Administrative Classification of Insurance by Other of Criteria
Generally, insurance classification has been an ongoing business. It could be classified in different forms according to the nature of the interest affected. Each classification is viewed in a different form by different authorities.
The classification of insurance below seems to have taken the administrative convenience of pointing out those lists of insurance in the country that has acquired socio-economic or socio-political value.
A very good example is motor vehicle insurance which involves three different perspectives of insurance.
{i} Property insurance { this perspective of insurance indemnifies against the damage of the car itself},
{ii} Personal accident insurance { this majorly focuses against personal injury of the owners-driver and if it happened that the injury was sustained by another party outside the owner while driving the insured vehicle, indemnity will not be considered to such person},
{iii} Liability insurance { indemnify against damage to property of, or against personal injury melted on a third party}.
The major consideration here is how the insured is prejudiced by the happening of the insured peril; personal injury/death, property damage/loss, or liability to the third party.
They include the following:
a. Personal Insurance
b. Property insurance
c. Pecuniary insurance
d. Liability insurance.
Personal Insurance
Personal insurance can be referred to as insurance of a person, it focuses on the human being as the subject matter of insurance.
Insurance here is taken on the life of the insured directly.
However, insurance of a person includes all items discussed under life assurances and some items under non-life insurance that relate directly to the person.
These are personal accident insurance and various policies under health/sickness insurance.
Personal accident insurance: This is an insurance contract that provides financial compensation to a policyholder who is a victim of an injury, sometimes resulting in death, due to an accident.
The level of the injury is specified, with the compensation payable being graded according to the nature of the injury.
Sickness insurance: It is common to every individual that not only accidents but also sickness can cause total disablement.
However, sickness insurance is a type of income protection policy that can help to make some financial provision and protection to someone who has been off from work due to sickness or injury.
Property insurance
Property can be defined as an object, movable or immovable, animate or inanimate, a material being or thing over which a person {natural or legal} exercises ownership control, either alone or joint ownership.
Also, some financial assets like money for instance cash at hand or in transit in the interest of the owner are included under property insurance. it is important to emphasize this point.
This is because the relationship of cash to term pecuniary may mislead a beginner into classifying cash under pecuniary insurance.
Property insurance is a broad term for a series of policies that are contracted to provide indemnity or liability coverage to the property owner in the event of damages or destruction of property which is graded according to the terms of the insurance.
The following insurance risks are under property insurance as listed by Ivamy {1979} marine insurance, fire insurance, burglary insurance, glass insurance, livestock insurance, war risk insurance, fidelity insurance, solvency insurance, and license insurance.
Liability insurance
Liability insurance provides protection or coverage to independent business professionals, entrepreneurs {self-employed persons} and most importantly business owners{the insured
} against claims arising from injury or damages to other people’s property.
In the course of conducting one’s own life in a society, there’s the possibility of inflicting injury {damages or loss} to another person or institution, herein. called the third party.
However, liability insurance indemnifies against or covers the cost of compensation to third-party claims.
i. Physical injury to another person, sometimes leading to loss of life
ii. Damage to another person’s property
iii. Damage to other persons and/or their interest due to non-observation of one statutory responsibility. this would normally invoke legal action by the injury.
Classification of Insurance Companies According to some legal procedures
i. Multiple-line Insurance Company
Multiline insurance introduces complex insurance instruments that are used by a company to bundle the risk exposures of multiple corporate insurance obligations into one insurance contract. The term ‘multiple-line insurance companies’ also refers to an insurance agency that writes policies for several different lines of insurance products. These various products include coverage for a variety of risk categories such as liability, fire, and auto insurance.
Individual customers may bundle their risk coverages of auto, marine, and homeowners into a multiline contract. By bringing all policies under one agency or carrier, commercial clients manage their single multiline contract easier instead than an entire portfolio. Bundling various coverages in a single contract reduces the overall premium and makes it easier for year-end accounting. At the same time, the liability limits increase, much as it happens under an umbrella policy.
ii. Stock Companies
A stock company is an organization with stockholders that participate in the gains and losses of the organization. Stockholders have the right to vote and to elect the board of directors. The stock company’s agreement specifies the types of insurance that will be sold. To operate a stock company, an insurer must have a minimum of capital and surplus in hand. Stock insurance companies distribute profits to their shareholders in the form of dividends.
A stock insurer may reserve profits to pay off debt or reinvest them in the company. Along with this, stock insurance companies also make their wealth from their surplus and reserve accounts(funds set aside by insurance companies at the beginning of a year to meet the costs of old and new claims).
Mutual Insurance Company
Mutual insurance companies are corporations owned by the policyholders, who elect the board of directors. The board of directors appoints the administrators who run the mutual insurance company. Instead of issuing stock, Mutual insurance companies raise their capital by selling surplus notes, which are unsecured debt. Policyholders of mutual insurance companies have less influence than institutional investors, who can accumulate significant ownership in a company. These policyholders may either receive a profit in the form of dividends or get an advance reduction in premiums. Mutual insurance companies are further categorized into the following specific types:
a. assessment mutual,
b. advance premium mutual,
c. factory mutual,
d. fraternal mutual,
e. perpetual mutual
Finally
Certain terms are usefully defined at the outset. Insurance is a contract of reimbursement. For example, it reimburses for losses from specified perils, such as fire, hurricanes, and earthquakes. An insurer is a company or person who promises to reimburse. The insured (sometimes called the assured) is the one who receives the payment, except in the case of life insurance, where payment goes to the beneficiary named in the life insurance contract. The premium is the consideration paid by the insured—usually annually or semiannually—for the insurer’s promise to reimburse. The contract itself is called the policy. The events insured against are known as risks or perils.
