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DEMOCRATIC REPUBLIC OF THE CONGO

MINISTRYOF HIGHER EDUCATION, UNIVERSITYAND
SCIENTIFIC RESEARCH
HIGHER INSTITUTE OF COMMERCE OF KINSHASA
I.S.C/KINSHASA

P.O. Box 16596

Kinshasa/Gombe

COURSE NOTES OF
LEGISLATION AND TECHNIQUES
INSURANCES.

2èmeBachelor's in Commercial and Financial Sciences

Willy-Patrick IKANSHA UKANTIK’YE

Ordinary Professor.

Academic Year 2022-2023

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INTRODUCTION
The company, whether operated in the form of a corporation or not, whether it carries out its
activity in the commercial, industrial, artisanal sector or as a service provider of
service, whether it has no employees or thousands of them, implements a set
of human, material, and intangible resources exposed to risks.
Ignoring them, whether intentionally or not, can lead to a serious financial imbalance.
or to the bankruptcy filing.
Large companies generally have the means to establish a specialized service,
but in SMEs-SMIs, most often, the business leader or possibly their
Wife personally takes care of insurance matters.
Or, concerned about the legitimate worry of making his business thrive, he lacks
of time and information to implement a coherent management policy
risks. Insurance issues are often postponed after urgent tasks,
which sometimes leads to a paradoxical situation where the more difficult the circumstances are and
the vulnerable company, the more daily concerns become important and
the less time the manager spends on insurance. This is precisely the time
during which the company would need the most protection.
Who among us thought to insure, without being forced by a disaster, by a friend or by
the public authorities, his business, his home, his vehicle or his person?
The objective of this course is therefore to desensitize business leaders, executives,
employees you are or will be, not to mention the insurance companies,
different risks faced by the company during its lifetime and the various possibilities of
to ensure them in good conditions.
We do not have the ambition to address all insurances in detail but to attempt
to touch on a field that often remains unknown, especially in developing countries
development, in order to popularize it and make various individuals understand it.
place in society as the only element guaranteeing our safety and that of our
activities.
To do this, our study will be conducted in two phases. In the first phase, we
we will discuss the insurance contract that concerns the legal and economic aspects of
this subject. Finally, we will address, in a second phase, risk management which is
a specific and new function within companies that is presented as
a guarantee technique in the search for security against risks.
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CHAPTER I: HISTORY AND EVOLUTION OF INSURANCE.

Section 1: History.
Insurance has developed pragmatically, under economic constraints and
social issues related to the necessity of undertaking.

A- PRE-INSURANCE.
We find 'traces' of pre-insurance in the earliest antiquity:
Aid fund for stone masons of Lower Egypt,
2250 years B.C., in the Code of Hammurabi, regarding transportation
by caravan (Darmatha),
The Athenian legislator Solon (640-558 BC) obtained from the Hetairies
(groups and artisans) their intervention in favor of their members affected by
adversity.
Theophrastus (371-286 BC) mentions a common fund contributed by
contributions, the content of which was used to provide assistance.
In Roman times, the Funerary College of Lanuvium ensured for its members,
in exchange for an entrance fee and contributions, a pyre and a tomb, while the
Legionnaires contribute to allow their members to cope with expenses of
mutation, retirement, or death.
B - NECESSITIES OF MARITIME TRADE.
The Romans and the Athenians knew the mechanism that gave rise to the 'loan to the
big adventure," and according to which the money lender received an interest of 15 to 40% if the
Cargo arrived safely. But this practice was banned by the authorities.
religious, as usurious, and was placed under interdict by Gregory IX in 1227. It is
why wealthy merchants committed to 'guaranteeing' a shipment in exchange for
advance payment of an amount of money.
It is in the field of maritime risks that the concept of insurance emerged, as
the Rhodian laws of the 12th century, the status of Marseille from 1256, or the Statutes
Maritimes of Venice from 1255.

One of the oldest contracts was found in Genoa in 1347 and is intended to guarantee a
transport of goods against the hazards of a journey.
The first maritime insurance companies appeared in 1424 in Genoa, then in
England with private clubs.

In France, marine insurance was practiced in Rouen by Spanish insurers.

as evidenced by the deeds of Notary from the years 1525 to 1530 that recount
Spanish practices from Seville or Bilbao, according to two types of transport:
Insurance on a specified boat until the port of Rouen, covering
goods unloaded at Le Havre or Barfleur, and transported on vessels
lighter to Rouen.
Insurance on a vessel whose name is still unknown at the time of subscription.
contract, with the obligation to notify the name of the vessel to the insurer within a short period of time.
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A French contract was concluded in October 1584 for the transportation of goods between
Marseille and Tripoli.
A regulation accompanied these first agreements:
An Edit of 1563 establishes a consular jurisdiction in Bordeaux.
In France, the Guidon de la Mer, written around 1570 and published in 1608, brings together the customs
in force in the various French ports.
But it is the Great Ordinance of the Navy, a work of Colbert inspired by
customs and statutes of the United Provinces (Amsterdam and Antwerp) that codified
marine insurance.
It is by the Edit of the Council of the Kingdom on June 5, 1668 that Colbert established the
Chamber of Maritime Insurance of Paris.
The Commercial Code of 1807, in effect from January 1, 1808, enshrines
his Book II on Maritime Law, and includes in its articles 332 to 396 the first
principles of insurance law.
Insurance has developed with the aim of protecting the integrity of assets.
against the risks of any nature that may affect them.
Its evolution is directly linked to that of society and economic activity.
Nowadays, the extent of international trade reinforces the need for insurance.
this economic activity.
C - ECONOMIC AND SOCIAL TRANSFORMATION
The 19th century sees a significant transformation of social structures due to expansion.
economic.
The regrouping of agricultural lands and their concentration in the hands of large landowners.
landowners have favored rural exodus, as well as the improvement of means of
communication, especially railways.
1- Concentration of wealth
The obligation for landowners to have their land or their
properties for rent have exposed them to the risk of ruin.
Likewise, it has also been the case for the risk of booming companies, exposed to losing their
buildings, production tools, stock and goods.
This favored the development of fire insurance companies, the most...
the old ones are the General Insurances, the Phoenix, the Union, the Sun that still exist
still, even if they have gathered.
2- Expansion of the scope of civil liability
The constant expansion of the field of civil liability, as well as the establishment of
increasingly dispersed heritage, necessitated their protection against the risk of
disappearance, either due to a material loss or due to a liability debt.
French law of April 9, 1898, on the compensation for workplace accidents making
employers' responsibility practically automatic, has led entrepreneurs to
massively insure their workers, until the law of October 30, 1946 creating Social Security
Social.
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Section 2: Birth of insurance.

1- LAND INSURANCE
It is at the end of the 17th century that fire insurance appears, given that
the increase of the population and the development of urban areas, which were
composed of extremely closely spaced wooden dwellings that are vulnerable to fire.
In London, in the middle of the night, on September 2, 1666, a fire broke out in a
London bakery, and it spreads so widely that it will take four days for it
master. It will destroy 13,000 houses on 400 streets over 175 hectares.
One of the few houses spared is a tavern run by a certain Edward Lloyd,
who had the idea of creating an insurance office covering the most varied risks, and who
will eventually become the largest global insurance organization: Lloyd's of
London.
In France, we will have to wait until the year 1717 to see the creation of the Bureau in Paris.
Firefighters, a municipal organization that resembles more a relief fund
than an insurance organization. Many municipalities are following this example.
In the 18th century, diocesan funds were established in large cities for a purpose
of mutual aid and charity, and find their resources in biannual fundraising.
The revolution will transform them into departmental funds, one of which is the Fund
The departmental service for the victims of fires in the Ardennes still exists.
In 1754, the General Insurance Chamber was established, and in 1786, the Water Company.
from Paris of the Périer Brothers, as well as the fire insurance company which
also practices life operations.
2- LIFE INSURANCE
Life insurance had a very difficult beginning as it was considered immoral.
as long as the death of the insured was likely to provide a material benefit to
a third.
She also appeared dangerous for the insured, to the extent that she could
give an interest to the beneficiary of the indemnity to 'hasten the death of the insured'
But it is still in the maritime field that it developed since it became the norm.
to ensure that the slaves are loaded as goods to be transported, then the captain and
the crew, and finally, in the 16th century, the Antwerp Company applied it to passengers.
Furthermore, in 1653, a Neapolitan banker suggested to Mazarin the creation of an association.
where members would contribute to a common fund, the contents of which
would be distributed among the surviving members at the end of a determined period (10 to 15
the tontines.
The Revolution marks a halt to the development of insurance in France.
The Law of Chapelier prohibits any grouping aimed at the defense of 'alleged
common interests", and it is thus that a decree of August 24, 1793 abolished the Companies
practicing life insurance operations. This did not prevent Napoleon himself from
to take out life insurance with Lloyd's of London in 1813.
2. If the need to protect heritage has led to the invention of the mechanism
the insurance contract, it has 'overflowed' its initial purpose. But above all, in
guaranteeing the policyholder's solvency, and protecting them from a liability debt,
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it allowed for the development of the field of civil liability, with the aim of compensating
the victims of damages.
3. Insurance has also become a tool of CREDIT:
By an insurance of thing:
by guaranteeing the integrity of the insured's assets, a general pledge for its creditors.
by protecting the company against the consequences of a loss of business or
from production resulting from a disaster, it guarantees its solvency with respect to the
tiers.
By a civil liability insurance:
by securing its heritage against a liability debt,
By a personal insurance:
by guaranteeing the repayment of loan installments, in case of violation of its
income capabilities (illness, death, loss of job) it allows him to obtain
bank competitions, and personal and real estate loans.
This purely contractual product put on the market by insurers can prove to be
also misleading, when it does not meet the expectations of the insured who sometimes finds himself
to refuse guarantees that he had believed to subscribe to in good faith.
The attitude of some insurers, sheltering behind ambiguous or equivocal clauses,
abusive practices, to deny their guarantee to an insured person who believed they were covered, discredited the
Insurance Companies in the eyes of the public, consumers, and the Courts.
In the Democratic Republic of the Congo, the insurance industry seems to have
a rather old existence. Charles Le jeune, to only mention this company
of insurance, had already been operating since 1889, that is to say at the time of the State
Independent from Congo. This Congolese insurance industry had, like the others
companies that worked in the colony, an extroverted character in that it had a
very narrow market that primarily recruited its clientele among expatriates and that did not
covered only a few major risks.
In the 20th century, developed countries witnessed a change in scale.
in the practice of insurance, namely, extension of old risks, use of
statistics, creation of new guarantees for new risks, development
considerable civil liability insurance. That said, insurance is a field
so paradoxical that it has always been the subject, in its principle, of the greatest fears
graves. For example, life insurance has long been considered immoral.
As for the insurance guaranteeing the consequences of civil liability,
Many believe that they lead to the irresponsibility of the insured who...
benefit. But at the same time, everyone expects a lot from the insurance which plays a
security role in the event of a disaster because we are sure to be compensated. It is in this that
Insurance presents an interesting aspect that has become almost mandatory to resort to, in
law and in practice, thus allowing for full and complete compensation
damages suffered.
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CHAPTER II: DEFINITION AND CHARACTERISTICS OF THE INSURANCE CONTRACT.

Definitions.
1. Legal definition: Insurance is the contract by which one party, referred to as the
subscribers are promised by another party, called the insurer, a
services in case of realization yh
2. of a risk, in exchange for the payment of a price called premium or contribution.
2. Technical definition: Insurance is the operation by which an insurer organizes in
mutuality is a multitude of insured individuals exposed to the realization of specific risks, and
compensate those among them who suffer a loss through the common pool of premiums
collected.
3. Economic definition: It is a product marketed by companies
insurance, in the form of a package of guarantees, often take it or leave it. It is
Why do we often talk about adhesion contracts, especially regarding individuals.
This is purely a legal product, since it consists only of obligations.
taken by the insurer.
Insurance is a means of covering the financial consequences of risks that do not
can be eliminated by preventive measures.
Like other preventive measures, insurance has a cost proportional to the amount.
guarantees provided and which is therefore necessarily included in that of the products
or services sold or provided by the insurer. That is why the company must try
to adjust the amount of its premiums as accurately as possible according to the risks incurred.
She does it with the help of insurance professionals, particularly intermediaries, such as
which Brokerage Firms or General Agents, whose skills can range from
conducting audits, up to the subscription of policies with insurance companies
the best positioned in the international insurance market.
Thus, the business leader will choose according to his budget:
Let it be a partial guarantee:
Liability insurance coverage limit.
Systematic franchises.
Underinsurance in terms of property damage.
This is a Total Guarantee, that is to say equivalent to the maximum amount of
predictable damage in property insurance, or unlimited in its amount.
It should be known that according to the indemnity principle, which is of public order, and pursuant to
article L 121-1 of the Insurance Code, the compensation due by the insurer cannot exceed the
amount of damages and cannot be a source of enrichment, in terms of
insurance of property.
Section 2: The insurance technique.
The technique of insurance is based on statistical methods, relying on the
law of large numbers, known as Bernoulli's: the larger the number of experiments, the more
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absolute gaps are increasing, and the relative gaps are decreasing to become
practically negligible for a very high number of experiments. This explains that
The insurer will use mathematical methods to select the risks it takes.
in charge, share them with others, and adjust the amount of premiums accordingly.
He will call upon 'actuaries', independent advisors tasked with applying
mathematics to financial issues, and to monitor the proper functioning
of an insurance or reinsurance contract. They are also responsible for the updating
mortality tables.
The insurer will therefore ensure to maintain a favorable claims + loss ratio / premiums.
It is immediately understood that a sudden and unforeseen increase in the
accident rate, as may particularly result from a change in case law in
The matter of civil liability risk will disrupt this claims/premiums relationship.
I. Homogenization of risks.
The insurer must choose homogeneous, normal risks that present
approximately the same characteristics as the risks observed for
The establishment of statistics. Aggravated risks are either refused or accepted.
subject to an additional premium.
However, it is known that:
- In property insurance: the insurer cannot refuse to insure risks in
certain areas of mandatory insurance (automobile, medical...), in exchange for the
determination of the premium by a rating office;
- In personal insurance: the insurer cannot refuse to cover employees
benefiting from a mandatory group insurance policy taken out by a
company, for pre-existing conditions at their membership.
II. Group insurance.
Several techniques allow an underwriter to take out an insurance policy.
on behalf of a third party, with or without a mandate.
The law provides for the mechanism of insurance for account:
- From a determined person,
- For whose account it will belong if the beneficiary is not determined.
In this latter case, 'the policy is as valuable for the benefit of the policyholder as
as a stipulation for another in favor of the known or unknown beneficiary of the said
clause.
- But the subscriber can, under certain conditions, contract for the members of a
group. This is an extremely widespread technique by which a subscriber
contract on behalf of the members of a group.

For the Code of Insurance: 'A group insurance contract is the contract taken out
by a legal entity or a business leader with a view to the membership of a group of
people under conditions defined in the contract, for the coverage of dependent risks
of human life, risks affecting the integrity of the person or related to
maternity, risks of inability to work or disability or risks of harm.
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Examples: 1) a banker contracts on behalf of his borrowing clients a

insurance guarantee regarding the reimbursement of loans in case of illness,
of disability or unemployment;
Members of a sports association are insured through a
federation.
Section 3: The classification of insurance.
We distinguish between property insurance and personal insurance.
I. Property insurance.
A) Surety of things.
This relates to compensation in the insured's estate or in the assets of
the company:

- Direct material losses such as:

Fire,
Machine breakage,
Damages suffered by the transported goods,
Theft, vandalism,
Water damage, broken glass,
All risks construction sites (T.R.C.)
Damage to the work,
etc.
- Immaterial losses, referred to as indirect:
Loss of earnings after a disaster,
Media reconstruction fees (computer risk),
Credit insurance (in case of debtor's insolvency),
Security deposit,
Loss of rent or income (in case of non-payment by the tenant),
Travel cancellation insurance,
Cancellation of show or sporting event,
Assistance service,
Legal protection.
B) Liability insurance.
An individual's assets constitute the general guarantee for their creditors, so it is therefore
exposed to a debt, due to damages caused to third parties, and which commit his
responsibility.
Thus, it is possible to have the amputation of one's assets guaranteed by an insurer.
by a 'debt of responsibility' for both individuals and businesses:
- For individuals:
Car insurance,
Family head insurance: multi-risk housing,
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- For businesses:
Operational liability insurance (RCE),
Liability insurance after work or after delivery,
Professional liability insurance,
Ten-year liability insurance (construction).

II. Personal insurance.

A) Individuals of the private sector.
- Life insurance:
in the event of life on a given date (retirement),
in case of death before a given date,
- Disability insurance in case of bodily injury or illness,
- Unemployment insurance.

B) Company persons.
Protection of leaders against their gross negligence in the event of a workplace accident.
Temporary social protection
Protection of the company in case of the absence of a key person,
Transmission of S.M.E. (payment of capital to partners or heir successors).
Section 4: Characteristics of the insurance contract.
This is a contractual technique that is based on the rules of law of
obligations.
-CONSENSUAL CHARACTER.
In principle, the contract only requires the exchange of the parties' wills, even if it
is subject to formal requirements. In principle, one can freely arrange the content
of the contract.

However, the insurance institution has a clear social interest, and dangers for
the consumer-insured, who led the legislator to establish rules of order
public, to which there can be no derogation.
Finally, the Insurance Code states that "the administrative authority may
impose the use of standard contract clauses. There are many standard clauses,
notably in mandatory insurance contracts, such as those relating to risk
automobile, construction, natural disasters...
The SYNALLAGMATIC CHARACTER.
The insurance contract imposes obligations on the parties.
necessarily reciprocal. The insured must always pay the price of the security sold by
the insurer whether it is premiums in commercial enterprises or contributions in
mutual insurance companies.
A) For the insurer:
The law states that:
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The losses and damages caused by fortuitous events or caused by fault of

The insured are the responsibility of the insurer, except for formal and limited exclusions contained in the...
police.
However, the insurer is not liable for losses and damages resulting from a fault.
intentional or fraudulent by the insured.
The insurer must fulfill the service stipulated in the contract within the agreed timeframe. They cannot
to be committed beyond. The insurer's obligation therefore consists of executing a
benefit in case of occurrence of the insured risk, which can take several forms:
Payment of a compensation or a capital,
Direct disinterest of the victim,
Organization for the defense of its insured: defense and recourse guarantee, protection
legal
Assistance service...

B) For the insured:

1- The obligation to declare the risk, or its aggravation:
In all forms of insurance, the insured must answer the questions accurately.
asked by the insurer, particularly in the risk declaration form by which
the insurer questions him during the conclusion of the contract about the circumstances that are of
nature for the insurer to appreciate the risks it assumes.
In property damage insurance contracts, the insured must report, during the contract term, the
new circumstances that either worsen the risks or...
create new ones and thus render the responses given to inaccurate or obsolete
the insurer, particularly in the aforementioned form, within a period of 15 days (or 10 days
according to the countries).

2-The obligation to pay the insurance premium.

The insurance contract necessarily places the payment of a premium on the insured.
your contribution:
Proportioned to the importance and likelihood of the occurrence of the loss,
On the agreed dates, otherwise he is exposed to the procedure for suspension of the guarantee.
and the termination of the insurance contract, as provided for in the Insurance Code.

3- The obligation to comply with the warranty conditions.

4-The obligation to take precautionary measures in case of loss.
5- The obligation to report the claim:
- The insurer must be notified as soon as possible of the occurrence of a claim.
so as to allow him to take the necessary measures to limit it
consequences, or exercise any potential remedies.
- The Insurance Code requires the insured to notify the insurer as soon as they have knowledge of it.
knowledge and at the latest within the time frame set by the contract of any nature of damage
to enforce the insurer's guarantee, under penalty of forfeiture of guarantee.
This period cannot be less than 5 working days. However, when it is provided for
a clause of the contract, the penalty for late declaration cannot be opposed to
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I assure you that if the insurer establishes that this delay has caused him harm. Furthermore,
it cannot be opposed in all cases where the delay is due to a fortuitous event or of
force majeure.
Finally, the forfeiture of warranty is not enforceable against the victim exercising the action.
direct.

III-RANDOM CHARACTER
The insurance contract is a reciprocal agreement whose effects, regarding the benefits
and to the losses, either for all parties, or for one or more of them,
dependent on an uncertain, accidental and unpredictable event.
This means that the insurer is only responsible for 'fortuitous events' or their consequences.
damaging from the simple fault of the insured, provided that it is not
volunteer.
The disaster should therefore not occur at the time of signing the contract, this character
random insurance contract opposed to an insurer taking charge of a claim
that the insured already knew at the time of signing the contract: outdated notion
unknown.
Thus, in terms of property insurance, the insurer will not cover the
voluntary "disasters," such as the destruction of an insured property, a vehicle, or a fire
of a building, with the aim of receiving compensation.
The voluntary disaster then has a 'fraudulent' character that can constitute an offense.
insurance fraud.
In liability insurance, the insurer will not cover damages
willfully caused to others: intentional damage or injuries.
In accordance with the law, it is up to the insurer, who intends to exempt themselves from their obligation to
guarantee, to report the evidence of the intentional nature of the harmful act.
In the matter of professional liability insurance, the risk in which the
The occurrence of the damage depends more on the will of the insured than on the risk itself.
even loses its random character.
This is particularly true in the area of business risk, where deliberate violation of
rules of the art, or the systematic execution of damage during the performance of work,
will undoubtedly cause damage.
In order to preserve the random principle, the insurer may therefore insert a condition of
guarantee, subordinating for example this one to compliance with the rules of the trade.
IV- BURDENSOME CHARACTER
There can be no liberal intent in the insurance contract. The insured must always...
pay the price of the security sold by the insurer whether it is premiums or contributions.
Indeed, the insurer's guarantee is only due in exchange for a premium or contribution.
If the insured does not pay their premium, the insurer has the option to suspend their coverage, and to
terminate your contract following the procedure that we will see later.
V-CHARACTER OF THE MEMBERSHIP CONTRACT
A-Standard contracts: insurance contracts belong to various categories such as
which are sold to customers such as automobile, multi-risk home insurance, and business risks
as a 'packaged product' including:
the nature of the insured risk
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the warranty conditions including:

the conditions under which the application of the guarantee is subject: Observation
from a break-in (Theft Guarantee), Use of preventive measures: a system
alarm...
risk exclusions: "All risks except..." Ex.: Civil Liability
after delivery: no guarantee due to subcontractors, No guarantee of the thing
delivered itself... Water damage guarantee: no coverage for water entry by
the open windows...
These types of contracts are also subject to formal control by the administration and
are subject to the law penalizing abusive clauses.
B - Insured's membership: Normally, it is the insurer who proposes a type of contract to
his future assured, which is free or not to accept.
The insured consumer generally cannot negotiate all the stipulations of the
contract that generally falls into a predetermined model, varying according to the Companies.
But a negotiation is still possible, particularly regarding the
franchises, ceilings, premium rates or guarantee conditions.
It follows from the law that 'in case of doubt, the contract is interpreted against the one who stipulated.'
and in favor of the one who has contracted the obligation. It results in what interpretation of a
The insurance contract must be made in favor of the insured.
However, with regard to large companies, insurance policies are often
negotiated through Brokers, who sometimes establish the contracts themselves.
One can no longer speak of a 'membership contract'.
In any case, it is up to the insured to find out what type of contract meets the
better suited to his specific needs, and he may have an interest in seeking advice from
professionals who are well acquainted with the insurance market: intermediaries such as
general agents, brokers.
C - Obligation of advice of the insurer: Like any professional, the insurer is
however bound by a duty of caution and diligence when concluding the
contracts (the concept of a pre-contract specific to the sales contract), as well as an obligation
of advice.
The insurer must inquire about the client's specific needs and offer them coverage.
adapted. The problem occurs particularly during the activity declared by
the insured. Thus, the insurer must advise on a coverage that covers their liability in the event of
damages caused in connection with the various aspects of his professional activities.
A company marketing bathroom furniture will also have to see itself
propose a guarantee regarding the consequences of connection work
plumbing, which normally falls under another activity.

He must ensure, especially when concluding a car contract, that the driver's license of
driving from a foreigner is valid for driving a motor vehicle in
France.
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The fault committed by the insurer in its duty to inform and advise engages its responsibility.
contractual liability towards the insured, allowing the latter to obtain
compensation for the damage that this fault would cause him, particularly due to a defect
insurance.
The amount of damages and compensation to which the insured may be entitled may correspond to
amount of compensation from which the insurer's fault has deprived him.
VI- GOOD FAITH AGREEMENT
Good faith must precede and accompany the entire life of the contract. The parties must
cooperate in the implementation of the contract.
A - The insurer's good faith:
At the time of signing the contract.
The insurer is obliged to provide advice throughout the life of the contract, and
notably during the signing of the contract.
He must demonstrate loyalty by advising his client on appropriate guarantees, and in
informing him clearly about the clauses and conditions of the contract.
On the occasion of the settlement of the claim.
The concept of good faith is invoked to sanction the insurer who behaves in a...
unfair manner towards the insured, by refusing or delaying the payment of the claim
by :
Delay tactics,
The lack of reaction to the approach of the two-year statute of limitations,
The insurer must draw the attention of its insured to the necessity of taking out a
full coverage, while the exclusion of warranty contained in the policy
It concealed an undetectable trap for the insured.

In general, judges believe that the insurer's resistance to honoring its

engagements becomes abusive when the insurer maintains its refusal to settle even though it
holds all the elements according to which the loss is indeed covered by the contract.

B - The good faith of the insured:

The insured must answer in good faith the questions posed to him by the insurer.
from the declaration of risk and must declare the new circumstances of aggravation of
risks failing to do so, exposing himself to the nullity of the contract in case of proof of bad faith of
in part.

In the absence of bad faith, he is only exposed to the proportional reduction of the rate of
prime.

The insured must comply with the warranty conditions specified in the insurance policy.
(preventive measures, use of protective means...) failing which he exposes himself to
a non-guarantee.

3) The consequences of the intentional fault of the insured are legally uninsurable.

4) He must demonstrate good faith in the declaration of the claim (taking measures for
safeguards, preservation of the insurer's remedies, compliance with the declaration deadline of
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disaster, completion of the formalities required by the contract, establishment of a statement of

losses ...), otherwise he risks a forfeiture of warranty.

In the event of a fraudulent claim, the insured is not only deprived of the
guarantee, but may be prosecuted for the offense of insurance fraud.

The bad faith of the insured can lead to the nullity of the contract in case of insurance.
excessive, likely to obstruct the principle of compensation, namely:

fraudulent overinsurance,
cumulative fraudulent insurance

VII. A SUCCESSIVE CONTRACT

The insurance contract is a contract that is spread over time. The guarantee
is planned for a duration that can be more or less long depending on the guaranteed period.

CHAPTER III: THE EXECUTION OF THE INSURANCE CONTRACT.

Section 1: The conclusion of the insurance contract.

The insurance contract always has a certain duration during which

which the insurer guarantees the insured in the event of a claim. However, over time, the context of the
The need for insurance can change; that is why it is appropriate to complete the conclusion.
initial of the contract by that of its modification.

1) The initial conclusion of the insurance contract.

It involves identifying the parties involved, studying the formation of the contract, and examining its
taking effect and finally its proof.

a) The parties to the contract.

We have seen that the insurance contract is an agreement between an insurer and
an insured (subscriber). The insurer can only be an insurance company, the insured is
the party to the contract in whose name the policy is signed and who commits to the payment of
primarily. It is often the insured themselves who subscribe for their own account, but it is not
mandatory as shown by insurance for the account of others, that is to say for the benefit of a
tiers.
b) The formation of the contract

Consensual, the insurance contract is formed as soon as the parties agree on the subject.
of the guarantee and its price. But the moment when one can be sure of the agreement of wills is
the one for the insured's signature on the policy. This signature is preceded by two steps:
 17

the insurance proposal first of all which is the document by which the future insured
requests an insurance guarantee for the risks it declares. This is actually a
printed form containing a questionnaire that allows the insurer to collect all the
information that the potential insured can provide to him. These are statements that
will serve as the basis for the contract subscription. The insurance proposal does not constitute
that an offer to contract does not bind either the insurer or the insured.

Then comes a second step, which is the consent of the insurer who can refuse.
to guarantee a risk that does not fall within its activity or that seems too high to it. It can
also request additional clarifications, and only accept the contract subject to
certain limitations or exclusions. When he agrees to guarantee the risk that is presented to him.
proposed, he establishes the contract, called the policy that he signs, and has the insured sign it. These are
So these two signatures mark the formation of the insurance contract.

c) The effectiveness of the contract

In principle, the contract takes effect as soon as it is concluded. But three clauses specify
clearly the effective date:
- a clause takes effect at noon on the day the contract is concluded. This clause
avoid uncertainties about the time and minute of signing the contract;
- a clause effective from such date: the guarantee only starts on the day the insured
take possession of an asset or terminate another insurance contract;
- a clause taking effect the day after noon following the payment of the first premium.
The insurer's guarantee obligation is linked to the payment of the premium.
by the insured.
d) The proof of the contract

It is the police that notes the coverage which establishes the mutual commitment of
the insurer and the insured.
The insurance policy is the document, signed by the parties, that acknowledges the existence and
the terms of the insurance contract, which therefore constitutes the proof element.
The cover note also known as the guarantee note or guarantee letter of
coverage is the document confirming the existence of a provisional warranty, before
the establishment of the insurance policy. This document allows the insured to be
immediately guaranteed without waiting for the final drafting of the policy.

2. The modification of the insurance contract.

a) The conditions for modification.
There must first be an active insurance contract. If the contract has
definitively ended, it cannot be modified. On the other hand, a contract that is only suspended
can regain its effectiveness for the future. The second condition is that a proposal
written should be presented to the insurer. Finally, if he does not respond within 10 days,
 18

Count from the day after the first presentation of the letter, it means that he accepted.
the modification proposed by the insured.

b) The content of the modification

The contract can be extended, it can be reinstated if it was suspended except
in the case of non-payment of the premium.

c) The proof of the modification

Normally, the proposed modification takes effect after 10 days.
But the normal mode of proof of the modification is the endorsement that is part of the policy.
which remains applicable on all points that have not been modified.

d) The changes made by the insurer

It happens that to replace an old typeface with a more modern one
Recently, insurance companies send a new contract to the insured for signature.
which cancels and replaces the previous one.

Section 2: Duration, tacit renewal and termination of the insurance contract.

The duration of the contract.
It is set by the police and is subject to the free agreement of the parties. However, the
insurance contracts are generally made for a fixed term, 1 year, 5 years and
Moreover, it is mandatory that the duration of the contract be mentioned in very prominent characters.
so that the insured is informed of the time during which he will have to fulfill his obligation to
payment of bonuses.
2) The tacit renewal.
It allows to extend the duration of the warranty. The conditions of the tacit
renewal is the existence of a fixed-term contract, the expiration of the contract
the expiration of the specified duration, and the insertion in the policy of an express clause providing for
that, by tacit agreement of the parties, there will be renewal of the contract. Furthermore, the effects
from the tacit renewal are as follows: - the contract is renewed for one year and can
thus indefinitely extended year after year by the operation of the clause;
- a new contract replaces the old one;
- the tacit renewal being optional, one of the parties can renounce it by
respecting the contractual notice period.
3) The termination of the insurance contract.
Each party has the option to terminate the contract with a notice period of 3 months.
before the deadline. This notice period is particularly applicable to annual contracts such as
the fire, theft, water damage, civil liability, etc. There is no form
particular to present the termination, a letter written by the insurer or by the insured
is more than enough. And in case of late termination for a specified deadline, the letter of
Cancellation has no value for the next deadline and must be renewed. When one
the parties have exercised the right of termination granted to them, respecting the deadline of
notice applicable, the contract ends on the anniversary date of its coming into effect, and the
 19

the obligations of the parties no longer exist, in particular, the obligation to pay the premium
the insured and the insurer's obligation to provide coverage.
It should also be noted that some significant changes in the conditions
The existence of the insured may lead to the termination of the insurance contract. This involves:
- of change of residence,
- of change in marital status;
- of career change;
- of definitive cessation of professional activity;
- the non-payment of premiums by the insured.
That being said, for the termination of the contract to be effective, it is necessary that the
The aforementioned events directly influence the object of the contract, meaning that the risk
guarantee in the insured's previous situation is not reflected in his current situation
New. For example, a change of profession will eventually open a faculty.
of termination for professional liability insurance contracts or insurance
bodily accidents. Conversely, a simple change of residence has no effect on the
professional risks if the previous employment remains.
CHAPTER IV: THE ELEMENTS OF THE INSURANCE CONTRACT.

The definition of insurance (Cf. Above) allows us to identify the three elements that
found in every insurance contract:
- a risk to guarantee
- a premium is the price of safety;
- an insurance benefit in case of a disaster.

The risk.
Of the three elements of insurance - risk, premium, loss - risk is the most
fundamental and determines the other two because the calculation of the bonus, like the realization of the
Claims depend on the insured risk. The word "risk" can be interpreted in several ways.
ways:
The risk is primarily the possibility of a random event, such as a fire,
death, civil liability. This event is therefore the cause of the loss.
The risk can also be the subject of the guarantee, that is to say the element of the estate.
the activity or the person threatened by the risk-event, to which the
guarantee. For example, the risk is the residence or the factory insured against fire.
- By extension, the risk is the damage itself caused by the disaster.
The risk being the fundamental element of the insurance contract, it is the very subject of
contract, that is why it must be lawful and legitimate.

The risk is real when its realization is possible. Of course, this realization
presents a character of uncertainty (random). On the other hand, if the risk does not exist, the
insurance contract becomes null due to lack of object. For example, one could not insure an item
already destroyed.
 20

The risk must be lawful, and the object of the contract cannot be contrary to public order (e.g.
smuggling operations) or to public morals.
Once the risk proves to be real and lawful, thus well characterized, it is up to
the insured to declare it in order to inform the insurer of the subject of the guarantee
requested: which heritage elements or which activity should be insured against which
risks? Then, the subject of the contract is delineated and specified by the exclusions of risks.
which do not take into account certain events or certain damages.
1) The declaration of risks.
The declaration of risks is one of the fundamental obligations of the insured because
it allows the insurer to form their opinion on the risk to be covered, to classify it in the
categories of risks listed by its statistics and thus determine the price of this
guarantee.

Since the insurance contract is to be performed successively, the risks it

coverage can change during the contract and may worsen. That is why the
the legislator has imposed on the insured not only the declaration of risks at the
conclusion of the contract, but also the statement of risk aggravations.

Failure to comply with these obligations results in very serious penalties. Indeed,
the insured is obliged to 'declare exactly at the conclusion of the contract, all the
known circumstances about him that are likely to make the insurer assess the risks
that he takes upon himself.

When the law requires the insured to declare only the known circumstances of
him, this implies that if a circumstance is unknown to the insured, he does not commit
no fault in not declaring it, it is normally guaranteed even if this circumstance
is likely to completely change the insurer's opinion on the risk. The circumstances
Known to the insured and that must be declared may be of two kinds:
The objective circumstances that allow the insurer to measure
the probability and intensity of the risk and to price it accordingly;
The subjective circumstances are those that concern the person himself.
the insured: is he already insured for the same risk? Has he already suffered losses? Has he ...
Has he already had his driving license revoked? etc.

Once concluded, the contract must in principle be executed in accordance with the will.
of the parties. But it may happen that the circumstances that led to the conclusion of the
if the conditions worsen, it will then be necessary to adapt the contract, and the insured is obliged to "declare to
the insurer the specific circumstances that have the consequences of exacerbating the risks.
As soon as the declaration of increased risks is made, the insured is in a situation
regular and fully guaranteed if an incident occurs. It should be noted that if any
irregularities are committed in the declaration of risks and that of aggravations
risks, before sanctioning, it is necessary to verify whether the insured is acting in bad faith or if he is
good faith.
 21

a) The insured is acting in bad faith.

In case of intentional false declaration by the insured, the insurance contract is

null, and the premiums paid remain acquired by the insurer who has the right to payment of
all the sums due as damages. The nullity of the contract implies the
retroactive disappearance of the insurer's guarantee towards the insured. This results in
the insurer may request the insured to reimburse all the indemnities paid
to settle previous claims.
b) The insured is acting in good faith.

If we forget or make an inaccurate statement, without any bad faith, this

does not result in the nullity of the insurance contract. Two situations may arise.

The irregularity is discovered before a claim; the insurer then has two options:
- the maintenance of the insurance contract subject to an increase in premium that
the insured can accept or refuse. In case of acceptance, the contract is
modified as of the new agreement. In case of refusal, the insurer may terminate the contract
and request a termination indemnity;
- the termination of the contract which can be requested directly by the insurer as soon as the
discovery of the inaccuracy. It notifies the insured in advance. The divisibility of the
applies in this case and the insurer must refund the insured in good faith the
prorated bonuses corresponding to the non-guaranteed period.
The irregularity is discovered after the loss: "the proportional premium rule"
applies. In most cases, the irregularity is discovered by the insurer during
of a disaster. The penalty is then the reduction of the compensation in proportion to the rate of
premium paid compared to the premium rate that should have been paid if the risks had been
completely and exactly declared.

This is the proportional rule of premium rate whose formula is:

Proportional reduction of premium

(Sanction of risk underpricing)
Compensation = damage x premium rate paid (1)
premium rate due

This sanction called 'the proportional reduction of the bonus' therefore reinstates
the balance of the insurance operation, it is applicable if the circumstances are inaccurately
declared had no influence on the occurrence of the loss, as it is the technical balance
the insurance that has been distorted and the proportional reduction of the premium restores it.
Finally, termination is also one of the penalties in case of discovery of inaccuracy.
the occasion of a disaster.
c) Unpenalized irregular declarations
 22

It can happen that an irregular declaration does not result in any sanction.
either from the insured's act or from the insurer's act.
*) Due to the insured: he can first mention a case of force majeure that prevented him from
fulfill its obligation. It should be noted that if the insured is unaware of the facts to declare, he is not
not at fault and does not incur any penalty. The retraction, that is to say the declaration
spontaneous from the disaster restores the good faith of the insured.

*) Due to the insurer: three exceptions can be invoked by the insured.

The insurer's knowledge of omitted or inaccurately declared facts can be
interpreted as a waiver of the right to request sanctions. In any case, the
the proof of the knowledge of the facts by the insurer or their qualified representative is the responsibility of
the insured.
In a more general way, the insurer may expressly or tacitly waive
apply the various sanctions.

*) He can expressly and in advance waive by inserting a "clause" in the policy.

of incontestability.

There is tacit waiver when, through clear behavior, the insurer has expressed their
intention to execute the contract: collection of premiums at the initial rate, declaration of
handling of the claim. Therefore, the insurer is required to exercise great caution.
as soon as he becomes aware of the irregularities.
The statute of limitations can finally be raised by the insured, that is to say, after a certain period of time, if
the insurer does not mention the omissions or inaccuracies made by the insured, the latter does not
may be sanctioned for these facts. The starting point of the deadline is the day when the insurer has
I am aware of the reluctance, false or inaccurate omission.

The framework of the contract as defined, the limitations on the guarantee are contained in the
"exclusions of risks", which exclude a number from insurance.
events or damages for which there is thus "no insurance".

2. Risk exclusions.

Some risks cannot be covered by insurance.

a) The risks of war, riots, and popular movements.

Insurance can only cover risks that are sufficiently diversified so that
may play the compensation through the law of large numbers. War events lead to
massive destruction of material goods and loss of human lives that
the insurance could not cover.

b) Intentional or fraudulent fault.

This occurs when the insured causes the guaranteed damage.

knowingly and willingly the damage, while being fully aware of the
consequences of his act (therefore there is voluntary damage).
 23

Indeed, introducing insurance coverage for intentional wrongdoing in

the insurance operation would distort its premises; the technique of insurance requires that the
the insured risk is a random event, the occurrence of which does not depend on will
of the insured nor of the beneficiary of the contract.

Two examples can be reported:

- Conscious suicide: suicide is the act of intentionally causing one's own death.
This act, in the mind of the one who commits it, must surely lead to death;
- the murder of the insured by the beneficiary.

Section 2: The bonus.

The premium price of insurance technically represents the value of the risk.
guarantee, its calculation is based on an essentially technical evaluation. The term 'premium'
is the generic term referring to the amount paid to an insurance company for the
guarantee of a risk.

The calculation of the bonus.

The setting of the bonus is freely determined by the parties.

1.1. The pure technical premium.

The amount of the pure premium technically corresponds to the probable cost of
guaranteed risk, it is determined by two parameters, the premium rate and the amount of
insured capital.

Prime pure = premium rate x insured capital (2)

For the premium to be fair, the applicable premium rate to the contract must be
correctly calculated, and that the insured capital which constitutes the premium base
corresponding to the value of the asset. The insurer has two 'proportional rules'
that the application allows him to restore the balance of the contract if it is broken, it is of a
the "proportional premium rule" which could be called the "proportional rule"
of capital" and on the other hand, "the proportional assessment rule for premiums."

The pricing and the proportional rule.

a) Pricing.
Technically, risks are assessed by statistical criteria of
probabilities (frequencies) and intensities (average cost) that allow for its establishment
pricing.

a.1. The frequencies of incidents.

 24

Probability calculation allows, by reference to the statistical census of

past events, grouped into homogeneous risks of the same nature, to estimate the chances
of claims processing.
For example, if in one year, there are 15 fires per 10,000 for such type of housing
houses, the probability, which is the ratio of the number of favorable cases to the arrival of a
event with a total number of possible cases, translates to the fraction 15/10,000.
Statistically, this report reflects the 'frequency' of claims.

a.2. The average cost of claims.

The probability must be weighted by the consideration of the average intensity of

losses. Indeed, the realization of risk is not necessarily total, and on 15
burned houses, 4 can be totally, 5 halfway and 6 to a small extent, of
Fortunately, on average, we can estimate, for example, the claims to be 60% of the total risk. This
intensity allows us to calculate 'the average cost' of claims for a unit of value
data. Thus, for an insured value of 1,000 Fc, the average cost per claim will be
60/100 x 1,000 = 600 Fc.

a.3. The premium rate.

It can be established on the two statistical parameters of frequency and cost.

of disasters:
Premium rate = frequency x average cost of claims (3)

Premium rate = 15/10,000 x 600 = 0.9 for 1,000 Fc

9/10 = 0.9 for 1,000 Fc

b) The proportional premium rule.

It is by examining the insurance proposal that the insurer assesses the risk and can it
Classify in the pre-established rates. If due to an error in the declaration of risks*
the insurer underestimated the risk, the balance of the contract cannot be restored on the day of
unfortunate that only by a reduction of the compensation, proportional to the required ratio between the
premium rate paid and the one that should have been if the risk had been correctly declared. See
formula (1), above.
B. The basis of the bonus and the proportionality of capital.

The value of insured assets is not always identical in each case.

in particular, the premium must be calculated based on the value of the capital that the insured
understand guarantee. In the previous example, the pure premium for fire insurance of a
A house costing 100,000 Fc, taxed at a rate of 0.9 for 1,000, will therefore be 90 Fc per year.

Pp = tx prime x insured capital

= 0.9/1,000 x 100,000
90 Fc / year
 25

a) Determination of the insurance value.

a1. Insured goods at determined value.

The movable or immovable property of individuals, fixed assets or the
Companies' fixed assets have a determined value.
The insurance value is:
Hello, 'use value' for goods used by the owner. The use value is
the replacement value minus depreciation for obsolescence;
Hello, 'replacement value' includes a depreciation guarantee that allows the insured to
benefit from a more comprehensive guarantee.

The determination of the insurance value can be carried out in two ways when
contract subscription:
hello 'declared value' that is to say the one subscribed by the insured without any control
reality. It does not constitute proof of the value of the asset for the day of
mischievous, but only the amount of the premium and the limit of commitment of
the insurer;
hello 'approved value'. That established in a contradictory manner between the insurer and
the insured at the time of the contract subscription. The agreed value, established by
expertise constitutes evidence of the value of the property on the day of the loss.

Stock insurance: risk insurances and variable premiums.

In stock insurance, it is provided, from the conclusion of the contract, for

variations in the value of risk during its execution. This is called 'floating policy'
"open" or "the subscription policy" the insurance policy covering objects that
may be constantly modified during the contract, the quantity of goods, of
goods or objects whose value is insured must be declared periodically so that
the insurer has an idea about the variations in the value of the risk.

b) The proportional capital rule = proportional base rule of

prime.

When on the day of the loss, it appears that the declared value of the insured funds
is lower than their actual insurable value, it is said that there is underinsurance, and the compensation
is obtained by the proportional rule of capital, which results in a reduction of
the compensation in the event of a loss in proportion to the ratio between the declared value and the
insurable value.

Proportional reduction of capital

(consequence of underinsurance)

Compensation = Damage x Declared Value (4)

Insurable value
 26

Property insurance is a compensation contract: the indemnity due

by the insurer to the insured cannot exceed the amount of the value of the insured item at
moment of the disaster. Indeed, the activation of the insurance contract cannot in any case
to be an opportunity for enrichment for the insured or their victim for whom the compensation must be
strictly proportional to the damage suffered.
Thus, overvaluing capital leads to paying an excess premium while
In any case, the compensation will always be limited to the damage suffered.

c) Other parameters of the premium: duration of the insurance and interest rates.

In the calculation of the pure premium, two other elements must be taken into account.
account :
- the duration of the insurance which is generally one year. If the risk appears constant
From one year to the next, the insured will pay annually the premium corresponding to the cost
of a year's insurance. For short periods of less than a year, the
half is a fraction of the annual premium;
- the interest rate: the insurer can deduct an interest from the premiums it collects at
the advance and that he places.

1.2. The loads of the premium.

The loading is the amount that must be added to the pure premium of an insurance.
to cover a number of expenses inherent to the management of the insurance company
and to the particular management of the subscribed contract.
We meet:
- the commercial charge = it refers to the overhead costs necessary for
functioning of the company such as rents, salaries, expertise, taxes, etc.
- the tax burden = it concerns the different taxes according to the insurance branch.
2. The payment of the premium.

The insured is obliged to pay the premium at the agreed rate and date, otherwise
the insurer cannot guarantee the risk. In principle, the premium is payable at the beginning of the
guarantee period in order to be able to settle the claims that occur during the year.
But if for some reason the contract is terminated before the end of the warranty year,
the insurer no longer owes its guarantee and correspondingly, the portion received for this period
must be returned to the insured. This is the principle of the indivisibility of the premium.

In the event of non-payment of premiums at maturity, the insurer must comply with a
very specific procedure before terminating the contract; first, the formal notice,
then the suspension of the warranty and finally the termination.

Indeed, the insurer must first send the insured a letter "of notice".
"residence" which must remind of the amount of the premium and the due date, and the fact that
the insured risks a future suspension of coverage. In the meantime, the coverage is
maintained for a period of 30 days and if a loss occurs, the insurer must settle it. At
 27

At the beginning of these 30 days, if the insured has still not paid, the guarantee will be suspended. And
As soon as he pays, the guarantee is reinstated.

Finally, there is termination of the contract by the insurer only 10 days after the deadline.
the 30 days which opens the suspension of the guarantee, therefore after the formal notice.

Summary table

Premium deadlines + 10 days = Possible formal notice

Formal notice + 30 days = Suspension of the warranty
Suspension of the warranty + 10 days = Termination
- Or Reminder of Notice Termination + 30 days + 10 days = Suspension of the guarantee +
Note: These deadlines are mandatory under French law and cannot be shortened.
police.

Section 3: The disaster.

There is a loss when the risk provided for in a contract in execution materializes and
triggers the insurer's obligation to guarantee. The occurrence of a loss is an element
normal in the insurance process, and the contract continues until the expected term.
The occurrence of the loss triggers obligations for both the insured and the insurer.

1. The obligations of the insured in case of a loss and the theory of forfeiture.

The insured is legally bound by only one obligation: to report the claim to
the insurer within a certain timeframe.

1.1. The obligation to report the claim.

The insured is obliged to 'notify the insurer as soon as they become aware of it and at
later within 8 days, of any loss liable to activate the insurer's guarantee.
This 8-day period cannot be shortened; however, it can be extended by a
mutual agreement between the contracting parties. The deadline begins to run the day after
the day on which the insured became aware of the loss.

1.2. The theory of forfeiture.

The forfeiture is defined as the loss of a right. In the matter of insurance, the
Forfeiture is the loss of the right to the insurer's guarantee against an insured who has not.
has not fulfilled its obligations in the event of a disaster. The forfeiture, which is a sanction, applies
not only in the event of late declaration of the claim but also for non-performance of
all other obligations imposed by the insurer.

Its result is to eliminate any compensation for the insured for the damage to
regarding which the fault was committed, without the contract itself being affected. We
does not make a distinction between the insured in good faith and the insured in bad faith. In all
 28

In cases, the forfeiture assumes that there has been a loss, therefore the occurrence of the risk provided for.
contract. It must be clear, precise and mentioned in very prominent characters in the
police.

2. The insurer's obligations in the event of a claim.

The fundamental obligation of the insurer is the settlement of the claim. Nevertheless,
he can manage the defense of his insured in the lawsuit brought against him by the victim.
When at the time of the conclusion of the contract, the possibility of the realization of the risk was
random, the insurer's obligation was then 'conditional', it becomes 'certain'
by the occurrence of the loss. The creditor of the benefit is often the insured-subscriber
of the contract, either the insured on behalf of whom the contract has been taken out, or the beneficiary.
designated in personal insurance in case of death. It is up to the creditor, insured or
beneficiary, to provide evidence of the loss (declaration) and proof of the obligation to
insurance guarantee (the policy is the essential instrument). As for the benefit of
the insurer is often an amount of money.
 29

CHAPTER V: INSURANCE COMPANIES.

The insurance activity includes a technical aspect of organization and management.

that can only be understood through insurance companies. In all countries
developed, we have strived to establish a cohesive legislation that sets up a true
status of insurance companies.

Section 1: General notions on professional organization of

insurance.

1) The organization of an insurance company.

If the internal organization of an insurance company varies with its size and the
practiced branches, we can nonetheless provide a typical organizational chart of a company where under
the authority of the CEO, assisted by a Secretary General, four departments implement the
four main functions: administrative, commercial, financial, and technical.

1.1. The administrative management.

She has under her authority the general services of the company, namely:
the personnel services
the design and organization offices,
typewriting services, dispatch of policies, receipts,
bills to agents and couriers,
the accounting department.

1.2. The technical direction.

She is responsible for the production services and the settlement of claims.

1.3. The commercial direction.

It usually includes:

- a financial service generally responsible for the portfolio of securities of the

company
- a real estate service that is responsible for managing the real estate domain.

2) Insurance intermediaries.

The insurance company offers a product, security, that it must sell.

to place insurance contracts with the public, there is a network of intermediaries
often called "producers" which are of two kinds, general agents and
courtiers.
 30

Insurance intermediaries are therefore individuals responsible for presenting to

public operations carried out by insurance companies, they are paid by
"commissions" which are percentages on the insurance premiums paid by the
companies in return for the provision of new contracts and possibly of
The management activity carried out. These intermediaries act under the control of the companies.
mandants.

2.1. General insurance agents.

It is through their network of agencies that insurance companies are in contact.

with the public: the general agent is a natural person who is responsible for placing
insurance operations and potentially manage them for the company of which he is
agent. The general agent practices a freelance profession, he can recruit assistants.
agents who are their own representatives.
Until recently, general insurance agents did not exist in the Democratic Republic of the Congo.
This structure was born on June 17, 1993, when SONAS proceeded with the opening.
of an agency in Gombe that had the authority to collect bonuses and settle
directly the claims.

a) The agency contract.

The agency contract determines the relationships that arise between the agent and the
company. The agent is bound by two exclusivity rules to the insurance company they represent.
a production exclusivity and a territorial exclusivity.
*) The exclusivity of production.
The general agent is required to reserve the exclusivity of his production to the company that he
represents and must therefore not accept, either personally or through an intermediary,
representation of other companies in the same categories of insurance. This exclusivity
production is however mitigated by the following provisions:
- An agent can represent several companies engaged in different sectors,
- an agent can have another insurer underwrite risks that his company
does not practice, or that she has refused or terminated, or that she has only accepted
for part (he can then show to another company only part of the risk
not covered).

Territorial exclusivity.

In exchange for production exclusivity, the agent benefits from exclusivity.

territorial subscription and management relating to risks located in its
constituencies. The principle of 'territoriality of agencies' does not allow the company to
create a new agency called 'Agency B' in the district, only by agreement of
parties.

The exclusivity of production and territoriality imposed on the general agent implies that
counterpart, that he benefits from the same advantages as those granted to the
most favored producer. Indeed, the companies should not accept on their part,
 31

the same risk, of dealing with another producer under different conditions than those
which were assigned to their general agent.

As an agent of his company, the general agent sometimes appears as the

agent of the insured, his client, whom he advises. If he exceeds his powers, the company
the principal is indebted to the deceived insureds. Of course, the company can then
to turn against his agent and engage their liability if they have poorly fulfilled their duties
mandate.

b) The agent's activity and their remuneration.

The contract that binds the agent to the company stipulates the content and the limits of his
activity that may be restricted to the sole transmission of proposals to the company
of insured persons, or extended to the signing of policies, the collection of premiums and the
settlement of current claims.
According to the extent of the mandate conferred upon him, the agent receives a commission.
of contributions and a management fee.
The commission of contributions remunerates its work of "production", that is to say the contribution of
new contracts to the company. As for the management commission, it compensates the agent.
management work that is determined in the appointment treaty. Finally, the rate of
the commissions are set by agreement between the parties, subject to certain established limits
by the supervising ministry.

The functions of the general agent cease upon revocation or termination

of an agency or the creation of an agency B in the constituency, the resignation, the cessation
voluntary functions, the death.

2.2. Insurance brokers.

The broker is an independent trader registered in the trade register and

subject to all the obligations of traders, specialized in a branch of insurance,
he has the ability to present the policyholders' guarantee requests to the insurance company
of his choice. It is also acknowledged that the broker is the agent of the insured.

a) The broker, agent of the insured.

The insurance broker, often referred to as "insurance advisor", carries out acts
by placing his clients' risks with the companies that seem best to him
willing to guarantee them. Owner of its portfolio, can transfer it to a successor who
choose independently. As an agent for its insured clients, it engages its
responsibility when he commits a fault in the performance of his mandate.

b) The broker and his relations with insurance companies.

 32

As the insured's representative, the broker can also be the insurer's representative.
for which he collects the first premiums or issues notes of
coverage.
In the Democratic Republic of Congo, the broker must, before carrying out their duties, be
mandatory approved by SONAS, which holds a monopoly on the insurance market.
The broker can be a natural person or a legal entity under private law.
The authorization is granted for an indefinite period but can be withdrawn at any time.
by SONAS under certain conditions, for example when the broker fails in their duties
professional duties.

In accordance with Article 5 of the broker's statute, SONAS retains the right to handle
directly with the insured contrary to practices in other countries where it
It is prohibited for the insurer to contact clients directly. This exception
intervenes with the concern of SONAS to establish its monopoly. In return for the service
Upon completion, the broker receives a commission that is set either as a flat fee by SONAS,
either as a percentage of the net premium.

The mandate of the insurance broker may come to an end for the following reasons: the
death of the broker, his bankruptcy, the non-payment of the guarantee, voluntary cessation
activities, the withdrawal of the license, the broker's conviction for certain
infractions.
3. The relationships between insurance companies: co-insurance and reinsurance.
The relationships between insurance companies are multiple and take place on
various plans. But from a strictly legal standpoint, it is these relationships arising from contracts that...
co-insurances and reinsurance contracts that need to be highlighted.

3.1. Co-insurance.

Co-insurance is the operation by which several insurance companies

guarantee, through a single contract, the same significant risk, each of them
taking on a portion of the capital based on its financial capacity. The
co-assurance allows the placement of large risks on the international market
insurance, it differs from multiple insurances and, to cover the risk 100%, the
capital is divided, each co-insurer agrees to cover the number of shares that
corresponds to its part.
In practice, co-insurance is carried out through an insurance contract.
unique, called 'collective insurance', often 'with single receipt' to which one commits
partially each co-insurer.

The company that acts on behalf of other companies is called a 'holding company'.
insurance called 'co-insurers', discusses the conditions of the contract, writes the policy, and
is the normal interlocutor of co-insurance with the insured. The placement of
Risk by the insured can be carried out at subscription.
 33

Regarding the payment of premiums, it is the sponsoring company that receives the
global premium and the distribution thereafter among all co-insurers. If the premium is not paid,
it is still the aperitif company that, on behalf of all co-insurers, initiates the
suspension procedure of the warranty.

As for the settlement of claims, the claim is made to the company.

female cashier who independently conducts payment operations for a fee
flat rate of co-insurers. If the loss is too significant (in financial terms), a "
"settlement committee" is formed among the co-insurers, and when the amount of
the indemnity is stopped, the opening company requests the co-insurers to pay their
quote-part.

If the insured wishes to terminate the insurance policy globally with respect to all the
co-insurers, he must send his cancellation letter to the initiating company while respecting the
legal notice periods and deadlines, clearly specifying that it is the entire contract
that it terminates. If it is the co-insurers who want to terminate the contract, for example after a
serious loss, the termination is notified to the insured by the underwriting company in the name of all.
partial termination may be desired. And in the case where it comes from the insured, their
The insurance intermediary must first find new co-insurers so that the
the guarantee must be fully maintained, and send the termination letter only to
target co-insurers. If one or more co-insurers wish to terminate their participation
In co-insurance, each of them notifies the insured of the cancellation for their own part.

3.2. Reinsurance.

Reinsurance is the operation by which an insurance company...

to ensure in turn for all or part of the risks that it remains solely responsible for.
of the insured. In fact, it is a contract by which an insurer, referred to as the 'ceding party', reinsures
for all or some of the risks it has assumed with a specialized insurer,
called 'reinsurer'.
Reinsurance allows for the maximum dilution of risks by leaving each insurer the
solely responsible for what he must keep for his own account, in order to respect his "
full of assurance. Reinsurance can be optional and only cover a specific matter or
a business group, without the parties being permanently linked.

Without reinsurance, there can be no coverage for large risks. It differs from the
co-insurance, insofar as the insured has no legal relationship with the reinsurer that he does not
does not know. But it usually results from a business share between the company
cedent and the reinsurer, realized by the conclusion of a Reinsurance Treaty.

This one does not focus on an isolated risk, but on a volume of business. That is why, it
a call to safeguard the insurer against the risk presented by the handling of claims
too important compared to its financial capabilities. The transferring company retains its
charge a portion of damage called 'retention amount'.

The reinsurer's guarantee applies per risk and per claim.

 34

The reinsurance market is technically very complex, it involves

important engagements and it has an international character. Reinsurance is not
subject to the rules of the Insurance Code.
In any case, it is important to understand that on the occasion of many claims, insurers
must not only be accountable to their insured, but also to their
co-insurers or their reinsurers. The latter, often foreign, have a hard time understanding.
the evolution of case law in specific areas of liability risk
civil (medical, industrial...) and require insurers to "get rid of" certain risks,
making them uninsurable.

Section 2: The legal forms of insurance companies.

The insurance technique requires an organization of the company capable of

implement a broad risk neutrality based on the law of large numbers: the
Small and medium enterprises cannot provide sufficient guarantees.

Only the following legal forms can organize themselves into an insurance company:

Commercial companies such as a public limited company that can be a private company
or a nationalized company. Such companies are required to have a provision
sufficient financial means to enable them to meet the payments they will have to make
to carry out. Nevertheless, for more security, insurance companies must possess
a free heritage to face all the hazards of activity, whether internal or external
related to the external economic difficulties faced by businesses. It is the role of the Margin of
solvency. Every insurance company must have one, sufficient in relation to
the importance of its activity. In the Democratic Republic of Congo, the only insurance company that
exists is a public company that has adopted the form of a joint-stock company
limited liability (S.R.L. = S.A. in France).
Mutual insurance companies or civil insurance companies. These companies
have a non-commercial object, they are based on mutuality of members and
constituted to cover the risks brought by their members. In return for payment
of a fixed or variable contribution, they guarantee to the latter the full payment of
commitments they enter into.

Section 3: State control over insurance companies.

The insurance activity interests the State very much, which is why in countries
like France, to complement the attributions of the Ministry of Economy, a
The insurance control commission and a national insurance council have been established.
in place. The entire system intervenes at all times in the life of the company
of insurance and operates in the form of controls, administrative control on one hand,
financial control of the other. At the creation of the company, there is first the procedure of
the approval of the new company, then it is the continuous monitoring of its solvency during
his activity, and finally, at the end of his life, it is the control of the transfer of his portfolio or
the control of its liquidation which occurs.
 35

In our remarks, we will not address this last stage.

Administrative control.

The approval is the act by which the supervisory minister of insurance (Finance)
allows an insurance company to conduct its business in the national territory,
after exercising its control over the guarantees presented by the company. None
insurance company, whatever its legal form, cannot commence its
exploitation without having previously obtained administrative approval. The latter may be
to be withdrawn at any time thereafter. The Approval is requested by the company for
operate in one or more branches of insurance but of course this one sees its
activity limited to the branches for which the approval is granted. This is the rule of the
specialty of the approval.
It is important to note an important exception to the administrative control of the State over the
insurance companies: companies whose sole purpose is reinsurance do not
are not subject to state control. This exception is justified by reasons
techniques because reinsurance is an essentially international activity, and could not
to be hindered by excessive controls overlapping from State to State.

2. Financial control.

In order to constantly maintain the solvency of the company in the face of its
creditors, particularly in relation to its privileged creditors who are the insured, the commission
the insurance control closely monitors technical provisions. In addition,
it requires the establishment of a solvency margin and a guarantee reserve that
must allow the company to remain at a sufficient level to avoid jeopardy
the rights of the insured.

When it seems that the interests of the policyholders are threatened, the commission may
warn the company or issue an injunction to take measures allowing
his financial recovery.

Note: Technical provisions represent on the balance sheet of insurance companies the
debts of the company towards its creditors, particularly towards the insured and
beneficiaries of insurance contracts.

The main provisions in property insurance are the provisions

mathematics of annuities, the capitalisation reserve, the provisions for claims remaining to
to pay the provisions for various risks. In life insurance, the technical provisions are the
mathematical provisions, the provision for participation in surpluses, the provision of
capitalization.
Other regulated commitments include preferential debts, the provision of
provisions, a reserve for loan amortization, security deposits
agents, insured parties, and third parties.
 36

It should be noted that for the Democratic Republic of the Congo, the approval is currently irrelevant.
current given that there is only one insurance company and that it is the
property of the Congolese state. If there are controls, they are those provided for by the framework law.
from 1978 on public enterprises.

Section 4: The Congolese insurance market.

- Birth of the National Insurance Company (SONAS).

These are the ordinance-laws No. 66/622 and 66/622 bis of November 23, 1966 that
the SONAS was created. Currently, the SONAS is governed at the level of its organizational structure
and financial, by Decree-Law No. 78/194 of May 5, 1978 and by Law No. 78/02 of June
January 1978 on Congolese public enterprises. SONAS is a company
public with technical and commercial characteristics endowed with legal personality.

- Social purpose of SONAS and guarantees offered.

Article 2 of Ordinance-Law No. 78/194 of May 5, 1978 defines the mission assigned to the
SONAS:
- all insurance, co-insurance and reinsurance operations with companies
foreigners established abroad;
- all operations related to real estate transactions including the purchase,
location or the sale of real estate to individuals and whose management has been
confided;
- the special service for the technical control of motor vehicles.

It can also perform all operations directly related to or

indirectly related to its corporate purpose. SONAS covers two major categories of insurance.
including several branches:
- life insurance
- the insurance of things with 4 main branches:
automotive industry or transport sector
Fire branch
civil liability and various risks.

- Reasons for the state's monopoly in the insurance sector.

The exclusive right that the Congolese State has granted itself in the exploitation of the market
the insurance had a dual foundation: it was first the concern to reorganize the
insurance sector and then that of protecting a nascent national industry.

Concern for the reorganization of the insurance sector.

Before the creation of SONAS, the insurance sector was extraverted and
feudalized to the economy of developed countries (Cf. the Charles Lejeune Company). This
dependency caused a capital flight to the detriment of the Congolese state. It is necessary to
 37

also remember that the years 1966-1967 which saw the birth of SONAS are those during
from which the Congolese state was reorganizing its economy. So these are all the elements that
has pushed the State to intervene in this economic sector in order to regain power over
decision in the hands of nationals. But given the almost non-existence of initiative
national private, the public authorities had to entrust the exploitation monopoly of
guarantees to a public company, SONAS.

Concern for the protection of a nascent national industry.

Through the monopoly granted to it, the public authorities wanted to regulate a
young national insurance industry. And some companies that existed before the
SONAS was approved as intermediaries. However, the monopoly of SONAS
initially had a temporary nature as it was granted for a period not exceeding 5
After this period, the insurance industry was to be subjected to competition for the benefit
essentially nationals. We note that to this day this monopoly of the
SONAS continues and has even strengthened.

- Administrative organization of SONAS.

The structures of SONAS are those established for all companies.

published by law n° 78/08 of January 6, 1978, namely, the Board of Directors,
Management Committee, the College of Statutory Auditors. Outside of Management
Generally, SONAS is organized around the following departments:

- the technical departments that handle production, namely pricing,

the preparation of insurance documents, the examination of insurance proposals;
- the functional departments that are responsible for issues related to activities
general administration, organization, financial management involved in
the entire society;
- the directions of the provinces (regions): the organization of services of SONAS has some
ramifications within the country where provincial directions are established
(regional).

- The control of the activity of SONAS by the Congolese state.

The control of a company's activity constitutes a handicap compared to

the autonomy she could enjoy. But this control is imposed for the respect of legality
and the public interest, which legitimizes the administrative and financial oversight of which the
SONAS is the subject of the state.

Indeed, Article 22 of the SONAS statutes specifies that the controls to which
this public company is subject to preventive measures as applicable. This control is exercised over
people like on the acts, at all levels and at all stages. Article 23
determine the authorities under which SONAS is placed:
The Ministry of Finance and Budget for the following areas: the conclusion of
market for works and supplies, the organizational framework, staff status, the
 38

salary scale, organization of services, annual reports,

the establishment of agencies and offices in the provinces;

The Presidency of the Republic (in place of the former Ministry of the Portfolio)
for the following areas: real estate acquisitions and disposals, borrowing and
loans, acquisitions and assignments of financial interests, the accounting plan
in particular, the budget or the state of revenue forecasts, the year-end account, the
report.

- List of new products from SO NAS

Auto insurance at KMVIP

2 BICYCLE RIDER INSURANCE
3 COMMERCIAL CREDIT INSURANCE
4 LEGAL PROTECTION INSURANCE
5 BALANCE REMAINING INSURANCE OF
6 LOCAL AUTHORITIES INSURANCE
7 FOREST OPERATIONS INSURANCE
8 GLOBAL BANKING ASSURANCE
9 GLOBAL MINING INDUSTRIAL INSURANCE
10 LIFE INSURANCE GROUP
11 DAILY INDEMNITY INSURANCE
12 INDIVIDUAL STUDENT INSURANCE
13 INDIVIDUAL OCCUPANT INSURANCE
14 INDIVIDUAL LIFE INSURANCE
15 FOREIGN ASSURANCE MANIFESTATIONS
16 MEDICAL INSURANCE, DISPENSARY, HOSPITAL, CLINIC, DENTISTRY
17 MULTI-RISK AGRICULTURAL INSURANCE
18 MULTI-RISK FIRE INSURANCE
19 FUNERAL INSURANCE
20 SME & SMI INSURANCE
21 AUTO INSURANCE
22 ASSURANCE RC EQUESTRIAN
23 PROPERTY INSURANCE
24 MEDICAL INSURANCE, DISPENSARY, HOSPITAL, CLINIC, DENTISTRY
25 DOG OWNERS LIABILITY INSURANCE
26 BIKE & HANDCART INSURANCE
27 HEALTH INSURANCE
28 SPECIAL MULTI-RISK BUSINESS INSURANCE
29 ACCOUNT HOLDER BANK GUARANTEE
30 ALL RISKS HOSPITAL INSURANCE
31 ALL RISK SPORTS INSURANCE
32 TRANSPORT INSURANCE FACULTY
33 INSURANCE TRANSPORT AIRCRAFT
34 LIFE INSURANCE IN CASE OF DISABILITY
35 TRAVEL INSURANCE
 39

CHAPTER VI: RISK MANAGEMENT.

THE RISKS OF THE BUSINESS.

The subjects presented in this chapter should help us better understand the
professional assurances and encourage us to pay attention to the different formulas and
options offered on the market. It is imperative for all owners and managers of
companies to understand the different aspects of insurance and how they
can help their firm succeed better.

Your insurance agent, a key player in protecting your business,

ultimately contributes to your success. Generalist agents provide businesses with a
a wide range covering fire insurance, accident and miscellaneous risks, and services
financiers.

Is your company a high-risk business? Of course, like any

business! Think for a minute about the hundreds of things that most owners
businesses fear:
some of them are predictable, or at least you can to some extent
to prepare or master them, namely:
- the projected revenue;
- labor costs;
- taxes;
- overhead costs;
- the cost of equipment and supplies;
- the price you ask in exchange for the products and services offered to your customers.

Others are unpredictable. For example:

- the possible initiatives of your competitors;
- the evolution of tastes and trends;
- the effect of these developments on your market and your clients;
- the local economy and its impact on your clientele (factory closures and
unemployment, for example).

These events are likely to directly affect your daily activities,

weigh on your profits and cause financial losses severe enough to
put your business at risk or even cause its loss. Undoubtedly, you have already
considered the most obvious risks and have you already taken out insurance for yourself
protect against losses that may result from it. Most homeowners
companies are aware of the consequences that a fire can have or a
injury.
 40

- The fire can damage or destroy the building occupied by your business and
transforming its content into a pile of smoking ashes. Whether you are a tenant
As the owner, the location of your business and your ability to continue
your activities could be seriously affected.
- If someone is injured on your premises, or by a product that you manufacture or that
you sell, or because of one of your services, your firm can be
outfit for medical expenses, loss of wages, and lost earnings
futures.

The destruction of property by fire and liability for damages

caused to others (or to others' property) are familiar risks. But companies are
faced with hundreds of other damages and liabilities that they often
tendency to ignore or underestimate.
Large companies often employ full-time risk managers or
risk manager: responsible for analyzing the risks or liabilities incurred. The person in charge.
takes risks and then takes measures to protect the firm against losses
accidental and avoidable, and to limit the financial consequences of the risks to which
she cannot escape. But most small businesses cannot afford the
services of a risk manager, even on a part-time basis, and it often falls back to them
owner to play this role.

Section 1: Definition of risk management.

Risk management consists of:

- Identify and analyze what may be the cause of loss,

- Choose the best way to remedy it.

Identification and analysis of risks.

It is vital to start by identifying the risks because as long as you do not

do not know the extent of the possible damages, you will not be able to achieve
point a realistic and profitable strategy to cope with it.

It is not easy to detect the hundreds of risks or dangers that may arise.
to cause unexpected damage. If you have never experienced a fire, for example,
you do not know how extensive fire damage can be. The damage
The subis by the buildings and their contents are obvious, but one must also consider:

- the damage or destruction caused by smoke or by the dozens of hoses

fire

- the damage suffered by the property belonging to employees (clothes, tools,

personal business) and to third parties (rented computer equipment, or
objects belonging to customers and entrusted for inspection or repair, by
example);
 41

- the volume of business that you will lose during the weeks (or months) that
demand the restoration;
- the switch to competition of some of your clients, who may not return
not when you resume your activity.

The risk identification process begins with a careful examination of

each activity carried out by asking oneself:
1) What could cause damage? If the risks are counted by
ten, you should find dozens of answers.

For each identified risk, ask yourself:

2) What would be the extent of this damage? This question helps you to define the
potential severity of each damage. What is the exact price attached to each
risk? The goal here is not to determine where the money will come from, but what.
could be the cost of the damage.

Many business owners use checklists,

risk analysis questionnaires, available from insurance agents who you
will help in this task, thanks to their skills and experience. Thus you
you will be less likely to underestimate the risks. They will also be able to answer your questions
when you try to determine the potential severity of losses due to a risk
given.

2. What kind of risks to examine.

In general, most questionnaires provide the following options:

- Losses regarding the goods,

- Losses due to interruption of activity,
- Losses due to civil liability,
- Losses related to key individuals,
- Losses related to vehicles.

2.1. Losses concerning assets.

The losses related to the assets are caused by:

- property damage caused to assets

- the loss of the use of property
- criminal acts.

a) Material damages.

Damage to property can arise from many hazards.

classics: fire, hurricane, vandalism are the first that come to mind. Rare are the
companies that do not insure themselves against them. But to effectively cope with
 42

In the event of physical damage to property, the business owner must not
consider only the damage caused to buildings or their destruction.

Their content can be even more vulnerable: manufacturers may lose

both their raw materials and the finished products ready to be shipped. The
merchants can lose their valuable accounting books (which makes it difficult to
billing of clients or the collections from those who owe them money.
Essential machines or equipment can become unusable due to fire.
and if it is not possible to find and install the equipment immediately
replacement, the company may find itself forced to close temporarily.

b) The loss of the use of goods.

Your company can lose the use of certain assets without suffering the slightest
material damage. A administration may close a factory for violation of
laws on hygiene and safety. The administration or an electrical line can prevent
the whole neighborhood to operate for one or more days.
c) Delictual acts.

Businesses are also vulnerable to offenses committed by others. The

Burglary is an obvious danger, but do not underestimate those that come from the
white-collar crime, the dishonesty of employees, embezzlement or forgery.
Traders in particular may need to protect themselves against counterfeit checks or
the irregular use of credit cards.

Evidently, the assets of a bank do not face the same risks as those
of a bookseller. An experienced insurance agent is well aware of the risks involved by
different types of business. Just as you trust an accountant to you
guide through the maze of tax legislation and accounting rules, you can
rely on the experience of an insurance specialist to help you identify the
risks that your company may face.

2.2. Losses due to the interruption of activity.

You have already seen how direct loss due to fire can lead to
temporary closure of a business. Even if the insurance provides the necessary money for the
reconstruction or repair of the damage resulting directly from the fire, the
Most insurance policies do not cover indirect damages, such as loss of profits.
caused by the interruption of activities during the repairs.

A special type of insurance will cover indirect losses resulting from a

direct damage (resulting from a covered risk, such as fire) that causes a
interruption of operation, for example:
- A tornado damages a toy store in October. By the end of November, the
the store is repaired and its stocks are renewed. But the Christmas sales season
it is too advanced for sales levels to approach normal. Instead
 43

to make 55% of its annual profits in December, as usual, it does not

realize that 15%. That is a loss of 40%.
- If a private school that burns in August cannot open its doors before
November, she risks losing half of her tuition rights for one year.
if not their entirety.

Business interruption insurance reimburses their policyholders for the difference.

between their normal income and what they will have earned during the period of forced interruption
of their activity.

The interruption of activity also incurs additional costs. It may be

as well as the company allows overtime to reduce its period of
closure, or that it reopens with a high workforce (additional salaries) in some
temporary premises (additional rents) using furniture and equipment from
location (additional overhead costs). These additional charges further weigh down
more of its finances at a time when its income is nil or minimal.

It is even possible for the company to insure against interruptions.

activity due to a direct disaster affecting someone else's property.
- If a key supplier has to cease operations due to a fire and cannot deliver
essential raw materials to an industrialist, the latter risks having to close his
factory as surely as if it had itself suffered a fire.
The damage suffered by the property of a key client can produce the same result.
If you rely on your client for the majority of your revenue and
what are interruptions in activity leading to the suspension of your purchases, your production is at risk of
you are left with nothing to do. The difficulties of others cause a loss of income for you.

Every year, hundreds of well-insured companies against damages

directly affecting their assets disappear for having underestimated their indirect risks.
Don't forget to protect your business against loss of income and expenses
unusual experiences you might face if a direct disaster forced you to close
temporary.

2.3. Losses due to civil liability.

Every company is also exposed to losses due to the triggering of its

civil liability. A company can be held legally responsible.
financially responsible) for bodily injuries suffered by one or more
third parties, or damages or destruction caused to the property of others. This
responsibility may result:
- from a court decision (as in a negligence trial);
- regulatory provisions (such as the laws of certain States on the
remuneration of employees;
- of the violation of the terms of the contract (when the contract imposes on one of the
parties the responsibility of certain types of losses).
 44

a) The responsibility towards the public.

A company can be held liable for injuries or other

damages suffered by any person as a result of a fault or negligence
committed by her (or by one of her employees).
- A customer stumbles on a broken step.
- A defective product injures its user.
- The worker in charge of installing a fan requested by a client does not secure it.
Good. The blades injure the customer by falling.
- A secretarial firm rents a floor in an office building and signs a
lease that imposes on the tenant (and not on the owner of the premises) the
responsibility for any injury or material damage suffered by third parties at
the interior of the rented premises.

If there is a trial, it doesn't matter who wins: a legal action takes time and
it's expensive, the trial takes away hours of productive work, you have to pay lawyers and
face other expenses.

b) The responsibility towards employees.

Many countries have established laws protecting the interests of employees.

victims of an injury or illness due to their professional activities.
The laws on worker remuneration require most employers to
compensate employees for lost wages and medical expenses resulting from an injury or
from an occupational disease (with the exception of certain voluntary injuries). In case
in case of the death of an employee due to an injury or occupational disease, his family receives
also a specified amount.

Although in some countries the rules for compensating workers do not

do not apply to all types of businesses or to all small businesses, a firm
in principle not concerned may find itself obliged, by a court decision made at the end
from a lawsuit, to compensate its employees for damages resulting from an injury or illness
of professional origin.

The risks examined above were more or less external to the company. However, it
There are also significant risks related to the company itself.

2.4. Losses related to key individuals.

What will happen to your business if an accident or illness occurs to you?

prevents you from working? Or if your sales manager, or one of your associates, dies
Suddenly? Most of us prefer not to consider such eventualities.
Nevertheless, it is important to prepare the survival of your business long before.
that a key person does not die or become invalid. Unfortunately, this
Precaution is often neglected.
 45

The following questions raise a number of issues that may

to ask oneself.
- How will the business survive if its owner falls seriously ill?
Do you become disabled?
- What sources of income will the owner have? What will be their situation?
fiscal?
- Who will take the reins to ensure the continuation of the activity?
- What will happen if this person is a minor or unqualified?

- And what if the owner died?

- If the owner has not written a will, what will happen to the business?
Will she retire? Will someone inherit it, and who?
- If the owner has invested all their savings in the business, their family will be
Does it constrain her to see them evaporate for lack of knowing what to do or how?
- If the company is to be sold, where will the working capital come from during the
transition period?
- How will the fair market value of the company be determined?
- What additional costs would you have to bear to ensure a replacement?
?
- How long would it take for the replacement to train and become
productive?

The identification and analysis of the risks and dangers that a company may face.
Encouraging us showed that many hypotheses needed to be considered. Once that
the risks have been identified, that their severity has been analyzed and that the coverage of
The employees have been studied, the next step is to choose the risk management measures.
who will best protect our company.

Section 2: Exposure to risks and risk management.

The next two steps of the risk management process reflect the approach of
managing personal finances.

1. Limiting losses: what can be done to prevent or limit exposure to

risks?
2. What methods to use to ensure that you have funds to cover losses
which cannot be avoided or prevented?

1. The limitation of losses.

1.1. Prevent or limit exposure to risks.

One of the principles of risk prevention and control applies equally

in our company as in our private lives: let's avoid overly dangerous acts.
Example: a trader may choose not to sell a product that could cause harm.
the clients; this way he reduces the risks of his civil liability being engaged.
 46

If you cannot completely eliminate a risk, reduce it.

Example: a property owner may waive the construction of a new building in
a rural site ravaged multiple times by forest fires. It reverts to flat land in
urban zone, connected to the water service and close to a fire station. Even if it is
difficult to completely eliminate the risk of fire, he has reduced the potential severity of his
losses by choosing a site that is safer and closer to firefighting services.

1.2. The bearable risks.

The owner of a business may consider that it is capable

to take on certain risks, because their cost is manageable.
- A company has several professional vehicles. Its drivers are
excellent drivers and the risk of collision is low because these vans
serve little-used country roads. As these are vehicles
of a certain age, their book value is significantly reduced.
- Instead of continuing to pay collision insurance for these vans,
company decides to completely renounce it. If one of its vehicles is damaged in
an accident, she will pay for the damages herself. She has thus decided to bear it herself
even the risk instead of transferring it to an insurance company in exchange for
payment of a bonus.
- The firm could also decide to take on some of the risk while ensuring the
stay.

1.3. The transfer of risk.

Risk transfer is another method of risk management. Although the

most companies do this by taking out an insurance policy, there is also
independent possibilities from insurance.
The firm can decide to completely eliminate the risk of collision by selling its
vans and by using a local delivery service. This solution eliminates not
only the risk of collision but also the risks associated with ownership and
the maintenance of the vans. In this case, the company transfers all the charges to
local delivery service.
This is the case in the rental of vehicles or equipment instead of making their purchases.
To limit the risk faced by his assets, a merchant may decide to reduce his
stocks and order certain items on demand. His restock orders from
their suppliers will be more frequent. Result? The value of stocks held in store
is weaker, which represents a lower risk. This trader actually transfers a
part of its risk to its suppliers.

1.4. Insurance as a risk management strategy.

The most common method of transferring risk is insurance. By insuring

your home and your car, you transfer a large part of the risk of loss to the
 47

company that issues the policy. The premium you pay is relatively low compared to
at the risk that you would have to bear if you did not ensure.
For professional insurance, as with private insurance, you
you just have to choose the risks you absolutely want to insure against.
However, some decisions have already been made for you:
- those imposed by law (such as social coverage for employees),
- those imposed by others. In most provinces, for example, you do not
can you register or operate a commercial vehicle without bringing the
proof that he is insured.

Very few companies or individuals today have enough liquidity or

financial reserves to protect themselves against the hundreds of risks at stake
goods or their liability that most businesses face.

The nature of these risks, the amounts they involve, and the level of
satisfactory protection is a delicate question. That is why it is so important to
turn to the experience and professional knowledge of an insurance agent, who
will help you protect what is essential.

1.5. The role of the insurance specialist.

The insurance agent is the main representative of insurance companies.

with the clientele. An independent professional, he is trained in risk analysis. He has
the habit of guarantees and possible financial strategies and he knows the laws that govern them
govern. Thanks to his experience, the agent can highlight risks that you
would have underestimated without this.

Finally, your professional insurer can help you find solutions

possible. The final decisions are yours, but your agent can propose you
choices from a wide variety of risk management strategies.
He has the technical knowledge necessary to amend the base fonts by adding them.
adding special covers and guarantees. This results in a policy tailored to
specific protection needs of your business.

Your agent can also advise you on non-insurance strategies that meet
your needs. If appropriate, he will suggest involving your accountant in your reflections and your
lawyer, so that they study the legal and tax implications of the proposed strategies.

2. How to organize your insurances.

A good insurance program is also important for the success of your

company regarding its financing, its marketing, its human resources management or
any other management function. Like the other functions, proper management of
Risks and insurance are not a matter of chance, but of organization and foresight.
A lifetime of work and hope can be destroyed in a matter of minutes if your
 48

the insurance program has certain flaws. To be sure you are protected, you
You must make arrangements in four distinct directions:
1) Detect the different ways you could incur damage.
2) Apply the indicated rules to ensure you are under the best conditions.
3) Organize the management of your insurance.
4) Seek the advice of a professional.

2.1. Detecting risks.

To protect yourself well, you must first detect the risks that
weighs on you and then you decide to act. Blind optimism or the feeling that "it
can happen to you" will not lessen the risk of a fatal disaster weighing on your
company.

Some companies will need to rely on special guarantees. For example,

if you use expensive professional tools or equipment for your activity, you
you may need special insurance covering damages or losses incurred
by them, or the interruption of activity resulting from their unavailability.

2.2. Study the cost of your insurances.

Before subscribing to an insurance, examine the methods through which you

you can reduce the cost of your guarantees. Please consider the following points:
- Choose the risks you will insure against and set the amount of
damages that each of them could cause you.
- First, cover your most important risks.
- Make the most of tax deductions.
- Avoid overlapping blankets.
- Avoid multiplying contracts. Many 'turnkey' policies are indicated.
for small businesses belonging to the categories for which they have been
foreseen, and they are often the only way for a small business to obtain
a truly appropriate protection.
- From time to time, review your insurance contracts to check that your
coverage is correct and that your premiums are as low as possible while
maintaining reasonable protection.

2.3. Set a plan.

To manage your insurance program in a way that provides good coverage

at the lowest possible cost, you will need to define a plan that meets all the objectives of
your business. Here are some suggestions for managing your risks and insurances well:
Clearly state in writing what you expect from your insurance.
2. Choose a single agent to handle your insurance. Having multiple would lead to
a dilution and a weakening of responsibilities.
3. If an employer or a partner must take responsibility for your program
Make sure he is aware of his responsibility.
 39

CHAPTER VI: RISK MANAGEMENT.

THE RISKS OF THE BUSINESS.

The subjects presented in this chapter should help us better understand the
professional assurances and encourage us to pay attention to the different formulas and
options offered on the market. It is imperative for all owners and managers of
companies to understand the different aspects of insurance and how they
can help their firm succeed better.

Your insurance agent, a key player in protecting your business,

ultimately contributes to your success. Generalist agents provide businesses with a
a wide range covering fire insurance, accident and miscellaneous risks, and services
financiers.

Is your company a high-risk business? Of course, like any

business! Think for a minute about the hundreds of things that most owners
businesses fear:
some of them are predictable, or at least you can to some extent
to prepare or master them, namely:
- the projected revenue;
- labor costs;
- taxes;
- overhead costs;
- the cost of equipment and supplies;
- the price you ask in exchange for the products and services offered to your customers.

Others are unpredictable. For example:

- the possible initiatives of your competitors;
- the evolution of tastes and trends;
- the effect of these developments on your market and your clients;
- the local economy and its impact on your clientele (factory closures and
unemployment, for example).

These events are likely to directly affect your daily activities,

weigh on your profits and cause financial losses severe enough to
put your business at risk or even cause its loss. Undoubtedly, you have already
considered the most obvious risks and have you already taken out insurance for yourself
protect against losses that may result from it. Most homeowners
companies are aware of the consequences that a fire can have or a
injury.
 50

CONCLUSION.

Some small business owners see insurance as a

kind of tax. They admit that they cannot avoid it, but they consider it as
a vexatious expense, to be minimized as much as possible. Is this opinion justified?

If you look at things more reasonably, the answer is no. Good.

used, insurance can greatly contribute to your success by reducing the
uncertainties weighing on your business. It can retain your staff, improve your
credit with your bank, allowing you to sell to your clients under certain conditions
favorable and help your business to cope in case of business interruption due to
one of the insured risks. Good management of your insurance offers such advantages
potential that you have every interest in giving him your time and attention.
 51

BIBLIOGRAPHY

1. BIGOT Jean: Treatise on Insurance Law, Companies, and Insurance Organizations,

L.G.D.J., Paris, 1996.
EWALD F., LORENZI J.H.: Encyclopedia of Insurance, Economica, Paris, 1997.
3. DRISSI-LOUIZ Hadhemi: Insurance Techniques, University Agency of the
Francophonie, Tunis, 2007.
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TABLE OF CONTENTS
INTRODUCTION
CHAPTER I: HISTORY AND EVOLUTION OF INSURANCE..................................................2
Section 1: History..................................................................................................................2
Section 2: Birth of Insurance............................................................................................4
CHAPTER II: DEFINITION AND CHARACTERISTICS OF THE INSURANCE CONTRACT...............................8
Section 1: Definitions...................................................................................................................8
Section 2: The technique of insurance........................................................................................9
I. Homogenization of risks.
II. Insurance of group........................................................................................................10
Section 3: The classification of insurances................................................................................10
I. The damage insurance.............................................................................................10
II. The insurance of individuals..............................................................................................11
Section 4: Characteristics of the insurance contract...........................................................................12
I- CONSENSUAL CHARACTER12
He- SYNALLAGMATIC CHARACTER........................................................................................12
III- RANDOM CHARACTER14
IV- BURDENSOME CHARACTER15
V- CHARACTER OF A MEMBERSHIP CONTRACT.............................................................................15
VI - GOOD FAITH CONTRACT...................................................................................................16
VII. A SUCCESSIVE CONTRACT18
CHAPTER III: THE COURSE OF THE INSURANCE CONTRACT.............................................19
Section 1: The conclusion of the insurance contract.19
Section 2: Duration, tacit renewal and termination of the insurance contract.............................21
CHAPTER IV: THE ELEMENTS OF THE INSURANCE CONTRACT...................................................23
The risk...................................................................................................................23
Section 2: The bonus.
Section 3: The disaster.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CHAPTER V: INSURANCE COMPANIES........................................................................33
Section 1: General notions on professional organization of...........................................33
insurance.................................................................................................................................33
Section 2: The legal forms of insurance companies....................................................38
Section 3: State control over insurance companies.39
Section 4: The Congolese insurance market.40
CHAPTER VI: RISK MANAGEMENT................................................................................44
Section 1: Definition of risk management.45
Section 2: Exposure to risks and risk management.51
CONCLUSION...........................................................................................................................56
BIBLIOGRAPHY.........................................................................................................................57
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TABLE OF CONTENTS