family health insurance is designed in order to provide medical care for married couples and their children. Group health insurance is considered to be the most affordable. This type of health insurance is usually provided by employers to their staff in order to enable employees to avoid paying out extremely high premiums every month and to receive medical help and health care they need immediately. In case you have group health insurance coverage, you can add to your spouse and your children and it will help you to save considerable amount of money.

‐ Choosing a Health Plan Following steps would be helpful in buying a health plan.

o It is very important to choose a reputable and experienced health insurance company as far as you have to be sure by 100% that you'll be provided will all necessary health care services when you need them.

o You have to search for appropriate health insurance quotes, compare them in order to see what is more available to you.

of 47

o Before purchasing any health insurance plan you also take into proper consideration to factors such as health insurance coverage. There are two types of coverage: basic and comprehensive.

o Basic health insurance coverage covers only hospitalization and surgery care costs.

o Comprehensive health insurance coverage is much more expensive in comparison with basic coverage and covers preventive care, regular check‐ups and prescription drugs.

o Before you sign any agreements and health insurance policy, you have to make sure that both the health insurance company and its agents are licensed.

o Don’t hesitate to ask all questions you can have concerning your health insurance policy, plan or coverage.

o Sign your policy only if you understand every word written in it. 8.6 LIFE INSURANCE Life insurance or life assurance is a contract between the Policyholder and the insurer, where commonly the insurer agrees to pay to the nominated beneficiary a sum of money upon the occurrence of the assured person(s)’ death or any other defined event such as ‘terminal illness’ or ‘critical illness’, in return the policyholder agrees to periodically pay to insurer an appropriate premium. The fundamental purpose of Life Assurance is to provide money to meet financial losses caused by death, disability and illnesses. However, Life Assurance policies may also provide investment benefits that is, money payable on survival of the life assured rather than only on death. In some circumstances you can also have policies that pay out benefits if the policyholder suffers a critical illness. There are two main elements of Life Assurance. These are:

‐ Protection ‐ Financial support to the dependents of assured after his death. ‐ Investment ‐ Return on the premiums invested with the insurer.

A life assurance product can be made up of either first or both of these two elements. Life Assurance policies are paid for by premiums. A premium is made up of five elements.

1. Basic Premium 2. Extra Ratings: The amounts levied for the sub‐standard risk profile 3. Contingencies: Cushion amount for the worst loss scenario. 4. Expenses: Management of Insurance Organization. 5. Profits: This is the ultimate share left for the insurer as a fruit for putting in order the

whole venture.

of 47

The Proportion of each element mentioned above, varies according to the type of policy of which there are many different forms.

‐ Buying Life Insurance When you buy life insurance, you want coverage that fits your needs. First, decide how much you need ‐ and for how long ‐ and how much you can afford to pay. Keep in mind the major reason you buy life insurance is to cover the financial effects of unexpected or untimely death. Life insurance can also be one of many ways you plan for the future.

Next, learn what kinds of policies will meet your needs and pick the one that best suits you, your family size and economic conditions. Then, choose the combination of policy premium and benefits and match up to protection in case of early death, or benefits in case of long life, or a combination of both.

It makes good sense to ask an Insurance Company’s representative to help you. An agent can help you review your insurance needs and give you information about the available policies. If one kind of policy does not seem to fit your needs, ask about others.

‐ Types of Life Insurance

All policies are not the same. Some give coverage for your lifetime and others cover you or a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. Your choice should be based on your needs and what you can afford.

o Term Assurance

Term Insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium. It does not build up a cash value and the premiums are fully consumed up to the completion of term.

You can renew most term insurance policies for one or more terms even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at some age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase.

of 47

You may be able to convert a term insurance policy into a cash value during a conversion period ‐ even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

o Cash Value Life Insurance

Cash Value Life Insurance is a type of insurance where the premiums charged are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up a cash value that may be used in a variety of ways. You may borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value. You can also use your cash value to keep insurance protection for a limited time or to buy a reduced amount without having to pay more premiums. You also can use the cash value to increase your income in retirement or to help pay for needs such as a child’s tuition without canceling the policy. Cash value life insurance may be one of several types; whole life, universal life and variable life are all types of cash value insurance.

‐ Whole Life Insurance

Whole Life Insurance covers you for as long as you live if your premiums are paid. You generally pay the same amount in premiums for as long as you live. When you first take out the policy, premiums can be higher than you would pay initially for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years.

‐ Universal Life Insurance

Universal Life Insurance is a kind of flexible policy that lets you vary your premium payments. You can also adjust the face amount of your coverage. Increases may require proof that you qualify for the new death benefit. The premiums you pay (less expense charges) go into a policy account that earns profit. Charges are deducted from the account. If your yearly premium payment plus the profit your account earns is less than the charges, your account value will become lower. If it keeps dropping, eventually your coverage will end. To prevent that, you may need to start making premium payments, or increase your premium payments, or lower your death benefits. Even if there is enough in your account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value.

‐ Variable Life Insurance

Variable Life Insurance is a kind of insurance where the death benefits and cash values depend on the investment performance of one or more

of 47

separate accounts, which may be invested in mutual funds or other investments allowed under the policy. Be sure to get the prospectus from the company when buying this kind of policy and study it carefully. You will have higher death benefits and cash value if the underlying investments do well. Your benefits and cash value will be lower or may disappear if the investments you chose didn’t do as well as you expected. You may pay an extra premium for a guaranteed death benefit.

‐ Important Things to Consider

o Review your own insurance needs and circumstances. o Choose the kind of policy that has benefits that most closely fit your needs. Ask

an agent of a company to help you. o Be sure that you can handle premium payments. Can you afford the initial

premium? If the premium increases later and you still need insurance, can you still afford it?

o Don’t sign an insurance application until you review it carefully to be sure all the answers are complete and accurate.

o Don’t buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.

o Don’t drop one policy and buy another without a thorough study of the new policy and the one you have now. Replacing your insurance may be costly.

o Read your policy clauses carefully. Ask your insurer about anything that is not clear to you.

o Review your life insurance program with your insurer every few years to keep up with changes in your income and your needs.

‐ Life Insurance Illustrations

You may be thinking of buying a policy where cash values, death benefits, bonuses or premiums may vary based on events or situations the company does not guarantee (such as interest rates). If so, you may get an illustration from the agent or company that helps explain how the policy works. The illustration will show how the benefits that are not guaranteed will change as interest rates and other factors change. The illustration will show you what the company guarantees. It will also show you what could happen in the future. Remember that nobody knows what will happen in the future. You should be ready to adjust your financial plans if the cash value doesn’t increase as quickly as shown in the illustration. You will be asked to sign a statement that says you understand that the growth impact given in the illustration is assumed and may differ from the actual.

of 47

9. LIST OF ACTIVE INSURANCE/REINSURANCE COMPANIES S. No. Insurance Company Contact Details NonLife Insurance Companies 1 ACE Insurance Ltd

6th Floor, NIC Building Abbasi Shaheed Road off: Shahrah – e –Faisal Karachi

Tel: 111‐789‐789 Fax : +92‐021‐35683935 Web: www.acelimited.com

2 Adamjee Insurance Co. Ltd. 6th Floor, Adamjee House I. I. Chundrigar Road Karachi

Tel: +92‐021‐32412623‐7 Fax: +92‐021‐32412627 Web: www.adamjeeinsurance.com

3 Alfalah Insurance Company Ltd. 5, Saint Marry, Main Boulevard Gulberg Lahore

Tel: 111‐786‐234 Fax: +92‐042‐3584 4372 Web: www.alfalahinsurance.com

4 Allianz EFU Health Insurance Limited D‐74, Block‐5, KDA Scheme‐5, Clifton, Karachi

Tel: +92‐021‐111‐432‐584 Fax: +92‐021‐5864020 Web: www.allianzefu.com

5 Alpha Insurance Co. Ltd. 2nd Floor, State Life Building No. 1B Wallace Road, Off I.I. Chundrigar Road Karachi

Tel : +92‐021‐3241604‐5 Fax: +92‐021‐32419968, 3242 2478 web : www.alphainsurance.com.pk

6 Asia Insurance Co. Ltd. 456‐K, Model Town Lahore

Tel: +92‐042‐35916801, 35176802 Fax: +92‐042‐35865579 Web:

7 Asian Mutual Insurance Company (Guarantee) Ltd. 1‐Punj Mahal Road, off. 68 Mozang Road. Lahore

Tel: +92‐042‐36312721 Fax: +92‐042‐36315989 Web:

8 Askari General Insurance Co. Ltd. 4th Floor, AWT Plaza The Mall, Rawalpindi

Tel : +92‐051‐927 2425‐27 Fax: +92‐051‐9272424 web: www.agico.com.pk

9 Atlas Insurance Limited 3. Bank Square Shahrah‐e‐Quaid‐e‐Azam Lahore

Tel : +92‐042‐37320542‐43 Fax : +92‐042‐3723 4742 Web: www.atlasinsurance.com.pk

10 Capital Insurance Co. Ltd. Office # 222, 5th Floor, MEGA Tower 63‐B Main Macdonald. Gulberg‐II Lahore

Tel : +92‐042‐3577 7527 Fax : +92‐042‐3577 7548 web : www.capital‐insurance.net

11 Central Insurance Co. Ltd. 5th Floor, Dawood Centre Moulvi Tamizuddin Khan Road P.O. Box No 3988 Karachi

Tel: +92‐021‐35684019 Fax: +92‐021‐3568 0218 Web: www.ceninsure.com

12 Century Insurance Co. Ltd 11th Floor Lakson Square Building No. 3 Sarwar Shahccd Road, P.O Box 4895 Karachi

Tel: +92‐021‐35698525, 111‐111‐717 Fax: +92‐021‐35671665 Web: www.cicl.com.pk

13 Continental Insurance Company Ltd. 901, 9th Floor Kashif Centre, Opposite Hotel Mehran, Sharae Faisal, Karachi

Tel: +92‐021‐35640115‐7 Fax: +92‐021‐35640118 Web:

14 The Cooperative Insurance Society of Pakistan Ltd. Cooperative Insurance Building

Tel: +92‐042‐37352306 Fax: +92‐042‐37356537 Web:

of 47

23, Sharae Quaid‐e‐Azam, Lahore.

15 Crescent Star Insurance Co. Ltd. 2nd Floor, Nadir Housc l.l.Chundrigar Road Karachi

Tel: +92‐021‐32415471‐3 Fax: +92‐021‐3241 5474‐5 Web: www.cstar.com.pk

16 Credit Insurance Co. Ltd. 2nd Floor Asmat Chamber,68 Mozang Road. Lahore

Tel: +92‐042‐36316774 Fax: +92‐042‐36368868 Web:

17 East West Insurance Co. Ltd. 410. E.FU House M. A. Jinnah Road, Karachi

Tel: +92‐021‐32313304‐1l Fax; +92‐021‐32310821, 32200128 Web : www.eastwestinsurance.com.pk

18 EFU General Insurance Ltd. EFU House, M.A. Jinnah Road Karachi

Tel: +92‐02l‐32313471‐90 Fax: +92‐021‐32310450 Web: www.efuinsurance.com

19 Excel Insurance Co. Ltd. 38‐C‐ l,Block‐6 P. E. C. H. S Shahrah ‐ e ‐ Faisal Karachi

Tel: 111‐777‐666 Fax: +92‐021‐34548076 Web: www.globemanagements.com

20 Habib Insurance Co. Ltd 1st Floor, Siate Life Buiktmg 6 Habib Square M.A. Jinnah Road Karachi

Tel: 111‐03‐03‐03 Fax: +92‐021‐35693676 Web: www.habibinsurance.net

21 IGI Insurance Limited 7th Floor, The Forum, Suite 701‐713, G‐20 Block 9, Khayaban‐e‐Jami. Clifton Karachi

Tel: +92‐021‐35301726‐8. 111‐234‐234 Fax : +92‐021‐35301729, 3530 1772 Web: www.igiinsurance.com.pk

22 National Insurance Company Limited NICL Building. Abbasi Shaheed Road, Karachi

UAN: 111‐642‐642 Email: [email protected] Web: www.nicl.com.pk

23 New Hampshire Insurance Co. 7th Floor, Dawood Centre M.T. Khan Road, Karachi

Tel: 111‐111‐244 Fax: +92‐021‐35634022 Web : www.chartisinsurance.pk

24 New Jubilee Insurance Co. Ltd. 2nd Floor, Jubilee Insurance House I.I. Chundrigar Road Karachi

Tel : +92‐021‐32412628 Fax: +92‐021‐32416728 Web : www.nji.com.pk

25 Pakistan Gen. Ins. Co. Ltd. 5‐Bank Square Shahrah‐e‐Quaid.e‐Azam Lahore

Tel : +92‐042‐3732 3569 Fax : +92‐042‐3723 0634 Web: www.pgi.com.pk

26 Pakistan Mutual Insurance Company 29‐A, Lytton Road, Lahore

Tel: +92‐042‐37124890 Fax: Web:

27 PICIC Insurance Limited 8th Floor. Shaheen Complex M.R. Kiyani Road Karachi

Tel: +92‐021‐32219555‐60 Fax: +92‐021‐32219561 web www.picicinsurance.com

28 Premier Insurance Limited 5th Floor, State Life Building No 2‐A Wallace Road, P.O Box No 4140 Karachi

Tel : +92‐021‐32416331‐4 Fax: +92‐021‐32416572 web: www.pil.com.pk

29 Reliance Insurance Co. Ltd. Reliance Insurance House 181 ‐ A Sindhi Muslim cooperative ‐ Housing Society, P.O Box No 13356 Karachi

Tel: +92‐02l‐34539415‐ 17 Fax : +92‐021‐34539412 Web : www.relianceinsins.com

30 Saudi Pak Insurance Company Ltd. 2nd Floor. State Life Building No. 2A Wallace Road, Karachi

Tel: +92‐021‐32418430 Fax: +92‐021‐32417885 web: www.saudipakinsurance.com.pk

of 47

31 Security Gen. Insurance Co. Ltd. SGI‐House, 1 8‐C/E‐1 Gulberg‐Ill Lahore

Tel : +92‐042‐35775024‐29 Fax : +92‐042‐35775030 Web:

32 Shaheen Insurance Co. Ltd. 10th Floor, Shaheen Complex M. R. Kayani Road Karachi

Tel: +92‐021‐32630370‐75 Fax: +92‐021‐32626674 Web: www.shaheeninsurance.com

33 Silver Star Insurance Co. Ltd. Silver Star House, 2nd Floor 5‐ Bank Square, Lahore

Tel: +92‐042‐37324488 Fax: +92‐042‐37229966 Web: www.silverstarinsurance.com

34 TPL Direct Insurance Limited 172‐B, 2nd Floor, Najeeb Centre Block ‐2, P.E.C.H.S. Karachi

Tel: +92‐021‐34322555 Fax: +92‐021‐34322515 Web: www.tpldirect.com

35 UBL Insurers Limited 2nd Floor, State Life Building No. 2 Wallace Road Off I.I. Chundrigar Road Karachi

Tel: 111‐845‐111 Fax: +92‐021‐32463117 Web: www.ublinsurers.com

36 United Ins. Co. of Pak Ltd. Nizam Chambers, 5th Floor Shahrah‐e‐Fatima Jinnah Lahore

TeI: +92‐042‐3636 1471 Fax : +92‐042‐36375036 Web: www.theunitedinsurance.com

37 Universal Ins. Co. Ltd. Universal Insurance House 63 – Shahrah‐e‐Quaid‐e‐Azam Lahore

Tel: +92‐042‐37353453 Fax: +92‐042‐37230326 Web: www.uic.com.pk

Life Insurance Companies 1 Adamjee Life Assurance Co. Ltd.

The Forum, Suite No. 301, 3rd Floor, Plot G‐20, Block 9, Clifton, Karachi

Tel: +92‐021‐35362620‐3 Fax: +92‐021‐3562621 Web: www.adamjeelife.com

2 Asia Care Health & Life Ins. Co. Ltd. 15‐C, 17‐C 2nd Floor, Commercial Lane No. 5, Zamzama Phase 5 DHA,Karachi

Tel: +92‐021‐35302072‐5 Fax: +92‐021‐35302076 Web: www.asiacare.net

3 American Life Insurance Co. (Pak.) Ltd. Dolmen City, 13th Floor (level 16) Block 4, Scheme 5, Clifton Karachi

Tel: +92‐02‐111‐111‐711 Fax: +92‐021‐3529 0042 Web: www.alico.com.pk

4 East West Life Assurance Company Ltd. 3rd Floor, 3 10‐EFU House MA. Jinnah Road Karachi

Tel: +92‐021‐32311662‐5 Fax: +92‐021‐3231 1667 Web: www.eastwestlifeco.com

5 EFU Life Assurance Limited 37‐K, Block‐6, P.E.C.H. Society Karachi

Tel: +92‐021‐111‐338‐111 Fax: +92‐021‐3453‐5079 Web: www.efulife.com

6 New Jubilee Life Insurance Company Ltd. 74/1‐A, Lalazar, M.T. Khan Road Karachi

Tel: +92‐021‐35611802‐08 Fax: +92‐021‐3561 0959 Web: www.njilife.com

7 State Life Insurance Corp. of Pakistan Principal Office State Life Building No. 9, Dr. Ziauddin Ahmed Road, Karachi‐75530

PABX No 021‐99202800‐9 Lines UAN 021‐111‐111‐888Web: http://www.statelife.com.pk

Takaful Companies 1 Dawood Family Takaful

1701‐A Saima Trade Towers, I.I. Chundrigar Road,Karachi

Tel: +92‐021‐111‐338‐786 Fax: +92‐021‐32277188 Web: www.dawoodtakaful.com

2 PakKuwait Takaful Company Limited 4th Floor Block A, FTC, Shahrae Faisal, Karachi

Tel: +92‐021‐35630707‐16 Fax: +92‐021‐35630699 Web: www.pktcl.com

of 47

3 Pak Qatar Family Takaful Suite # 102‐105, Business Arcade, Block 6, PECHS Sharae Faisal, Karachi

Tel: +92‐021‐34311747‐56 Fax: +92‐021‐34386451 Web: www.pakqatar.com.pk

4 Pak Qatar General Takaul Limited Suite # 402 – 403, Business Arcade, Block 6, PECHS Sharae Faisal, Karachi

Tel: +92‐021‐34380357‐61 Fax: +92‐021‐34386453 Web: www.pakqatar.com.pk

5 Takaful Pakistan limited 2nd & 3rd Floors, Dadex House, 34‐A/1, Block‐6, P.E.C.H.S. Shahrah‐e‐Faisal, Karachi

Tel: +92‐021‐111‐875‐111 Fax: +92‐021‐34373195‐6 Web: www.takaful.com.pk

Reinsurance Company 1 Pakistan Reinsurance Company Limited

PRC Towers, 32 ‐ A, Lalazar Drive, M.T. Khan Road, Karachi

Tel: +92‐021‐99202908‐14 Fax: +92‐021‐99202921‐22 Email: [email protected] Web: www.pakre.org.pk

of 47

10. GLOSSORY OF INSURANCE TERMS The language of insurance, at times, can be quite complex and confusing. Below are some commonly used insurance terms and their meanings. This information is for educational purposes only and should not be relied upon to form professional opinions on coverage issues.

A Absolute liability ‐ The liability of a wrongdoer's automobile insurance company to pay someone harmed by the wrongdoer, even if the wrongdoer has violated the terms of the insurance policy, for example, by driving with an expired license. Accident ‐ An event that happens by chance and is not expected in the normal course of events, which results in harm to people, damage to property or equipment, or a loss of process or productivity. Accident Benefits (AB) ‐ The part of auto insurance that provides medical care and income replacement benefits to insured persons injured in a car collision, regardless of who caused the accident. Actual Cash Value ‐ The fair market value of property taking into account factors that might augment or reduce the value of the property in question. Actuary ‐ A certified professional who specializes in mathematics of insurance and evaluates statistical information to determine rates and risks. Additional Insured ‐ A person other than the named insured who is protected by the terms of the policy. Additional Premium ‐ An extra charge for an alteration, during the policy period, which increases the hazard or the insurance company's liability. Appraisal ‐ A valuation or an estimation of the value of property usually done by an expert in that field, such as a surveyor, who has no personal interest in the property. Appraisal Clause ‐ A clause in an insurance policy that gives the insurer the right to demand an appraisal on the damaged property. It gives both the insurer and insured a means of settling disputes over the value of lost or damaged property. Arbitration ‐ An alternative to litigation for resolving a dispute between an insurer and its customer or between insurers. An unbiased person or panel is appointed to review the case and determine responsibility for paying for the loss or the amount to be paid.

of 47

Arbitration Clause ‐ A clause in an insurance policy, reinsurance contract, or other contract that provides arbitration in the event of a disagreement. Arrears‐ The status of a policy on which the premiums are overdue and unpaid but are still considered collectible. Arson ‐ The willful and malicious burning of property. Assurance ‐ Same as Insurance. Assured ‐ Same as Insured. Assurer ‐ Same as Insurer. Authorization ‐ The power or right to act on behalf of another. Automatic Reinstatement ‐ After a claim has been paid or the property restored, most policies automatically return the stated limit of insurance to its original amount. Automobile Insurance ‐ Insurance coverage that provides indemnity and/or compensation for injury or physical damage which ensues from the ownership, use or operation of an automobile. Avoidance of risk ‐ Taking steps to remove a hazard, engage in an alternative activity, or otherwise end a specific exposure.

B Blanket Policy ‐ An individual policy covering several perils on a single amount rather than on individual limits. Bodily Injury ‐ A term, mostly used in automobile insurance, meaning physical injury as a result of a car collision. Broad coverage ‐ This provides comprehensive insurance coverage for buildings and named perils coverage for contents. Breach ‐ Failure to live up to the conditions or warranties contained in a policy. Broker ‐ An insurance broker sells insurance for more than one company. Burglar Alarms ‐ Devices of various types which give warning of entry into premises by unauthorized persons.

of 47

Burglary ‐ Unlawful removal of property from premises involving visible forcible entry. Burglary Insurance ‐ Insurance against loss of property caused by burglars. Buy back Deductible ‐ A deductible which may be removed by payment of additional premium when full coverage is required. Business Interruption Insurance ‐ Various types of insurance against business expenses and loss of income resulting from a fire or other insured peril.

C Cancellation ‐ During the policy period, either the insurer or the customer may terminate coverage according to provisions in the contract. Capacity ‐ The amount of capital available to an insurance company, or to the industry as a whole, for underwriting insurance coverage or coverage for specific perils. Captive Insurance Company ‐ A company that is owned solely or in large part by one or more non‐insurance entities for the primary purpose of providing insurance coverage to the owner or owners. Certificate of Insurance ‐ Written document stating that insurance is in effect, includes general statement of policy's coverage. Certified Copy ‐ Reproduction of a document, that authority having custody of original signs and attests as a true, genuine and authentic copy. Civil Commotion ‐ Disturbance involving a large number of individuals. An uprising of people creating a prolonged disturbance. Civil Liability ‐ An individual's liability to others for harm caused to them by his or her actions. Claim ‐ The exercising of a policyholder's right under a policy to be paid by his or her insurance company for certain financial losses suffered. Claimant ‐ One who makes a claim. Clause ‐ Words in a policy which describe certain specifications, limitations or modifications. Co‐insurer ‐ Two or more persons or companies who may be sharing a loss. A company whose policy covers the same risk as that of one or more other companies, is a co insurer whether the policies are written separately or together.

of 47

Collusion ‐ A secret agreement between persons to defraud another. Commercial lines ‐ Refers to insurance for businesses, organizations, institutions, volunteer groups, governmental agencies, and other commercial establishments. Compulsory Insurance ‐ Any form of insurance (usually auto insurance) that is required by law. Concealment ‐ As applied to insurance, the withholding from an insurance company of information pertinent to a risk. Conditions ‐ Conditions are terms of insurance contracts that impose obligations an insured person must satisfy in order to preserve coverage.

D Death Benefit ‐ An amount set out in the policy representing the amount that will be paid in the event of death. Also referred to as "principal sum." Debris Removal ‐ A provision in an insurance policy most commonly found in fire insurance providing indemnification for the cost of removal of the debris after a fire. Declaration ‐ Statement, signed by the insured, warranting that information given by him is true. Declarations ‐ The portion of the insurance contract that contains information such as the name and address of the insured, the property insured and its location and description, the policy period, the amount of insurance coverage, applicable premiums, and any other information provided by the insured. Deductible ‐ An agreed specified sum to be deducted from the amount of loss and assumed by the insured. Deductible Clause ‐ A clause defining the amount of loss for which insured is liable; defines insurer's and insured's contributions to cover losses. Deferred Premium Payment Plan ‐ Plan providing for the payment of the premium over time. Depreciation ‐ Reduction in value of property through use, ageing, deterioration and obsolescence. Disclaimer ‐ A denial of liability for cause. Disclosure ‐ Act of making known something to be known.

of 47

Dismemberment ‐ Loss of a limb, e.g., leg, arm, finger or eye.

E Employer's Liability Insurance ‐ Protects an employer against injuries sustained by employees that fall under common‐law liability. This should not be confused with workers' compensation liability, which is liability as defined by workers' compensation law. Endorsement ‐ An amendment added to a written document, particularly an agreement between parties, altering its provisions. Exceptions ‐ Differences listed in a policy which amend the standard declarations so as to provide the required coverage. Exclusion ‐ Risks, perils or properties defined in the policy as not covered.

F Fire Insurance ‐ Coverage for losses from fire and lightning and also the resultant damage caused by smoke and water, usually supplemented by Extended Coverage Insurance. First Party ‐ The person who is insured on the insurance policy. He or she is also the "policyholder" or "insured." There may be other people, named or unnamed, who are covered as well. Flat Cancellation ‐ The cancellation of a policy as of the effective date with all paid premium refunded. Fleet Policy ‐ In automobile insurance, this is a policy insuring a number of cars for one owner. Forgery ‐ In general, any false writing with intent to defraud. Fraudulent Misrepresentation ‐ A false statement made knowing it to be false and intending another to act on it to his detriment, or made carelessly or recklessly without regard to whether it is true or false.

G Good Faith ‐ Most ordinary contracts are good faith contracts. Insurance contracts are agreements made in the utmost good faith. This implies a standard of honesty greater than that usually required in most ordinary commercial contracts.

of 47

Grace period ‐ A period after the premium due date during which an overdue premium may be paid without penalty. The policy remains in force throughout this period. Gross Negligence ‐ The degree of negligence somewhat greater than ordinary negligence. It may be a reckless wanton and wilful misconduct causing bodily injury and/or property damage.

H Hazard ‐ A risk or probability that the event insured against might occur. Hazard, Moral ‐ Hazard arising from character, interest, habits and lack of integrity of the insured or person concerned. Hazard, Physical ‐ Hazard arising from physical condition or characteristics of the object that is insured, e.g., using and storing volatile materials and substances on the premises. Hit and Run Accident ‐ Collision between motor vehicle and/or a motor vehicle and another object and/or a motor vehicle and a pedestrian where a driver leaves the scene of the accident without identifying him/herself. This is an offence under the Highway Traffic Act. Homeowners insurance ‐ An elective combination of coverages for the risks of owning a home. It may include coverage for fire, burglary, vandalism, earthquake and other perils. Hostile Fire ‐ A fire which occurs in or escapes to a place not anticipated, e.g., a fire in a fireplace becomes uncontrollable and ignites something externally. See Friendly Fire.

I Indemnify ‐ To compensate the insured person for a loss, in whole or in part, by payment, repair, or replacement. Inland Marine Insurance ‐ Coverage for movable property in transit, excluding ocean crossing; includes bridges and tunnels, because they are implements of transportation. Inspection ‐ Independent checking of facts about an applicant or claimant, usually by a commercial inspection agency. Insurable Interest ‐ An interest which the insured must have in the subject matter of the insurance he buys so that if the event insured against occurs, the insured will suffer a pecuniary loss.

of 47

Insurance ‐ A contract between an insurance company and its customer for a specific period of time. It protects the customer financially against a loss. Insurance is also a mechanism for dispersing risk, because it shares the losses of the few among the many. Insurance Policy ‐ A written contract of insurance. Insured ‐ The entity (individual or otherwise) whose risk of financial loss from an insured peril is protected by the insurance policy. Insurer ‐ The company providing the insurance coverage. Insuring Clause ‐ Describes the intent of the policy, just what insurance coverage is provided by the policy and in what limits.

J Joint and Several Liability Clause ‐ This exists when the situation is such that a creditor in the case can sue any one of the debtors individually, or any, several or all of them, at the creditor's option. Judgment ‐ An order given by a Court.

L Lapse ‐ An insurance policy which, having reached its expiry date, is not renewed or extended is said to have lapsed. Liability ‐ This is a legally enforceable obligation. Liability insurance pays for the damages or losses suffered by others for which the insured person is legally responsible. Liability Insurance ‐Insurance which agrees to indemnify the insured for sums he may be required by law to pay to third parties as damages for bodily injury or damage to property. Limit of Liability ‐ The maximum amount, as stated in the policy, which an insurer is bound to pay in case of a loss.

M Material Fact ‐ Information about the subject of insurance, insured risk, that, if known, would change the underwriting basis of the insurance, and which could cause the insurer to refuse the application or charge a higher rate.

of 47

Material Misrepresentation ‐ When a policyholder or applicant makes a false statement of material (important) fact on the application, he or she has committed a material misrepresentation, which may result in loss of coverage. Moral Hazard ‐ A position taken by an insured that increases the chance of a loss or the seriousness of a loss.

N Named Insured ‐ The person in whose name the policy is issued (see Insured or Policyholder). Technically, he or she would be the first party to the contract, the second party being the insurance company that issues the policy. Named Perils (or Basic) Insurance Policy ‐ Covers only those perils, such as fire and theft, that are specifically named in the insurance policy. Natural Disaster ‐ A disaster caused by the elements such as flood, earthquake, tornado, lightning, etc. Negligence ‐ To fail to do what a reasonable and prudent person would do (or to do what such a person would not do); this can result in property damage, injury or death. No‐Fault ‐ This type of automobile insurance provides some compensation for personal injury and death arising out of a motor vehicle accident, with payments made regardless of who caused the loss. However, it does matter who caused the accident; if found to be at fault, a driver may experience an increase in future premiums. Non‐disclosure ‐ A contract of insurance is based on utmost good faith. An applicant for insurance is required to disclose to the company all material facts which are necessary to underwrite a policy. If the applicant does not disclose all these facts, he/she is guilty of non disclosure and may risk having coverage voided from inception. Non‐hazardous ‐ A risk not involving the ordinary or average hazard of its class, or a risk free of the average hazards of all classes of risk. Non‐insurable Risk ‐ A risk for which no insurance can be written. The chance of loss is very high or cannot be accurately measured. Notice of Loss ‐ Notice detailing the losses and the circumstances surrounding how they occurred required by insurance companies immediately after an accident or other loss. Notice of Termination ‐ The conditions of insurance policies stipulate how a policy may be terminated during its term.

of 47

P Premium ‐ An insurance premium is the money the policyholder pays to the insurer for financial protection against specific risks for a specific time‐span. Product Liability Insurance ‐ Protects manufacturers' and distributors' exposure to liability for bodily injury or property damage caused by the negligent manufacturing of the product. Property Insurance ‐ Covers an insured's property against damage, destruction or loss by a covered peril. Proximate Cause ‐ Cause of loss or damage. Unbroken chain of cause and effect between the occurrence of an insured peril and damage to property.

R Regulator ‐ The federal government agency responsible for the control and regulation of the insurance industry, like SECP. Reinstatement ‐ The reactivation of suspended or cancelled insurance. Reinsurance ‐ Insurance purchased by an insurance company from another insurance company (reinsurer) to provide it protection against large losses on cases it has already insured. Essentially, insurance for insurance companies. Rider (or Endorsement) ‐ An amendment to an insurance policy. It is used to add or remove coverage. Risk ‐ A chance of loss or injury for which an insurance claim may be submitted. For a risk to be insurable, related events that could result in a claim must be unexpected.

S Salvage ‐ On paying for a total loss of property, an insurance company takes title to what remains of or what is recovered of the property. This is a right of salvage. Schedule of Insurance ‐ A list of items individually covered by a policy, Standard Risk ‐ A person who, according to a company's underwriting standards, is entitled to purchase insurance protection without special restrictions.

of 47

Subrogation ‐ Once a company has paid a loss for which someone other than the policyholder is responsible, it may have the right to recover this loss from the guilty party. This right is called subrogation. Surrender ‐ Cancellation of a policy before its normal expiry by mutual consent of insured and insurer. Survey ‐ An examination of a risk to be insured, following which the surveyor completes a form giving all particulars.

T Third Party ‐ A claimant under a liability policy, so called because he is not one of the two parties (insured and insurer) who has entered into the insurance contract which pays his claim. Third‐Party Liability (Auto) Insurance ‐ Covers an insured if his or her car injures someone else or damages property and he or she is held legally responsible.

U Umbrella Policy ‐ A special form of liability policy designed to protect the insured for certain unknown contingencies over and above the normal coverage and to provide excess insurance. Underwriter ‐ An underwriter is an employee of an insurance company who looks at an insurance application and decides whether or not the insurance company can or should provide the applicant with insurance, based on the risk that person presents. Underwriting Profit or Loss ‐ The amount of money that an insurance company gains or losses as a result of its insurance operations. It excludes investment transactions and income taxes. Underwriting Rules ‐ The rules used by insurance companies to assess the risk they are taking on by insuring a particular customer. These rules are set individually by insurance companies. Uninsurable Perils ‐ These are events or situations for which insurance coverage cannot be purchased. The damage as a result of these incidents is usually predictable or preventable. For example, if you build your house on a flood plain, your house will, at some point, be flooded. Flooding, in this case, is an uninsurable peril. Utmost Good Faith ‐ A phrase in a legal document calling for the highest standards of integrity on the part of the insured and the insurer.

of 47

W Waiting period ‐ A period of time set forth in a policy which must pass before some or all coverage begin. Waiver ‐ The intentional relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing. Warranty ‐ A statement by the policyholder that certain conditions of the insured risk exist or will be met. If found to be false, it provides the basis for voidance of the policy. Without Prejudice ‐ An action taken during claims negotiations designated as "without prejudice" is intended to be without disadvantage to the existing rights of the parties.

~ Ends Here ~

SECP Insurance Guide

Documents

Transcript of SECP Insurance Guide