UNIVERSITY OF LUSAKA
SCHOOL OF LAW
L211 – INSURANCE &
PENSIONS LAW : UNIT ONE
Understanding Insurance & Risk
Management
M S T IO NGE M SET EK A
COVERAGE AND REMEDIES
• Coverage :
- limitations ?
- Exclusions?
- Deductibles?
- Influencing Factors?
COVERAGE AND REMEDIES
• Remedies:
- Replacement
- Repair
- Cash Settlement
- Hybrid
COVERAGE AND REMEDIES
• Which One applies and when ?
-Policy coverage
-Item Type/ Value
- Cost and ùpracticability
-Coverage Limit
Not covered ?
A LWAY S R E A D
POLICY TERMS,
INCLUDING LIMITS,
EXCLUSIONS, AND
DEDUCTIBLES, TO
K N O W W H AT I S
INSURED.
WHAT IS INSURANCE?
•A – B
• C,D,E,F,G …
RULES GOVERNING
INSURANCE
• One assumes risk for another
• In regard to an uncertain event
• Usually a future event
• beyond parties’ control
• Creating some loss/exposure to adversity borne by the assured
• and covered by the insurer
• Insurer is bound to pay if/when the event occurs
• Involves insurable interest –
KEY PLAYERS
• Who Gives: Insurer / Insurance company / Insurance carrier
• To Whom: The insured / Policyholder
PURPOSE OF INSURANCE
• Pool money collected to boost economy
• Underwrite securities for commercial and large industries
• Support prosperity by reducing financial risks
INSURANCE TRANSACTIONS
• Insured assumes small loss (premium)
• Insurer promises to cover in event of covered loss
• Losses must be measurable in financial terms
• Involves Insurable interest (ownership, possession, or pre-existing relationship)
INSURANCE PROCESS
• Contract issued (insurance policy)
• Terms & Conditions explain coverage & compensation
• Payment of premium from insured to insurer
• If loss occurs → claim submitted for processing
HOW INSURANCE WORKS
• Pooling funds from many insured entities
• Premiums depend on frequency & severity of events
CHARACTERISTICS OF AN
INSURABLE RISK
• Large number of similar exposure units
• Definable and measurable loss (time, place, cause, damage)
• Accidental loss (pure risk)
• Large loss (meaningful size to insurer)
• Affordable premium/Calculable loss
• Limited Risk of catastrophically large loss
RISK MANAGEMENT
DEFINITION
• Identification, assessment & prioritization of risks
• Apply resources to minimize, monitor & control risk impact
• Ensure uncertainty doesn’t derail business goals
SOURCES OF RISK
• Financial market uncertainty
• Natural causes/disasters
• Project failures
• Credit risk
• Legal liabilities
• Accidents
• Deliberate attacks
• Unforeseen events
TYPES OF EVENTS
• Negative Events → Risks
• Positive Events → Opportunities
RISK MANAGEMENT
APPROACHES
• Avoidance (eliminate threat)
• Reduction (minimize likelihood)
• Mitigation (impact/effect)
• Transfer (shift risk to another party)
• Retention (accept risk)
PRINCIPLES OF RISK
MANAGEMENT
• Create value
• Integrate into processes
• Be part of decision-making
• Address uncertainty
• Systematic & structured
• Based on best info
• Tailorable
• Consider human factors
• Transparent & inclusive
• Dynamic & responsive to change
• Continuous improvement
• Periodic reassessment