Master the world of business insurance with these clear and concise notes. Covering various types of insurance, risk management strategies, and the role of insurance in mitigating business risk, this resource is essential for understanding risk protection.
Features:
Detailed breakdown of insu...
Table of Contents
INSURANCE AND ASSURANCE AS RISK MANAGEMENT TOOLS FOR INDIVIDUALS AND BUSINESSES ......... 2
INSURABLE AND NON-INSURABLE RISKS............................................................................................................. 2
TYPES OF INSURANCE: ........................................................................................................................................... 3
COMPULSORY INSURANCE ......................................................................................................................................... 3
COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES ACT (COIDA).................................................................. 3
Advantages of COIDA......................................................................................................................................... 4
Disadvantages .................................................................................................................................................... 4
ROAD ACCIDENT FUND (RAF) ..................................................................................................................................... 4
NON-COMPULSORY INSURANCE .................................................................................................................................. 4
A. Fire insurance ............................................................................................................................................ 5
B. General Business insurance/ Commercial Insurance .................................................................................. 5
C. Household insurance .................................................................................................................................. 5
D. Vehicle insurance ....................................................................................................................................... 6
E. Money in transit insurance .......................................................................................................................... 6
F. Fidelity insurance ....................................................................................................................................... 6
G. Crop insurance ........................................................................................................................................... 6
1
, Chapter 9
Insurance
Insurance and assurance as risk management
tools for individuals and businesses
Insurance = is IN case something happens (eg: fire, theft, flood). These events may or may not
take place, but in order to manage the risk IN case they do occur, the insured wants to be
INdemnified (placed in the same financial position he/she was in before the incident).
AS sure as we are human beings living on planet Earth, we will all retire after we have worked or it
is possible that death may come first. We can manage the risk of our loved ones being without
income if we die, or the risk of being unable to maintain a decent standard of living after
retirement, through ASsurance.
By taking out insurance and assurance, the insured (an individual or business) pays a monthly
premium to transfer the risk to the insurer.
Insurable and non-insurable risks
Some risks are UNinsurable and some of them are so expensive to insure, that it is Unaffordable
to insure against these risks. Some of these risks are:
War and associated risks are generally uninsurable as insurance companies regard it as a
risk that should be managed by the Government (it should be prevented).
One risk that is generally considered to be uninsurable is bad debt. There is, however,
insurance available against bad debt, but it is one of those risks that is almost unaffordable
Business risks such as price fluctuations due to time intervals (between the time that the
goods are ordered and they time they are received)are not covered by means of a
traditional insurance policy. The business may decide to hedge against such risks (don’t
need to know)
If trading inventory becomes obsolete or outdated due to changes in fashion, it is a
business risk that is not insurable
Technology changes at quite a rapid pace and constant improvements are made to
machinery and the production processes. A business cannot take out insurance against
machines becoming outdated. Leasing, is an option to prevent being stuck with outdated
equipment.
No one can take out insurance against committing an illegal act.
Some areas in the world (and South Africa) are fast becoming a bigger risk due to climate
change. Consequently, some insurers consider the risk associated with natural disasters as
too high, to cover these areas.
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