INSURANCE COMPANY'S BASIC DUTIES

Insurance is a method of spreading over a large number of persons a possible financial loss too serious to be conveniently borne by an individual. An insurer is an entity that enters into a contract with the client (the insured) for the purpose of protecting them against loss arising from the specified event in exchange for a fixed sum called the premium. When such loss occurs, the insurer will indemnify the insured fully or partially in the form of cash, repairing, replacing, or reinstatement. The following are some basic duties of the insurance company in practicing the insurance business.

Duty to indemnify, this refers to the contractual duty that the insurer agrees to make good any financial loss the insured may suffer within the scope of the contract. This means that the insured should be placed in the same financial position he was before the occurrence of an insured event. On the occurrence of loss through the insured event, the insured will be indemnified fully or partially by the insurer in the form of cash, repairing, replacing or reinstatement. Insurers manage to indemnify all of the losses suffered in the pool through the pooling of losses where the losses of the few are spread over the group, and the average loss is substituted for actual loss.

Duty to remunerate, this refers to the insurer’s duty to pay or offer other financial compensation to the agent or broker for the services performed on the insurer’s behalf. These remunerations can be in the form of commissions, which are fixed percentage rates of the collected premiums, or in the form of salaries. It is important for you to note that insurance brokers and insurance agents do not charge their clients for services provided, because they earn brokerage commissions and salaries respectively from the insurance companies in accordance with Insurance Act.

Duty to design appropriate insurance products, this refers to the professional duty to design insurance covers according to the needs and wants of the clients in the market. The law requires professionals who manage insurance businesses to have professional training from higher institutions so that they can better design their insurance products that will satisfy their customers’ needs. When designing an insurance product, insurers must pay attention to the risks that affect a large number of people, unintentional and accidental losses, economically feasible premium losses, non-catastrophic losses, determinable and measurable losses, and calculable chance of loss

Duty to understand the nature of the insured’s business, this refers to the professional duty of understanding the risk exposures of the other party they are contracting with. Like any other business, insurers' main objective is to run a profitable business, hence it is necessary for them to analyze the risks of the potential clients before agreeing whether to insure them or not. Insurers can understand the nature of the insured’s business and their risk exposures through internet research, physical inspection, books of accounts, quarterly reports, memorandum, and articles of association.

Duty to understand the nature of the insurance business and offer professional advice to the insurance regulator (TIRA) on ways of developing the insurance industry. It is the insurer’s professional duty to be fully aware of the nature of the insurance business and the needs of the market so as to be in a position of power with regard to the control of their business. Insurers can understand the nature of the insurance business by being at the forefront in all matters relating to the insurance industry such as attending different summits arranged by the regulator, finding solutions for the complaints made by their customers and following up on what other insurance markets abroad are developing and coming up with.