Contractual Saving

CONTRACTUAL SAVING INSTITUTIONS IN MALAYSIA

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Overview

Insurance companies are in the business of assuming risk on behalf of their customers in exchange for a fee, called a premium. Law of Large Number

• For a very large number of exposure, one can predict precisely the actual number of occurrence of an event.

Pure risk vs. Speculative risk

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INSURANCE COMPANIES IN MALAYSIA

Incorporated under Companies Act 1965, to engage in insurance services Other legislations:

• Life Insurance Act 1961 – to govern the operation of insurance companies • Insurance (Amendment) Act 1983 – to further strengthen and consolidate the activities of the insurance industry • Financial Services Act 2013

The companies design financial schemes to provide members and dependants with a measure of security in the form of retirement, medical, death or disability benefits

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PRINCIPLES OF INSURANCE

Relationship between insured and beneficiary. Insured must provide full and accurate information. Insured not to profit by insurance coverage.

If a third party compensates the insured for the loss, insurance company’s obligation is reduced by the amount of the compensation.

The insurance company must have a large number of insureds so that the risk can be spread among many different policies.

The lost must be quantifiable

The insurance company must be able to compute the probability of the loss occurring.

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PRINCIPLES OF INSURANCE CONTRACT

Insurable Interest Principle of Indemnity

Principle of Contribution Principle of Utmost Good Faith

Principle of Subrogation

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ADVERSE SELECTION AND MORAL HAZARD IN INSURANCE

Screening – background check & medical examination Restrictive Provision Prevention Fraud

Cancellation of Insurance

Deductible

Coinsurance

Limits on the Amount of Insurance

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INSURANCE AGENTS

Independent agents

Exclusive agents

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LIFE INSURANCE

Whole Life Policy

• Sum assured will be...