CHAPTER ONE

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HISTORY OF INSURANCE
In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: natural or nonmonetary economies (using barter and trade with no centralized nor standardized set of financial instruments) and more modern monetary economies (with markets, currency, financial instruments and so on). The former is more primitive and the insurance in such economies entails agreements of mutual aid. If one family's house is destroyed the neighbours are committed to help rebuild. Granaries housed another primitive form of insurance to indemnify against famines. Often informal or formally intrinsic to local religious customs, this type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is an insurance market rather than a company) for marine and other specialist types of insurance, but it operates rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667."A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England's first fire insurance company, the 'Insurance Office for Houses', at the back of the Royal Exchange. Initially, 5,000 homes were insured by Barbon's Insurance Office.

WHAT INSURANCE IS ?
A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part
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of the loss (called the deductible), and the insurer pays the rest. Examples include car insurance, health insurance, disability insurance, life insurance, and business insurance.

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

TERMS RELATING INSURANCE

SUM ASSURED
An amount payable to the assured (agreed in advance),at an agreed time.

LIMIT OF INDEMNITY
An amount payable to the insured,commencerating with his loss or damage subject to the maximum limit agreed in advance.

INTERMIDIARY/BROKER
A person or firm who arranges a cover with the Insurer/Assurer on behalf of the Insued/Asssured,in consideration of a commision,payable by the Insurer/Assurer.

POLICY
Policy is a document which shows that a contract has been made between the Insurer/Assurer and Insured/Assured. It is not called a contract in itself.

PROPOSAL FORM
Through Proposal Form Insured/Assured presents various type of information to the Insurer/Assurer for obtaining a cover for risk. There is other method adopted in the market also to present the risk such as representation by the agent/broker or surveys in case of complex nature of general insurance rieks.

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PREMIUM
An amount paid by the insured/assured in consideration of accepting the risk by the insurer/assurer. Premium includes, pure premium, commission paid to the agent/broker, administrative expenses and profit.

UNDERWRITER
Underwriter is a person working in an insurance company, who evaluate the risk presented by the insured/assured as to whether to accept or reject the risk and if it is accepted on what premium and terms and conditions.

CLAIMS MANAGER
Claims manager is called the watch dog of the funds of the policy holders being managed by the insurance company. Incase of claim he has to assess whether the claim is payable under the terms and conditions of the policy or not and if payable what should be the quantum of the claim.

ARBITRATOR
Arbitrator is a person who resolve dispute if arising between the insurer/assurer and insured/assured .Its decision is final and binding under the law.

RE-INSURANCE COMPANY
A company from where insurer/assurer seeks cover over and above the amount which he can bear in case of claims as per resources available with him.

CLAIM
An occasion which on trigging the operative clause of the policy,is notified by the insured/assured to the insurer/assurer for payment of agreed sum assured or indemnity according to loss sustained.

ABSOLUTE LIABILITY
A legal doctrine causing one party always to be responsible for payment of damage claims, regardless of circumstances causing the loss. This doctrine has been applied to those using explosive or keeping dangerous animals as pets.

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ACTUARY
An insurance company mathematician, who complies statistics of losses, develops insurance rates calculates dividends, and evaluates the financial standing of insurance company.

CAPTIVE INSURANCE
An insurance company operated by a main company or group of companies, to insure its own risks. A part of self insurance plan.

CASH VALUE
The saving feature associated with permanent life insurance. The result of a initial period when premium payments exceed mortality and other charges.

INSURABLE INTEREST
The ability to demonstrate that the insured event is capable of causing a financialloss to the person owing the insurance. To collect from a property insurance contract, the insurable interest must be demonstrated at the time of the loss. In life insurance the insurable interest must exist when the policy is begun.

CLASSES OF INSURANCE
The insurance is mainly divided in following two major classes of business.

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GENERAL INSURANCE
General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance General insurance means managing risk against financial loss arising due to fire, marine or miscellaneous events as a result of contingencies, which may or may not occur. General Insurance means to Cover the risk of the financial loss from any natural calamities viz. Flood, Fire, Earthquake, Burglary, etc.. i.e. the events which are beyond the control of the owner of the goods for the things having insurable interest with the utmost good faith by declaring the facts about the circumstances and the products by paying the stipulated sum , a premium and not having a motive of making profit from the insurance contract. Some of the General Rules: 1. Mis-description : The insurance policy shall be void and all the premiums paid by insured may be forfeited by the insurance company in the event of mispresentation or mis-declaration and/or non-disclosure of any material facts.

2. Reasonable care : The insured shall take all reasonable steps to safeguard the property insured against any loss or damage. Insured shall exercise reasonable care that only competent employees are employed and shall take all reasonable precautions to prevent all accidents and shall comply with all statuary or other regulations .

3. Fraud : : If any claim under the policy may be in any respect fraudulent or if any fraudulent means or device are used by the insured or any one acting on the insureds behalf to obtain any benefit under the insurance policy, all the benefits under the insurance policy may be forfeited.

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LIFE ASSURANCE
Life assurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the "premium") at regular intervals or in lump sums. In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured's demise. The value for the policy owner is the 'peace of mind' in knowing that the death of the insured person or if he lives too long, or if he becomes disabled, will not result in financial hardship. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.

ORIGION OF LIFE ASSURANCE

Risk protection has been a primary goal of humans and institutions throughout history. Protecting against risk is what insurance is all about. Life insurance came about a little later in ancient Rome, where burial clubs were formed to cover the funeral expenses of its members, as well as help survivors monetarily. With Rome's fall, around 450 A.D., most of the concepts of insurance were abandoned, but aspects of it did continue through the Middle Ages, particularly with merchant and artisan guilds. These provided forms of member insurance covering risks like fire, flood, theft, disability, death, and even imprisonment. During the feudal period, early forms of insurance ebbed with the decline of travel and long-distance trade. But during the 14th to 16th centuries, transportation, commerce, and insurance would again reemerge. And similar to ancient Rome, burial societies were formed in the Buddhist period to help families build houses, and to protect widows and children. However, it was after 1840 that life insurance really took off in a big way. The trigger: reducing opposition from religious groups.

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LIFE-BASED CONTRACTS
Life-based contracts tend to fall into two major categories: Protection policies designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. Investment policies where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life and variable life policies.

INSURANCE VS ASSURANCE
The specific uses of the terms "insurance" and "assurance" are sometimes confused. In general, in jurisdictions where both terms are used, "insurance" refers to providing cover for an event that might happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that is certain to happen. In the PAKISTAN both forms of coverage are called "insurance", principally due to many companies offering both types of policy, and rather than refer to themselves using both insurance and assurance titles, they instead use just one.

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CHAPTER TWO

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4 Is of Insurance Service
The 4 Is refers to the different dimensions/ characteristics of any service. Unlike pure product, services have its own characteristics and its related problems. So the service provider needs to deal with these problems accordingly. The service provider has to design different strategies according the varying feature of the service. These 4 Is not only represent the characteristics of different services but also the problems and advantages attached to it. These 4 Is are

INTANGIBILITY
Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible. Hence, insurance rightly come under services, which are intangible. Efforts have been made by the insurance companies to make insurance tangible to some extent by including letters and forms.

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INCONSISTENCY
Service quality is often inconsistent. This is because service personnel have different capabilities , which vary in performance from day to day. This problem of inconsistency in service quality can be reduced through standardization, training and mechanization.

INSEPARABILITY
Services are produced and consumed simultaneously. Consumers cannot and do not separate the deliverer of the service from the service itself. Interaction between consumer and the service provider varies based on whether consumer must be physically present to receive the service.

INVENTORY
No inventory can be maintained for services. Inventory carrying costs are more subjective and lead to idle production capacity. When the service is available but there is no demand, cost rises as, cost of paying the people and overhead remains constant even though the people are not required to provide services due to lack of demand. In the insurance sector however, commission is paid to the agents on each policy that they sell. Hence, not much inventory cost is wasted on idle inventory. As the cost of agents is directly proportionate to the policy sold.

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PRINCIPLES OF INSURANCE
In every sort of contract there are some principles which must be followed in order to accomplish the contract. Following are the principles of every insurance contract.

INSURABILITY
Risks that are insurable can be categories in following categories: LARGE NUMBER OF SIMILAR EXPOSURE UNITS Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates.

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DEFINITE LOSS The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements. ACCIDENTAL LOSS The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable. LARGE LOSS The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer. AFFORDABLE PREMIUM If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. CALCULABLE LOSS There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented
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under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim. LIMITED RISK OF CATASTROPHICAL LARGE LOSSES Insurable losses are ideally independent and non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capital constrains insurers' ability to sell earthquake insurance as well as wind insurance in hurricane zones. In the U.S., flood risk is insured by the federal government. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

LEGALLITY
When a company insures an individual entity, there are basic legal requirements. Several commonly cited legal principles of insurance include; PRINCIPLE OF UTMOST GOOD FAITH An insurance contract is one of utmost good faith. What this means is that all material facts about an insured risk must be disclosed to the insurers at the time of completing the proposal form, or subsequently if the facts change.

PRINCIPLE OF INDEMNITY Indemnity means that the insurers agree to compensate in the event of loss such that the insured is left substantially in the same position financially after the loss as she was before it but the insured cannot profit from a loss.

PRINCIPLE OF CONTRIBUTION If more than one policy covers the same risk it is not possible for the insured to claim on both and make a gain. In this situation each of the insurers involved would be required to contribute a proportionate amount of the loss - this is known as the principle of contribution.

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PRINCIPLE OF SUBROGATION In the event of a claim and where the insurers have fully indemnified the insured, the insured's original interests can be taken over by the insurers - this is known as the principle of subrogation. For example, where a third party causes damage to the insured's property, after the insurers have settled the claim they can pursue the third party for the cost of the damage.

INSURABLE INTEREST You must have an interest (insurable interest) in the thing insured. If you could insure something which you did not have an insurable interest in (ownership of) it would be possible to gain in the event of another's loss.

INDEMNIFICATION
To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, life insurance is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally two types of insurance contracts that seek to indemnify an insured: 1. An "indemnity" policy, and 2. A "pay on behalf" or "on behalf of policy The difference is significant on paper, but rarely material in practice. An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000). Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner in the above example) would not be out of pocket

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for anything. Most modern liability insurance is written on the basis of "pay on behalf" language. An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance policy. Generally, an insurance contract includes, at a minimum, the following elements: identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy. When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims in theory for a relatively few claimants and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit.

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CHAPTER THREE

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TYPES ACCORDING TO PRODUCTS

Insurance Companies are divided in to two major types depending upon their products;

LIFE ASSURANCE COMPANIES

These are the companies that sales out life assurance product only. It is not concerned with other type of insurances. GENERAL INSURANCE COMPANIES These are those companies whose core business is dependent upon non-life products i.e.; Auto Insurance, Marine Insurance etc. REINSURANCE Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.

TYPES ACCORDING TO OWNERSHIP

According to ownership, insurance companies can be classified as; MUTUAL COMPANIES This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders. STOCK COMPANIES Stockholders (who may or may not own policies) own stock insurance companies CAPTIVE INSURANCE COMPANIES These companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100 percent subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of
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an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices. Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:

heavy and increasing premium costs in almost every line of coverage; difficulties in insuring certain types of fortuitous risk; differential coverage standards in various parts of the world; rating structures which reflect market trends rather than individual loss experience;

insufficient credit for deductibles and/or loss control efforts.

OTHER TYPES OF INSURANCE COMPANIES

There are a few other types of Insurance Companies that can not be defined under one category are as under; DOMESTIC INSURANCE COMPANIES This type of insurance company is incorporated and formed under the laws of the state in which it is domiciled. For example, a company incorporated in California is domestic to California and is foreign to the other states. FOREIGN INSURACE COMPANIES This type of insurance company is also domestic company as it is domiciled in one state but it is licensed to do business in another state. For example, a California domiciled company doing business in Nevada is foreign to Nevada but can do business in Nevada because it met the licensure requirements.

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ALIEN INSURANCE COMPANIES This type of insurance company is often confused with a Foreign insurance company. The Alien company is the one that is formed under the laws of a country other than the United States. For example, a company organized under the laws of Canada and doing business in the United States would be an Alien company in this country. However, if it is properly licensed, it can do business in the United States AUTHORIZED AND UNAUTHORIZED INSURANCE COMPANIES Upon applying for approval to do business in a state, the insurance company receives a certification of authority from the state Insurance Department (Division). Once they receive this certificate they become known as an admitted, or authorized, company. Companies without a certificate of authority are known as un- admitted, or unauthorized, companies. A note of caution before buying insurance. You should always learn if the company is admitted/authorized. Otherwise, they may not honor your claim. ASSESSEMENT INSURANCE COMPANY Non-incorporated associations of individuals or business, called subscribers, engage in cooperative insurance programs. Each policyholder is insured by all others, and each insures the others. Coverage is exchanged on a reciprocal basis. FRATERNAL BENEFIT SOCIETY This type of social organization has bylaws allowing it to sell insurance to its members. The society has no capital stock, is not for profit, and is organized for the benefit of the members. LLOYDS INSURER Lloyd's is a very well known name and most people think of it as an insurance company. The truth is, it isn't. It is a number of people organized into syndicates or groups for the purpose of underwriting risks. Lloyd's operate on many of the same principles as a stock exchange in that it matches buyers wishing to secure insurance with sellers who wish to underwrite risks.

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CHAPTER FOUR

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HISTORY OF EFU
In the early 30s of the 20th century, under the inspiration of the Quaid-e-Azam Mohammad Ali Jinnah, there began to appear signs of economic renaissance of the Muslims of India. Shipping, Airline, Banking and Insurance companies made their debut. In 1932, Mr. Ghulam Mohammad, a far sighted man, established Eastern Federal Union Insurance Company (EFU) with financial assistance from the Aga Khan III and the Nawab of Bhopal. Mr. Abdur Rehman Siddiqui became the founder chairman. The company was originally registered at Kolkata and operated in India (undivided) and Burma. In 1947, on the birth of Pakistan, EFU found a new home in a new country. In Pakistan, EFU rapidly established itself as a progressive and innovative insurer. It gave the emerging insurance industry the leadership, the manpower and the drive needed to grow in a situation where at one time, three-fourths of insurance was held by foreign companies. By 1961, EFU had become the flag bearer of Pakistan's insurance industry on the world stage, and the largest life company in Afro-Asian countries (excluding Japan) under the leadership of Mr. Roshen Ali Bhimjee. It remained so until 1972 when Life Assurance business in Pakistan was nationalized. Thereafter EFU operated solely as a General Insurance Company, and was subsequently renamed EFU General Insurance Limited. Now EFU General is the second largest non-life insurance company in the country and the mother company of other insurance organizations of EFU Group. In June 1990 the Government of Pakistan decided to allow Life Assurance business in private sector also. On 18 November 1992, EFU Life was granted a license to carry on life assurance business. It started operations immediately with Group Life products and in March 1994 launched its Individual Life products. EFU entered the field of life assurance with the focus on the changing needs of the population. The company is committed to provide its policyholders with solutions to the problems of today's complex and rapidly changing financial environment by introducing innovative, and modern products. In March 2000, Allianz Aktiengesellschaft (Allianz AG), a global leader in the insurance industry with an active presence in 70 markets across 5 continents and EFU Group signed a joint venture to form a new company for providing health insurance cover to the people of Pakistan. Allianz EFU Health Insurance Limited, approved by the
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Government of Pakistan, is the first specialized health insurance provider in the country and aims to play a pivotal role in developing the health insurance market in Pakistan. Traditionally the EFU name has become synonymous with progressiveness and prompt claim settlement and now the EFU being the largest insurance group provides a full range of general, life and health insurance services. EFU is the leading insurance group in Pakistan providing a full range of insurance services. This includes life, health and general insurance. A pillar of EFU's strength lies in its close and long-term (over 50 years) relationship with its main reinsurer, Munich Re of Germany, one of the largest reinsurance companies in the world.

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CORPORATE PROFILE

The Company was incorporated on September 2, 1932 and is engaged in non-life insurance business comprising of Property, Marine/Aviation, Motor and other Miscellaneous products. The shares of the company are quoted on Karachi and Lahore Stock Exchanges of Pakistan. The Principal place of business is located at EFU House, M.A. Jinnah Road, Karachi, Pakistan. The company operates through 61 branches in Pakistan. EFU is one of the few Pakistani organizations run totally by professional management and highly motivated field force. Policies accepted by all institutions in the country. Rating: Insurer Financial Strength AA, Outlook: Stable (Rating Agency: JCRVIS). Client-base comprises of many leading business houses and multinational companies. A unique feature of EFU is a voluntary review mechanism by professionals of international repute. The independent reviews by these professionals enable the company to keep abreast of international changes in the industry as well as ensure that management adopts the best international practices. Another pillar of EFU's strength is its very close and long-term relationship with its reinsurers. EFU gave the emerging insurance industry the leadership, the manpower and the drive needed to grow in a situation where at one time, three-fourths of insurance was held by foreign companies. The company has also taken the initiative to transform its Enterprise Information System with an end to end solution comprising Oracle's latest technological software and hardware as part of the infrastructure solution to meet Company's projected Online Transaction Processing needs, keeping in view both the present requirements and future needs such as Data Warehouse, business intelligence and Customer Relationship Management System.

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BOARD OF DIRECTORS

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MANAGEMENT
Managing Director Hasanali Abdullah, F.C.A.

Senior Deputy Managing Director Mahmood Lotia, A.C.I.I.

Deputy Managing Director Qamber Hamid, LL.B., LL.M.

Senior Executive Directors Abdul Rehman Khandia, A.C.I.I. Jaffer Dossa Khurram Ali Khan, B.E. Malik Akbar Awan Muhammad Iqbal Lodhia Nudrat Ali S. M. Haider, M.Sc. S. Salman Rashid Shaukat Saeed Ahmed

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Executive Directors Ali Safdar Altaf Qamruddin Gokal, F.C.A. K.M. Anwar Pasha Syed Kamran Rashid Syed Rizwan Hussain

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VISION STATEMENT
Our vision is to be the first choice company for our customers, shareholders and employees. To achieve this we will be driven by an obsession to be better than the best in a continuous journey, not a destination. At EFU first choice means a sustained commitment to meet and exceed stakeholder expectations. A will to go the Extra Mile to delight our customers with products and services that exceed their expectations

MISSION STATEMENT
We will manage our affairs through modern technology, collective wisdom and institutionalized leadership. We will be a respected, cultured and an educated company with a strong market position. Together with our customers, reinsurers and employees we will achieve world class quality standards through continuous quality improvement. Achieve zero defects in everything we do. We will do good business, with good clients and of the highest integrity. We will not compromise our principles and we will like to be known as a responsible corporate citizen aware of our obligation to the Government and the society we serve.

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COMPANY INFORMATION

Chairman Saifuddin N. Zoomkawala

Managing Director & Chief Executive Hasanali Abdullah

Directors Rafique R. Bhimjee Sultan Ahmad Abdul Rehman Haji Habib Jahangir Siddiqui Muneer R. Bhimjee Taher G. Sachak

Chief Financial Officer & Corporate Secretary Altaf Qamruddin Gokal, F.C.A. Legal Advisor Mohammad Ali Sayeed Audit Committee Muneer R. Bhimjee Taher G. Sachak Abdul Rehman Haji Habib Rating Agency: JCR-VIS Insurer Financial Strength Rating: AA Outlook: Stable Registered Office 11/4, Shahrah-e-Pehlavi, Peshawar.
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Main Offices EFU House M. A. Jinnah Road, Karachi. Co-operative Insurance Building 23, Shahrah-e-Quaid-e-Azam, Lahore.

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CHAPTER FIVE

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UNDERWRITING DEPARTMENT
Insurance underwriters evaluate the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to acquireor to "write"business that will make the insurance company money, and to protect the company's book of business from risks that they feel will make a loss. In simple terms, it is the process of issuing insurance policies. Each insurance company has its own set of underwriting guidelines to help the underwriter determine whether or not the company should accept the risk. The information used to evaluate the risk of an applicant for insurance will depend on the type of coverage involved. For example, in underwriting automobile coverage, an individual's driving record is critical. As part of the underwriting process for life or health insurance, medical underwriting may be used to examine the applicant's health status (other factors may be considered as well, such as age & occupation). The factors that insurers use to classify risks should be objective, clearly related to the likely cost of providing coverage, practical to administer, consistent with applicable law, and designed to protect the long-term viability of the insurance program. The underwriters may either decline the risk or may provide a quotation in which the premiums have been loaded or in which various exclusions have been stipulated, which restrict the circumstances under which a claim would be paid. Depending on the type of insurance product (line of business), insurance companies use automated underwriting systems to encode these rules, and reduce the amount of manual work in processing quotations and policy issuance. This is especially the case for certain simpler life or personal lines (auto, homeowners) insurance. MAJOR UNDERWRITING FUNCTIONS One of the most important functions of the underwriter is creating a policy that will be beneficial to both the customer and the insurance company. The underwriter must weigh the risks of insuring a particular customer. Then, the rates will be established which a customer pays in return for the insurance company agreeing to cover these risks. The underwriter must create a policy that is suitable to the customer yet not too liberal as to expose the insurance company to excessive claims. Insurance underwriters use computers as an integral part of the policy writing process. When a customer submits an application for insurance, the underwriter is able to use smart systems to make a decision on the application. The smart systems are able to analyze the risk associated with a customer and recommend acceptance or denial of the application. Also, the smart systems are able to provide an acceptable rate based on
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the risk of the customer. This allows the underwriter to create a policy that provides the customer with the right amount of coverage while not exposing the insurance company to any unnecessary risk. An insurance underwriter deals closely with customers on a daily basis so it is very important to be able to build relationships and clearly explain all policy details. Also, an underwriter must be able to analyze information and be able to make decisions very quickly. Since change constantly occurs in both business and personal situations, the underwriter must be flexible and able to adapt policies to meet the needs of the customer.

THE UNDERWRITING PROCESS The actual process by which risks are underwritten will vary from one class of business to another and will also depend on an insurers general approach. What we can do is to look at underwriting in a general sense in relation to personal insurances, life assurance and commercial insurances. PERSONAL INSURANCE The underwriting of personal insurances is relatively straightforward. The main source of information abut a risk will come from the proposal form and if there is anything else which an individual underwriter may want, he would write to the proposer. A large volume of proposal forms for various classes of personal insurance will be dealt with by branch offices of insures. Much of the work will be mechanical in nature and the vast bulk will be processed with little difficultly In many cases the underwriting is delegated to some other person, quite outside the insurance company. This is the case for example in travel insurance where the policy is sold by a travel agent or airline. A proposal form is completed by the proposer and the policy issued almost immediately from a pad of policies. Possibly with an upper monetary limit on the sum insured. Underwriting in these cases is almost a matter of making sure that a completely undesirable proposer is not allowed cover. There will be little discrimination among those cases which are accepted and he brooked or other agent will have little or no flexibility in pricing. COMMERCIAL INSURANCE The underwriting of commercial business insurances is a much more complicated and involved task. Commercial insurance ranges form small shops and factories to large multinational corporations with operations in many countries throughout the world. The degree of complexity of the underwriting will obviously vary with sheer size of the risk but certain basic principles are still recognizable. The underwriter has to evaluate the hazard associated with the risk which is being proposed. In small cases he may be able to do this from reading a proposal form and corresponding with the proposer. It may be that a local inspector asked to call and see
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the shop or factory. In large cases this is simply impossible. For one thing the details of a risk could not be confined to a proposal from. There is just too much information to condense on to a form no matter how large the form may be. This is where the broker may help. As we mentioned earlier, the broker in these large cases will be in a position to prepare the case for the underwriter. This may mean site inspections by the broker and the preparation of the plans and reports on the relevant aspects of the risk. This documentation, which may be extremely extensive, is then passed to the underwriter and negotiation can commerce on the terms, conditions, cover and price. RISK SURVEYS Even where a broker is involved (and certainly when there is no broker). The underwriter will involve a surveyor. This risk surveyor is the person who acts as the eyes and ears of the underwriter, many companies employ specialist surveyors in the different areas of risk such as fire, security, liability, business interruption and so on. The surveyor will eventually prepare a report for the underwriter and in the case of many property risks will also draw plan. The report will cover a number of features, including. A full description of the risk. This may include the plan of the premises in the case of property risk, the process being carried out at the premises, details of the insured etc. An assessment of the level of risk. This will take into account all the relevant hazard factors, both moral and physical, and provide the underwriter with some idea of the degree of risk which he is being asked to accept. The surveyor will also be able to comment on surrounding property as in the case of fire insurance, for example, this may have an impact on the level of risk. A measure of maximum probable loss (MPL). This MPL, or estimated maximum loss (EML) as is known by some, is the maximum that the surveyor believes will be the subject of a loss. This is simple to illustrate in the case of fire insurance. Say there is a building which has a value of 300,000. It is one building with no divisions and if a fire starts in one area it is likely to spread throughout the entire property. The MPL in such a case could be 300,000, in order words, in the worst situation; the whole building could be destroyed. Imagine, now, that the building has been divided into three equal sized sections. The wall which creates the section at the left of the building is a fire wall. This wall means that it is most unlikely that fire would spread through either way. The other dividing wall has a door in it and the likelihood is that any fire would spread between these two sections. Each section has the same value, let us say, and the conclusion would have to be that the MPL is 200,000. In the worst case the fire would start in one of the sections at the right of the building and then spread through the dividing wall to the other. The section separated y the fire wall would the saved.

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This MPL calculation takes no account of any good features which may be present. The underwriter must then consider the impact of good features and may reduce the MPL. In a fire risk the underwriter may take account of fire lighting apparatus of various kinds such as automatic sprinkles. One point the surveyor would have to remember is that MPL, he has just calculated is only for fire damage. The building could, for example, be in the flight path for a major airport and run the risks of being destroyed by aircraft. Dividing walls would be little calculating MPL is to give the underwriter an idea of the maximum which is likely to be lost. Recommendations on loss prevention. The surveyor will also make known to the insured what steps should be taken to protect the risk. In a few cases these recommendations will be in the form of requirements which the insured must implement if cover is to be granted. The surveyors view on the adequacy of the insurance being requested. In all of this the responsibility for ensuring that the cover is adequate, rests with the insured. He may seek advice from a broker or other expert but at the end of the day he will have to satisfy himself that the insurance are adequate. Adequacy, in the case of many classes of insurance will mean the sum insured. This will be true for many classes of property insurance. In the case of liability insurance there is of course no sum insured, but a limit of indemnity. Adequacy in thee cases will mean a limit of indemnity large enough to cater for the expected claims. The adequacy of cover is an extremely important issue and the underwriter will want to ensure, as far as is possible. That the insured is not under insuring the risk. Assuming that the risk is acceptable in all matters relating to the level of hazard, the decision as to how much of a risk can be accepted is, in part, dependent on the financial capacity of the insurer. The insurer may have some limit on how much of a particular type of risk it wants to accept in any year. Questions relating to the financial capacity of the insurer, lead us into the area of reinsurance. PREMIUMS So far we have looked at the role of the underwriter, the underwriter process itself and the part played by reinsurance. These have examined, in their different ways, the way in which risks are accepted insurers and the financial steps which insurers take to protect themselves. We have two final aspects the insurance transaction to examine. The first, which business of pricing and paying for the insurance service and the second is the making of claims. The last task of the underwriter, as we listed them, was to calculate a suitable premium. The premium which an insured pays represents that insureds contribution to the common pool. This contribution must be fair and must reflect the degree of hazard which that insured brings to the pool. In other words the premium must be sufficient to:

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Cover Expected claims The insurer is in a position to estimate the level of claims which it expects. It is not possible to say exactly how much is to be paid out in claims but because of the numbers involved the insurer can make a reasonably accurate assessment of the likely loss costs. At the very minimum the premium must be sufficient to meet these expected claims. Reserve for outstanding claims Not all claims will be settled during the year for which the premium has been paid and hence the premium must take into account those claims still to be settled at the end of the year. This is particularly true in the case of claims involving personal injury. They can take several years to settle and the insurer must bear them in mind when calculating the premium. Contingent reserve The insurer must also take into account the fact that there can be contingencies, beyond their control, which may involve a liability to meet claims at some time in the future. Insurers do this by making reserves. Meet all expenses The insurer has a number of operational expenses to meet in the running of the business. These include: salaries to staff; office costs of all forms advertising; Commission.

The premium collected from each insured must be sufficient in aggregate to cover these costs of operating. PROVISION FOR PROFIT Finally, the insurer must ensure that there is provision for a reasonable profit. The majorities of insurers are answerable to shareholders and must provide a reasonable return on the investment which these shareholders have made in the company. In the case of mutual companies, the members will still be looking for a reasonable surplus being made in order to meet the objectives of the mutual. Arriving at the premium, however, is not simply a matter of calculating the correct premium by a mathematical formula. A number of important commercial considerations must also be borne in mind. These will include: Inflation The insurer must be aware of the changing value of money. Claims will be met tomorrow, out of premium received today. The implication of this is that the cost
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of settling a claim may rise, not due to any increase in the magnitude of the claim itself Interest rates We have already seen that insurers are major investors of funds. These funds generate substantial investment income upon which insurers depend. Variability in interest rates has also to be taken into account in premium calculations. Exchange rates We have also seen that a substantial volume of premium income is derived from outside of the United Kingdom. Whenever there is movement of money across national borders, there is the added problem of exchange rate risk. The insurer has to take account of this risk and the cost of managing it has to recover through the premium which insureds pay. Competition The final commercial factor is that of competition. The insurer is not alone in the market place and increasingly there is strong competition. Charging too high a premium may result in the loss of business but charging too little mean running at a loss. This is a difficult tightrope along which insures must walk.

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CLAIMS DEPARTMENT
Once the client has insurance, the rest is easy, right? Unfortunately , not. Insurance is different than most other products that a client will purchase. The client gets nothing. At least, the client gets nothing physical except a piece of paper. The insurance industry trains new employees by telling them that the insured, your client, has purchased a promise and it is the employees job to make sure that the insured gets what is promised. What is actually promised? The insurance company promises to pay all covered first party claims in a timely manner and to defend and indemnify all third party cases. The insurance company promises to act with the utmost good faith towards their insured. But, this really only happens once - when the insured has a claim. Claims adjusters have a saying: We are the only contact with an insured after they buy the policy, and then its only because something bad happened. In order to help your client through this bad experience, you need to know what is available to your client.

The size of the loss is one factor in determining what needs to be done. On a small loss, the client can probably handle it without assistance. Anything under a few thousand dollars, maybe even up to $10,000, the client should be able to resolve with the insurance adjuster, and, with some insurance companies, possibly even the insurance agent. Of course, company should be prepared to offer assistance if the matter is not quickly resolved. First party losses such as theft, fire and vandalism may require some assistance. There are a variety of sources available for clients. The first line of defense should be the attorney who has helped the client so far. If you have been involved with the client in choosing insurance products than you have familiarity with the policy, the agent, and can best assist the client. You may act as a liaison between the client and the insurance company. Just as on a smaller loss, you may provide documents. You should also be present if the client is asked to give a statement or a statement under oath. However, if the loss is larger, more complicated or requires some specialized knowledge, than you need to bring in some true experts. The ABA Journal can be a resource to find experts. If you cannot find an expert in these sources, go to your list of attorneys who specialize in insurance coverage and see if they have some contacts - or find an insurance adjuster turned attorneys. If none of these sources work for you or the client, and the client needs someone, you may need to contact a public adjuster. As with any recommendation, due diligence should be completed on the public adjuster. One or more of these sources should be able to help your client avoid a less than full recovery on a first party insurance claim. On third party losses, the use of counsel becomes more important. If the client is involved in an automobile accident, has a slip and fall on the premises, or another third party case, the quick involvement of counsel can make all the difference. Sometimes
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clients do not want to report a claim to the insurance company. However, you can advise them of the importance of timely reporting and make sure that the claim is timely and accurately reported, as is required by the insurance company. (Failure to report a claim timely may result in a denial of coverage.) Company can also direct any investigation, in conjunction with the insurance adjuster, and thus preserve attorney work product privileges that may be applicable. But, more importantly, you can protect your clients interest from start to finish. Once companys client suffers a third party loss, there is a chance of litigation. Even if company is not a litigator, company may want to bring in a litigator to help companys client. While most insurance policies provide that the insurance company elects counsel, not all policies do. If companys clients policy allows the client to choose counsel, then quickly bringing in trial counsel experienced in litigation will allow trial counsel to be involved every step of the way and potentially save time and money. If the policy allows the insurer to choose counsel, then the client may still have someone looking out for their interests - especially important in consent to settle policy. Additionally, in consent to settle policies, someone will need to advise the insured whether they should give consent to settle. Further, a conflict of interest may develop with the insurer or the client may not understand the process. All of these situations present an opportunity for company to provide counseling and insight to companys client. These add value to companys service. FACTORS OF EFFECTIVE CLAIM MANAGEMENT Following are the factors that may effect to attract the customer for further business if adopted. Claims reporting Receipt of claims by the company Claims files and procedures Fraud detection and prevention Claims assessment Claim processing Complaints and dispute settlement Supervision of claims-related services Market practices

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CLAIMS REPORTING The insurance company writes insurance policies in easily understandable language. Policies spell out what is covered and what is not covered. If necessary, plain language explanations could be an addendum to the legal language.The insurance company draws the attention of the policyholder /claimant/ beneficiary both when he/she signs a policy (for policyholders only) and when he/she reports a loss on his/her duties related to claim reporting which include: To try to minimize losses;

To report claims in a timely fashion;

To co-operate in the investigation by providing the company with all relevant information and, in Particular, copies of official documents regarding the damage (accident, loss, etc.);

To authorize the company to handle necessary inspections and assess the extent of the damage prior to any repairs or replacement;

To ensure that the claims reporting phase proceeds as smoothly as possible, the insurance company sends to the policyholder/claimant/beneficiary within a reasonable period of time (beginning from when the loss is reported):

An appropriate claim form (when the loss reporting is made in writing) for the type of policy -prepared either by an individual insurance company or at the national level by companies or the supervisory authorities together with instructions and useful information on how to comply with the terms of the policy and the legitimate requirements of the company

The information necessary to help them to report the claim.

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RECEIPT OF CLAIMS BY THE COMPANY The insurance company or broker must be contacted as soon as possible on happening of event of claim. Insurer must should send acknowledgement to make insured known that his notification is received by the company. If there is any delay insured must be made informed of it. Insurer must ask for the documents required in settling the claims.

Company should inform the insured about his right of subrogation if insured is not known to.

CLAIMS FILES AND PROCEDURES Once a claim has been filed and, when applicable, after any additional documents that are required to process the claim have been received, the file established by a company contains the following documents. Intimation letter Claim form duly filled and signed by insured Claim filing number Policy number; Name of the policyholder/claimant/beneficiary; Summary sheet showing development / review of the claim; Type of insurance concerned; Opening date of the file; Date of loss; Reporting date; Description of the claim; Information on claimants;

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 Assessment date; Electronic and/or paper copy of the adjustors and investigators reports where applicable; Identity of the adjuster; Estimated cost of damage; Dates and amounts of payments; Date of denial, if applicable; Name of intermediary, if applicable; Date of file closure; Documents recording contacts with the policyholder/claimant/beneficiary

FRAUD DETECTION AND PREVENTION Insurance fraud has existed ever since the beginning of insurance as a commercial enterprise. Fraudulent claims account for a significant portion of all claims received by insurers, and cost billions of dollars annually. Types of insurance fraud are very diverse, and occur in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities also affect the lives of innocent people, both directly through accidental or purposeful injury or damage, and indirectly as these crimes cause insurance premiums to be higher. Insurance fraud poses a very significant problem, and governments and other organizations are making efforts to deter such activities. The chief motive in all insurance crimes is financial profit. Insurance contracts provide both the insured and the insurer with opportunities for exploitation. One reason that this opportunity arises is in the case of over-insurance, when the amount insured is greater than the actual value of the property insured. This condition can be very difficult to avoid, especially since an insurance provider might sometimes encourage it in order to obtain greater profits. This allows fraudsters to make profits by destroying their property because the payment they receive from their insurers is of greater value than the property they destroy. Insurance companies are also susceptible to fraud because false insurance claims can be made to appear like ordinary claims. This allows fraudsters to file claims for damages that never occurred, and so obtain payment with little or no initial cost.

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Types of Fradulent Claims Fraudulent claims can be one of two types. They can be otherwise legitimate claims that are exaggerated or built up, or they can be false claims in which the damages claimed never actually occurred. Once a built up claim is identified, insurance companies usually try to negotiate the claim down to the appropriate amount. Suspicious claims can also be submitted to special investigative units, or SIUs, for further investigation. These units generally consist of experienced claims adjusters with special training in investigating fraudulent claims. These investigators look for certain symptoms associated with fraudulent claims, or otherwise look for evidence of falsification of some kind. This evidence can then be used to deny payment of the claims or to prosecute fraudsters if the violation is serious enough. Detection of Fradulent Claims The detection of insurance fraud generally occurs in two steps. The first step is to identify suspicious claims that have a higher possibility of being fraudulent. This can be done by Computerized Statistical analysis or by referrals from Claims Adjusters or insurance agents. Additionally, the public can provide tips to insurance companies, law enforcement and other organizations regarding suspected, observed, or admitted insurance fraud perpetrated by other individuals. Regardless of the source, the next step is to refer these claims to investigators for further analysis. Due to the sheer number of claims submitted each day, it would be far too expensive for insurance companies to have employees check each claim for symptoms of fraud. Instead, many companies use computers and statistical analysis to identify suspicious claims for further investigation. There are two main types of statistical analysis tools used: Supervised And Unsupervised. In both cases, suspicious claims are identified by comparing data about the claim to expected values. The main difference between the two methods is how the expected values are derived. Supervised Method Expected values are obtained by analyzing records of both fraudulent and nonfraudulent claims. This method has some drawbacks as it requires absolutely certainty that those claims analyzed are actually either fraudulent or non-fraudulent, and because it can only be used to detect types of fraud that have been committed and identified before. Unsupervised Method Unsupervised methods of statistical detection, on the other hand, involve detecting claims that are abnormal. Both claims adjusters and computers can also be trained to identify red flags, or symptoms that in the past have often been associated with
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fraudulent claims. Statistical detection does not prove that claims are fraudulent; it merely identifies suspicious claims that need to be investigated further.

CLAIMS ASSESSMENT When any claim is presented to insurer,Following points are taken into accoount: Any method of taking into account specific factors such as depreciation, discounting or negligence on the part of the victim is clearly outlined in the claim file. Any loss evaluation methods used by the company are reasonable and coherent. The insurance company uses internal methods for assessing claim values based on the applicable law of the jurisdiction. Companies that use claims adjusters or intermediaries will need to ascertain their competence qualifications. Moreover, if these claims adjusters/intermediaries were to commit any errors or misappropriation of funds affecting their policyholders, claimants or beneficiaries within the framework of the contract2 with the insurance company, the latter would be held responsible. Consequently, companies may decide to limit the scope of action of claims adjusters and intermediaries (for example, by setting ceilings on the number of claims they can handle). Companies notify policyholders/claimants/beneficiaries whenever they use independent claims adjusters or intermediaries.

When the damage is assessed through a written estimate made on behalf of the insurer, the insurer sends the policyholder/claimant/beneficiary a copy of the document used to set the amount of compensation.

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CLAIM PROCESSING Claims handeling procedures are in written form and each member or at least one member is provided with that written regulations or procedures so that manuals could be consulted at time when required. Otherwise the staff is also qualified. Internal Audit is also conducted either by Internal auditors appointed or by the employees themselves as one employee checks the work of consecutive employee., this helps to save the cost of internal auditor and the effeiciency is also achieved. The Company keeps claimants informed of the progress during the claims process. The company provides information on when payments, repairs or replacements are expected to be made, and, if necessary, explains why additional time is required. When the company decides to call on outside parties (i.e. loss adjusters, solicitors, surveyors, etc), it informs claimants of this fact, gives the reasons for this decision and explains the role that these outside parties will play in processing the claim. When a final payment or offer of settlement is made, the company explains to claimants what the payment or settlement is for and the basis used for the settlement. The insurance company documents their claim files in order to be able to address questions that may arise concerning the handling and payment of the claim. If the claim is denied, the insurance company states explicitly to the claimant the policy provision, conditions or exclusion on which the denial is based. If the amount offered is different from the amount claimed, the insurance company explains the reason for this to the claimant. When the insurance company is not responsible for meeting all or any part of the claim, it notifies the claimant of this fact and explains why.

COMPLAINTS AND DISPUTE SETTLEMENT When the claimant files a complaint, the company: Acknowledges receipt of the complaint within a reasonable period of time; Provides claimants with explanations on how their complaints will be handled and on the procedures to be followed; Provides information to claimants on internal and external dispute settlement procedures; Processes complaints promptly and fairly; Keeps claimants regularly informed of how their complaints are progressing; Provides a final response in writing within a reasonable period of time. If the claimant is dissatisfied with the final response that he/she has been sent by the company, he/she can activate an internal appeals process. He/she can also
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appeal to the dispute settlement procedures available outside the company (for example, the handling of complaints by the supervisory authorities). In case of a dispute, the claimant should be informed by the company of the existence of these appeal procedures. SUPERVISION OF CLAIMS-RELATED SERVICES The insurance supervisory authorities may conduct examinations on claims management services especially where problems are suspected. In these cases, the following elements are taken into account: Possible access to non-confidential claims data for all open and closed files within a specified time frame (e.g. for the current year and the two preceding years); Maintenance of sufficient and appropriate information on claims files; Use of the appropriate type of claim form for the type of insurance; Proper qualification of the claims departments employees based inter alia on the applicable insurance code; Valuation of claims payments according to company procedures; Appropriate tracking of the nature and number of complaints related to claim management process; Monitoring of the proportion of claims that result in litigation; Compliance with procedures for combating fraud and money laundering; Regular internal audit practices on claims files; Appropriate internal claims procedure manuals; Proper procedure for coding and statistical reporting of losses; Performance in terms of the speed of claim settlements

MARKET PRACTICES The public authorities promote the implementation of a benchmark exercise regarding the claims process or a specific part of this proces.

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CRUX
It is quite tough and complicated process in which insured do not have any participation other than just providing the exact information of claim. Staff should treat it with full attenton as claim procedure of inurance company establishes its goodwill in market,and helps to generate more and more business. Guidance,Expertise, Knowledge of when to bring someone else in, all provide an important service to client.

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HUMAN RESOURCE DEPARTMENT

Employees are the most important asset of any organization. The future of the firm depends on the performance of its employees. The role of a human resource manager is pivotal in managing the expectations and performance of the employees. Read on to know more about human resource manager's job description, human resource manager's duties, and the requirements of a human resource manager. Human resource management refers to the coherent and strategic approach to understand the needs of the people working in a firm. Undoubtedly, the growth of a firm is totally based on the individual and the collective efforts of its workers. Human resource management evolved as a serious discipline in the business world when it was understood that employees are not mere business units, like machines and automobiles. Instead, they are a valuable human manpower and have personal, emotional, and financial needs. When it was realized that human beings are not unidimensional entities, human resource management was developed to cultivate a positive work culture in the organization, motivate employees, streamline the recruitment process, and provide employee training. The penalties for not being correctly staffed are costly. Understaffing loses the business economies of scale and specialization, orders, customers and profits. Overstaffing is wasteful and expensive, if sustained, and it is costly to eliminate because of modern legislation in respect of redundancy payments, consultation, minimum periods of notice, etc. Very importantly, overstaffing reduces the competitive efficiency of the business. Staffing level planning requires that an assessment of present and future needs of the organization be compared with present resources and future predicted resources. Appropriate steps then be planned to bring demand and supply into balance. Thus the first step is to take a 'satellite picture' of the existing workforce profile (numbers, skills, ages, flexibility, sex, experience, forecast capabilities, character, potential, etc. of existing employees) and then to adjust this for 1, 3 and 10 years ahead by amendments for normal turnover, planned staff movements, retirements, etc, in line with the business plan for the corresponding time frames. The result should be a series of crude supply situations as would be the outcome of present planning if left unmodified. (This, clearly, requires a great deal of information accretion, classification and statistical analysis as a subsidiary aspect of personnel management.)

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What future demands will be is only influenced in part by the forecast of the personnel manager, whose main task may well, is to scrutinize and modify the crude predictions of other managers. Future staffing needs will derive from: Sales and production forecasts The effects of technological change on task needs Variations in the efficiency, productivity, flexibility of labor as a result of training, work study, organizational change, new motivations, etc. Changes in employment practices (e.g. use of subcontractors or agency staffs, hiving-off tasks, buying in, substitution, etc.) Variations, which respond to new legislation, e.g. payroll taxes or their abolition, new health and safety requirements Changes in Government policies (investment incentives, regional or trade grants, etc.) What should emerge from this 'blue sky gazing' is a 'thought out' and logical staffing demand schedule for varying dates in the future which can then be compared with the crude supply schedules. The comparisons will then indicate what steps must be taken to achieve a balance. That, in turn, will involve the further planning of such recruitment, training, retraining, labor reductions (early retirement/redundancy) or changes in workforce utilization as will bring supply and demand into equilibrium, not just as a oneoff but as a continuing workforce planning exercise the inputs to which will need constant varying to reflect 'actual' as against predicted experience on the supply side and changes in production actually achieved as against forecast on the demand side. The dynamics of business have become more and more challenging in today's global economy. Employee retention is a crucial factor and firms hire human resource managers for this vital task. Also, the function of a human resource manager is to work in tandem with all the departments of a firm in order to monitor and decipher the needs of the employees. The human resource department acts as a bridge between the CEO or the Managing Director of the company and the various branches, like executive, administrative, project management teams, and operations management.HR department have to perform the following duties. RESOURCE HUNTING AND RECRUITMENT The entire process of recruitment is monitored by the human resource manager. The human resource manager's duties consist of job posting, hiring, conducting recruitment exams (if any), and interviewing. Other functions of a human resource manager are to
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maintain excellent professional relations with the educational institutions and recruitment agencies. The main sources of recruitment are: Internal promotion and internal introductions (at times desirable for morale purposes); Careers officers (and careers masters at schools); University appointment boards; Agencies for the unemployed; Advertising (often via agents for specialist posts) or the use of other local media (e.g. commercial radio).

Where the organization does its own printed advertising it is useful if it has some identifying logo as its trade mark for rapid attraction and it must take care not to offend the sex, race, etc. ant discrimination legislation either directly or indirectly. The form on which the applicant is to apply (personal appearance, letter of application, completion of a form) will vary according to the posts vacant and numbers to be recruited. It is very desirable in many jobs that claim about experience and statements about qualifications are thoroughly checked and that applicants unfailingly complete a health questionnaire (the latter is not necessarily injurious to the applicants chance of being appointed as firms are required to employ a percentage of disabled people). Before letters of appointment are sent any doubts about medical fitness or capacity (in employments where hygiene considerations are dominant) should be resolved by requiring applicants to attend a medical examination. This is especially so where, as for example in the case of apprentices, the recruitment is for a contractual period or involves the firm in training costs. Interviewing can be carried out by individuals (e.g. Underwriter or Branch manager), by panels of interviewers or in the form of sequential interviews by different experts and can vary from a five minute 'chat' to a process of several days. Ultimately personal skills in judgment are probably the most important, but techniques to aid judgment include selection testing for: Aptitudes (particularly useful for school leavers); Attainments; General intelligence.
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(All of these need skilled testing and assessment.) In more senior posts other techniques are: Leaderless groups; Command exercises; Group problem solving. (These are some common techniques - professional selection organizations often use other techniques to aid in selection.) Training in interviewing and in appraising candidates is clearly essential to good recruitment. Largely the former consists of teaching interviewers how to draw out the interviewee and the latter how to rate the candidates. For consistency (and as an aid to checking that) rating often consists of scoring candidates for experience, knowledge, physical/mental capabilities, intellectual levels, motivation, prospective potential, leadership abilities etc. (according to the needs of the post). Application of the normal curve of distribution to scoring eliminates freak judgments. COACHING THE EMPLOYEES Training the employees is another important duty of a human resource manager. Why is training so essential? Well, every organization has its specific organizational culture and it is expected that the employees follow it. Induction and orientation lectures are the initial periods of training, wherein the employees get to know the work culture of the company. Icebreaker sessions, as we normally call them in the management terminology, help the employees feel comfortable and show active participation in training programs. Effective communication is a tool that the human resource manager can use to connect with the employees and build team spirit among them. The human resource manager can play a pivotal role in adopting the six sigma training programs. The principles of change management can be adequately applied to help the firm reap rich benefits. Training is a technique of using human resources, not only in an efficient manner but also use their skills effectively. Training refers to the teaching of employees to perform a particular task or to perform a specific job on which employee is to be hired. It usually means the change in the specific knowledge, skills, behavior and attitude. Training is also designed to meet the goals of the organization as well as the employees goals. Development is a very broad terminology thats why most of the firms give equal importance to development as training. Development helps employees to accomplish their goals along with the goals of the organization because the goals of the employees are also very important if these goals are not fulfilled in an organization a very competent employee will leave your firm, which is not good for the organization.
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Development plays a vital role in the career planning of the employees and to make employee loyal to the organization and reduce the turnover rate. Now a days number of organizations spent lot of money on development programs and it is increasing with the passage of time and according to the requirements of the organization. Human resource is the life blood of any organization. Only through well-trained personnel, an` organization can achieve its goals. At a glance, we find that training gives the following results: Growth, expansion and modernization cannot take place without trained manpower It increases productivity and profitability, reduces cost and finally enhances skill and knowledge of the employee. Prevents obsolescence Help in developing a problem solving attitude Gives people awareness of rules and procedures Why we need Training Nowadays as businesses are growing, companies are expanding across the boundaries of any country, number of employees working in any organization is immense, and so to manage these concerns its become very important for the employers to train their employees so they can perform their best to enhance the efficiency and productivity Some of the reasons for the growing importance are as follows. Every organization has its own sets of beliefs, values, culture. So these organizations expect their employee to act accordingly. Due to the impact of globalization its become important for organizations to train their employee to handle the different impacts of globalization. Nowadays workforce is very diverse, it consists of people form cultural backgrounds, having different sets of values, beliefs. So training is the tool which will help employees to work together in a friendly atmosphere. As more and more women are becoming part of workforce today, so it becomes necessary to train workers how to work in this kind of environment.
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Ways of Training 1. On the Job Training 2. Off the Job Training Training can be either on the job or off the job. In the first case, the worker is trained under the guidance of a supervisor whereas off the job training is usually through lectures, conferences, case studies, audio visual etc. Instructor-led training is the best way to gain in-depth, hands-on knowledge of the Business Objects products. Training programs are designed to support all levels from beginners to advance. Here are a number of key benefits of EFUs training programs: Everyone is exposed to the same message at the same time. There is plenty of opportunity to ask questions. We can slow down or speed up the pace of training program, based upon learners' grasp of the material. Having an instructor nearby makes learning a computer program less intimidating. Learners can interact with, and ask questions from a friendly expert. We can check learners' progress regularly, to ensure that everyone is achieving the learning objectives. Learners' attention can be devoted solely to the training, with no distractions. Learners receive training on those skills that are critical to their jobs, never more than they need.

MOTIVATION AND PERFORMANCE APPRAISAL Motivation is a key to trigger the performance of an employee. An average employee may turn into an outstanding performer on being motivated. A human resource manager conducts sessions and lectures that keep the employees aware about the growing competition in the market and the need to constantly upgrade the skills of the employees. Also, the performance of employees is constantly monitored over a monthly or yearly basis and rewards, gifts, and prizes are distributed for exceptional performances. The human resource manager also looks after the performance appraisal of the employees. Attention to the mental and physical well being of employees is normal in many organizations as a means of keeping good staff and attracting others.
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The forms this welfare can take are many and varied, from loans to the needy to counseling in respect of personal problems. Among the activities regarded as normal are: Schemes for occupational sick pay, extended sick leave and access to the firm's medical adviser; Schemes for bereavement or other special leave; The rehabilitation of injured/unfit/ disabled employees and temporary or permanent move to lighter work; The maintenance of disablement statistics and registers (there are complicated legal requirements in respect of quotas of disabled workers and a need for 'certificates' where quota are not fulfilled and recruitment must take place); Provision of financial and other support for sports, social, hobbies, activities of many kinds which are work related; Provision of canteens and other catering facilities; Possibly assistance with financial and other aid to employees in difficulty (supervision, maybe, of an employee managed benevolent fund or scheme); Provision of information handbooks; Running of pre-retirement courses and similar fringe activities; Care for the welfare aspects of health and safety legislation and provision of firstaid training. The location of the health and safety function within the organization varies. Commonly a split of responsibilities exists under which 'production' or 'engineering' management cares for the provision of safe systems of work and safe places and machines etc., but HRM is responsible for administration, training and education in awareness and understanding of the law, and for the alerting of all levels to new requirements.

SALARY AND PAYROLL NEGOTIATIONS Though salary related issues are a responsibility of the accounts department of the firm, still, in the initial stages of recruitment, the human resource manager handles the salary issues of an employee. Since a human resource manager handles the recruitment process he/she is more aware about the ability, experience, and skills of the employee, therefore, he/she can take better decisions about the salary of the worker. Generally, the
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HR department works in collaboration with the accounts department in salary related issues. There is no doubt that motivation is the crux for good performance, but there is no clear-cut answer to the question of how to motivate. The previous pages gave a glimpse of the answer through various theories and practices. Money is a factor in motivating people and this section concentrates on this. Reward systems are discussed in general and later in specifics in terms of payment by results. Various schemes for financial motivation are also described. Money is important! we live in a money-motivated world. Any amount of human relations cannot compensate for a lack of monetary reward. If the reward is right, good human relations will give that extra zest to a team, motivating them to give of their best efforts. Insufficient monetary reward cannot be compensated by good human relations. Even dedicated footballers do not think of playing for England, they merely pay 'lip service' to It.; the financial rewards of playing for their clubs far exceed those received from playing from their country. Cricketers and rugby players no longer play for their own country but opt for the 'highest bidder'. Professional tennis players have refused to play at Wimbledon, the 'Mecca' of lawn tennis, because the rewards were not attractive. It is no different in the industrial world. Strikes for better salary and rewards do still occur. All this despite the claim of psychologists that security is the prime need of a person, as indicated in the previous section. Has the sense of values changed with time? But we are not concerned here with the philosophical angle, but with hard facts of life in a commercial world. Self-motivation can go only so far and it needs to be constantly reinforced by rewards. In particular, merit must be measured and rewarded regularly, if it is to be encouraged and sustained. The 'gold banana' in Foxboro has its origin in just an ordinary banana, which one of the pioneers could muster on the spur of the moment when he discovered extraordinary performance by one of the employees.

EMPLOYEE SATISFACTION AND FEEDBACK Are the employees satisfied with the facilities of the firm? Are any issues that are causing an unrest among the employees? There may be differences in the ideas/opinions of the various employees. Is that creating a conflict? All such matters related to employee satisfaction are handled by the HR manager. The principles of conflict resolution can be used to resolve differences among the employees. Mostly, human resource managers
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accept the feedback of the employees and this leads to an efficient management of the workers.

EDUCATIONAL REQUIREMENTS FOR A HUMAN RESOURCE MANAGER Generally, a graduate level degree in labor laws, social sciences, human resources, and industrial laws is considered for entry level jobs in human resource management. Many firms look out for a fair amount of work experience before hiring HR managers. So, if you have a master's degree or an MBA in human resource management, then it's better to spend spend 3 6 years taking a professional experience and then look for senior level positions. Even courses related to humanities, like public administration, psychology, sociology, political science, and economics are considered by many firms. With experience in this field one can climb the ladder of success gradually and soar great heights. PERSONALITY TRAITS OF A HUMAN RESOURCE MANAGER

The various personality traits needed to be an excellent human resource manager are as follows: Excellent communication skills and leadership qualities. Strong presentation abilities. Ability to think out of the box. Very good initiation and negotiation skills.

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CRUX
Human Resource Department is the most important department on which the internal system of whole organization is based. It motivates the employees and takes in account the incentives and tactics required to keep the qualified and experienced employees with them and to make them work in the way organization wants. We can sum up it as under:

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ACCOUNTS DEPARTMENT
We are living in a world where people need things from the day they are born to the day that they die. Some of these 'needs' are physical needs, a need for goods of various sorts, food, and clothing, shelter, and so on. Some of them are emotional 'wants', a need for education, entertainment, or recreation. In satisfying such needs businessmen perform useful services to their fellow beings. In return they expect to earn a reasonable reward for their efforts in the form of profits. "Cut your coat according to your cloth" -- so goes the saying. Even a king becomes a pauper, if he fails to exercise economy in his expenditures. In other words, every individual will have to plan his expenditure according to his income. Obviously the question arises -- why is this planning necessary? The need for such planning arises as our wants or desires or needs for goods and services are unlimited, while the means, i.e. the income with which to buy such goods and services are limited. Where, however, goods and services are available free of cost, i.e. gifts of nature, such as air, water (not in cities) etc., there is no question of economy. But the necessity of economy is undeniable, where goods or services are not available free of cost and their supply is limited. A proper and fair planning of expenditures helps us to ensure proper use of our income. Of course, it is true that making a proper planning cannot increase the quantity of goods or money. But certainly we can ensure most economic use of goods or money at our disposal. Most of us do maintain some kind of a written record of our income and expenditure. The idea behind maintaining such record is to know the correct position regarding income and expenditure. The need for keeping a record of income and expenditure in a clear and systematic manner has given rise to the subject of 'book-keeping'. Some individuals do not recognize the necessity of keeping accounts of their day-to-day expenditures, since they spend their own income and are not required to account for it to anybody else. But such an idea is wrong. A family, However, small it may be, must exercise proper control over its expenditures so as to ensure future security. A Family has two-fold responsibilities -- one is that of ensuring all (round welfare of the family and the other is the social responsibility. Needless to say, money is the most essential pre-request for ensuring peace and happiness of a family, which each and every member desires. The quantum of money must be adequate in relation to the needs. But mere adequacy of money will not do; one has to take care of its proper utilization. For this it would be necessary to exercise economy and maintain proper books of account. On the other hand each and every family must save a portion of its income for future contingencies. It is possible to increase the amount of saving

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through proper management and effective control of the family expenses. Through such saving the family helps materializing the economic planning of the country. It is all the more necessary for an organization or a concern to keep proper accounts. At the end of the year the true result of the economic activities of a concern must be made available otherwise it will not be possible to run the concern. In case of a business concern the profit or loss at the end of a year must be ascertained, because, the amount of profit must be adequate in relation to that of investment made in the business. If it is not so or if there is a loss, it is an indication of some defects existing somewhere in the management of the business. All such defects need to be detected and analyzed and appropriate measures taken for their rectification. But it is only possible, if proper books of accounts are maintained in the business concern. So, the importance of bookkeeping to a business is the same as that of fresh air to a man to exist. Without bookkeeping records a business would meet death, though not instantly, but in a short time. Moreover, if proper books of accounts are not kept in a business, the amount of profit cannot be ascertained and it will not be possible to distribute the profit among the owners of the business. The income tax dues to the Government cannot also be paid. In the absence of books of accounts misuse or defalcation of money will remain undetected. The owner and other parties interested will not be able to have any information about the condition of the business. For the same reason in the case of nontrading concerns like, schools, clubs, colleges, universities, hospitals etc. the need for accounting is universally recognized. Thus we see that the necessity of keeping accounts is not only confined to business concerns but it is also useful for all classes and grades of people and organizations.

FUNCTIONS OF ACCOUNTING DEPARTMENT The function of an accounting department is to look after the finances of a company. This can be anything from paying bills to making sure that the employees that work for the company get paid.

The four main accounting functions are: Making Payments Making sure that all bills and claims are paid by the company, on time and also at the least cost possible .If there is a discount for paying quickly, the accounts department will usually pay the bills as soon as possible so that the company spends as little money as

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they possibly can. They are responsible for all outgoing payments and making sure that what they are paying is correct.

Payroll The accounts department have to ensure that the employees are all paid correctly and on time. They also have to make sure that all of the employees are paying the right amount of tax and that they have not made any mistakes with tax brackets and government payments on behalf of the employees.

Receiving Payments The accounting department must also receive payments and make sure that these are all processed correctly. These will all be payments for the services or products the company has provided and they must ensure that they have paid all relevant tax. There will also be an element of chasing up payments and making sure that all of the payments are received when they should be.

Budgets They are also responsible for giving budgets and estimates of what they feel the company should be spending. These may be split by department or function and they must also predict budget figures for years to come so that the company knows what it should be spending and more importantly, charging to customers.

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ACCOUNTS DEPARTMENT OF EFU INSURANCE Accounts department of EFU insurance have divided its duties into different sections. Cash Collection Section Cash Disbursement Section Salary Preparation Section Budget Preparation Section Agents Commission Section

CASH COLLECTION SECTION For the collection of cash, account department has a cash counter. When a policyholder comes to pay his premium, they check whether the policyholder is able to pay his premium or not. If the policyholder comes within 30 days after the due date, then he is considered as able to pay his policy otherwise he is not able. CASH DISBURSEMENT SECTION For cash disbursement, first the voucher is prepared, signed and prepared by authorized officer, for the person to whom the payment is made. After these the cashbook is maintained, cheques are prepared, and these cheques are sent to concerned party. Bank Statement is prepared daily by the authorized banker regarding total collection and payments of cheques i.e. realization of cheques. These banks Statements are punched into the computer. SALARY PREPARATION SECTION In Account Department Salary of the employees is calculated. Different allowances are offered to the employees. Loan facilities are available for the employees. Tax is deducted from salary. A provision of recoveries of the loan is made. BUDGET PREPARATION SECTION Budget is prepared annually. Proposed budget is sent to principal office. The funds of different heads of proposed budget are transferred to zonal office.

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COMMISSION SECTION The commission of business brought by agents is calculated in the Commission Section.

CRUX
It is responsible for financial health of an organization. Accounting is the conscious of the business world. When handled with care and with respect, it performs as expected. When abuse occurs, and the system is circumvented or overridden because of dishonesty and greed, it doesnt work correctly. Accounting is much like all other systems in place, they are only as good as the people using them.

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REINSURANCE DEPARTMENT
This department is considered with distributing and shredding the risks admitted for insurance by reinsuring all or a substantial part of such risks with re-insurers witnessed with efficiency and power financial positions who may be companies specialized in reinsurance or direct insurance companies accepting reinsurance operations and Lloyds bodies. The reinsurance department grants the company an accommodating capacity enables it to accept easily and quickly insurance operations with large amounts or risks which it could not have accepted in the absence of the facilities granted to it through reinsurance and subsequently maintaining the financial stability of the company in connection with the results of its works. There are two basic methods of reinsurance: Facultative Reinsurance In facultative reinsurance, the ceding company cedes and the reinsurer assumes all or part of the risk assumed by a particular specified insurance policy. Facultative reinsurance is negotiated separately for each insurance contract that is reinsured. Facultative reinsurance normally is purchased by ceding companies for individual risks not covered by their reinsurance treaties, for amounts in excess of the monetary limits of their reinsurance treaties and for unusual risks. Underwriting expenses and, in particular, personnel costs, are higher relative to premiums written on facultative business because each risk is individually underwritten and administered. The ability to separately evaluate each risk reinsured, however, increases the probability that the underwriter can price the contract to more accurately reflect the risks involved. Treaty Reinsurance It is a method of reinsurance in which the insurer and the reinsurer formulate and execute a reinsurance contract. The reinsurer then covers all the insurance policies coming within the scope of that contract. The reinsurance contract may oblige the reinsurer to accept reinsurance of all contracts within the scope (known as "obligatory" reinsurance), or it may require the reinsurer to give the reinsurer the option to reinsure each such contract.

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TYPES OF REINSURANCE Proportional Proportional reinsurance (the types of which are quota share and surplus reinsurance) involves one or more reinsurers taking a stated percent share of each policy that an insurer produces. This means that the reinsurer will receive that stated percentage of each dollar of premiums and will pay that percentage of each dollar of losses. In addition, the reinsurer will allow a "Ceding Commission" to the insurer to cover the initial costs incurred by the insured. The insurer may seek such coverage for several reasons. First, the insurer may not have sufficient capital to prudently retain all of the exposure that it is capable of producing. For example, an insurance company might purchase a 50% quota share treaty; in this case they would share half of all premium and losses with the reinsurer. In a 75% quota share, they would share (cede) 3/4 of all premiums and losses. The other form of proportional reinsurance is surplus share or surplus of line treaty. In this case, a retained line is defined as the ceding company's retention - say $100,000. In a 9 line surplus treaty the reinsurer would then accept up to $900,000 (9 lines). So if the insurance company issues a policy for $100,000, they would keep all of the premiums and losses from that policy. If they issue a $200,000 policy, they would give (half of the premiums and losses to the reinsurer. The maximum underwriting capacity of the cedant would be $ 1,000,000 in this example. Non-proportional Non-proportional reinsurance only responds if the loss suffered by the insurer exceeds a certain amount, which is called the "retention" or "priority." An example of this form of reinsurance is where the insurer is prepared to accept a loss of $1 million for any loss which may occur and they purchase a layer of reinsurance of $4 million in excess of $1 million. If a loss of $3 million occurs, then insurer will retain $1 million and will recover $2 million from its reinsurer(s). In this example, the reinsured will retain any loss exceeding $5 million unless they have purchased a further excess layer of say $10 million excess of $5 million

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RETROCESSION Reinsurance companies themselves also purchase reinsurance, a practice known as a retrocession. They purchase this reinsurance from other reinsurance companies. A reinsurance company that sells reinsurance is a "retrocessionaire". A reinsurance company that buys reinsurance is a "Retrocedent". It is not unusual for a reinsurer to buy reinsurance protection from other reinsurers. For example, a reinsurer that provides proportional, or pro rata, reinsurance capacity to insurance companies may wish to protect its own exposure to catastrophes by buying excess of loss protection. Another situation would be that a reinsurer which provides excess of loss reinsurance protection may wish to protect itself against an accumulation of losses in different branches of business which may all become affected by the same catastrophe. This may happen when a windstorm causes damage to property, automobiles, boats, aircraft and loss of life, for example. This process can sometimes continue until the original reinsurance company unknowingly gets some of its own business (and therefore its own liabilities) back. This is known as a "spiral" and was common in some specialty lines of business such as marine and aviation. Sophisticated reinsurance companies are aware of this danger and through careful underwriting attempt to avoid it.

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MARKETING
In the insurance business, you want to be perceived as a person who markets instead of one who sells products. Individuals who believe their goal in life is to sell you something; in many ways, these persons have greatly damaged the image of the insurance and financial service industry. Building a protection portfolio for each client will cause you to stand out, and separate you as an adviser from the average insurance product pusher. Let's face it, one who is in the insurance business can appreciate the ups and downs of the industry. Everything you do, in the name of the client not only impacts you, but everyone else in the world of insurance. Every scandal or omission of the facts causes us all to suffer as well as our clients. It is bad customer service when anyone misleads a present or potential client. That jaded individual may drop their current insurance product, which leads to financial ruin due to a premature death and leave his or her loved one with an income deficit. When you market, you should be letting people know what services you have to offer. As a person in the insurance industry, your job is to protect families from financial disaster. You are supposed to make recommendations to clients who have holes in their insurance portfolio. This idea that everyone needs the same life insurance or health insurance policy is ludicrous. If you try to fit everyone with the same shoe or insurance policy, then you reduce yourself to being a pushy salesperson. We have enough corruption in every industry; however, the insurance industry is amongst the most important, and it should be treated with respect. You could be the difference between a widow staying in her home or having to move into an apartment. Look beyond your wallet on your next insurance appointment. Think of your clients as your mother and father, and we can all sleep better at night. The insurance industry needs to police itself and get rid of any product pushers that may still be selling insurance. It is important that the public not only purchases insurance, but has the right kind to fit their individual needs. Insurers will often use insurance agents to initially market or underwrite their customers. Agents can be captive, meaning they write only for one company, or independent, meaning that they can issue policies from several companies. Commissions to agents represent a significant portion of an insurance cost and insurers that sell policies directly via mass marketing campaigns can offer lower prices. The existence and success of companies using insurance agents (with higher prices) is likely due to improved and personalized service.

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MEANING OF MARKETING The marketing concept is the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition. Today most firms have adopted the marketing concept, but this has not always been the case. In 1776 in The Wealth of Nations, Adam Smith wrote that the needs of producers should be considered only with regard to meeting the needs of consumers. While this philosophy is consistent with the marketing concept, it would not be adopted widely until nearly 200 years later. THE MARKETING PROCESS Under the marketing concept, the firm must find a way to discover unfulfilled customer needs and bring to market products that satisfy those needs. The process of doing so can be modeled in a sequence of steps: the situation is analyzed to identify opportunities, the strategy is formulated for a value proposition, tactical decisions are made, the plan is implemented and the results are monitored. The Marketing Process Situation Analysis | V Marketing Strategy | V Marketing Mix Decisions | V Implementation & Control

Situation Analysis A thorough analysis of the situation in which the firm finds itself serves as the basis for identifying opportunities to satisfy unfulfilled customer needs. In addition to identifying the customer needs, the firm must understand its own capabilities and the environment in which it is operating.
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The situation analysis thus can be viewed in terms an analysis of the external environment and an internal analysis of the firm itself. The external environment can be described in terms of macro-environmental factors that broadly affect many firms, and micro-environmental factors closely related to the specific situation of the firm. The situation analysis should include past, present, and future aspects. It should include a history outlining how the situation evolved to its present state, and an analysis of trends in order to forecast where it is going. Good forecasting can reduce the chance of spending a year bringing a product to market only to find that the need no longer exists. If the situation analysis reveals gaps between what consumers want and what currently is offered to them, then there may be opportunities to introduce products to better satisfy those consumers. Hence, the situation analysis should yield a summary of problems and opportunities. From this summary, the firm can match its own capabilities with the opportunities in order to satisfy customer needs better than the competition. There are several frameworks that can be used to add structure to the situation analysis: 5 C Analysis Company, customers, competitors, collaborators, climate. Company represents the internal situation; the other four cover aspects of the external situation PEST analysis For macro-environmental political, economic, societal, and technological factors. A PEST analysis can be used as the "climate" portion of the 5 C framework. SWOT analysis Strengths, weaknesses, opportunities, and threats - for the internal and external situation. A SWOT analysis can be used to condense the situation analysis into a listing of the most relevant problems and opportunities and to assess how well the firm is equipped to deal with them. Marketing Strategy Once the best opportunity to satisfy unfulfilled customer needs is identified, a strategic plan for pursuing the opportunity can be developed. Market research will provide specific market information that will permit the firm to select the target market segment and optimally position the offering within that segment. The result is a value proposition to the target market. The marketing strategy then involves:

Segmentation Targeting (target market selection) Positioning the product within the target market
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Value proposition to the target market

Marketing Mix Decisions Detailed tactical decisions then are made for the controllable parameters of the marketing mix. The action items include: Product development - specifying, designing, and producing the first units of the product. Pricing decisions Distribution contracts Promotional campaign development

Implementation and Control At this point in the process, the marketing plan has been developed and the product has been launched. Given that few environments are static, the results of the marketing effort should be monitored closely. As the market changes, the marketing mix can be adjusted to accomodate the changes. Often, small changes in consumer wants can addressed by changing the advertising message. As the changes become more significant, a product redesign or an entirely new product may be needed. The marketing process does not end with implementation - continual monitoring and adaptation is needed to fulfill customer needs consistently over the long-term. MARKET SEGMENTATION Market segmentation is the identification of portions of the market that are different from one another. Segmentation allows the firm to better satisfy the needs of its potential customers. The Need for Market Segmentation The marketing concept calls for understanding customers and satisfying their needs better than the competition. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike. Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution, and mass communication. The drawback of mass marketing is that customer needs and preferences differ and the same offering is unlikely to be viewed as optimal by all customers. If firms ignored the differing customer needs, another firm likely would enter the market with a product that serves a specific group, and the incumbant firms would lose those customers.

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Target marketing on the other hand recognizes the diversity of customers and does not try to please all of them with the same offering. The first step in target marketing is to identify different market segments and their needs. Requirements of Market Segments In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:

Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified. Accessible: the segments must be reachable through communication and distribution channels. Substantial: the segments should be sufficiently large to justify the resources required to target them. Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes. Durable: the segments should be relatively stable to minimize the cost of frequent changes.

A good market segmentation will result in segment members that are internally homogenous and externally heterogeneous; that is, as similar as possible within the segment, and as different as possible between segments. Bases for Segmentation in Consumer Markets Consumer markets can be segmented on the following customer characteristics.

Geographic Demographic Psychographic Behavioralistic

Geographic Segmentation The following are some examples of geographic variables often used in segmentation.

Region: by continent, country, state, or even neighborhood Size of metropolitan area: segmented according to size of population
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Population density: often classified as urban, suburban, or rural Climate: according to weather patterns common to certain geographic regions

Demographic Segmentation Some demographic segmentation variables include:

Age Gender Family size Family lifecycle Generation: baby-boomers, Generation X, etc. Income Occupation Education Ethnicity Nationality Religion Social class

Many of these variables have standard categories for their values. For example, family lifecycle often is expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of the children. Psychographic Segmentation Psychographic segmentation groups customers according to their lifestyle. Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables include:

Activities Interests Opinions

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Attitudes Values

Behavioralistic Segmentation Behavioral segmentation is based on actual customer behavior toward products. Some behavioralistic variables include:

Benefits sought Usage rate Brand loyalty User status: potential, first-time, regular, etc. Readiness to buy Occasions: holidays and events that stimulate purchases

Behavioral segmentation has the advantage of using variables that are closely related to the product itself. It is a fairly direct starting point for market segmentation. Bases for Segmentation in Industrial Markets In contrast to consumers, industrial customers tend to be fewer in number and purchase larger quantities. They evaluate offerings in more detail, and the decision process usually involves more than one person. These characteristics apply to organizations such as manufacturers and service providers, as well as resellers, governments, and institutions. Many of the consumer market segmentation variables can be applied to industrial markets. Industrial markets might be segmented on characteristics such as:

Location Company type Behavioral characteristics

Location In industrial markets, customer location may be important in some cases. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the vendor may be critical. In some industries firms tend to cluster together geographically and therefore may have similar needs within a region.
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Company Type Business customers can be classified according to type as follows:

Company size Industry Decision making unit Purchase Criteria

Behavioral Characteristics In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral characteristics may include:

Usage rate Buying status: potential, first-time, regular, etc. Purchase procedure: sealed bids, negotiations, etc.

TARGET MARKET SELECTION

Target marketing tailors a marketing mix for one or more segments identified by market segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire market. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm's objectives, resources, and capabilities. Attractiveness of a Market Segment The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment:

Size of the segment (number of customers and/or number of units) Growth rate of the segment Competition in the segment Brand loyalty of existing customers in the segment Attainable market share given promotional budget and competitors' expenditures
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Required market share to break even Sales potential for the firm in the segment Expected profit margins in the segment

Market research and analysis is instrumental in obtaining this information. For example, buyer intentions, sales force estimates, test marketing, and statistical demand analysis are useful for determining sales potential. The impact of applicable microenvironmental and macro-environmental variables on the market segment should be considered. Note that larger segments are not necessarily the most profitable to target since they likely will have more competition. It may be more profitable to serve one or more smaller segments that have little competition. On the other hand, if the firm can develop a competitive advantage, for example, via patent protection, it may find it profitable to pursue a larger market segment. Suitability of Market Segments to the Firm Market segments also should be evaluated according to how they fit the firm's objectives, resources, and capabilities. Some aspects of fit include:

Whether the firm can offer superior value to the customers in the segment The impact of serving the segment on the firm's image Access to distribution channels required to serve the segment The firm's resources vs. capital investment required to serve the segment

The better the firm's fit to a market segment, and the more attractive the market segment, the greater the profit potential to the firm. Target Market Strategies There are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following: Single-segment strategy It is also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources.

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Selective specialization This is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments. The product itself may or may not be different - in many cases only the promotional message or distribution channels vary. Product specialization The firm specializes in a particular product and tailors it to different market segments. Market specialization The firm specializes in serving a particular market segment and offers that segment an array of different products. Full market coverage The firm attempts to serve the entire market. This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment. MARKET ANALYSIS The goal of a market analysis is to determine the attractiveness of a market and to understand its evolving opportunities and threats as they relate to the strengths and weaknesses of the firm. Following are the aspects by which market is analyzed

Market size (current and future) Market growth rate Market profitability Industry cost structure Distribution channels Market trends Key success factors

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Market Size The size of the market can be evaluated based on present sales and on potential sales if the use of the product were expanded. The following are some information sources for determining market size:

government data trade associations financial data from major players customer surveys

Market Growth Rate A simple means of forecasting the market growth rate is to extrapolate historical data into the future. While this method may provide a first-order estimate, it does not predict important turning points. A better method is to study growth drivers such as demographic information and sales growth in complementary products. Such drivers serve as leading indicators that are more accurate than simply extrapolating historical data. Important inflection points in the market growth rate sometimes can be predicted by constructing a product diffusion curve. The shape of the curve can be estimated by studying the characteristics of the adoption rate of a similar product in the past. Ultimately, the maturity and decline stages of the product life cycle will be reached. Some leading indicators of the decline phase include price pressure caused by competition, a decrease in brand loyalty, the emergence of substitute products, market saturation, and the lack of growth drivers. Market Profitability While different firms in a market will have different levels of profitability, the average profit potential for a market can be used as a guideline for knowing how difficult it is to make money in the market. Michael Porter devised a useful framework for evaluating the attractiveness of an industry or market. This framework, known as Porter's five forces, identifies five factors that influence the market profitability:

Buyer power Supplier power

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Barriers to entry Threat of substitute products Rivalry among firms in the industry

Industry Cost Structure The cost structure is important for identifying key factors for success. To this end, Porter's value chain model is useful for determining where value is added and for isolating the costs. The cost structure also is helpful for formulating strategies to develop a competitive advantage. For example, in some environments the experience curve effect can be used to develop a cost advantage over competitors. Distribution Channels The following aspects of the distribution system are useful in a market analysis:

Existing distribution channels - can be described by how direct they are to the customer. Trends and emerging channels - new channels can offer the opportunity to develop a competitive advantage. Channel power structure - for example, in the case of a product having little brand equity, retailers have negotiating power over manufacturers and can capture more margin.

Market Trends Changes in the market are important because they often are the source of new opportunities and threats. The relevant trends are industry-dependent, but some examples include changes in price sensitivity, demand for variety, and level of emphasis on service and support. Regional trends also may be relevant. Key Success Factors The key success factors are those elements that are necessary in order for the firm to achieve its marketing objectives. A few examples of such factors include:

Access to essential unique resources Ability to achieve economies of scale Access to distribution channels
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Technological progress

It is important to consider that key success factors may change over time, especially as the product progresses through its life cycle THE PRODUCT LIFE CYCLE

A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product. If a curve is drawn showing product revenue over time, it may take one of many different shapes, an example of which is shown below: Product Life Cycle Curve

The life cycle concept may apply to a brand or to a category of product. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile. Product development is the incubation stage of the product life cycle. There are no sales and the firm prepares to introduce the product. As the product progresses through its life cycle, changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities. Introduction Stage When the product is introduced, sales will be low until customers become aware of the product and its benefits. Some firms may announce their product before it is introduced, but such announcements also alert competitors and remove the element of surprise. Advertising costs typically are high during this stage in order to rapidly increase
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customer awareness of the product and to target the early adopters. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits. During the introduction stage, the primary goal is to establish a market and build primary demand for the product class. The following are some of the marketing mix implications of the introduction stage: Product - one or few products, relatively undifferentiated Price - Generally high, assuming a skim pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly. Distribution - Distribution is selective and scattered as the firm commences implementation of the distribution plan. Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives may be directed toward early adopters. The introductory promotion also is intended to convince potential resellers to carry the product. Growth Stage The growth stage is a period of rapid revenue growth. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. Once the product has been proven a success and customers begin asking for it, sales will increase further as more retailers become interested in carrying it. The marketing team may expand the distribution at this point. When competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition. During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows: Product - New product features and packaging options; improvement of product quality. Price - Maintained at a high level if demand is high, or reduced to capture additional customers. Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product.
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Promotion - Increased advertising to build brand preference. Maturity Stage The maturity stage is the most profitable. While sales continue to increase into this stage, they do so at a slower pace. Because brand awareness is strong, advertising expenditures will be reduced. Competition may result in decreased market share and/or prices. The competing products may be very similar at this point, increasing the difficulty of differentiating the product. The firm places effort into encouraging competitors' customers to switch, increasing usage per customer, and converting nonusers into customers. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products. During the maturity stage, the primary goal is to maintain market share and extend the product life cycle. Marketing mix decisions may include: Product - Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. Price - Possible price reductions in response to competition while avoiding a price war. Distribution - New distribution channels and incentives to resellers in order to avoid losing shelf space. Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get competitors' customers to switch. Decline Stage Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change. If the product has developed brand loyalty, the profitability may be maintained longer. Unit costs may increase with the declining production volumes and eventually no more profit can be made. During the decline phase, the firm generally has three options:

Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product. Harvest it, reducing marketing support and coasting along until no more profit can be made. Discontinue the product when no more profit can be made or there is a successor product.
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The marketing mix may be modified as follows: Product - The number of products in the product line may be reduced. Rejuvenate surviving products to make them look new again. Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products serving a niche market. Distribution - Distribution becomes more selective. Channels that no longer are profitable are phased out. Promotion - Expenditures are lower and aimed at reinforcing the brand image for continued products. Limitations of the Product Life Cycle Concept The term "life cycle" implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Consequently, the life cycle concept is not wellsuited for the forecasting of product sales. Furthermore, critics have argued that the product life cycle may become self-fulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline. Nonetheless, the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle. SITUATION ANALYSIS

In order to profitably satisfy customer needs, the firm first must understand its external and internal situation, including the customer, the market environment, and the firm's own capabilities. Furthermore, it needs to forecast trends in the dynamic environment in which it operates. A useful framework for performing a situation analysis is the 5 C Analysis. The 5C analysis is an environmental scan on five key areas especially applicable to marketing decisions. It covers the internal, the micro-environmental, and the macroenvironmental situation. The 5 C analysis is an extension of the 3 C analysis (company, customers, and competitors), to which some marketers added the 4th C of collaborators. The further addition of a macro-environmental analysis (climate) results in a 5 C analysis, some aspects of which are outlined below.
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Company

Product line Image in the market Technology and experience Culture Goals

Collaborators

Distributors Suppliers Alliances

Customers

Market size and growth Market segments Benefits that consumer is seeking, tangible and intangible. Motivation behind purchase; value drivers, benefits vs. costs Decision maker or decision-making unit Retail channel - where does the consumer actually purchase the product? Consumer information sources - where does the customer obtain information about the product? Buying process; e.g. impulse or careful comparison Frequency of purchase, seasonal factors Quantity purchased at a time Trends - how consumer needs and preferences change over time

Competitors

Actual or potential Direct or indirect

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Products Positioning Market shares Strengths and weaknesses of competitors

Climate (or context) The climate or macro-environmental factors are:

Political & regulatory environment - governmental policies and regulations that affect the market Economic environment - business cycle, inflation rate, interest rates, and other macroeconomic issues Social/Cultural environment - society's trends and fashions Technological environment - new knowledge that makes possible new ways of satisfying needs; the impact of technology on the demand for existing products.

The analysis of the these four external "climate" factors often is referred to as a PEST ANALYSIS.

Information Sources Customer and competitor information specifically oriented toward marketing decisions can be found in market research reports, which provide a market analysis for a particular industry. For foreign markets, country reports can be used as a general information source for the macro-environment. By combining the regional and market analysis with knowledge of the firm's own capabilities and partnerships, the firm can identify and select the more favorable opportunities to provide value to the customer.

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THE MARKETING MIX (THE 4 P'S OF MARKETING)

Marketing decisions generally fall into the following four controllable categories:

Product Price Place (distribution) Promotion

The Marketing Mix

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These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response. Product Decisions The term "product" refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made:

Brand name Functionality Styling Quality Safety Packaging Repairs and Support Warranty Accessories and services

Price Decisions Some examples of pricing decisions to be made include:

Pricing strategy (skim, penetration, etc.) Suggested retail price Volume discounts and wholesale pricing Cash and early payment discounts Seasonal pricing Bundling Price flexibility Price discrimination
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Distribution (Place) Decisions Distribution is about getting the products to the customer. Some examples of distribution decisions include:

Distribution channels Market coverage (inclusive, selective, or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers Order processing Transportation Reverse logistics

Promotion Decisions In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include:

Promotional strategy (push, pull, etc.) Advertising Personal selling & sales force Sales promotions Public relations & publicity Marketing communications budget

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Limitations of the Marketing Mix Framework The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy. Today, with marketing more integrated into organizations and with a wider variety of products and markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it.

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CHAPTER SIX

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MOTOR INSURANCE
Motor Insurance is a product that ensures the insured that he will be compensated in case if he suffered any loss. This type of insurance is being sold on a greater range than other classes of business. Following are those policies that are issued by EFU General Insurance.

PRIVATE AND COMMERCIAL VEHICLE COMPREHENSIVE INSURANCE This is the widest form of cover; our client is protected against financial losses of all kinds, accidental loss to vehicle, theft of car and third party liability claims on him or her.

PRIVATE AND COMMERCIAL VEHICLE THIRD PARTY MOTOR VEHICLE INSURANCE EFU's client is protected against all financial losses due to accidental damage liability of all forms to third party, property damage or bodily injury, death or both.

PRIVATE AND INSURANCE

COMMERCIAL

VEHICLE

ACT

ONLY

LIABILITY

The cover meets the minimum legal insurance requirement. In this cover, EFU offers protection against financial losses due to liability of accidental bodily injury or death to third party. In addition to above basic protections EFU is offering insurance solutions to their clients, combining basic covers with following EXTRA BENEFITS: Family Accidental Benefit Cover EFU offer accidental death or injury benefit for insured, spouse and the entire family of EFU individual clients, in addition to comprehensive insurance of motor vehicle.

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Accidental Death Cover for Salaried Driver For our commercial clients owning fleet of vehicles a specially designed product offering personal accident covers for the paid drivers. Protection of Loan Amount for Financial Institutions For financial institution offering car financing schemes EFU offer modified insurance package offering protection of outstanding loan amount to the leasing company in case of death of lessee, combined with the comprehensive coverage of motor vehicle Personal Accident Benefit Cover for Passengers This is a very popular cover that EFU is giving its clients who are in hospitality business, car rental service. Their guests are offered accidental injury or death benefits while traveling in motor vehicle.

CRUX OF ABOVE DETAIL

Coverage Third party personal injury and death Act liability policy Third party policy Comprehensive policy

Third party property damage

Theft/own damage, constructive total Loss

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MARINE INSURANCE
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination. Thats why
"Marine Insurance is said to be Mother of all Insurances.

At EFU General Insurance two major types of Marine Insurances are issued.

MARINE CARGO In Marine Insurance coverage is provided for goods in transit for both Import and Export and the mode of conveyances on waterways, air and land routes Marine Cargo Insurance is divided mainly into three segments Import The goods are covered from warehouse to warehouse the contract is usually on C&F and CIF basis. Export The goods are covered from warehouse to warehouse. The contracts can be CIF and FOB basis. Inland Transit The goods are covered from anywhere in Pakistan to anywhere in Pakistan. The covers with respect to above segments are granted as per London Institute Cargo Clauses A, B & C. Whereas clause A provides widest and most comprehensive cover while clause C provides the narrowest scope of cover.

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MARINE HULL Insurance that covers physical damage to vessels, including their machinery and fuel but not their cargo. Construction Risks During the period of the construction of a vessel, it may be insured with an insurance company familiar with handling of such insurance. Due to the fact that a Ship-owner's Yard is essentially a static, non-marine risk, it is possible that basically non-marine insurer will take on the risk of covering a vessel while it is under construction, but generally it is unsatisfactory. Cover will be required for a whole period of construction, which may last for two or three years and as the builder frequently accepts responsibility for the launching of the vessel, its tests, sea-trials and possibly its delivery voyage, builder's risks policies issued in the marine market include full marine cover accordingly. The Institute Clause for Builders' Risks provides a comprehensive form of cover in this respect. Cover can be extended to include War risks but due to the operation of the "Waterborne Agreement"; the vessel is only insured while she is waterborne i.e. after launching. Period of Insurance The customary practice is to effect Hull policies for a period of 12 months. The clauses contain, however, the "Continuation Clause" which provides that if at the expiration of the policy the vessel is at sea, or in distress, or at a port of refuge or of Call, the vessel shall, provided previous notice is given to the underwriters, be held covered at a prorata monthly premium to her port of destination. This clause provides protection for an insured in the event that vessel was known to be in a damaged condition at sea or feared lost and the policy was nearing termination, naturally making it difficult to obtain renewal of the policy. These days most renewals are arranged well ahead (negotiations frequently commencing two months before expiry) and the need for this clause has, therefore, been reduced. Types Of Hull Cover Institute Time Clauses Hulls: total loss, general average and collision liability (including salvage, salvage charges and sue and labor) Institute Time Clauses Hulls: total loss only (including salvage, salvage charges and sue and labor)
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 Institute Time Clauses Hulls: port risks and institute time clauses and hulls: port risks including limited navigation Institute Voyage Clauses Hulls Additional Insurance Institute War and Strike Clauses Hulls Time Institute Time Clauses Hulls: disbursements and increased value (total loss only, including excess liabilities) Protection and Indemnity Associations Liabilities in respect of Seamen Liabilities in respect of Passengers Liabilities in respect of Third Parties Liabilities arising from Collisions Liabilities arising from Pollution Liabilities arising from Wreck Removal General Average

Miscellaneous Marine Risks There are quite a number of other marine risks, such as Ship Repairers' Legal Liability and Ship Owners' Liabilities (usually to "on deck" shipments covered by "under deck" bill of lading), Terminal Operators Liability Insurance and Stevedores Liability Insurance. These represent small but important areas within the specialized field of Marine Insurance.

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AVIATION INSURANCE
No one will ever know when mankind first tried to fly, but it is clear that man envied the gift given by nature to the animal kingdom, that is, the ability to fly. Very large sums are invested in modern aircraft and their operation. The largest modern airliners cost up to Pak Rupees 14 billion each and may carry over 500 passengers whose collective worth, if compensation for death or injury has to assessed, may run to a further Pak Rupees 50 billion. Even a small private aircraft may be the cause of a mid-air collision with similar financial consequences. The failure of a component manufactured by a small company may result in the loss of a fully loaded airliner. Because such catastrophic loss may arise it is normal for aviation risks to be excluded from many kinds of general insurance policy.

BUYERS OF AVIATION INSURANCE Commercial Aircraft Operators Corporate and Business Aircraft Operators Aerial Work and Air Taxi Operators Private Owners and Flying Clubs Air-Craft Manufacturers Owners and Operators of Air-Ports, Hangers Aircrew Passengers Shippers Of Goods By Air Lessors (Banks, Financial Institutions) Hang Gliders Conventional Gliders, Balloons and Hovercraft

IMPORTANCE It has been realized that an increase in speed from 60 m.p.h. to an estimated 1800 m.p.h. in respect of the new supersonic aircraft, together with their ever-increasing costs would reveal the amount of money that air-operators, manufacturers and
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financial enterprises are investing in the aircraft industry and in civil air transport, and would emphasize the fact that each and every individual company or enterprise could not afford to lose the whole, or even a part, of their capital as a result of accident or misfortune. That is why the idea of spreading the risk by insurance is regarded as inevitable, and why aviation insurance enterprises, as well as new ventures, have been constituted and actively continued. TYPES OF COVERS OFFERED Aviation Hull All Risks Hull War and Hijacking Spare Engines and Spare All Risk Legal Liability To Passengers Legal Liability To Third Parties Legal Liability To Cargo Legal Liability To Mail Comprehensive General Liability Loss Of License Personal Accident

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HOME INSURANCE
Safety of home is a big challenge in the present circumstances and if things go wrong, like burglary or fire - it is important to have right insurance. With EFUS HOME INSURANCE PLUS you can be sure that your most important insurance needs are automatically covered without any hidden notes. PROPERTY IS INSURED AGAINST? Home Insurance Plus protects against loss/damage caused by: Fire, explosion (including explosion of domestic appliances like geyser and stoves) lightning, thunderbolt, earthquake Burglary, house breaking or any attempt of threat Riot, strike, labor disturbance and malicious act Aircraft and other aerial devices or articles dropped there from as well as falling trees Bursting or overflowing of underground water or sewerage pipes (excluding damage caused thereto) Flood, typhoon but excluding rain damage except when occurring during or immediately after typhoon Impact by road vehicle Personal accident cover Loss of rent and Terrorism

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VALUABLES Valuables like Jewelry are held covered when they are: at residence or in a specified locker or in transit between residence and the locker and vice versa (maximum limit Rs. 100,000/-) or worn and robbed anywhere in Pakistan (limited to 30% of the insured value of the jewelry. Maximum limit Rs. 100,000/-) Cash on body also covered maximum up to Rs. 10,000/- during transit

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SHOP INSURANCE
EFU, being INNOVATORS of world class quality insurance products; introduce SHOP INSURANCE cover. Under this policy your shop (both building and contents or just building or contents), neon sign & plate glass are protected against the following perils: Fire, lightning, thunderbolt and short circuit. Burglary including dacoity and armed holdup. Riot & strike damage. Malicious damage. Explosion. Terrorism. Aircraft and other aerial devices or articles dropped therefrom. Impact by any road vehicle. Atmospheric disturbance (flood, cyclone and typhoon). Earthquake.

In addition to the above traditional risks, following are special features of our policy: CASH-IN-SAFE / COUNTER / DRAWER The Company shall indemnify the insured for loss of cash up to 5% of sum insured of contents (maximum Rs. 25,000/-), or any other limits specifically noted on the schedule of the policy, whilst contained (in drawer, safe or counter) in the premises described in the schedule, due to burglary, dacoit and armed holdup.

PERSONAL ACCIDENT COVER The Company undertakes to pay the compensation on the scale provided below for bodily injury as hereinafter defined sustained by the owner(s)/partner(s) whilst in the shop mentioned in the schedule occasioned by any of the perils stated above.

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FIRE INSURANCE
EFU Insurance writes a portfolio comprising a broad spread of quality business relating to industrial, commercial and service activities, including transportation, oil production, manufacturing, engineering, banking, and other miscellaneous services. The business written ranges from simple commercial property risks to the largest and most sophisticated industrial and energy risks. CLIENT FOCUS The team of EFU Insurance claims and business administration specialist ensure that client's affairs receive immediate and responsive attention, using sophisticated management systems based on the latest information and communication technology. Providing expert advice on the interpretation and consequences of contractual obligations, together with the efficient handling and prompt settlement of claims, underlines the dedication of EFU Insurance to provide the utmost quality of service to clients and a commitment to develop long-term and mutually beneficial relationships with our clients. EFU takes a proactive role in developing innovative solutions, which meet the specific requirements of its clients. TYPES OF POLICIES
Property policies come in three basic types; package, combined and single. Example of package policies is that of a household policy (domestic) and a shopkeeper policy (commercial).

The package policy contains a number of different sections e.g. fire, accidental damage, glass, theft, third party liability, employers liability, goods in transit, money, and the insured usually buys the policy as a whole, although small modifications can be made if required. The cover, limits, and sums insured are standard for each policy issued to the same trade, or section of the market for which it is designed. A combined policy is one where separate sections are brought together to create a policy which is specific to the needs of the organization insuring. These policies are usually bound by a front and back cover. The insured can elect to have particular sections included within the policy, which is tailored specifically client by client; i.e. one insured may choose, fire, business interruption, theft and glass coverage, whereas another client may choose fire, theft, glass, money, goods in transit and frozen food coverage, because this would be more particular to his need.
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The single policy on the other hand is one where only one type of cover is provided such as fire policy or a theft policy; single policies are however, becoming rarer since the combined policy can be adapted to suit most needs of an organization.

PROPERTY
EFU covers both medium and large industrial and commercial risks relating to property, including energy complexes.

Scope of coverage is fire and allied perils extending to all risks including difference-incondition, with both physical damage and business interruption. EFU leads on a number of major industrial energy accounts and industrial property risks. EFU is recognized market leader for worldwide marine energy business, with a wellspread, diversified portfolio. It has a highly experienced underwriting team supported by advanced computer systems for accumulation and analysis.

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BOND
Historically many companies have approached banks when requiring a bond. A bond is not a policy of insurance but is in effect a form of financial guarantee. It is a guarantee by one party (the surety or guarantor) to another party (the body requesting the bond) that a third party (the company requiring the bond) will meet its contractual obligations. Increasingly insurance companies are providing bonds, with two distinct advantages over the banks: Charges on company assets are not generally requested No reduction upon the company's borrowing facility will be imposed. Before acting as a surety or a guarantor in respect of a bond, an insurance company will usually require the following information: Three years financial audited account for the applicant company Three years consolidated audited account for the ultimate holding / parent company in addition to the above if the company is owned by another company Full details of the circumstances in which the bond is required, including a copy of the bond wording and the bond amount A fee is charged for providing the bond and counter indemnities are generally required from the applicant company and / or its ultimate holding / parent company. In certain circumstances, counter indemnities may also be required from shareholding directors in their personal capacity. A counter indemnity is in many respects a written formalization of an existing common law right. If a company for whom a guarantee is provided fails in its obligation to perform and this gives rise to a call on the bond, surety or a guarantor can claim reimbursement from the company.

TYPES OF BONDS OFFERED AT EFU Bid Bond Performance Guarantee Bond Mobilization Advance Bond Retention Money Bond Excise Bond Supply Bond

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MISCELLANEOUS INSURANCE
This is not a particular type of Insurance as fire, motor , home ,shop , etc are. It includes all those insurances that can be classified separately such as personal accident , liability etc. Following are few types of Miscellaneous insurance that are issued by EFU insurance

Workmen's compensation Travelcare (EFU travel insurance) Personal accident Liability insurance Fidelity guarantee Money insurance Plate glass insurance Burglary Golfers insurance Credit card insurance Computer crime insurance

Now each will be discussed one by one.

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WORKMEN'S COMPENSATION

The Workmen's Compensation Act provides no-fault benefits in the event of death or injury to a 'Workman' (normally with an income of less than PKRS 3,000 per month) due to an accident at work. Employers can protect themselves in case they are required to pay under the terms of this Act for injury to an employee by purchasing our Workmen's Compensation policy.

TRAVELCARE (EFU TRAVEL INSURANCE)

Enjoy our 24-Hour Non-Stop Travelcare to any destination all around the world which is specially designed for the travelers traveling abroad. Our Worldwide Travelcare offers best coverage with Immediate Assistance and Direct Settlement of Claims in the Country of Visit.

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PERSONAL ACCIDENT INSURANCE Personal accident policy covers the expenses insured may have to bear on accident. EFU provides its customers with a number of benefits in such policy it may be doubling the indemnity amount or compensation in some other way. Following are the types of personal accident policies issued by EFU insurance

Group Personal Accident Personal Accident cover for individual persons Family Package gives a discount when the whole family buys one policy

This policy will also compensate in the event of Death, Permanent Disability or Temporary Disability due to an Accident. Coverage is worldwide.EFU adds extra coverage that will pay for medical expenses resulting from an Accident.

LIABILITY INSURANCE Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract. It is sub-divided into four major heads that are Public Liability Insurance Any firm or any individual in the normal course of business or other activities may negligently cause damage to the property of others or injury to others. This may result in that person becoming legally liable to such persons whose property has been damaged or who have been injured. Apart from this liability, extensive legal fees may have to be paid. Our Public Liability Insurance policy will pay all sums which a firm or individual may become legally liable to pay as compensation for bodily injury or illness caused to third parties.

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Product Liability Insurance Any firm that produces, repairs, services or supplies goods or products may become liable to users of such goods if these goods are defective in any way and as a result of such defect, the user may suffer property damage or bodily injury. Our Product Liability Insurance policy will pay all sums that the producer or supplier becomes legally liable to pay in such a case including the legal expenses incurred in defending himself in a court of law. Employer's Liability Insurance

An employer may become liable to his employee if due to the negligence of the employer the employee is injured at work. Our Employer's Liability Insurance policy will protect the employer in such a case and will pay all sums that the employer becomes legally liable to pay to his employee as compensation. In addition, it will pay for legal fees incurred in preparing a defense in a court of law. This is similar to Workmen's Compensation Insurance as explained above. General Professional Indemnity Professional lawyers, doctors, engineers, etc. run the risk of becoming legally liable to others as a result of not properly performing their professional duties. This may include for instance, the case where a lawyer gives wrongful advice to his client resulting in his client suffering a financial loss. Our professional Indemnity policy will pay all sums that such a professional becomes legally liable to pay as a result of professional negligence. In addition it will pay for legal expenses incurred in preparing a defense in a court of law.

FIDELITY GUARANTEE

Should a company suffer a direct financial loss as a result of an employee's dishonest activities, our Fidelity Guarantee policy will compensate the company for such loss.

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MONEY INSURANCE A business may be robbed of cash either during normal business hours or after normal business hours. Money may be stolen whilst in transit between the bank and the office or on any other route. Our Cash in Transit, Cash in Safe and Cash in Drawers policy will compensate the business for such loss. The policy may be extended to cover accidental injury to employees of the business who may be injured during a hold up.

PLATE GLASS INSURANCE Plate Glass is costly to replace and certain businesses find glass insurance an important part of their insurance portfolio. This applies particularly to retail shops, department stores, showrooms, etc. where shop fronts and window displays play an important role in attracting business. The Glass Policy pays the cost of replacement of all external glass following breakage at the business premises. The Glass Policy may be extended to cover special types of glass which are very expensive to replace such as silvered, wired, ornamental, stained, lettered, toughened and armored glass.

BURGLARY

Property belonging to a business or a household may be stolen from the business premises or the home. Our policy will compensate the business or the individual in the event of loss of property from the insured premises following actual forcible entry on to the premises.

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GOLFERS INSURANCE

Golfer Insurance offers you and your spouse total peace of mind when you play golf. Coverage includes golf equipment, personal effects, hole-in-one expenses, personal liability and personal accident.

CREDIT CARD INSURANCE

Do you really need credit card insurance? If so, are the card insurance programs being offered to you a good deal? The answers depend on which of the many forms of credit card insurance you're considering... and who's offering it .There is, for example, insurance to pay your credit card bills if you become disabled or you lose your job. This type of insurance may be a good thing if your other potential sources of income wouldn't be enough to pay your monthly debts. But, there may be a waiting period before you'd receive your first benefit payment, and the insurance may only pay the minimum card payment each month (up to the policy coverage limit). So, unless you are disabled or out of work for a very long time, the cost of the premiums could easily exceed any monthly benefits. Likewise, insurance that will pay off card balances if you die may make sense only if you have a lot of credit card debt and little or no other life Insurance. In general, you might be better off insuring yourself against income loss or death by purchasing regular disability or life insurance instead of credit insurance. Some credit card protection plans are basically notification servicesthey'll contact your card issuers if your cards are lost or stolen and arrange for new cards, or maybe they'll periodically send you copies of your credit report so you can review it for accuracy. "This may be a useful service for some people, but it offers nothing you cannot do yourself with a minimum amount of effort. If you think you want this kind of service, though, you should first ask your card issuers if they offer the same service more cheaply or at no cost. Some telemarketers are aggressively selling insurance that covers the fraudulent use of your credit card.

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ENGINEERING POLICY
Also known as Machinery Breakdown or Plant All Risks Insurance, this type of insurance provides very broad cover for damage to electrical and mechanical machinery. EFU insurance offers following covers in this regard: ERECTION ALL RISKS INSURANCE Erection All Risk Insurance offers comprehensive and adequate protection during the period and stages of erection of the machinery, plant and steel structures of any kind as well as third party claims in respect of property damage or bodily injury arising in connection with the execution of an erection project. CONTRACTOR'S ALL RISKS INSURANCE Contractor All Risks Insurance offers comprehensive and adequate protection against loss or damage in respect to contract works of civil engineering projects, construction plant and equipment and construction machinery as well as third party claims in respect of property damage or bodily injury arising in connection with the execution of a construction project CONTRACTOR'S PLANT AND MACHINERY INSURANCE This policy is developed for the contractors. It offers comprehensive insurance to contractor's plant and machinery on an annual basis. It offers loss or damage occurring at work, at rest or during maintenance or during the transit of equipment and is not limited to a specific construction site. MACHINERY INSURANCE Machinery Insurance is developed to grant industry the effective insurance cover for expensive plant, machinery and mechanical equipment. All type of machinery, plant, electrical and mechanical equipment and apparatus may be covered under this policy. By its very nature Machinery Insurance is an all risk "Accident" insurance for machinery. It covers unforeseen and sudden physical loss or damage from causes not specifically excluded, in a manner necessitating repair or replacement. Those items having a short service life compared to the entire plant are normally excluded.

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MACHINERY LOSS OF PROFIT (MLOP) INSURANCE This policy provides cover for actual loss of gross profit sustained as a result of a business interruption caused by an accident indemnifiable under machinery insurance. MLOP insurance makes good The continuing business expenses (standing charges) The net profit The salaries and wages paid to employees The increase in cost of working like the additional expenditure incurred for avoiding or diminishing a reduction in turnover MLOP insurance is of special interest for bottle neck equipment used in the field of power generation like boilers, steam turbines, generators, transformers, process machinery etc. BOILER AND PRESSURE VESSEL INSURANCE (Machinery) Boiler is an integral part of many plants. Boiler is a device which produces steam under high pressure and temperature. Boiler is an expensive equipment and always contain risk of explosion and collapse. Boiler explosion not only destroy the boiler itself but cause catastrophic damage to surrounding property and machines. Collapse of a boiler occur more frequently than explosion and may occur due to bending of boiler's components due to high temperature and pressure. This policy covers both loss due to explosion and collapse of boiler or any other pressure vessel (like gas cylinder). This policy covers cost of repairs of boiler and pressure vessel and auxiliary equipment and surrounding buildings, machinery and other property. ELECTRONIC EQUIPMENT INSURANCE Electronic Equipment Insurance is today a common policy for high valuable electronic equipment. The term electronic equipment comprises all electrical systems having moderate power requirement such as Electronic data processing ( EDP ) equipment Electrical and radiation equipment for medical use Communication facilities

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In other words all types of equipment which generate, convert, store transfer and/or process physical data and information can be insured. Electronic Equipment Insurance is one of the most comprehensive policies. The insurance protects owner as lesser or lessee, as operator, or as hirer, or as maintainer. This policy is an "Accidental" insurance of "all risk" basis covering almost all the perils but only after successful commissioning of the insured items. Mobile and portable equipment whilst at stationary or at transit any where in the country may also be covered under this policy. COMPREHENSIVE MACHINERY INSURANCE POLICY The Comprehensive Machinery Insurance policy is intended to provide property cover for machinery and industrial plant as an enhancement of machinery insurance and is specially aimed at risks which are demanding from underwriting perspective. Power and steel plants, paper, cement factories, sugar mills or other industry with a high exposure to machinery damage but a lower exposure to fire, explosion and natural hazards are insured under this policy. COMPREHENSIVE PROJECT INSURANCE POLICY The Comprehensive Project Insurance policy is applicable to erection and construction projects, but it is particularly relevant to risks such as hydroelectric plants which involve both construction works and machinery erection. In addition to Third Party Liability and construction machinery this policy includes marine cargo section so as to fully live up to the idea of a Comprehensive Project Insurance.

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RISK MANAGEMENT
Risk is the sugar and salt of life. Risk brings sweetness to life and it brings bitterness. There is something exciting about the risk, an edge that it brings, a dimension we would not want to give up. The other side of risk is less attractive. The bitter side of risk is one with which we are only too familiar. 'Risk' is the unlooked for, unwanted event in the future. Events such as those at Flixborough, Seveso, Three Mile Island, Bhopal, Chernobyl, Zeebrugge, Piper Alpha or Kings Cross. These events and others like them have certainly grabbed the headlines but they are only the tips of the risk iceberg. They are the events, which make the headlines and the news bulletins, but they are far removed from the everyday forms of risk, which regularly confront us. The 'real' level of risk comprises the steady toll of fires, accidents, thefts, explosions, and other similar events. These are events, which rarely grab frontpage space in our newspapers but nevertheless form the bulk of the work of risk management. The dimensions and effects of such loss events have long since become major significance for whole economies and the questions of how to predict and prevent them are accordingly the subject of intensive discussion both in the political sphere and among the public at large. It is an illusion to think that such events can always be prevented wherever they occur. An analysis of loss experience has shown, however, that it is often a combination of individual causes which, taken on their own, would not have any dramatic impact that leads to major or even catastrophic losses and that these, in turn, can give rise to some very complex effects. This realization makes it necessary to approach the problem of the limitation and control of threats from several angles at once or, in insurance terms, from the viewpoint of several different classes of business. The complex realities of modern economic life and the growing awareness of the public at large place increasing demands on companies to pursue appropriate and far-sighted policies about risk. The same applies to insurers in determining their underwriting policies. The rapid development of new technologies and the changing nature of production processes necessitate a constant analysis of risk profiles. Both entrepreneurs and insurers therefore enormously increased need for analytical and advisory services. Risk Management Department at E.F.U is meeting part of this demand. This company offers our client advice in the field of Risk Management.

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Aside from this, it is EFU's aim to offer its clients comprehensive support in questions of risk management affecting any sector. What do EFU's services cost? These highly individual services exceed the scope of what we normally offer our clients and therefore cannot be provided free of charge. However, at EFU we charge you nothing. Does EFU also offer risk management training? Depending upon the request, we hold specific risk management seminars for our business partners. After an introduction to the theory of risk management, the practical side is demonstrated by means of a case study. The participants then have a chance to make risk management decisions and to analyze these in the course of workshops. Whom do you approach for risk management services? The "Risk Management" Central Office of EFU: Head Office - will be glad to receive your orders. It is responsible for coordinating and supervising the work that will be done on your behalf. This concentration of activities in one central office is of great advantage to you. Our branches with which you have dealt previously will also be pleased to help in passing on your requests to our risk management specialists.

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CHAPTER SEVEN

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STRATEGIC ANALYSIS
This strategic analysis will include SWOT and PEST analysis and BCG matrix of EFU. That will be described as below.

SWOT ANALYSIS
SWOT is basically a combination of four factors that a Company must account for

Now each of these aspects will be discussed as under with reference to EFU insurance STRENGTHS Strengths of EFU Insurance can determine the competition ability in the market ,with other Insurance Companies. The more the strength of the company, comparing to its competitors the more superior it is on its competitors. After having a detailed research on the EFU Insurance and using the marketing strategies to analyze. The Following Strengths are determined. Pioneer of General Insurance EFU GENERAL INSURANCE LIMITED is Pakistan's pioneer general insurer with the industry's highest premium growth in 2003 of Rs. 86 crores.EFU established in 1932, under the inspiration of the Quaid-e-Azam Mohammad Ali Jinnah. The company was originally registered at Calcutta and operated in India (undivided) and Burma. In 1947, on birth of Pakistan EFU found a new home to develop. In Pakistan, EFU rapidly established itself as a progressive and innovative insurer. It gave the emerging insurance
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industry the leadership, the manpower and the drive needed to grow in a situation where at one time, three-fourths of insurance was held by foreign companies. Traditionally the EFU name has become synonymous with progressiveness and prompts claim settlement and now the EFU being the largest insurance group provides a full range of general ,life and health insurance services. Eastern Federal Union Insurance Company has an advantage of being the pioneer of the Insurance Industry in Pakistan. Because of the experience and market share they had gained, made them the leader in General Insurance in Pakistan. More over it is the nature of the customer that preference is for the older and stable company. And as EFU has been providing its services since 1947, people are more intend towards EFU. Wide Variety of Insurance Policies EFU has a wide variety of Insurance policies. Main categories are: Life Health General Insurance Customers Business or non-business when have to buy more than a single type of insurance policies, then they seek for the company which can fulfill there needs under one roof.EFU provides wide range of Insurance services. Specifically Insurance Industry Comparing to EFU competitors, Easter Federal Union Insurance is specifically the Insurance Industry. Its focus is totally on the development of Insurance sector. All the investment of this company is for the betterment and progress of insurance company. Having focus on the Insurance, EFU has gain more professionalism in providing Insurance services to its customers .Major competitor of EFU is Adamjee Insurance Limited. This is not specifically for Insurance. It is the group of industries, and one of their industries is the Insurance service providers. Easy Access for Customers Customers can have the access to EFU very easily. One can contact to the EFU through one of the 64 branches spread all over the Pakistan. From which 23 along with the Head office in Karachi, the largest city of business in Pakistan. And 14 branches are in the Lahore the second largest city of Business. Rest all are distributed in the country according to the demand of the customers. And it is still growing. Customers can also have an access through Internet. The widely used media, in the customers of EFU. No
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other insurance company is providing the facility to submit policy online. This easy and fast way of submitting Insurance Policies saves the time for the customer and for the EFU to process the policy Another easy and efficient way to access to the EFU is the agents in the market. EFU agents step by step guides the customers for deciding for the right policy which fulfills the needs of the customer more efficiently. Leasing Contracts with Banks In Pakistan auto leasing is growing day by day. Banks have an agreement with the lassie that the auto should be insured. Banks have different contracts with Insurance companies. EFU also have contracts with Banks. Those banks which have agreements with EFU, makes it compulsory for the lassie to insured their vehicle from EFU Auto insurance. Technical Support from Largest Reinsurers of World Another pillar of EFU's strength is a very close and long term (over 50 years)relationship with its main reinsurer, Munich Re, the largest reinsurance company in the world and the strong support of Allianz Aktiengesellschaft (Allianz AG), a global leader in the insurance industry. By this support EFU provides its insurance services on the international standards, with complete satisfaction of customers needs. WEAKNESSES Another important aspect of the SWOT analysis is the weaknesses of the company. No company is perfect. Some weaknesses are there, and to overcome those company move towards progress and development. EFU also have some weaknesses which can put hurdles in achieving the goal. After analyzing these are the following weaknesses determined. People Of Pakistan are not More Policy Conscious People of Pakistan are not so much policy conscious. Pakistan is an underdeveloped country. People are intending to invest, from where they can have a proper income source rather than to secure the income source. Awareness about Insurance Benefits Is Very Less People in Pakistan are not very much risk conscious. Literacy factor is also involved for less awareness of Insurance benefits between the people of Pakistan. The insurance is the long term planning and is very helpful, that a person further plans risk free. Proper know how about the insurance policy and less advertisement through the channels easily access to the people is very poor. This is the reason that the awareness of the benefits of insurance are very less in Pakistan.
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Loss due to Heavy Claims Insurance is basically a pool strategy. All people invest some amount of money and one when one suffers then that person will be paid the amount promised/agreed by the insurance company. And that amount is collected from other investors .But when there are many claims that the people giving amount are less and the people claiming are more than the company suffers loss. This is the one big uncertainty. OPPORTUNITIES Customer Trust Customer trust is the one of the foremost priority of the EFU. Customer trust means customer will prefer EFU then other insurance companies. That will increase the sales and will helps in achieving the goal.EFU insurance is struggling to have the customer trust by providing the excellence in service, the quality of the service, and by reducing time of processing the policy. Senior. Vice President of EFU Insurance quoted in regard of achieving the customer trust ; Once the customer is satisfied with our service to fulfilling the need or the problem he/she was facing and for that purpose we were contacted by him/her. Then we had the trust of the customer Increase in Growth Increase in growth is the major aim of any company, as well as EFUs. Increasing in growth by having more market share , by having more sales and by increasing the quality and in line services will result in the increase in the overall growth of the EFU insurance. Moreover the increase in the sales point units or Volume is also the factor of growth increment. And EFU is planning for it. Increase in growth needs a long term strategic planning. The broader view of the market and demand. The capability to utilize the recourse more efficiently then to the competitors. More Bank Contracts The bank agreements on the insurance company specification on the auto leasing are the one of the major opportunity for EFU to increase its sales. The more the auto leasing banks agree to have contracts with EFU. The more will be the sales of EFU insurance. To achieve this opportunity EFU is making its repute in the market best by providing quality service to its customers. Development in Education and Information Development in Information and Education about the Insurance will affect directly to the EFU insurance. The more the qualified and with more knowledge the employees will. The more will be the profit. Recently Halley college of Banking & Finance Lahore,
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started the MBA related to Insurance services. And EFU Insurance provided Rs. 15 lac. For the development of this discipline. THREATES Foreign Insurance Companies Foreign Insurance Companies are investing here in Pakistan. And Government of Pakistan is also supporting them, and planning for more foreign investment. And many other Insurance companies will also invest. And start providing their services here in Pakistan, with new technologies, more improved methods and more investment. This increases the competitors to EFU insurance. And increase the number of competitors. Undercutting Pricing Strategy of Competitors The price cutting strategy of the competitors of EFU insurance produces many hurdles. When competitors lower their prices of premiums, then the customers intend towards them. More over the people which are already the customer of the EFU also attracted to other companies. And that lower the sales. This is the very tactical threat. Sometimes it may effects a lot .When the same quality of service is being provided by another company but on the lower price. So there is always a threat for EFU Insurance. Natural Disasters Natural Disasters are one of the big threats for the EFU insurance. In Pakistan floods, earth quakes and many other natural disturbances occurs periodically. When this happens the heavy amount of claims occurs which cannot be easily settled. And thus sometimes gives a heavy loss. Recently on 8th October earth quake, many claims occurred. Same was happened in the Sialkot flood. Religious and Cultural Resistances Pakistan is an Islamic country and the culture here is based on Islamic principles. One the controversy in the Insurance company services and the Religion is that the Islam doesnt allow the Insurance. And people resist for insurance, and avoid the advertising of Insurance. This leads in lack of knowledge and benefit about the EFU insurance.

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Summing up SWOT Analysis of EFU SWOT Analysis of EFU General Insurance can be summed up as:

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PEST ANALYSIS
POLITICAL FACTORS Within Pakistan political ambitions and rise of communalism, fissiparous tendencies are on the rise and may well continue for quite some time to time. Therefore, it expected that the assurance companies might consider offering political risk coverage also. The only area where Pakistan insurers consider giving cover is with regard to customs duty change under certain conditions. Certain type of political risk at the international level has serious implications for exporters. The term political risk has a wider connotation than commonly understood or assumed. It covers events arising not just from politics, but risks in the course of international transactions. In this connection, it may be noted that export credit assurance has evolved out of uncertainties relating to international trade, particularly due to problems arising out of foreign legal jurisdiction, political changes and currency exchange difficulties faced by many developing countries. The political situation of Pakistan is not stable and after the war on terror it has gone worse especially for the business sector, and due to inconsistent policies of government every new government set different policies which make difficult for the businesses to grow and be consistent in their performance. ECONOMICAL FACTORS Interest rate at bank and interest rate of P.F variation very much affect to insurance industry, because people always attract by higher return. Therefore, they do not prefer lower return policy. Unemployment also affects assurance industry, because the unemployment people will not have earning, so saving also affect to insurance sector insurance industry will directly affected by Earthquake, Monsoon, and Natural calamity. Because of these events turns into lots of damages, so the insurance companies have to pay claim against policy.

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SOCIAL FACTORS The basic social factors that affect the life assurance sector are as under: Population Life style Educational level Level of earning Societal benefits

These are the major social factors, which affect the insurance sector. We will discuss all of them in brief : Population Growth in the population is a major factor pushing up the demand. It is also going to exert a special influence on the insurance market in other ways. Apart from exerting pressure on demand for goods and services, and through that, ill effects of uncontrolled growth of population also could spur the growth of demand. For example, overcrowding in public places of entertainment, public support, or too many vehicles on the road can result in hazards like stampedes and pollution, which require covers and still are not sold on a large scale today. Life Style The peculiar lifestyle of a country or an age also influences the insurance business. Change therein produces different demands for life assurance. For e.g. All over the world, family size is shrinking and the fact that in decades to come, both presents are more frequently likely to work outside the home will mean that there could be a greater possibility of property loss. Similarly, a larger number of vehicles. Level of Education Pakistan is one of the developing countries, the level of education is very low here. The literacy rate is very poor. More than 50% of the population is still uneducated or more or less not educated. Thus the people are not able to understand the concept of the insurance. Among the educated people the quality of the education is still a big question mark. Thus the awareness is not created and it has become a big challenge for the industry. Thus one of the factors, which affect the insurance sector, is low level of education.

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Level of Earning Another factor, which affects the insurance sector, is the level of earning. In Pakistan the rule of 80-20 is working. The 80% of the total population is having the 20% of the wealth and the 20% of the total population is having 80% of total wealth. Thus the richer are richer and poorer are poorer. Due to this the insurance sector is affected very much. Societal Benefits In view of the fact that large sections of Pakistan have inadequate insurance cover, an important social responsibility of the government relates to spreading it far and wide. In addition, the government attempts to extent insurance with certain social obligations in view in both urban and the rural areas through such means special schemes for the weaker sections, and by tilting of the insurance companies investments in favor of social developments.

TECHNOLOGICAL FACTORS Internet as an intermediary in the current Pakistan market customer is not aware about the intrinsic value of insurance. He thinks of insurance only in the mount of March as a tax saving measure. The security provide by an insurance cover is rarely thought about. In such a scenario Internet can be an effective medium for educating the consumers about insurance. It serves as a single window for disseminating product, process and procedural information to the consumers. Product development number of insurance subsequently product effective channel for segment. and target marketing through the Internet with increase in the companies there will be a need for market segmentation and designed for each of them. In such a scenario Internet can be a pushing product specific information to a particular market

Consumer feedback about a particular product as well as suggestions for different types or covers can also be generated through the Internet. Retail marketing is a commonly expected concept and the providers of the retail products and service will try out for larger market and market share. There would be cut through competition and the real benefit would be to the customers in terms of better products, distribution, pricing, post transaction service and technology.

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Technology will perhaps be the single largest driver of the retail thrust. The entire strategy will evolve around the absolute ability of the organization. The customer will demand for greater convenience of excess to the Product/ service and all at low cost of delivery. There fore the use of technology and specifically the Internet with realigned strategies would be one of the key factors to success. Constraints of locations, timing and accessibility would not be a hurdle for either customers or businesses.

Summing up the PEST Analysis The progress of a company, apart from the internal matters and financials of the Company, is affected by many other factors in environment. That are Political, Economic, legal, social, technological factors prevailing in country.

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BCG MATRIX

CASH COW The EFU General Insurance has strong market position in Pakistan because of their evergreen insurance policy & nature throughout the year thats why it has large market share and its products has till very strong potential to grow and penetrate in Pakistani markets. Therefore according to BCG matrix product lines of EFU General Insurance lies in Cash Cows due to large market share and high potential to grow. Around 30 to 40 advisors work under one unit manager. The cost of maintaining them is very less in comparison to the other department.

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FINANCIAL ANALYSIS
In Financial analysis topics that will be discussed are

Vertical Analysis of Balance Sheet and Profit & loss Account Horizontal Analysis of Balance Sheet and Profit & loss Account Ratio Analysis VERTICAL ANALYSIS OF PROFIT AND LOSS ACCOUNT

2010 Profit & Loss Account Net Premium Revenue Net Claims Change in Premium Deficiency Reserve Management Expenses Net commission Investment Income/ (Loss) Rental Income Profit & deposit Other Income Share profit/(Loss) of Associates Exchange Gain/(Loss) General And Admin Expenses Amount due from State life Insurance-Written
off

Rupees in 000 5846591 3941583 2129 1134685 656319 (357955) 83513 87232 38778 151114 4342 478662 (359763) (53558) (413321)

% 100 67.42 0.04 19.41 11.23 (6.12) 1.43 1.49 0.66 2.58 0.07 8.19 -

2009 % Rupees in 000 5570211 100 39114444 70.22 54900 0.99 1076139 461193 673524 86079 93133 9068 295196 5935 428027 19.32 8.28 12.09 1.55 1.67 0.16 5.30 0.11 7.68 14.39 (1.24) 13.15

Profit/(Loss) before tax Taxation- net Profit/(Loss) after tax

(6.15) 801443 (0.92) (69114) (7.07) 732299

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HORIZONTAL ANALYSIS OF PROFIT AND LOSS ACCOUNT

Profit & Loss Account Net Premium Revenue Net Claims Change in Premium Deficiency Reserve Management Expenses Net commission Investment Income/ (Loss) Rental Income Profit & deposit Other Income Share profit/(Loss) of Associates Exchange Gain/(Loss) General And Admin Expenses Amount due from State life Insurance-Written off Profit/(Loss) before tax Taxation- net Profit/(Loss) after tax Difference 276380 30139 (52771) 58546 195126 (1031479) (2566) (5901) 29710 (144082) (1593) 50635 (1161206) 15586 (1145620)

(%)Increase or Decrease 4.96 0.77 (96.12) 5.44 42.31 (153.15) (2.98) (6.34) 327.64 (48.81) (26.84) 11.83 (144.89) 22.54 (156.44)

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Analysis of Profit & Loss Account The net premium of the year 2010 increased but on the other side net claims are also increased by 0.77% and net commission is also increased by 5.44%, which causes the decrease in overall income. But overall as I threw light on past Financial data of EFU insurance it is better than previous years. But when we throw light on Investment income, we see company was in deficit as compared with previous year. They should work upon it or they should reduce their investment for sometime up till the situation of the country becomes suitable for investors. The profit before tax shown by EFU is far lesser than its previous year. It has shown an decrease of 144.89% that is a great loss to the company. Company should take steps to get back to its previous position.

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VERTICAL ANALYSIS OF BALANCE SHEET

2010 Balance Sheet Cash and Bank Deposits Loans to Employees investment Investment properties Deferred taxation Other assets Fixed assets Total Assets Total equity Underwriting provisions Deferred liabilities Creditors and accruals Other liabilities Total equity and Liabilities % Rupees in 000 1 706 571 3293 11663731 235703 115012 6.95 .001 47.53 0.96 0.47

2009 % Rupees in 000 1 349 606 2775 12643728 242110 33657 7121559 545475 21938950 6.15 .001 57.63 1.10 0.16 32.46 2.49 100 47.70 44.26 0.11 6.56 1.37 100

10108274 41.19 709085 2.89 24541669 100 9591171 12707217 40847 1830011 372423

39.08 10464492 51.78 9710098 0.17 7.45 1.52 24379 1439213 300768 21938950

24541669 100

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HORIZONTAL ANALYSIS OF BALANCE SHEET

Balance Sheet Cash and Bank Deposits Loans to Employees Investment Investment properties Deferred taxation Other assets Fixed assets Total Assets Total equity Underwriting provisions Deferred liabilities Creditors and accruals Other liabilities Total equity and Liabilities

Difference 356965 518 (979997) (6407) 81355 2986675 163610 2602719 (873321) 2997119 16108 390798 71655 2602719

% Increase or Decrease 26.45 18.67 (7.75) (2.65) 241.72 41.94 29.99 11.86 (8.35) 30.87 67.55 27.15 23.82 11.86

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Analysis of Balance Sheet Total assets of the company have increased with a percentage of 11.86, which is good sign. But still this increase is lesser than the increase company has seen in previous years. Putting a view on investment, that has reduced by the previous year. Thats why the investment income of company is reduced comparing with previous years. And this reduction has shown reduction in investment properties owned by EFU insurance. If we put an eye on total equity, it shows people have taken their money back that has reduced the equity amount of EFU. It may be for the fact foreign investment in Pakistani industry has been reduced sine 4-5 years. That has affected each and every business sector of Pakistan.

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Ratio Analysis Ratio Analysis is the basic tool of financial analysis and financial analysis itself is an important part of any business planning process as SWOT (Strengths, Weaknesses, Opportunities and Threats), being the basic tool of the strategic analysis plays a vital role in a business planning process and no SWOT analysis would be complete without an analysis of companies financial position. In this way Ratio Analysis is very important part of whole business strategic planning. Ratios that will be computed and compared are as follows: Return on Assets Return on Equity Return on Capital Employed Earning per Share Cash Dividend Bonus Dividend yield Payout Ratio Ratios Return on Assets (%) Return on Equity (%) Return on Capital Employed (%) Earning per share Rs. Cash dividend (%) Bonus (%) Dividend yield (%) Payout Ratio (%) 2010 (1.68) (4.31) (3.75) (3.31) 12.50 Nil 2.48 (37.76) 2009 (25.77) (54.14) (53.86) (43.77) 40.00 8.70 4.10 68.28

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Interpretations of Ratios

The Return on Equity has decreased in 2010 as compared to the last year because there has been a decrease in the paid up capital of the company and the total equity has decreased so it is a bad sign for the company. The rising trend in Earning per Share shows that companys share price rises in stock exchange which is a positive sign. Bonus has not been paid in 2010 which is not a good sign for the investors, because investor can draw his investment back for this reason. Dividend yield was also lesser in 2010 than 2009, which is not a good sign for both, for the investor and the company. Cash dividend paid is also showing the same results, that the value is decreased compared with last year.

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CHAPTER EIGHT

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joined Al-Falah Branch of EFU insurance for my internship of six weeks on

27-06-2011.There was a lot of work and opportunity for me to understand how work is carried out. I tried my best to exploit this opportunity. How I worked, is written as under Department wise.

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MOTOR DEPARTMENT
I just started from Motor department under the observation of Mr.Ahmad Saeed. The following points came into my knowledge;

PRIVATE CAR COMPREHENSIVE POLICY

The policy for private car is divided into following Sections SECTION I-LOSS OR DMAGE SECTION II-LIABILITY TO THIRD PARTY SECTION III-MEDICAL EXPENSES EXCLUSIONS

SECTION I-LOSS OR DAMAGE The company promises to indemnify the insured against loss or damage to the Motor Car and/or accessories. But company will not pay for: Consequential loss/Depreciation Damage to tyres and battery (unless the car is damaged at the same
time then company will be liable for 50% of replacement cost)

If the car is disabled company will be liable for its removal cost to nearest repairers and then redelivery to insured(Amount not exceeding Rs.500) Insured may authorize the repairer provided Amount not increasing Rs. 500 A detailed estimate is furnished with the company Insured will provide company all necessary assistance

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SECTION II-LIABILITY TO THIRD PARTIES The company is liable to indemnify the insured in case of accident in which the motor vehicle is involved for all costs and expenses insured is liable to: Death or injury of third party Damage to property other than insureds own property Company is liable for expenses incurred with written consents Same coverage will be provided to the insureds authorized person driving motor car provided: He is not covered under some other policy He observes all terms and conditions of policy Coverage will be provided to insured although he is not driving his own motor car if he observes all terms and conditions. In case of Insureds death his legal representative will be entitled for the indemnity provided by insurer.

SECTION III-MEDICAL EXPENSES The company is liable for all reasonable medical expenses not exceeding Rs.350 in respect of any one accident incurred in connection with bodily injury.

EXCLUSIONS The company shall not be liable under the Policy for following events; Loss or Damage outside the Geographical area Claim arising under contractual liability If motor for which policy is granted is; Being used outside limit to use Driven by any other person Loss or Damage caused by nuclear weapon material Loss or damage sustained after variation or termination of insureds interest.

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MOTOR CYCLE COMPREHENSIVE POLICY

Motor policy issued by EFU insurance has two sections in it. Major parts of its policy is as such: SECTION I-LOSS OR DAMAGE SECTION II-LIABILITY TO THIRD PARTIES GENERAL EXCEPTIONS

SECTION I-LOSS OR DAMAGE The company promises to indemnify the insured against loss or damage to the Motorcycle and/or accessories. But company will not pay for:

Consequential loss/Depreciation Damage to tyres and battery (unless the Motorcycle is damaged at the
same time then company will be liable for 50% of replacement cost)

Loss or damage to accessories by burglary/theft. Loss by criminal act of Insureds Known Person

If the Motorcycle is disabled company will be liable for its removal cost to nearest repairers and then redelivery to insured(Amount not exceeding Rs.100) Insured may authorize the repairer provided Amount not increasing Rs. 200 A detailed estimate of cost is furnished with the company Insured will provide company all necessary assistance

SECTION II-LIABILITY TO THIRD PARTIES The company is liable to indemnify the insured in case of accident in which the motorcycle is involved for all costs and expenses insured is liable to: Death or injury of third party Damage to property other than insureds own property Company is liable for expenses incurred with written consents Same coverage will be provided to the insureds authorized person driving motorcycle provided: He is not covered under some other policy He observes all terms and conditions of policy

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 Coverage will be provided to insured although he is not driving his own motorcycle if he observes all terms and conditions. In case of Insureds death his legal representative will be entitled for the indemnity provided by insurer.

EXCLUSIONS The company shall not be liable under the Policy for following events; Loss or Damage outside the Geographical area Claim arising under contractual liability If motorcycle for which policy is granted is; Being used outside limit to use Driven by any other person Any accidental loss or damage caused directly or indirectly ionizing radiations or contamination by radioactivity from any nuclear fuel. Loss or Damage caused by nuclear weapon material Loss or damage sustained after variation or termination of insureds interest.

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COMMERCIAL VEHICLES COMPREHENSIVE POLICY

It is same as private car policy described above. One section that this policy contains in place of MEDICAL EXPENSES Section is TOWING DISABLED VEHICLES Section that is described below:

SECTION III-TOWING DISABLED VEHICLE

This policy shall be operative whilst the motor vehicle is being used for the purpose of towing any one disabled mechanically propelled vehicle and the indemnity provided by Section II of this policy shall subject to its terms and limitations be extended to apply in respect of liability in connection with such towed vehicle. Provided that; Such towed vehicle is not for reward. The company shall not be liable by reason of this section of the policy in respect of damage to such towed vehicle or property being conveyed thereby.

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I learned how is premium calculated on a motor vehicle. So I am giving the main Performa or method by which premium is calculated.

Basic Add I.E.V* Sub-Total Less Special Discount** Sub-Total Less No Claim Bonus*** Sub-Total Add Terrorism**** GROSS PREMIUM Add A.S.C (5%) F.I.F (1%) F.E.D (16%) Stamps

. .. ..

() ...

(...........) .............

........... ...........

........... ........... ........... ............ ...............

NET PREMIUM

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NOTES * It is a specific percentage of Insureds Estimated Value(Value with which vehicle is insured).Percentages are as under Motor car 6.5% Motorcycle 7.5% Commercial Vehicle 5.5% (Any change in these fixed percentages can be made with the provision of Provision number from Head Office) **Special Discount is allowed to reduce the premium in favor of insured. It is just granted in case of Motor Car. Maximum limit allowed for Special Discount is 15%( Any change in this fixed percentage can be made with the provision of Provision number from Head Office) ***No Claim Bonus is allowed to the insured for not presenting any claim in previous insured period. This is for his good repute in claims. Maximum limit Allowed for No Claim Bonus is 25%( Any change in this fixed percentage can be made with the provision of Provision number from Head Office) ****Terrorism Allowance is included to cover losses that may occur due to any act included in term terrorism. It is different for all these three classes of motor insurance Motor cycle Rs.200 Motor car Rs.1000 Commercial Vehicle Rs.1000 The value for commercial vehicle is exceeded to 3000 where the value of vehicle exceeds Rs.500000.

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ASSIGNMENT # 1
Calculate the Premium amount on the Motor Car valued Rs.450000, Where special Discount is 11.03% and No Claim Bonus 19%.

Basic Add I.E.V (6.5%) Sub-Total Less Special Discount (11.03%) Sub-Total Less No Claim Bonus (19%) Sub-Total Add Terrorism GROSS PREMIUM Add A.S.C (5%) F.I.F (1%) F.E.D (16%) Stamps

Rs. 1000 29250 30250

(3337) 26913

(5113) 21800

1000 22800

1140 239 3830 6

NET PREMIUM

28015

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ASSIGNMENT #2
Calculate the Premium amount on the Motorcycle valued Rs.62000, Where No Claim Bonus 35%.(Allowed by a permission number issued by Head Office) Basic Add I.E.V (7.5%) Sub-Total Less No Claim Bonus (35%) Sub-Total Add Terrorism GROSS PREMIUM Add A.S.C (5%) F.I.F (1%) F.E.D (16%) Stamps 151 32 508 6 200 3027 (1738) 3227 4650 4965 Rs. 315

NET PREMIUM

3724

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ASSIGNMENT #3
Calculate the Premium amount on the TRUCK valued Rs.650000, Where No Claim Bonus 23%. Truck is of 1.5 Metric ton capacity. Rs. Basic* Add I.E.V (5.5%) Sub-Total Less No Claim Bonus (23%) Sub-Total Add Terrorism GROSS PREMIUM Add A.S.C (5%) F.I.F (1%) F.E.D (16%) Stamps 1552 326 5214 6 3000 31036 (8374) 28036 35750 36410 660

NET PREMIUM

38134

*Basic amount for a truck below 2 metric ton is Rs.660, and for capacity above 2 metric ton is Rs.810

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LEARNING ABOUT MOTOR TARIFF

I have studied these points from Motor Tariff Book provided to the company by regulatory authority. Private Car Benefits can be reduced as provided along with the Policy, But any portion of the policy can not be waived. (Means no Premium wavier) Employer owes the liability to public in case of accident while the car was in his employees use. (No extra premium is charged for it) Insurer will be liable (Up to Rs.400 for one loss) in case of loss of rugs, luggage of insured or insureds household (extra premium is charged for it) Accident to insured, or any named person, other than a paid driver will be according to following provisions Rs 20000 for death Rs 10000 for loss of 2 limbs or sight of 2 eyes or loss of one limb and sight of one eye Rs 5000 for loss of one limb or sight of one eye Rs 100 per week during temporary total disablement (limited to 26 weeks) Same above provisions will be applicable when any passenger met an accident with an insured car. Premium Charging Criteria is as follows by the company: 2 seats (including drivers seat) Rs 23 3 seats (including drivers seat) Rs 45 Each Seat in excess of 3 seats (Up to 11) Rs 15 (Including drivers seat) Each Seat in excess of 11 seats Rs 08 (Including drivers seat) Dickey seat must also be considered if passengers are taken there in. If employee is also travelling in employers car, and is injured then insured may be indemnified by the insurer for this liability up to Rs. 1 lac . Cover against liability of negligence is also provided on the payment of extra premium.

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Motor Cycle

For passengers in side car extra premium is charged, Premium charged is according to the extent of liability insurer is going to accept. Insureds liability for goods carried in side car is covered up to the loss of Rs.5000 in one accident. Benefits may be increased or reduced at proportionate premium Benefits may not be granted to pillion-riding passenger Excess of Rs50 are to be borne by the insured himself in case of loss of accessories.

Commercial Vehicle Following benefits may increase the chargeable premium in case of commercial vehicle

Liability to public risk indemnity by insurer can be increased by paying extra premium to insurer. When insured wants to be indemnified against his liability that he owes to his employees sitting in that insured vehicle. To cover the liability he owes to non fare-paying passengers other than employees extra premium is paid. To be covered against the liability of hire-paying passengers sitting in that commercial vehicle. To avail the coverage against the liability of goods carried on insured vehicle. To cover the legal liability for damage to property caused by spark or ashes from an insured vehicle. To indemnify the hirers in case of accident extra premium is charged.

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NO CLAIM BONUS SCHEDULE

NO CLAIM MADE DURING PRECEDING One year of Insurance

OR

COMPREHENSIVE 3RD PARTY & PENDING POLICIES ACT ONLY POLICIES 5% 10%

Two consecutive years of Insurance

10%

15%

Three consecutive years of Insurance

15%

20%

Four consecutive years of Insurance

20%

25%

Five consecutive years of Insurance

25%

331/3%

No claim bonus is provided according to above schedule. The provisions of No Claim Bonus are same for all three types of covers provided in Motor Department.

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HOW TO HANDLE CLAIM IN MOTOR DEPARTMENT In Motor department claim occurring is most frequent and higher in frequency as compared to other departments. Following three types of claim occurs in motor departments: Partial Loss Full Loss Theft

PARTIAL LOSS Partial Loss means loss has occurred but has not destroyed the vehicle completely, only a part of vehicle is damaged that have not made the vehicle unable to be used for its original purpose.

Documents Required Following Documents are asked for when the vehicle is destroyed partially: Intimation Letter Claim form duly filled and signed by the insured Estimate Repair Bill Photocopy of Registration Book Photocopy of driving License FIR if loss is of Rs.50000 or above Survey Report Complete Survey Fee Bill Payment Bill of Workshop Final Bill of Repair must match with Survey Report

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FULL LOSS

Full loss means the motor is completely destroyed and is unable to be used for the purpose it is made. When a vehicle is completely lost maximum claim amount that is equitable to be paid for the car that was just before the accident is paid. Some formalities are there to be fulfilled for having claim for full loss as under.

Documents Required

Following Documents are asked for when the vehicle is destroyed completely Intimation Letter Photocopy of Endorsement or Schedule (If any) Claim form duly filled in or and signed by the insured Copy of FIR duly attested by SHO/DSP Original Registration Book Photocopy of License Original Keys Purchase invoice or Receipt Transfer Deed (if it is transferred from another individual ) Open Transfer letter No objection Letter Final Investigation Report Survey Report/Survey Fee Bill Insured Acceptance Letter Letter of Subrogation in Repairer Shop

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THEFT

In case of theft the vehicle is treated as if full loss has occurred. But here a promise or agreement is made that if after the claim is fully settled, the lost vehicle is recovered who will have right of its ownership. Here insured have an option that he may pay the claim amount back to insurer and get the ownership and possession of the vehicle back or he may either keep the amount or give the ownership and possession to the insurer.

Documents Required

If the vehicle is lost following documents will be required. Intimation Letter Photocopy of Endorsement or Schedule (If any) Claim form duly filled in or and signed by the insured Copy of FIR duly attested by SHO/DSP Original Registration Book Photocopy of License Original Keys Purchase invoice or Receipt Transfer Deed (if it is transferred from another individual ) Open Transfer letter No objection Letter Final Investigation Report Survey Report/Survey Fee Bill Insured Acceptance Letter Letter of Subrogation in Repairer Shop

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Process of Claim Placement and Settlement The claim placement is made, as far as, I observed and was trained by following steps: First of all a notice of claim is received by the insurer and raw form information is obtained from insured about the particulars of policy and accident particulars. Then the office works starts, after getting the initial information I was asked to firstly to find that relevant policy or schedule (in case of scheduled Policy) out and get relevant particulars required to process the claim further. Then Sir Ahmad taught me how to prepare a claim file for each claim, then I was asked to prepare the Claim file for each particular claim. Then according to the instructions of Sir Moaz (Our Branch Officer) surveyor was appointed to make a survey of the place of accident and estimate the amount justifiable to be paid. After the survey have made, according to surveyor report presented to Claim manager equitable amount of claim is agreed upon and insured is informed about that amount decided. After that when no issues arises between both parties (otherwise arbitrator is appointed) a claim registration form is prepared to attach with an that particular file. All Documents are attached in Claim File along with workshop bill and Surveyor report. And finally the claim is settled and the cheque is forwarded to the insured.

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MY INTERACTION WITH MIS (MANAGEMENT INFORMATION SYSTEM) OF EFU Firstly I interacted with MIS of EFU in Motor Department. MIS of EFU is one of the best MIS used in insurance industry now a days. It is very easy to interact with and to use it. It was not difficult for me to understand its working. All the data captured either it is a claim or new business captured or any endorsement is transferred to Head office in one hour. And if any permission or modification is to be made, Deputy Manager use to be on online chats with the head office to sort out if any problem is there. I learnt how to formulate the following documents in motor department using the MIS: New policy Document Premium Bill Endorsement Claim Registration Form Certificate of Insurance

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CONCLUSIVE NOTES AT MOTOR DEPARTMENT On my last day at motor department, Sir Asif butt gave a conclusive lecture to me. In which he took an oral test and told some important points to keep in mind while working in motor department. Following are those conclusive notes: Depreciation is to be considered only when claim is being made. When Insurance is being commenced market value is considered Depreciation is accounted for. If sum insured is more than market value the claim will be according to market value. If the amount of sum insured is lesser than the Market value the average would be be apply at the time claim is to be made. Motor policy do not ceases or completes before the agreed time period ends although a number of claim might have occurred. Liability cover is coupled with motor for third party liability. Legal advisor is to be appointed in case where it is to be decided either the liability applies or not.

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FIRE DEPARTMENT
The second department I moved towards was Fire Department. I learnt the work and worked under the observation off Sir Asim Malik. He took a starting lecture briefing about the risk covered and property that is normally asked to be insured against fire risk. FIRE INSURANCE POLICY Under this policy the property is covered against the fire perils. Now the point comes that which perils are covered and are referred to as fire perils. There are two types of perils or risks to be covered under Fire Policy Fire Allied Perils

Fire Fire means exactly the fire that burnt down the property.

Allied Perils Following are the allied perils covered under the Fire policy, and can be included into the policy by endorsement by charging extra premium Riot & Strike damage Malicious damage Explosion Earthquake Fire & shock Atmospheric Disturbance Impact Damage Aircraft Damage Electrical Clauses A & B Night work Burglary (Theft) Terrorism

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Each is described briefly below, what I learnt from Sir Asim Malik and the Clauses of EFU insurance.

Riot & Strike Damage Fire policy may extend to cover Riot & Strike damage. It will cover the Loss or Damage to the property insured directly caused by: The act of any person taking part together with others in any disturbance of the public peace (whether in connection with the strike or lock out or not). The action of any lawfully constituted authority in suppressing or attempting to suppress any such disturbance or in minimizing the consequences of any such disturbance. The willful act of any striker or locked out worker done in furtherance of a strike or in resistance to a lock-out. The action of any lawfully constituted authority in preventing or attempting to prevent any such act or in minimizing the consequences of any such act.

Malicious Damage Fire Policy may extend to cover, here we can say Riot and Strike Damage endorsement may further extend (Because these two provisions are coupled) to cover Malicious Act. This extension shall mean to cover; Loss or Damage to the property insured directly caused by the malicious act of any person (Whether or not such act is committed in the course of a disturbance of public peace).

Explosion If this provision is included extra peril will b covered that is: Loss or Damage to the property insured by fire or otherwise directly caused by explosion, but excluding loss of or damage to boilers, or other vessels, machinery or apparatus in which pressure is used or their contents resulting from their explosion

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Earthquake Fire & Shock Earthquake Fire Cover endorsement will cover loss or damage by fire to any of the property insured by this policy occasioned by or through or in consequences of earthquake. Earthquake shock Risk endorsement will cover loss or damage (including loss or damage by fire) to any of the property insured by this policy occasioned by or through or in consequence of earthquake.

Atmospheric Disturbance If this endorsement is also included in fire policy, the insurer is now liable to provide cover against the perils of: Hail, Snow, Wind, Hurricane, Cyclone, Tornado; or Typhoon, and/or, Rain, provided the building in respect of which the claim made or containing the property in respect of which the claim is made is so damaged by any of the perils is specified in A supra as to admit rain water to the interior of the said building; and/or, Flood Which shall mean; The overflowing or deviation from their normal channels of either natural or artificial water courses. and Any flow or accumulation of water on the ground except when such flow or accumulation be of water emitted from any water supply main, tap, pipe, valve or the like.

Impact Damage The company shall indemnify the insured in respect of loss or damage to the building &/or its contents, gate, boundary ,wall due to impact by any road vehicle not belonging to or under the control of the insured.

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Aircraft Damage This extension will include the coverage from loss or damage to the property insured(by fire or otherwise) directly caused by aircraft and other aerial devices and/or articles dropped there from.

Electrical Clauses A By this clause the company expressly declares to be free to be free from liability for loss of or damage to any electrical machine, apparatus, fixture or fitting (including electric fans, electric household or domestic appliances, wireless sets and radios) or to any portion of the electrical installation, arising from or occasioned by overrunning, excessive pressure, short circuiting, arcing, self-heating or leakage of electricity, from whatever cause(lightning, included); provided that this exemption shall apply only to the particulars electrical machine, apparatus, fixture, fittings or portion of the electrical installation so affected and not to other machine, apparatus, fixture, fittings or portion of electrical installation which may be destroyed or damaged by fire so set up.

Electrical Clauses B Loss or damage by fire to the electrical appliances and installations insured by item of this policy arising from or occasioned by overrunning excessive pressure, short circuiting arcing self-heating or leakage of electricity, from whatever cause(lightning, included) is covered subject to the terms and conditions of the policy but it is expressly understood that no liability exists under this policy for loss or damage to any electrical machine, apparatus, fixture or fitting or to any portion of the electrical installation, unless caused by fire or lightning.

Night work Night work is an employment practice designed to make use of the 24 hours of the clock. The term "shift work" includes both long-term night shifts and work schedules in which employees change or rotate shifts. Coverage is provided to these works by the payment of extra premium.

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Burglary (Theft) This Burglary endorsement covers loss or damage caused by Burglary and Theft (i.e. theft following upon an actual forcible and violent entry of and / or exit from the premises) In respect of contents of offices, warehouses, shops, etc. and cash in safe or strong room and also damage caused to the premises.

Terrorism Until 9/11, most standard insurance policies used to provide protection against the risk of terrorism automatically. However, after September 11, 2001, premiums for terrorism coverage have increased. In India, effective from 1st April 2002, terrorism was made a separate add-on cover, which had to be bought at the option of the insured.

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Rates Applicable Following are the rates by which premium is charged on sum insured. For Stores Perils Fire (Retail Premises) Fire (godowns) Riot & Strike Damage Malicious Damage Explosion Earthquake Fire & Shock Atmospheric Disturbance Aircraft Damage Impact Damage Electrical Clause B Rate(per thousand) 1.70 1.20 1.20 0.24 0.10 0.60 1.20 0.10 0.10 3.20

*For stores, Burglary rate is decided according to security position there. It is not fixed.

For Residential Perils Fire Riot & Strike Damage Earthquake Fire & Shock Atmospheric Disturbance Burglary Electrical Clause B Rate(per thousand) 0.50 1.00 0.60 1.00 5.00 3.20

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How to Calculate Fire Premium As was for motor, here is an numerical to calculate premium on fire policy placed with the company. So following numerical is used

Fire Add Allied Perils (If any) Riot and Strike Earth Quick, Fire, Shock Explosion Atmospheric Disturbance Malicious damage GROSS PREMIUM Add A.S.C (5% of sub total) Sub Total F.I.F (1% of Sub Total) F.E.D (16% of Sub Total) Stamps NET PREMIUM PAYABLE

-----

-----------------------------

---------------------------

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ASSIGNMENT # 4
By following given data calculate the premium to be charged on Rahat Departmental Store. Include all possible allied perils.

Item Building Stocks Furniture Fixture & Fittings Cameras Electric Appliances Glass Items Godowns Computers Total

Value (In Rs.) 5000000 10000000 2500000 500000 500000 500000 15000000 1000000 35000000

*Godowns will be excluded when fire rate is being applicable on building, the reason is separate godowns rates are applicable, and are charged with a rate of 1.20 per thousand.

**Burglary Rate will be Applicable only on Stocks and Godowns items, Because the building fixture and heavy machinery can not be robbed.

***Electric Clause B will be applicable to only Electric Appliances and Computers.

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Solution Amount(In Rs.) Fire on retail premises (1.70 per thousand) Fire on Godowns (rate 1.20) Add Allied Perils Riot and Strike (rate 1.20) 42000 21000 3500 42000 8400 3500 37500 4800 214700 34000 18000

Earth Quick, Fire, Shock (rate 0.60) Explosion (rate 0.10) Atmospheric Disturbance (rate 1.20) Malicious damage(rate 0.24) Aircraft Damage (rate 0.10) Burglary (rate 1.50) Electric Clause B (rate 3.20) GROSS PREMIUM Add A.S.C (5% of sub total) Sub Total F.I.F (1% of Sub Total) F.E.D (16% of Sub Total) Stamps NET PREMIUM PAYABLE

3000 217700 2177 34832 6 254715

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ASSIGNMENT # 5
By following given data calculate the premium to be chargeable on residential house. Include all possible allied perils.

Item Building Electric Appliances Furniture Decoration Equipment Fixture Computer Kitchen appliances Sewage Equipment Total

Value (In Rs.) 6500000 120000 500000 30000 25000 15000 30000 30000 7250000

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Solution Amount(In Rs.) Fire on retail premises (0.50 per thousand) Add Allied Perils Riot and Strike (rate 1.00) 7250 4350 7250 150 384 23009 3625

Earthquake, Fire, Shock (rate 0.60) Atmospheric Disturbance (rate 1.00) Burglary (rate 5.00) Electric Clause B (rate 3.20) GROSS PREMIUM Add A.S.C (5% of sub total) Sub Total F.I.F (1% of Sub Total) F.E.D (16% of Sub Total) Stamps NET PREMIUM PAYABLE

1150 24195 242 3865 5 28271

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How to Fire Policy Is Commenced Sir Asim Mailk told me how the fire business is placed and what criteria is made to reach the decision either to accept the business or decline it. And if it is to accept on what terms and conditions. A major factor which helps to reach the decision is Premises Risk. It is major and the core factor to decide either to accept or not. Premises Risk To evaluate the premises risk a pre-inspection of risk is made. In which quality of following points in taken into account; Construction Electrical Work Safe Clearly defined Proper Electrician Available Probability of Short Circuit Overhead Water Tanks Number of Water Tanks Properly water is available or not? What Are precautionary measures in case of fire? Boundary Wall Construction Material With which Walls are made Width of Walls Height of Walls Moral Hazard Behavior of Employees Satisfaction of Employees Wiring either open or lose? House Keeping Premises is clean or messy? How they dispose raw material? Warehouse premises In which conditions stock is kept? How healthy are employees? Kutcha Pukka Wood Concrete

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 Stock Positioning Survey Report

Stock Entry Stock Exit Normal Loss Abnormal Loss Reasons of Loss

All above points are taken into account by Appointed surveyor into his survey report that he presents to fire department. According to his presented report the quality of business placed is decided and according to that quality it is ranked as; Poor Average Above Average According the class in which it is placed the business is accepted or declined, and terms and conditions of the insurance contract are decided and the premium on which the insurance will be provided and either discount is to be granted or not. Policy Status after Loss Occurrence The policy does not end up after the loss has occurred. The insured has option either to carry policy on reduced sum insured (Out of which the claim has been paid) or to pay extra premium to fill up for reduced premium.

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Declaration Policy Concept in Fire Insurance When Fire policy is to be issued for Stock, Raw material, Work in process there is another form of policy that can be issued which is declaration policy. Here the premium is charged by projecting the stock values in coming 12 months based on past experience. And after that year is past projection are matched with the actual situation. If the premium is overcharged the over above amount is returned (but not more than 1/3rd of total premium amount). In case the premium charged based on projections is lesser than the amount that would have been charged based on actual values is to be paid by insured to insurer. Purpose of Declaration Policy Declaration policy is issued for the stocks that are not constant through out the year, Specially for the seasonal products such as crops etc. this policy helps the insured to save his cost to be spent as premium in period of low demand and stock ultimately.

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ASSIGNMENT #6
A Declaration Policy was issued by EFU insurance based on data that is projection of past year now by matching the actual and projected data state the premium position as it is payable by the company is receivable. Projected values Item Raw Material Work in Process Finished Goods Total Amount Rs. 7000000 7000000 2500000 16500000

Now the premium Calculated based on these projected values GROSS PREMIUM (75% of 5 Rs. Per thousand) Add A.S.C (5% of sub total) Sub Total F.I.F (1% of Sub Total) F.E.D (16% of Sub Total) Stamps NET PREMIUM PAYABLE

Amount(Rs.) 61875

3000 64875 649 10380 5 75909

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After the year past following Data was received, Now I will calculate premium based on these actual values; Month January February March April May June July August September October November December Total Value of Stock (In Rs.) 8500500 7680708 95112011 7920111 6295021 5090007 7500000 9000000 8900800 4791709 6500000 8900000 90590057

*Average stock=90590057/12=7549171 Now the premium Calculated based on these actual values GROSS PREMIUM (5 Rs. Per thousand) Add A.S.C (5% of sub total) Sub Total F.I.F (1% of Sub Total) F.E.D (16% of Sub Total) Stamps NET PREMIUM PAYABLE 1887 39663 397 6346 5 46376 Amount(Rs.) 37746

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Balance of Premium Now we will calculate either the premium is payable or receivable by following calculations. Amount(Rs.) Gross Premium Already Charged Less Actual Premium Chargeable GROSS REFUNDABLE PREMIUM Add F.I.F Refundable F.E.D Refundable NET REFUNDABLE PREMIUM 241 3861 28231 (37746) 24129 61875

Analysis EFU is to return the above amount to insured.

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Concepts of Discount Discounts are allowed to customers for the measures they have made to avoid loss or risk. Following discounts are allowed for the facilities they have to avoid fire loss; Precautionary Measures Construction 1st Class Tube well Fire Extinguishing Appliances Hydrant Maximum Allowable Discount Discounts Allowed (%) 10 2.50 5 20 37.50

*Discount is allowed on Fire Premium only. Not on Allied perils. Example Premium without Discount Amount(Rs.) Gross Fire premium Allied Perils Premium Gross Premium Add A.S.C( 5%) Sub Total Add F.I.F F.E.D Net Premium 12530 200480 1466010
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1000000 250000 1250000

3000 1253000

Premium with Discount Amount(Rs.) Gross Fire premium Discount Allowed (37.5%) Allied Perils Premium Gross Premium Add A.S.C( 5%) Sub Total Add F.I.F F.E.D Net Premium 8780 140480 1027260 3000 878000 1000000 (375000) 250000 875000

DIFFERENCE Amount(Rs.) Without Discount With Discount Benefit to Insured 1466010 1027260 438750

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Claim in Fire Department When Claim in fire occurs the insurance Company performs the following steps: Receive Notification Appoint Surveyor Evaluate Claim value based on Survey report Prepare claim File Settle the Claim

Fire Claim File Claim file of fire have the following documents: Claim Intimation or Claim Notification Form Policy Documents Surveyor Report (Insurer Surveyor) Claim Bill Fire Brigade Report (if Any) Loss Voucher Satisfaction Letter Copy of Cheques (Issued for Indemnity) Receiving Letter/Receipt Any supporting documents Subrogation Letter Claim Registration Form

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MARINE DEPARTMENT
Then I was shifted to Marine Department where I learnt and worked under the observation of Sir Khalil Shah. I observed EFU Marine department issuing or covering following means of trade: By Ship By Air By Rail Now the Further division of coverage is Marine Hull Marine Cargo Freight As far as Marine Cargo is concerned both aspects of trade IMPORT & EXPORT are covered. After Discussing the Items or Subject matter of Marine Insurance I learnt about the Clauses to be attached with a Marine policy that are Institute dangerous drugs clause. Institute radioactive contamination exclusion clause. Computer millennium clause. Cargo termination of transit clause.(terrorism) Institute classification clause. Institute cargo clause (A). Institute cargo clause (B). Institute cargo clause (C). Cargo ism forwarding charges clause. Institute war clause (cargo). Road/rail cargo clauses (A). A few of them are described below:

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Institute Dangerous Drugs Clause It is written in the clause that no claim would be paid under the policy where the drugs traded are opium or other such dangerous drugs that are restricted by International Convention. When the drugs are to be insured under marine policy a complete description of drugs, country from where trade is being made, Certificate of authorization by the Govt. of that country, route by which these drugs are to be taken, is required to be made to the insurance Company. Institute Radioactive Contamination Exclusion Clause In this clause it is said that no claim would be paid in case the loss or damage is caused by the Radio active contamination, rays, radio active waste, toxic material and any radioactive weapon being used for the dangerous purposes. It does not mean that radio active isotopes are also excluded if being used for peaceful purposes. Computer Millennium Clause In no case shall this insurance cover any loss, damage, expense, or liability of whatever nature which might otherwise be recoverable under this insurance arising out of or in any way connected with, whether directly or indirectly, the use or operation of any computer, computer system, computer software, programme or process or any electronic system where such loss, damage, expense or liability arises whether directly or indirectly, as a consequence of The date change to the year 2000 or any other data change and/or Any change or modification of or to any such computer, computer system, computer software, programme or process or any electronic system in relation to any such date change. INSTITUTE CARGO CLAUSES A These clauses are mostly used now instead of Institute cargo Clauses B & C. The reason is it covers all the risk and has wider scope than other clauses. The following are the important points extracted from the documents; It covers all the risk of loss or damage to subject matter. It will not cover the loss because of employees willful act, unsuitable packing, inherent vice, loss or damage by delay, normal loss, unseaworthiness of ship, or loss by civil war, riots, commotion, political act, or act of terrorism. Insurance starts from the time goods are transferred to the place from where the goods are to be loaded to the conveyance that would carry it these to the ship and ends when unloading is completed to final warehouse, or goods are
Page | 175

transferred to other vehicle, or the place of storage is elected to be changed or on expiry of 60 days, or if the voyage is changed. When asking for claim claimant must have some insurable interest in subject matter . Extra charges are to be paid by insured if he asks to forward goods to some other port. Constructive total loss would not be paid unless its repairing values exceeds its actual value. It is duty of insured to put his maximum effort to avoid loss, delay and try his maximum to minimize loss if loss occurs. Insured should follow law and practice.

INSTITUTE CARGO CLAUSES B It is almost same as Institute Cargo Clauses A, but it have some extra exclusions, means these two clauses differ in coverage. These exclusions are: Fire & explosion Vessel or craft being stranded grounded sunk or capsized Overturning or derailment of land conveyance Collision or contract of vessel craft or conveyance with any external object other than water Discharge of cargo at a port of distress Earthquake volcanic eruption or lightning Loss of or damage to the subject matter insured caused by General average sacrifice Jettison or washing overboard Entry of sea lake or river water into vessel craft or place of storage Total loss of any package lost overboard or dropped whilst loading on to, or unloading from vessel or craft.

INSTITUTE CARGO CLAUSES C It is almost same as Institute Cargo Clauses A, but it have some extra exclusions, means these two clauses differ in coverage. These exclusions are: Fire & explosion Vessel or craft being stranded grounded sunk or capsized Overturning or derailment of land conveyance

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 Collision or contract of vessel craft or conveyance with any external object other than water Discharge of cargo at a port of distress Loss of or damage to the subject matter insured caused by General average sacrifice Jettison Rates of Clauses Rates that are applicable to Institute Cargo Clauses A, B and C are assumed to be as follows: Clauses Rates

Institute Cargo Clause A

.17%

Institute Cargo Clause B

.50%

Institute Cargo Clause C

.36%

Total loss Clauses

.27%

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How to Calculate Marine Premium Premium of marine will be calculated as by following Performa; I also learned that following structure is used to calculate premium for Marine Insurance Policies:

Marine Add WAR & SRCC (Optional) Add O.A (Over Age) (if vessel above 25) GROSS PREMIUM Add A.S.C (5% Sub Total) Sub-total Add F.I.F (1% Sub Total) F.E.D (5% Sub Total) Stamps NET PREMIUM PAYABLE

-----

-----

---------

------------

-----------------

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Interaction with MIS By using MIS in marine Department I observed and issued following documents that are a part of Marine insurance policy: Marine Policy Document Endorsement Cover Note Certificate

These four are the basic documents to be issued in Marine Department.

Concept of Open Policy Open policy is issued for a particular period of time that covers all the voyages during that period of time. Whenever a new shipment is to be made a cover note is issued against each shipment having particulars of that particular voyage. Bank is involved in this transaction and open policy is normally demanded by bank to make the policy easier so that problems could be avoided. The voyages against which insured do not informs insurer or do not provide particulars to insurance company to issue cover notes although during the period of open policy, Any loss or damage to subject matter is not payable by the insurance company.

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Claim in Marine Department The claim procedure is same as was in fire or motor department. Following steps are to be followed; Receive Notification Appoint Surveyor Evaluate Claim value based on Survey report Prepare claim File Settle the Claim

Claim File of Marine Following Documents are to be attached in claim file of Marine department. Claim Notification or Claim Intimation Form Original Policy (Copy) Printed and signed Bill of Lading/Airway Bill/TR/RR (Copy). Original short Landing Certificate Bill of Entry (Copy) Surveyor Report Claim Bill Whether claims lodged on carriers or not If lodged whether extension requested or not Status of recovery claim against carriers

Subrogation Letter Loss Voucher Indemnity Letter in lieu of original documents Proceeds realization certificates PRC (In export Claims Only) Letter of Credit (Copy)

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 Any supporting documents Claims Registration Form Important Points and Terms on Last Day at Marine Department I was given lecture by Sir Asif butt on Marine Policy on my last day at Marine Department. I came across following important points; Any reduction in rates is not applicable to Institute Cargo Clauses B, C and Total Loss. On following items compulsory excess is to be applied Vegetable oil 1% excess Motor vehicles Rs.300 excess Tea howsoever packed 1% excess Only one transshipment is allowed for more than one additional premium is to be paid. Special Ratings may be given for special customers (no reduction can be allowed in case of duties) For Raw Jute, Kenaf, Meshta, Sisal following provisions are to be applicable; Minimum rates will be Clauses Rates Institute Cargo 1.283% Clause A Institute Cargo 1.175% Clause B Institute Cargo 1.068% Clause C

For additional shipment 0.24% premium will be charged If stored in closed warehouse of massive construction 0.22% for each 30 days If stored in open or else where 0.64% for each 30 days

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MISCELLANEOUS DEPARTMENT
I worked here under the observation of Sir Asif Butt. He taught me about the different policies issued under the head of Miscellaneous insurance. There was not much about this department at AL-FALAH branch as the volume of work under this head was very low. But I studied following policies in this department. Money in Transit Policy Public Liability Policy Professional indemnity Policy Contractors All Risk Policy Burglary and House Breaking Policy 24 Hours Worldwide Personal Accident Policy Erection All Risk Policy Electronic Equipment Insurance policy Fidelity Guarantee Policy Boiler and Pressure Vessel Insurance Policy Workmens Compensation Policy

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ENGINEERING DEPARTMENT
Mostly the Engineering Policy is considered the part of miscellaneous department, but I have studied it as a different department under the observation of Sir Asif Butt. This policy is mostly not issued to new customers , because it contains a lot of risk and is involved in huge projects which can result in huge loses. Thats why old reliable customers are issued with this policy. In case of claim, all risks falling under the limit of Branch are rated and approved in branch. For special rating approval obtain from head office.

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ACCOUNTS DEPARTMENT
The last department I worked in was Accounts Department under the observation of Sir Asif Butt who is Deputy Manager there. I learnt a lot there the practicalities of accounts system. I will describe these all in form of accounting terms used in EFU insurance

Receipts This is an account in which amount collected is placed.

BDS In this account the amount refundable to clients is placed

Ledger This is a form of account made for each individual head of accounting i.e assets, Account receivable.

Journal Voucher It is made when any correction in account is to be made.

Advice When any payment is made on behalf of Head office, an advice is sent to Head office for the payment.

Budget An annual budget is allocated by the head office keeping in view all financial requirements of the branch that must be followed.
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Collection Account In this account all amount collected as premium, Head office transfers etc is placed. Further payments to be made are paid from this account. This account further splits into following two accounts;

General Disbursement Payments of Salary, Commission, Tea expense, Rent, Electricity, Telephone Bill, and all expenses other than claims are made from this account. Claim Disbursement Payment of claim is made from this account. Transfer of Fund from Head Office Branch limit for the balance of Collection Account is Rs.150000. From where various payments are made. If branch needs more amount to write its expenses off Special Transfer of amount is made from Head Office. Banks are given instructions to transfer amount from collection account to sub-accounts weekly. So transfer of amount is made on these dates 5,13,21,28. Transfer of Fund to Head Office When the amount in Collection account exceeds the branch limit, D.D (Demand Draft) of over and above amount is made and is transferred to head office.

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STATEMENTS PREPARED ON MONTH END Following Statements are prepared on ending date of each month. News It is prepared and sent to head office, stating all the business of the branch for the month. Premium Progress Report (PPR) This report states about each business placed by each agent up till the date. Because based on this statement Commission of each agent is to be decided. Development Officer Business Progress Report (DOBPR) This report describes the business placed by Development Officers of the company. Branch Progress Report (BPR) This statement tells about the progress and the business of branch wholly. This helps to describe the ratings of branch in organization. Branch Management Expense Statement This is a statement presented to Head office showing all the expenses of Branch. e.g. salaries, petrol, rent and all other expenses. It helps when preparing budget for the branch. Marketing (Officer) Management Statement This statement is prepared to show the progress of marketing. In marine Insurance AlFalah branch was ranked in top 3 in EFU. As Marketing head of EFU is Sir. Haji Iqbal.

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LEDGER PREPARED Following Ledgers are prepared in branch Client Ledger It contains the premium receipts from all clients. Agent Ledger It contains the commission balance of all agents working for EFU Co-insurers Ledger This ledger contains all the balances receivable or payable to co-insurers. General Ledger In this ledger all other heads of the expenses and incomes are placed. Claim Ledger It contains the amount of claim payable or paid , survey fees and salvage recovery made by selling the waste.

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CHAPTER NINE

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As it was my first experience to work in practical environment, I gained a lot. I learnt how to sit in professional environment, it is all because of the people out there helped me a lot. From all six weeks that I spent there I understand that the organization have very strong roots in market. It should rightly be called as a giant of Insurance Market. Based on its financials I can surely come to a decision that the solvency position of the company is very sound. But current political position has affected it badly. EFU needs to Re-Gain its position. After spending six weeks at different departments of the EFU, interacting with the employees, getting their views, observing the organizational structure and design, I have come up with the following suggestions that in my view, will definitely improve a few weaknesses observed in the EFU by me.

FLEXIBLE POLICIES The EFU should adopt flexible policies, especially in the areas of the recruitment, promotions, evaluation of the employees otherwise the high turnover observed in the EFU will continue to create problems for the EFU now and in the future. Because not being satisfied many experienced employees will leave the Organization. PERMANENT HIRING The fresh hiring should be made permanent so that they are secured of their future. Further the allowances and perquisites attached with the permanent jobs will also increase the motivation level of the employees. As I observed there one hiring was made during my internship, and that was the first hiring in last 5 years and the guy appointed was not permanent. He was on Temporary basis. JOB TRAINING PROGRAMS The EFU should place emphasis on the organization of effective training and development programs for its new as well as existing employees so that these are gradually updated regarding the recent developments in the field of Insurance. As far as I observed the persons employed there were not known to insurance as thoroughly as they should being an insurance person. PERQUISITES AND ALLOWANCES The number of allowances and perquisites for the employees should be increased to ensure that they put their body and soul in the jobs assigned to them. As far as I observed they were not being awarded as they should. Their basic salary was very low.
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ADOPTION OF EFFECTIVE TECHNOLOGY The current Computer system used by the EFU is very effective in processing. But my view is that their is further room for improvement. They should try to be best in technology to compete in market. DECENTRALIZATION The higher authorities should form team-based management rather than centralized management. It would result in improvement in uplifting the morale of the employees. They will be more motivated and involved in all their operations resulting in overall effectiveness of the organization.

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CHAPTER 10

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GLOSSARY Accident An event or occurrence which is unforeseen and unintended. Accidental Bodily Injury Injury to the body as the result of an accident. Accident Insurance Insurance cover of the loss of any limbs or eyes, etc. in the event of an accident. It also generally covers compensation to the policyholders dependents in the event of death. Accord and Satisfaction When one party has discharged its obligations under a contract, it may elect to release the other party from its obligations. When this is done in return for a new consideration, the release is known as accord and satisfaction. Act of God Event caused by nature that is so unpredictable as to be unavoidable, for example, the timing and location of earthquakes or floods. Acts of God are normally insured against as a matter of course. Actuary A person professionally trained in the technical aspects of pensions, insurance and related fields. The actuary estimates how much money must be contributed to an insurance pension fund in order to provide future funds. Actual Total Loss Insured item that has been lost or completely destroyed. The full insured value is payable by the insurer. Additional Insured An assured party specifically named under an insurance policy that is not automatically included as an insured under the policy of another, but whom the named insureds policy provides a certain degree of protection. (e.g. bankers or financial institutions) Adjuster (US: adjustor) Person who calculates losses in insurance claims, also called a loss adjuster. ARfreightment Carriage of goods by sea. Agent An insurance company representative licensed by the IRDA negotiates or effects contracts of insurance, and provides service to the policyholder for the insurer.

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All-Risks Policy Insurance policy that covers personal possessions against loss or damage, usually anywhere in the country. All-risks policies are frequently extended to cover possessions in other parts of the world, and are therefore often used to insure small moveable items. Despite the term all-risks, there is usually some important exclusion. Arbitration A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to responsibility for or extent of a loss. Arson The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent. Assignment Legal transfer of a property, right or obligation from one party to another. Assurance Insurance that provides for an event that will certainly happen (such as death), as opposed to an event that may happen. There are many types of assurance policies such as endowment assurance, life assurance, and so on. Assured Person who receives the proceeds of an assurance policy when the policy matures or the person assured dies. Average Adjuster Person who calculates the loss: how much money is to be paid on an insurance claim. Average Clause (Condition of average) In marine and commercial insurance and some fire insurance policies, a clause in the policy that stipulates certain items shall be subject to average if there is underinsurance. Bailee Person to whom goods are entrusted for safe keeping. Bailment Act of placing goods into the care (but not possession) of someone else. The person who places the goods is the bailor and must be the rightful owner. The bailee is the person who receives the goods. Bailor Person who leaves goods with somebody (the bailee) for safe keeping. Bank assurance Involvement of banks in the traditional insurance market.
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Barranty of the Master An action of the master of the ship which violates the trust given to him provided such action is not taken in connivance with the ship owner. Bill of Lading Document detailing the transfer of goods from a (foreign) supplier to a buyer. It may be used as a document of title. BIMCO The Baltic and International Maritime Council (BIMCO) is based in Copenhagen and has been in operation since 1905. It is a group of ship owners, brokers, agents, clubs and others interested in carriage by sea and unites them in promoting proper shipping practices and in opposing objectionable and unfair import charges, claims, etc. Blanket Insurance A policy designed to provide coverage under a single limit for two or more items (e.g. building and/or contents), two or more locations, or a combination of items and/or locations. Bottomry A primitive form of ship mortgage, whereby the master, while away from the ships home port, by signing a bottomry bond, borrowed money on the credit of the vessel to pay for goods or services needed to preserve the ship or complete the voyage. The creditors security was extinguished, however, if the ship was lost or destroyed. Break Bulk Carriage of goods other than by container. Broker A marketing specialist who represents buyers of insurance and who deals with companies in arranging for the coverage required by the customer. He should be a license holder, issued by IRDA. Burglary Breaking and entering into other persons property with felonious intent. Business Interruption Insurance (BI insurance) Insurance that provides compensation for the policy holder if his or her business activities are interrupted by a mishap such as a fire. The amount insured covers loss of net profits, fixed costs and any additional expenses incurred. The policy is subject to a material damage warranty, i.e. a claim for matching damage must have been paid for the BI cover to be effected. It is also known as consequential loss insurance.

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Cancellation The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company. Captive Insurance Company A companyowned solely or in large part by one or more non-insurance entities for the primary purpose of providing insurance coverage to the owner or owners. Cargo Insurance It is a type of Transit insurance designed to protect the shipper of the goods against financial loss if the goods are damaged or lost. Cash against Document (CAD) Method of payment for goods for export, whereby the documentation for a shipment is sent to an agent or bank at the destination. These are passed to the consignee, who makes the payment. The consignee is free to take delivery of the shipment when it arrives. Catastrophe Cover Type of reinsurance on an excess of loss basis to protect against an accumulation of losses arising from one event. Catastrophe Risk In insurance, an exceptional loss for example, resulting from a flood or earthquake. Caveat Emptor Latin for buyer beware. In legal terms this maxim means that a buyer of goods should use his or her own common sense, and that the law is not prepared to aid someone who buys goods foolishly. Certificate of Insurance A statement of coverage issued to an individual It is a proof of insurance. Generally, it is issued for Motor and Marine insurances. Certificate of Motor Insurance Document that confirms the existence of a valid motor insurance policy. It must state the name of the policyholder, the registration number of the vehicle, dates of commencement and expiry of the insurance, the person or persons insured to drive the vehicle, and any limitations on use. The form should be as per Motor Vehicles Act,1 988. Cession Amount of the insurance ceded to a reinsurer by the original insuring company in a reinsurance operation. Claim Request for payment to an insurance company in respect of loss or damage covered by an insurance policy, usually submitted by filling in a claim form.
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Claims-Made Policy Insurance policy in which the insurer must meet only claims made during the time cover is provided (irrespective of when the loss occurred). Coinsurance Method of sharing insurance risk between several insurers. The policyholder will deal as a lead insurer who issues documents and collects premiums. The policy will detail the shares held by each company. Commercial Lines Insurance of business, organizations, institutions, governmental agencies and other commercial establishments. Commission The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance. Concealment Deliberate failure of an applicant for insurance to reveal a material fact to the insurer. Conditions Provisions inserted in an insurance contract that qualify or place limitations on the insurers promise to perform. Consequential Loss Financial loss occurring as the consequence of some other loss. Often called an indirect loss. Consequential loss or damage is indirect loss or damage caused by a covered peril such as fire. Consideration In some forms of contract, the agreement is made binding by the payment of a sum of money from one party to the other. Such a payment is known as a consideration. The term is also used informally to mean any form of payment. Consignment Shipment of goods sent to someone for example, an agent, usually so that he or she may sell them for the consignor. Contract A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy. Contractual Liability Legal Liability of another party that the business firm agrees to assume by a written or oral contract. It is common in construction and other agreements (written and oral) for one party to assume the liability of another. This is sometimes referred to as a hold
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harmless agreement. The extent to which one holds another harmless varies from contract to contract, job to job and so on. Contractors All Risks Type of insurance that provides compensation to a contractor in the event of damage to construction works from a wide range of perils. Contra Proferentem Rule Nickname for the following Latin maxim: verba chartarum fortuis accipiuntur contra proferentem meaning the words of the contract are construed more strictly against the person drafting them. In effect, the contra proferentum rule means that if a contract is ambiguous, it will be construed in a way that is the least advantageous to the party that drew up the contract. Contribution It is a term insurance in which a risk has been insured twice over, and each insurance company shares the costs of a claim payment. Contributory Negligence Lack of care in looking after something that reduces the value of damages or an insurance payment in the event of a claim being made. Cover Note Document issued by an insurance company giving cover for a short time, often one month, while a complete policy (and, possibly, an insurance certificate) is drawn up and issued. Cross Liability Endorsement In the event of claim by one insured for which another insured covered by the same policy may be held liable, this endorsement covers the insured against whom the claim is made in the same manner as if separate policies had been issued. However, it does not operate to increase the insurance companys overall limit of liability. Co-insurance Method of sharing insurance risk between several insurers. The policyholder will deal as a lead insurer who issues documents and collects premiums. The policy will detail the shares held by each company. Damaged Arrived value It refers to the market value of the goods in damaged condition. Debris Removal Clause The clause extends insurance coverage to include the cost of debris removal resulting from damage caused by a covered loss up to a specified limit of loss.

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Deductible An amount which a policyholder agrees to pay, per claim or per accident, towards the total amount of an insured loss.- (Excess) Depreciation A decrease in the value of property over a period of time due to wear and tear or adolescence. Depreciation is used to determine the actual cash value of property at time of loss. Directors and Officers (D & O) Liability Insurance Type of insurance that provides a companys directors and officers with cover against losses incurred through misleading statements or negligence. Duty of Disclosure Positive duty to disclose material facts in an insurance proposal. Dynamic Risk Any insurance risk resulting from a human decision. Earned Premium For an insurance policy, the part of the premium that relates to an expired period of cover. Electronic Data Interchange (EDI) Method by which companies or people communicate with their banks, clients and suppliers using computers. Embezzlement Fraudulent use or taking of anothers property or money which has been entrusted to ones care. Errors and Omissions Insurance (E & O insurance) Insurance that covers liability for errors and omissions, such as incorrect records or accounting. Estimated Maximum Loss (EML) Used in fire, explosion and material damage insurance policies, it is an estimate of the monetary loss that could be sustained on a single risk as a result of a single peril, which is considered by the underwriter to be possible. Estoppel Legal restrictions on a persons actions. The law insists that a person must bear liability for previous actions. Estoppel is generally used to prevent a denial of responsibility, for example, the parties to a contract cannot subsequently claim that they were unaware of its conditions.

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Excess Sum that a policyholder has (by agreement) to contribute to an insurance claim, for example, on a motor insurance the policyholder may have to pay the first Rs. 500 or Rs. 1000(the excess) on any claim. It may be compulsory or voluntary. Excess of Loss In reinsurance, an agreement that requires the reinsurer to bear any loss over a certain stated amount. Exchange Gain Profit made by an importer if there is an favorable change in the exchange rate. Exchange Loss Loss made by an importer if there is an unfavorable change in the exchange rate. Expense Ratio The ratio of a companys operating expenses including acquisition costs to premiums written or earned. Extended Reporting Period Endorsement Added to a claims-made policy of liability insurance to provide the original amount of insurance for a limited period of time. Ex gratia Payment In insurance, a payment made to settle an issue (such as an insurance claim) but without admitting liability. Facultative Type of reinsurance in which risks are coded on an individual basis. The coding company can choose whether or not to reinsure and the reinsurer can decide to accept or reject the business. FIA Abbreviation of Fellow of the Institute of Actuaries. Fidelity Guarantee Insurance Commercial insurance that covers misappropriation of funds or other wrongdoing by an employee. It is also called fidelity insurance. Fidelity Policy A form of protection which reimburses an employer for losses caused by dishonest or fraudulent acts of employees. Fiduciary A person who holds something in trust for another.
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Fire A combustion accompanied by a flame or glow, which escapes its normal confines to cause damage. First Loss Insurance Type of fire insurance or theft insurance in which the full value of the insured item is declared, but a lower sum is insured (at a consequently lower premium). Fleet Insurance Motor insurance policy that covers a group of vehicles from one organization. Fortuitous Loss Unforeseen and unexpected loss that occurs as a result of chance. Franchise In insurance, a franchise is an agreed figure below which an insurance company does not have to meet a claim. A loss above the franchise figure is paid in full. Fronting In insurance, selling certain products with the intention of passing them on to another company General Average In insurance, a situation in which a loss, resulting from a deliberate act of sacrifice to save other goods, is shared by the insurers concerned (such as the insurer of a vessel and the insurer of its cargo where part of the cargo has been jettisoned and lost to save the ship). Glass Insurance Protection for loss of or damage to glass and its appurtenances. Gross Negligence The intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or property of another. Group Insurance Insurance written on a number of people under a single master policy, issued to their employer or to an association with which they are affiliated. Hazard Condition that creates or increases the chance of loss. Hull Insurance Insurance of a vessel and its machinery. A policy is generally taken out during construction which covers the ship for the whole of its useful life. Most hull insurances provide cover against accidents caused by the negligence of crew or stevedores.
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Implied Warranty In marine insurance, warranty that a vessel is seaworthy and its voyage lawful (not explicitly written into the contract). Incurred Losses Expense account in an insurance companys income statement reflecting the claims paid during the policy year plus the loss reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year. Incurred-But-Not Reported Reserves(IBNR) Liability account on an insurers balance sheet reflecting claims that are expected based upon statistical projections but which have not yet been reported to the insurer. Indemnification Compensation to the victim of a loss, in whole or in part, by payment , repair or replacement. Indemnity Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position that existed before the loss. Insurable Interest Financial interest, recognized at law, which the insured has in the subject matter of insurance. In some cases, an unlimited insurable interest exists, for example, in ones own life and the life of a spouse. However, in most cases, insurable interest is limited to the value of the property or goods, or extent of liability. Insurable Risk Risk against which insurance cover can be obtained by somebody with an insurable interest in it. Insurance Contract under which the insurer agrees to provide compensation to the insured in the event of a specified occurrence, for example, loss of or damage to property. In return, the insured pays the insurer a premium, usually at fixed intervals. The premium varies according to the insurers estimate of the probability that the event insured against will actually take place (a calculation carried out by an actuary). Insured Person or company that holds an insurance policy (a contract with an insurance company); a policyholder. Insured Peril Peril that is specifically stated in an insurance policy as being coverd or included.

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Insurer Insurance company or other person or company that agrees to indemnify someone against particular risks, usually as defined in an insurance policy and for an insurance premium. Insuring Agreement That part of an insurance contract which sets forth the type of loss being covered by the policy and the parties of the insurance contract. Insuring Clause The clause in an insurance contract which sets forth the type of loss being covered by the policy and the parties of the insurance contract. Intangible Assets They are abstract commodities, which cannot be seen or perceived through the senses, for e.g., goodwill, honesty, integrity, etc. Jettison Hazard covered under a marine cargo policy which is defined as the throwing overboard of cargo to preserve property from loss. Jewelers Block Insurance Coverage designed to protect the insured stock, property left with the insured for repair or other purposes, and the insureds interest in and legal liability for property on consignment from others in the jewelry trade. Joint- and Several Liability a legal principle that permits the injured party in a tort action to recover the entire amount of compensation due for injuries from any defendant who is able to pay, regardless of the degree of that partys negligence, once any liability by that defendant has been established. Key Person Insurance Insurance to cover the health of an essential employee (a key person) in a company. This form of insurance covers the cost of replacing such personnel at short notice by equally qualified temporary staff and any loss of profits incurred in the meantime. Knock for Knock Agreement In motor insurance, agreement between a group of insurers that no question of responsibility will be discussed and that each company will pay for damage to its own policyholders vehicles, so long as the policyholder is covered for such damage. Lapse The termination or discontinuance of an insurance policy due to non-payment of a premium.

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Lapsed Policy A policy terminated for non-payment of premiums. Larceny The unlawful taking, carrying loading away of another persons property. Law of Large Numbers Concept that the greater the number of exposures, the more closely will actual results approach the probable results expected from an infinite number of exposures. Liability Any legally enforceable obligation. Liabilities Portion of an insurers balance sheet which denotes legal obligations of the company, including anticipated future payments of losses covered under policies issued. Liability Insurance Insurance designed to protect the policyholders from financial loss due to liability resulting from injuries to other persons or damage to their property. Lien The right to possession of property until such time that an outstanding liability has been repaid. Lloyds of London Incorporated association of insurers that specializes in marine insurance. Formally, established by Act of Parliament in 1871, the Corporation developed from a group of 17th century underwriters who met at Edward Lloyds coffee house in London. Lloyds supervises about 20,000 individual insurers (names) grouped into syndicates, each of which has unlimited liability and accepts a fraction of the risk of business brought to them by one of more than 200 registered brokers. Lloyds involvement in marine insurance currently comprises less than half the total business transacted by Lloyds underwriters. From 1988 to 1994, Lloyds lost over 8 billion pound Sterling and many names went bankrupt. As a result limited liability companies are now allowed to become corporate names. Loading The amount that must be added to the pure premium for expenses, profit and a margin for contingencies. Loss The occurrence of an event for which insurance pays. Loss avoidance A risk management technique whereby a situation or activity may result in a loss for a firm is avoided or abandoned.
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Loss control Any conscious action intended to reduce the frequency, severity, or unpredictability of accident loses. LossofProfits Insurance Type of insurance that provides cover against loss of trade and profits resulting from some disaster such as a fire. In the latter case the policy would typically pay a business the equivalent of the expected net profits lost while repair work and restocking were carried out, plus salaries, rates and rent due in that period. Fire damage itself will probably be covered by a separate fire insurance. A loss-of-profits policy is sometimes also called a business-interruption policy. Loss Payable Clause Means of protecting a mortgagees interest in property by directing the insurer to make a loss payment to the mortgagee in the event of a loss. Loss Prevention Any measure which reduces the probability or frequency of a particular loss but does not eliminate completely all possibility of that loss. Loss Ratio In insurance, the value of all claims expressed as a percentage of total premium for a period. The figure is used as a guide to the profitability of the business when considering rates. Loss Reserve The amount set up as the estimated cost of a claim. Marine Insurance Insurance of ships and their cargoes which provides indemnity for property loss, damage and injury to third parties. Marine losses arise in four areas: Hull damage to or loss of vessel. Cargo goods that have been sold and are being shipped to the buyer. Freight the cost of transporting cargo. Liability damage or injury to third parties. Minor A person under the age of 18, who cannot legally conduct certain transactions or purchase certain goods. Misrepresentation A false, incorrect, improper, or incomplete statement of a material fact, made in the application for an insurance policy. Moral Hazard Hazard arising from any nonphysical, personal characteristic of a risk that increases the
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possibility of loss or may intensify the severity of loss, for instance, bad habits, low integrity, poor financial standing. Mutual Insurance Company An insurance company in which ownership and control is vested in the policyholders and a portion of surplus earnings may return to policyholders in the form of dividends. Named Perils Coverage in a property policy that provides protection against loss from only perils specifically listed in the policy. Negligence Failure to use the care that a reasonable and prudent person would have used under the same or similar circumstances Occupational Hazard Occupations which expose the insured to greater than normal physical danger by the very nature of the work in which the insured is engaged and the varying periods of absence from occupation, due to the disability, that can be expected. Occurrence An accident, including continuous or repeated exposure to substantially the same general, harmful conditions, that results in bodily injury or property damage during the period of an insurance policy. Overriding Commission In reinsurance, commission paid to the ceding company which is more than the acquisition cost to allow for additional expenses Package Policy A combination of two or more individual policies or coverages in a single policy e.g. Motor Package Policy, Householders Package, Shopkeepers Policy, Office Package Insurance etc. P & I Clubs Protection and Indemnity Associations. These are associations of ship owners organized to provide mutual aid for members for liabilities not covered by marine hull policies. Each ship owner contributes to the fund on a tonnage basis but could be called upon to make further contributions if claims in a year are heavy. Peril In insurance, any event that causes a loss and which may be included or excluded on an insurance policy, for example, an insured peril in a fire policy is fire; an excluded peril is war.

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Peril of Nature In insurance, a class of peril that includes earthquake, flood, hailstones, storm, thunderbolt and subsidence; such perils are usually covered by property insurance. Peril of the Sea All perils which are unique of transportation and which could not be prevented by reasonable efforts, including sinking of the vessel, standing, heavy weather, lightening, collision with other vessels or submerged objects and damage by sea water when caused by an insured peril. Personal Lines Those types of insurance such as auto or home insurance, for individuals or families rather than for business or organizations. Physical Damage Damage to or loss of the auto resulting from collision, fire, theft or other perils. Policy The legal document issued by an insurance company to a policyholder, which outlines the conditions and terms of the insurance, also called the policy contract or the contract. Policyholder A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance. Pollution Liability Exposure to lawsuits for injury or cleanup costs that result from pollution damage. Pool An organization of insurers or reinsurers through which particular types of risk are underwritten and premiums, losses and expenses are shared in agreed upon amounts. Portability The right to transfer pension rights and credits when a worker changes jobs. Premium The sum paid by a policyholder to keep an insurance policy in force. Probate The court supervised process of validating or establishing a distribution for assets of a deceased including the payment of outstanding obligations. Product Liability Legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of its product.

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Product Liability Insurance Coverage designed to provide protection against financial loss arising out of the legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of covered product. Proof of Loss Documentary evidence required by an insurer to prove a valid claim exists. It usually consists of a claim form completed by the insured, and for health insurance claims by the insureds attending physician. For medical expense insurance itemized bills must also be included. Proposal Form filled in by a person wanting to take out insurance. Inaccuracies or omissions (accidental or deliberate) in a proposal may invalidate any insurance policy issued. Proposer Individual or company offering or seeking insurance. Proximate Cause In insurance, the immediate effective cause of an insured loss. It was defined in the case of Pawsey v. Scottish Union & National as the active efficient cause which sets in motion a train of events, which brings about a result, without the intervention of any force, started and working actively from a new and independent source. Prudent Insurer Hypothetical insurer who is in possession of all relevant information (material facts) before issuing an insurance policy. Pure Risk In insurance, a risk that can result in either a break-even situation, or a loss. Risk Avoidance Any action that removes the chance of an adverse outcome happening. Risk Control In insurance, measures adopted to minimize the effect of an insurable risk, either before or after a loss occurs. Risk Reduction Measures that could reduce the chance of losses occurring or the size of such losses. Risk retention insurance: Policy of bearing a risk because it would cost more to insure against it than the loss itself. Risk Retention Insurance Policy of bearing a risk because it would cost more to insure against it than the loss itself.
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Reimbursement The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amounts specified in the policy. Reinstatement The resumption of coverage under a policy which has lapsed. Reinsurance Transfer of an insurance (or part of the risk covered) from one insurance company to another for a premium, not necessarily with the knowledge of the policyholder. Renewal Continuance of coverage under a policy beyond its original term by the insurers acceptance of the premium for a new policy term. Replacement The substitution of health insurance coverage from one policy contract to another. Retention The net amount of risk retained by an insurance company for its account or that of specified others, and not reinsured. Risk The chance of loss. Risk Control Any conscious action intended to reduce the frequency, severity, or predictability of accidental loses. Robbery The taking of property from a person by force or threat of violence Salvage Rescuing people or property from a flood, fire, shipwreck or other disaster. A person who salvages goods may be paid compensation by their owners or insurers. The ownership of some salvaged goods can be a contentious issue. Sight Bill Bill of exchange payable on presentation i.e. on sight. Slip Document produced by a broker when insurance business is placed at Lloyds of London. It includes such details as the name of the insured, the starting date and period of insurance, the property insured and the period of cover, the premium and commission payable, and any special conditions or limitations.

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Sound Arrived value It refers to the market value of the goods in sound condition. Stop-Loss Type of insurance or reinsurance that covers a whole account over a period of time. No payment is made until the accumulated losses in the year exceed the stop-loss level. Subrogation Right of an insurer, having indemnified the insured, to avail himself or herself of any rights and remedies of the insured, for example, salvage. Sum Insured Limit of an insurance companys liability under a particular insurance policy. Surplus In reinsurance, it is the amount by which the sum insured exceeds the ceding offices retention. Surplus Treaty Reinsurance agreement whereby all risks that exceed a pre-determined amount are reinsured. Surveyor Person whose job is to examine buildings, etc. and report on their condition, often employed by an insurance company (for buildings insurance) or a mortgage provider. Tariff In insurance, it is a collective agreement by members to calculate and charge the same premium for a given risk or type of insurance. Third Party Person mentioned in a contract but not a party to the contract. Third-party insurance, for example, gives the insured cover against claims made by a third party (who is not named in the policy and not a party to it). Third Party Liability Liability arising to a party, who is not party to the contract i.e. other than the insured or the insurer. This party/person is called the third party and the liability to him/her arising under law or contract is called third party liability. Total Loss In marine insurance, the loss of ship at sea or the total destruction of a ship and/or its cargo.

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Through Bill of Lading A bill of lading providing for the carriage of goods by water, from their point of origin to their final destination, either by successive ocean carriers or by more than one mode of transportation. Theory of Probability This theory enables the insurance company to predict potential losses based on a study of the insureds previous loss experiences. Underwriter Person or institution that agrees to take up a proportion of the risk of something, for example, an underwriter may take up the shares of an issue that are not taken up by the public, in return for a commission (known as an underwriting commission). For the issuer, the underwriter represents the guarantee that the whole issue will be subscribed. Underwriting Process of assessing proposals/risks for insurance. Undischarged Insolvent The person who has declared insolvency but not paid off his creditors nor has entered into any scheme of settlement with them. He is incapable of entering into any contract. Unexpired Risk Reserves Fund that an insurance company sets up to cover a shortfall in an insurance companys unearned premium reserve. Unvalued Policy Insurance policy that has a sum insured against each item of property, but not acknowledged by the insurer as true values. In the event of a claim, the insured must prove the actual value of the item. Utmost Good Faith Phrase referring to contracts of insurance in which both parties must disclose all the facts that may influence the others decision to enter into the contract, whether they are asked to do so or not. If either party has not acted in the utmost good faith, then the contract may become void. Valued Policy Insurance policy that has values assigned to insured items, the values being agreed by the insurer. In the event of a claim for total loss, that is the sum paid without the need for further negotiation. Void Contract Contract that was drawn up on the basis of what turns out to be misunderstandings on both sides. Such a contract is deemed in law never to have existed.

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Warranty In insurance, it is an undertaking by an insured person that something will, or will not, be done; for example, that an alarm system will be maintained and switched on. Breach of warranty allows an insurer to repudiate claim. Waybill (Sea waybill) A waybill is a non-negotiable receipt issued after receipt of the goods by the carrier.It is clearly marked non-negotiable. It is usually employed in the container trade for normal shipments with consent of the shipper who does not insist on being issued a negotiable bill of lading. It is not a document of title, so that delivery of the goods shipped is made, not by presentation of a document, but by the consignee nominated on the waybill identifying himself. Only one original waybill is usually issued to the shipper. Although it is not a document of title, it is a contract of carriage. Wear and Tear Popular and legal term for depreciation. Wear and tear is the decrease in value of an item due to deterioration through normal use rather than through accident or negligence. Work in Progress In accounting, the value of goods currently under manufacture or services being supplied, but not completed at the end of the accounting period.

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BIBLOGRAPHY I got help in formation of this project from following sources; Course Books & Reading Material And following websites: www.efuinsurance.com www.wikipedia.com www.netmba.com

www.pakre.org.pk www.sbp.org.pk
www.karobar.pk www.businessrecorder.com

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