ISR3701
NOTES
,© 2020 University of South Africa
All rights reserved
Printed and published by the
University of South Africa
Muckleneuk, Pretoria
ISR3701/1/2021–2023
70708274
Shutterstock.com images used
InDesign
MNB_Style
,CONTENTS
FORWARD v
MODULE AIM AND OUTCOMES vii
FRAMEWORK AND CONTENT viii
TOPIC 1: RISK MANAGEMENT AND INSURANCE xi
LESSON 1:RISK MANAGEMENT 1
1.1 RISK MANAGEMENT AS A CONCEPT 2
1.2 RISK IDENTIFICATION 3
1.3 RISK EVALUATION 4
1.4 RISK CONTROL 4
1.5 PERSONAL RISK MANAGEMENT 5
LESSON 2:THE NON-LIFE INSURANCE MARKET 8
2.1 INSURANCE MECHANISM 9
2.2 THE NON-LIFE INSURANCE MARKET 11
2.3 MARKET ASSOCIATIONS 13
2.4 EDUCATIONAL ASSOCIATES 14
2.5 ADDRESSING THE LOW-INCOME MARKET 15
TOPIC 2: NON-LIFE INSURANCE 17
LESSON 3: PRACTICE OF UNDERWRITING 18
3.1 ESSENTIAL ELEMENTS OF A CONTRACT 19
3.2 SPECIAL LEGAL CHARACTERISTICS OF INSURANCE CONTRACTS 19
3.3 THE PARTS OF THE POLICY 21
3.4 INSURABLE INTEREST 24
3.5 INSURABLE AND UNINSURABLE RISKS 25
3.6 THE PROPOSAL FORM 26
3.7 THE PROCEDURE 27
3.8 PREMIUM COLLECTION 27
LESSON 4:RENEWALS 30
4.1 THE RENEWAL LISTING 31
4.2 THE CLAIMS EXPERIENCE 31
4.3 OPTIONS 31
4.4 SURVEY 32
4.5 SOUTH AFRICAN SPECIAL RISKS INSURANCE ASSOCIATION (SASRIA) 32
4.6 RENEWAL 32
LESSON 5:NON-LIFE REINSURANCE PRACTICE 34
5.1 THE REASONS FOR AND THE IMPORTANCE OF REINSURANCE 35
5.2 CLASSES OF REINSURANCE 35
5.3 PROPORTIONAL REINSURANCE 35
5.4 QUOTA SHARE TREATY 36
5.5 SURPLUS TREATY 37
5.6 NON-PROPORTIONAL REINSURANCE 37
LESSON 6:CLAIMS PROCEDURES 41
6.1 NOTIFICATION OF A CLAIM 42
6.2 THE CLAIMS DEPARTMENT 42
6.3 VALID CLAIM 42
(iii) ISR3701/1
, 6.4 INDEMNITY 43
6.5 METHODS OF SETTLING CLAIMS 45
6.6 CLAIMS DISPUTES 46
6.7 PRESCRIPTION PERIOD 47
6.8 POST-LOSS ACTION 47
LESSON 7:REGULATION OF THE NON-LIFE MARKET 49
7.1 NON-LIFE INSURANCE BUSINESS 50
7.2 INSURANCE ACT 50
7.3 OTHER STATUTES 51
7.4 COMPULSORY INSURANCE 54
LESSON 8:THE PERSONAL INSURANCE POLICY 55
8.1 PERSONAL LINES 56
8.2 HOUSEOWNERS/HOMEOWNERS 56
8.3 HOUSEHOLDERS 57
8.4 ALL-RISKS INSURANCE 58
8.5 PERSONAL ACCIDENT INSURANCE 59
8.6 PERSONAL LIABILITY 60
8.7 SMALL-CRAFT INSURANCE 61
LESSON 9:COMMERCIAL INSURANCE 63
9.1 MULTI-PERIL POLICIES 64
9.2 FIRE SECTION 65
9.3 ACCIDENT CLASSES 67
9.4 LIABILITY 69
9.5 OTHER TYPES OF COVER 69
LESSON 10: MOTOR INSURANCE 71
10.1 COMPULSORY MOTOR INSURANCE 74
10.2 TYPES OF COVER IN MOTOR INSURANCE 75
10.3 FIRST AMOUNT PAYABLE 76
10.4 MOTORCYCLES 76
10.5 COMMERCIAL VEHICLES 77
10.6 MOTOR TRADE RISKS 77
10.7 METHODS OF RATING 77
10.8 CLAIMS HANDLING 78
LESSON 11:
SASRIA, COID AND MISCELLANEOUS COVERS 80
11.1 SOUTH AFRICAN SPECIAL RISKS INSURANCE ASSOCIATION (SASRIA) 81
11.2 THE COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES ACT (COID),
130 OF 1993 82
11.3 SPECIALIST INSURANCE COVERS 82
11.4 BANK ASSURANCE AND GROUP SCHEMES 89
TOPIC 3: SELF-FUNDING AND ALTERNATIVE RISK FINANCING TECHNIQUES 93
LESSON 12: CONCEPTS OF ALTERNATIVE RISK TRANSFER (ART) 94
12.1 ALTERNATIVE RISK TRANSFER 95
12.2 RISK RETENTION 98
12.3 CAPTIVES 99
12.4 FINITE RISK INSURANCE AND CAPITAL MARKET INSTRUMENTS 100
REFERENCES 104
(iv)
NOTES
,© 2020 University of South Africa
All rights reserved
Printed and published by the
University of South Africa
Muckleneuk, Pretoria
ISR3701/1/2021–2023
70708274
Shutterstock.com images used
InDesign
MNB_Style
,CONTENTS
FORWARD v
MODULE AIM AND OUTCOMES vii
FRAMEWORK AND CONTENT viii
TOPIC 1: RISK MANAGEMENT AND INSURANCE xi
LESSON 1:RISK MANAGEMENT 1
1.1 RISK MANAGEMENT AS A CONCEPT 2
1.2 RISK IDENTIFICATION 3
1.3 RISK EVALUATION 4
1.4 RISK CONTROL 4
1.5 PERSONAL RISK MANAGEMENT 5
LESSON 2:THE NON-LIFE INSURANCE MARKET 8
2.1 INSURANCE MECHANISM 9
2.2 THE NON-LIFE INSURANCE MARKET 11
2.3 MARKET ASSOCIATIONS 13
2.4 EDUCATIONAL ASSOCIATES 14
2.5 ADDRESSING THE LOW-INCOME MARKET 15
TOPIC 2: NON-LIFE INSURANCE 17
LESSON 3: PRACTICE OF UNDERWRITING 18
3.1 ESSENTIAL ELEMENTS OF A CONTRACT 19
3.2 SPECIAL LEGAL CHARACTERISTICS OF INSURANCE CONTRACTS 19
3.3 THE PARTS OF THE POLICY 21
3.4 INSURABLE INTEREST 24
3.5 INSURABLE AND UNINSURABLE RISKS 25
3.6 THE PROPOSAL FORM 26
3.7 THE PROCEDURE 27
3.8 PREMIUM COLLECTION 27
LESSON 4:RENEWALS 30
4.1 THE RENEWAL LISTING 31
4.2 THE CLAIMS EXPERIENCE 31
4.3 OPTIONS 31
4.4 SURVEY 32
4.5 SOUTH AFRICAN SPECIAL RISKS INSURANCE ASSOCIATION (SASRIA) 32
4.6 RENEWAL 32
LESSON 5:NON-LIFE REINSURANCE PRACTICE 34
5.1 THE REASONS FOR AND THE IMPORTANCE OF REINSURANCE 35
5.2 CLASSES OF REINSURANCE 35
5.3 PROPORTIONAL REINSURANCE 35
5.4 QUOTA SHARE TREATY 36
5.5 SURPLUS TREATY 37
5.6 NON-PROPORTIONAL REINSURANCE 37
LESSON 6:CLAIMS PROCEDURES 41
6.1 NOTIFICATION OF A CLAIM 42
6.2 THE CLAIMS DEPARTMENT 42
6.3 VALID CLAIM 42
(iii) ISR3701/1
, 6.4 INDEMNITY 43
6.5 METHODS OF SETTLING CLAIMS 45
6.6 CLAIMS DISPUTES 46
6.7 PRESCRIPTION PERIOD 47
6.8 POST-LOSS ACTION 47
LESSON 7:REGULATION OF THE NON-LIFE MARKET 49
7.1 NON-LIFE INSURANCE BUSINESS 50
7.2 INSURANCE ACT 50
7.3 OTHER STATUTES 51
7.4 COMPULSORY INSURANCE 54
LESSON 8:THE PERSONAL INSURANCE POLICY 55
8.1 PERSONAL LINES 56
8.2 HOUSEOWNERS/HOMEOWNERS 56
8.3 HOUSEHOLDERS 57
8.4 ALL-RISKS INSURANCE 58
8.5 PERSONAL ACCIDENT INSURANCE 59
8.6 PERSONAL LIABILITY 60
8.7 SMALL-CRAFT INSURANCE 61
LESSON 9:COMMERCIAL INSURANCE 63
9.1 MULTI-PERIL POLICIES 64
9.2 FIRE SECTION 65
9.3 ACCIDENT CLASSES 67
9.4 LIABILITY 69
9.5 OTHER TYPES OF COVER 69
LESSON 10: MOTOR INSURANCE 71
10.1 COMPULSORY MOTOR INSURANCE 74
10.2 TYPES OF COVER IN MOTOR INSURANCE 75
10.3 FIRST AMOUNT PAYABLE 76
10.4 MOTORCYCLES 76
10.5 COMMERCIAL VEHICLES 77
10.6 MOTOR TRADE RISKS 77
10.7 METHODS OF RATING 77
10.8 CLAIMS HANDLING 78
LESSON 11:
SASRIA, COID AND MISCELLANEOUS COVERS 80
11.1 SOUTH AFRICAN SPECIAL RISKS INSURANCE ASSOCIATION (SASRIA) 81
11.2 THE COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES ACT (COID),
130 OF 1993 82
11.3 SPECIALIST INSURANCE COVERS 82
11.4 BANK ASSURANCE AND GROUP SCHEMES 89
TOPIC 3: SELF-FUNDING AND ALTERNATIVE RISK FINANCING TECHNIQUES 93
LESSON 12: CONCEPTS OF ALTERNATIVE RISK TRANSFER (ART) 94
12.1 ALTERNATIVE RISK TRANSFER 95
12.2 RISK RETENTION 98
12.3 CAPTIVES 99
12.4 FINITE RISK INSURANCE AND CAPITAL MARKET INSTRUMENTS 100
REFERENCES 104
(iv)
