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Asigurari Internationale

ACADEMY OF ECONOMIC STUDIES OF MOLDOVA

Doctor of Economic Sciences, professor L. Cobzari, T.Vsokaia,

A.Goncearenco, E.Drobshev, A.Pociumban, A.Romanova

International insurance

Lecture course

Chiinu 2003

Contents

Theme 1.Economic Essence, Functions and Classification of Insurance.3

1.1.Economic essence and functions of insurance..3

1.2.Classification of insurance4

1.3.Types of insurance funds...7

Theme 2.Juridical Aspects of Insurance Activity.9

2.1.Forms of insurance activity...9

2.2.State control over the insurance activity...10

2.3.Forms of control over insurance companies activities.11

2.4.The core and main elements of the contract of insurance.12

Theme 3.Insurance Marketing..14

3.1.The essence of the insurance marketing14

3.2.Methods of promotion of insurance services.16

3.3.Insurance middlemen.19

3.4.The essence of the insurance market.20

Theme 4.Insurance Market in Foreign Countries.23

4.1.Insurance development tendencies on the international level...23

4.2.The Insurance Market of the USA.25

4.3.The Insurance Market of Great Britain.28

4.4.The Insurance Market of Germany31

4.5.The Insurance Market of Switzerland...33

4.6.The Insurance Market of Russia34

4.7.The Insurance Market of Moldova35

Theme 5.Property Insurance.37

5.1.Physical persons property insurance38

5.2.Juridical persons property insurance39

5.3.The conclusion of insurance contract41

5.4.The measuring of damage and compensation...42

Theme 6.International Practice of Transport Insurance...44

6.1.Motor-vehicle insurance45

6.2.Vessel insurance48

6.3.Marine freight insurance49

6.4.Containers insurance.51

6.5.Aircraft insurance..52

Theme 7.The Insurance of Responsibility on the International Level.54

7.1.The insurance of the civil responsibility of car-owners55

7.2.The insurance of the civil responsibility of carriers to passengers56

7.3.The insurance of the civil responsibility of the enterprises of the sources of high danger58

7.4.The insurance of professional responsibility.59

Theme 8.Economic and Political Risks Insurance...61

8.1.Commercial risks insurance..61

8.2.Insurance against losses due to production interruptions..64

8.3.The insurance of new technique and technology risks..65

8.4.Political risks insurance.66

8.5.Export credits insurance67

Theme 9.Personal Insurance.70

9.1.Life insurance70

9.2.Additional pension insurance71

9.3.Accident insurance72

9.4.Compulsory insurance of passengers73

9.5.Voluntary medical insurance.73

9.6.Medical insurance of persons going abroad..75

Theme 10.Reinsurance...77

10.1.The essence and the meaning of reinsurance77

10.2.Types of reinsurance contracts..78

10.3.Proportional reinsurance80

10.4.Disproportional reinsurance..81

Bibliography84

Theme 1. Economic Essence, Functions and Classification of Insurance.

1.1. Economic essence and functions of insurance.

1.2. Classification of insurance.

1.3. Types of insurance funds.

1.1. Economic essence and functions of insurance.

Insurance is a complex of economic relations associated with forming the insurance fund at the expense of the insurers with the purpose of covering the loses caused by some unfavourable events, stipulated in the contract.

Characteristic features of insurance:

1) Premiums are paid by policyholders up to the definite rates and the funds are formed for the account of premiums.

2) The funds are accumulated in special organisations insurance companies.

3) The funds are only distributed to the fund investors.

4) The funds are used only for particular purposes.

5) The funds are used according to the rates, stipulated beforehand, that is, when joining the insurance relations the insurer knows what compensation he might get for an incident.

6) The funds are distributed only within stated periods of time.

7) Insurance is necessary only when somebody is interested in it, i.e., when some unforeseen circumstances can really occur.

8) The events must have features of probability or fortuity, when the occurrence of the event is not obvious or doesnt depend on the will of the insurer.

9) Insurance is based on mutual and solidary distribution of losses among all participants of insurance.

Functions of insurance:

1) The core of risk and redistributing function is that the insurance funds are redistributed among the participants due to concluding the insurance agreement and consequence of insurance events.

2) The core of preventive function is that insurance companies carry out financing of unfavourable events. For this the insurance company forms a set of preventive actions for the account of allocations.

3) The core of saving function is that a sum of money is saved by means of life insurance and is connected with the defence of the achieved income.

4) The core of controlling function is that the insurance companies control the activities of their clients concerning their observing of safety measures.

1.2. Classification of insurance.

A classification of insurance is the distribution of insurance services according to the groups defined by some common signs. There exist classifications based on forms and on branches of insurance.

Classification based on forms of insurance.

Insurance is carried out in two forms: obligatory and voluntary.

Obligatory forms are defined by the following principles:

1) The obligatory insurance is defined by the law, according to which the underwriter must insure the corresponding objects, and the insurer must take necessary insurance payments. The law usually stipulates all necessary terms and the order of carrying out the given kind of insurance.

2) For the overall obligatory insurance indicated by the law, the insurance agencies carry out annual registration of the insured objects, make payments and charge premiums in the stipulated terms.

3) Automatic insurance covering of the objects is indicated by the law. The insurer mustnt announce the appearance of the insured objects to the insurance company. The given property is automatically included in the field of insurance. It will be automatically registered and the insurer will be charged to pay the fee.

4) The effect of the obligatory insurance does not depend on the premiums. In cases when the insurer didnt pay the insurance premiums, they are charged by the order of the court. In case of loss of or damage to the insured property not covered by insurance premiums the insurance compensation is due to payment out of the insurance debts. The undue premiums are imposed with a fine.

5) Permanent obligatory insurance. It works during the whole period, within which the insurer uses the insured property. Only unpractical and dilapidated property doesnt fall under insurance coverage. The effect of the insurance doesnt stop when the property is passed on from one insurer to another. It loses its effects only in case of loss of the property. In case of personal insurance an overall automation comes into effect. But it has a strictly stipulated period of time and is completely dependent on insurance premiums (for example, obligatory insurance of passengers).

Kinds of obligatory insurance in Moldova:

insurance of passengers against accidents;

insurance of military men;

obligatory medical insurance;

car owners responsibility insurance;

carriers responsibility insurance.

Voluntary insurance is based on observing the following principles:

1) Voluntary insurance is effective under the law about insurance and under voluntary authority. The law defines the objects that fall under insurance and stipulates the general conditions of insurance. The specific terms are regulated by the insurance rules.

2) Voluntary participation in insurance is characteristic only for the insurers. The underwriter is not authorised to refuse to insure the object if the wishes of the insurer do not contradict the conditions of insurance. The given principle guarantees concluding the contract on the demand of the insurer.

3) Selective voluntary insurance is due to the fact that not all insurers wish to participate in it. Besides, there exist some restrictions for making contracts.

4) Voluntary insurance always has some time limits. For this end, the beginning and the end of the period of insurance are specially stipulated in the contract. Voluntary insurance may become permanent only by making the second contract for a new period.

5) Voluntary insurance is effective only after paying the insurance premium. The contract comes into effect after paying a single or the first insurance premium. Non-payment of the next premium of long-term insurance brings to the cessation of the contract.

The voluntary insurance coverage depends on the wishes of the insurer. Under the property insurance the insurer may define the size of the insurance sum within the limits of the property evaluation. Under the personal insurance the insurance sum is defined by the contract of the parties.

Classification according to the branches.

Insurance is carried out in the next branches:

property insurance;

personal insurance;

responsibility insurance in the face of the third person;

insurance of economic risks.

Property insurance is the branch of insurance, where the object of insurance is the property that can be damaged. Depending on the forms of property and the categories of insurance there exists: the property of juridical persons, physical persons and agricultural enterprises.

Personal insurance is the branch of insurance in which the objects of insurance are life, health and ability of a person to work. There are life insurance, insurance against accident and medical insurance.

Liability insurance is the branch of insurance the object of which is the responsibility in the face of the third person, which may suffer from the actions of the insurer. There are insurance of responsibility of car owners, insurance of professional responsibility, etc.

Insurance of economic risks is the branch of insurance, the objects of which are the results of entrepreneurs activity. There may be defined the insurance of the risks against direct and indirect losses.

1.3. Types of insurance funds.

Insurance funds are a fair necessity, they perform the functions of safe keeping and continuity of production of material goods for people.

Functions of insurance funds:

1) Preventing the insurance cases.

2) Suppression and liquidation of the event covering losses.

Depending on the degree there are three means of forming the insurance funds:

1) centralised;

2) decentralised (self-insurance);

3) insurance.

Under centralised form the insurance fund is formed by the state. Its core is that the state allocates a certain portion of its resources and keeps it for extraordinary cases of destructive consequences. This fund may be created both in material and monetary forms.

Negative moment: sufficient material and financial resources are drawn from inventory reserves. It is impossible to provide big reserves.

Positive moment: it doesnt depend on wishes and potentials of final users of funds. It is concentrated in one owners hands and prevents its using for other purposes.

Under self-insurance a reserve fund is formed by any juridical or physical person. Self-insurance may be carried out both in material and monetary forms.

Negative moment: the volume of possible losses is unknown, neither is the needed size of the fund.

Positive moment: a quick method of using, as it is at the disposal of the owner.

Insurance as a means of forming an insurance fund assumes:

Merging of different producers, when they are not able to cover the losses for their own account. Then the redistribution of losses from one suffered to other insurers takes place.

Existence of the majority interested in forming the insurance fund, existence of insurance companies dealing with the redistribution of resources and possible losses. The fund is used only to cover the losses of certain participants of the fund, stipulated beforehand.

The questions for the control:

1. Give the definition of insurance as an economic category.

2. Enumerate the characteristics of insurance.

3. Characterise the functions of insurance.

4. Classify insurance according to its forms.

5. Classify insurance according to its branches.

6. Enumerate and characterise types of insurance funds.

The literature:

1. Law of RM of 15 July 1993 The Official Monitor of the RM 12, December 1993.

2. , a book under edition of professor Reitman L.I., The bank and exchange scientific consultative center, M., 1992.

3. Basacov I.I. , Rostov-on-the-Don, , 1999.4. Serbinovski B.U., Garikusha V.N. , Rostov-on-the-Don, , 2000.Theme 2. Juridical Aspects of Insurance Activity.

2.1. Forms of insurance activity.

2.2. State control over the insurance activity.

2.3. Forms of control over insurance companies activities.

2.4. The core and main elements of the contract of insurance.

2.1. Forms of insurance activity.

Nowadays there are the insurance companies of the following legal forms:

1) Joint-stock insurance companies are companies that are formed to carry out insurance operations, which nominal capital is formed by issuing or selling shares. They usually function on the same legal basis as other joint-stock companies and can carry out any kinds of insurance on license basis.

2) State insurance organisations are juridically independent organisations, the capital of which is partially or totally formed from the state funds.

3) Mutual insurance communities form a system of contractual relations between the insurers, usually between construction, transportation, industrial and financial corporations where they join their capital with one reason to cover their possible losses. Every participant of such a community becomes both an underwriter and an insurer.

4) Private insurance companies belong to one owner or his family. English corporation Lloyds is a unique form of such a corporation of private underwriters. All members of Lloyds join in syndicates to increase their capital when assuming the insurance risks. Insurance premiums and losses are proportionally distributed among the members of the syndicate according to their financial interests.

5) Non-governmental retiring fund is a special form of personal insurance which guarantees rental payments to insurer on achieving by them a particular age.

6) Captive insurance company is a joint-stock insurance company protecting generally insurance interests of the founders.

2.2. State control over the insurance activity.

The activities of the underwriters radically differ from other enterprises activities as they are aimed towards uninterrupted process of compensation of losses caused by different circumstances. A big portion of responsibility of the underwriter for his activities requires a State insurance control. In general this control means the study of financial situation of the underwriter and his financial solvency.

The aim of the state control is to provide and develop the market of insurance services, ensuring necessary conditions for the underwriters activities as well as defence of his interests.

State control must help to establish insurance companies that have strong financial ground; avoid forming speculative and forged companies. These functions are performed by State Insurance Supervision at the Ministry of Finance.

Obligations of the State Insurance Supervision:

1) introducing the unique State Insurance Registry;

2) auditing in insurance companies;

3) control over the insurance rates;

4) control over the payability of underwriters;

5) setting the rules about forming and placing insurance reserve funds;

6) ensuring the publicity of insurance activities;

7) checking the authenticity of the presented reports;

8) providing official information about underwriters registration.

The State Inspection has the right to:

1) have a call report about insurance activities and financial situation;

2) carry out the control over the authenticity of the information provided and over the observing the legislation;

3) instruct the underwriters about elimination the infringements and in case of non-fulfilment of state orders to hold up the effect of the license;

4) to make a claim against the underwriter in case of multiple infringements of law.

2.3. Forms of control over the insurance companies activities.

The system of state regulation of insurance activity includes registration of insurance companies and issue of licenses for providing different kinds of insurance.

To register an insurance company the founders make a written application to the Registration Chamber, enclosing the necessary documents (the protocol of the foundation meeting, the foundation contract and the charter).

When the organisation is registered it is introduced into the State Register of Underwriters. The founder is given a State Registration Certificate.

State registration may be denied only if the foundation documents do not meet the legislation requirements of RM.

The following information is included in the State Register of Underwriters:

1) the full and abbreviated name of organisation;

2) the juridical form of organisation;

3) the period of functioning of the organisation;

4) the location of the organisation and its branches;

5) the date of the organisations registration and its registration number;

6) the volume of the regulation fund;

7) the names of the persons entitled to represent the organisation.

For the underwriters operating in Moldova to have a license is a must. To get this license an insurance company must pay the regulation fund in full.

To get the license the underwriter must present the following documents:

1) an application form;

2) the charter;

3) a copy of the registration certificate;

4) the development program of insurance operations for the period of 3 years, including kinds of operations and their volume; maximum responsibility on individual risk, conditions of insurance protection;

5) terms of insurance;

6) certificates from banks and other institutions that confirm the existence of authorised and reserve funds;

7) economic grounds of activities including assessment of profits and losses, expenses and costs;

8) statistical grounds of tariff systems, rates and reserves.

2.4. The essence of an insurance contract and its main elements.

To start an insurance activity it is necessary to develop individual contracts with each underwriter. Economic insurance contracts must assume juridical forms, that is the forms of contracts.

Juridical regulation of insurance relations covers the rights and obligations of the parties. According to the insurance contract one of the parties the underwriter undertakes the risks of another party insurer. Accordingly the underwriter undertakes to cover all expenses for any losses or damages happened under this contract. The insurer in his turn undertakes to pay the underwriter all agreed feel and keep all his obligations.

When making the insurance contract the insurer gets acquainted with the rules of the proper kind of insurance and the terms of the contract are specified at that.

There may be essential and nonessential terms of the contract.

Essential terms express the subject of the contract and the main interests of the parties. The terms may be changed only if both parties agree to do it.

Essential terms are: the insured objects; the volume of the insurance liabilities; insurance compensation; insurance sum; an insurance period; insurance rate.

Non-essential terms are: the size of insurance premiums; the procedure of making a contract; the procedure of paying the insurance fee; the procedure of paying the insurance compensation, etc.

When making the contract the parties must specify the causes of its termination. As a rule the insurance contract is terminated in the cases of:

expiration of validity;

carrying out of all taken obligations;

non-payment of insurance fees in due time;

liquidation of the underwriter;

liquidation of the insurer or his death;

arbitration award to invalidate the insurance contract.

The questions for the control:

1. Enumerate and characterise types of insurance companies existing nowadays.

2. Specify purposes and targets of state regulation of insurance activities.

3. Enumerate the rights and obligations of the State Insurance Supervision Office.

4. Speak on the regulation of State registration of insurance companies.

5. Speak on the regulation of licensing of insurance activities.

6. Characterise the essential and non-essential conditions and terms of insurance contract.

7. Specify the cases of termination of an insurance contract.

The literature:

1. Law of RM of 15 July 1993 The Official Monitor of the RM 12, December 1993.

2. , a book under edition of professor Reitman L.I., The bank and exchange scientific consultative center, M., 1992.

3. Basacov I.I. , Rostov-on-the-Don, , 1999.4. Serbinovski B.U., Garikusha V.N. , Rostov-on-the-Don, , 2000.5. under edition of L.I. Korchevskaia, .. Turbina, ., (, 96.6. The decision of the Government of the RM 77 of 3 February 1996 .

Theme 3. Insurance Marketing.

3.1. The essence of the insurance marketing.

3.2. Methods of promotion of insurance services.

3.3. Insurance middlemen.

3.4. The essence of the insurance market.

3.1. The essence of the insurance marketing.

Marketing is a philosophy of the underwriter, determining the strategy and tactics of his activities in the conditions terms of competition. Marketing simultaneously combines market research, new product development, distribution, advertising, promotion, product improvement and so on.

The Insurance service is the specific goods the sale of which is quite difficult. The central part of the underwriters marketing is sales activity, oriented to the sale or the insurance services promotion from the underwriter to the insurer.

The sales activity is a range of the insurance companys action that may be taken as two important tasks to form the demand for the insurance services and to satisfy the insurance clients interests of a company.

The demand formation is a goal-oriented influence on potential clients with one purpose to raise the achieved demand level by the insurance company up to the wished level. It influences potential insurer with the help of advertising, forming a positive image of the underwriter, holding the meetings for concluding the insurance agreements, differentiation of tariffs for the insurance services, combination of the insurance services with different forms of trade and juridical service.

The second important task of marketing is satisfaction of insurance interests. It is noted that the level of the insurance of the clients service influences the demand, i.e. the higher the service level, the bigger demand for his insurance services.

If the insurance services demand goes down, the leaders should find out the reasons and take measures directed to their elimination.

Practically marketing is oriented to:

1) reasons of the necessity and goal-orientation of rendering some kinds of the insurance services;

2) demand formation on the insurance services;

3) satisfaction of the clients insurance interests;

4) price forming;

5) regulation of the insurance activity;

6) pure organisation of the insurance services promotion;

7) coordinating and planning the production, sales and financial activity of a company;

8) organising new insurance services, corresponding to the insurers demands;

9) regulation and orientation of the companys activity;

10) current operative leadership of the insurance services realisation and achievement of goals.

However the specific marketing functions are: collecting and analysing the information about the market, making contacts with the insurers, managing the assortment of the insurance services.

Strategic marketing solves the following tasks: the selection of the perspective company activities, orientation and kinds of the insurance services, making image and prestigious marking, definition of the price policy.

Tactical marketing is oriented to form the system of relations of the services consumers, interaction with public, providing forms and methods of sales, sales management in accordance with the strategic goals.

3.2. Methods of promotion of insurance services.

There are three main methods of insurance services promotion: extensive, exclusive and selective.

Extensive method is using services of any go-between company, capable to conclude one or more insurance contracts.

Exclusive method is used when the insurance company counteracts with only one general insurance agent, which has an exclusive right to conclude insurance contract in a given region. This contract should be concluded in favour of the above-mentioned insurance company.

Selective method is used, when the insurance company counteracts with two or more general agents in a given region.

Insurance service promotion is connected with the process of forming demand for the insurance services. Promotion includes any kind of informing people about insurance services or an insurance company. There are two basic and two auxiliary kinds of promotion. Basic kinds of promotion include advertising and personal contacts, auxiliary kinds of promotion include publicity and stimulation.

Advertising is any paid form of impersonal providing the insurance service.

Personal contact is an oral communication with one or more insured persons in order to conclude the insurance contract.

Publicity is impersonal and unpaid stimulation of the demand for the insurance product by means of making people aware of it with the help of mass media.

Stimulation are short-term measures of encouraging purchase or sale of an insured product and various non-repeated techniques, which are not included in traditional promotion.

Actually insurance companies seldom use only one way of promotion, because any way has its own advantages, disadvantages and fields of application.

Advertising has the following advantages:

attracts a large geographically spread insurance market;

informs potential insurers about services, it may be many times repeated for the same audience;

the potential insurers have a possibility to compare the offers of this company with those of the competitors;

gives a certain idea about the underwriters and their services;

may change when necessary.

Advertising has also some disadvantages:

the dialogue with the audience is impossible;

neither an individual approach to each insurer is possible;

it requires big charges.

A Personal contact has the following advantages:

it provides the dialogue with the insurers, raises a counter reaction of the customers;

the costs are lower than those for the advertising;

it holds regular insurers, helps hesitating insurers to take decisions.

Disadvantages:

it is ineffective for informing the insurers as a personal contact is possible only with limited members;

the costs for one consumer are higher;

doesnt cover a big, geographically spread market.

Publicity has the following advantages:

it gives the audience more reliable information, covers a bigger number of citizens;

like advertising it has better possibilities for the presentation of the insurance company and its products;

it is relatively cheap.

Disadvantages:

inability of the company to control;

non-guarantee of positive reaction of mass media;

mass media may accentuate the customers attention on feedback, essential characteristics of the underwriter and his services;

non-regularity of publications.

Stimulation of the insurer has the following advantages:

it leads to a short-term increase of the contracts conclusion;

is supplementary to advertising and personal contacts;

attracts attention and holds the information that can attract the potential insurers interest;

has a certain incentive to conclude a contract.

Disadvantages:

it may be used only as an additional means of promotion;

can not be regularly used.

The essence of marketing is that operating by different means of promotion it chooses the one that has to be accented.

3.3. Insurance middlemen.

In the process of carrying out their activity the insurance company has the right to use the middlemens services insurance agents and brokers.

The insurance broker is a juridical or a physical person registered in the right order as an entrepreneur, realising the intermediarys activity on insurance on their behalf under the instructions of the insurer or underwriter. Brokerage on insurance that is effected by a physical person must be stipulated in the document about its validity. A physical person that has become an insurance broker, can not be the employee of any insurance company.

Insurance agent is a physical, sometimes juridical person fulfilling, on behalf of the underwriter, the operations of concluding the contract with the population about the sole and property insurance and insurance payments for them.

Insurance agent is a part-time worker of an insurance company. He gets his commissions for collecting insurance duties, for serving the insurer on the basis of the contract concluded. Insurance agent bears complete material responsibility to the underwriter.

The most important difference between the insurance agent and the insurance broker is that the broker works as an independent qualified expert for the insurer.

The insurance broker fulfils the following basic functions:

appreciates the subject of the insurance, i.e. he defines what kind of insurance the potential insurer needs and what exact risks are to be insured from;

makes comparative analysis of the financial health of a number of underwriters;

selects the most profitable underwriter for the client;

legalises insurance agreements agreed with the insurer;

controls duly received insurance fees from the insurer to the underwriter;

renders advice and assistance in receiving insurance sum of money by the insurer or the insurance compensation when the insurance accident happens.

The insurance broker is not entitled to:

fulfil other kinds of activity;

take part in the authorised capital of the insurance companies, hold stocks, shares and other rights of participation.

The insurance broker is responsible for:

the fulfilment of liabilities, stipulated in the agreement;

reliability, objectivity, completeness and due information given to the client and controlling authorities;

the secrecy of the information, that is the commercial secret of a client.

The detailed list of the insurance brokers liabilities and the responsibility to the insurer or the underwriter for their fulfilment are given in the agreement concluded between them.

3.4. The essence of the insurance market.

Insurance market is a socio-economic area where the insurers that need insurance services operate, underwriters (insurance companies) satisfying the demand for them and insurance middlemen.

The first section in the insurance market is an insurance company. That is the very place where the process of creation and usage of the insurance fund is exercised, some economic relations are formed and others appear; personal group and collective interests are interconnected.

Insurance Company is an isolated structure, effecting the conclusion of the insurance agreements, and their fulfilment. Economically isolated insurance companies build their relations with other underwriters on the basis of reinsurance and co-insurance.

Classification of the insurance market is carried out according to the branch reasons and scales.

According to the branches reasons we differ the market of life insurance and markets of property insurance, responsibility insurance and accident insurance.

According to scales we differ national, regional and international insurance markets.

National Insurance Market is a field of the insurance organisations activity in a particular country. It consists of insurance companies, specialised reinsurance organisations, insurance middlemen. All the insurance activities on the national market are effected within the framework of the National Insurance Legislation, the control under the fulfilment of which is charged with the State Insurance Inspection. The bigger National Insurance market has been formed in the USA, Great Britain, Germany and other countries.

Regional Insurance Market unites insurance companies, National Insurance markets of some separate regions, connected with tight integration relations between them. The biggest regional market is the North American Insurance Market (USA, Canada).

International Insurance Market is a total combination of the National and Regional Insurance markets. In the narrow sense the local insurance markets, which are characterised by high specific share of International Insurance operations (New York, London), are called International market.

Insurance market includes many kinds of potential clients of insurance services with different interests and demands. Market segment are clients of insurance services similarly reacted to these or those suggestions of insurance companies. Market segmenting is a process of dividing consumers into groups according to any sign actual for the realisation of an insurance service (age, sex, financial sufficiency, profession, etc.).

Insurance Company must choose what kind of exact service it will offer and towards what kind of group it will be orientated. The segmentation is spread according to geographic and demographic signs, the level of income, etc.

Geographic segmentation is built according to regional signs: republic, district, city, land, region.

Demography is built on age, sex, level of the family income.

The questions for the control:

1. Speak on the essence and basic tasks of insurance marketing.

2. Speak what targets the practical marketing is directed to.

3. Specify the basic functions and obligations of an insurance agent.

4. Enumerate the obligations of an insurance broker.

5. Characterise the essence of an insurance market.

6. Classify the insurance market.

7. Characterise the principles of insurance market segmentation.

The literature:

1. , a book under edition of professor Reitman L.I., The bank and exchange scientific consultative center, M., 1992.

2. Basacov I.I. , Rostov-on-the-Don, , 1999.3. Serbinovski B.U., Garikusha V.N. , Rostov-on-the-Don, , 2000.4. under edition of L.I. Korchevskaia, .. Turbina, ., (, 96.5. Gvozdenko A.A. " ", ., , 1998.

Theme 4. Insurance Market in Foreign Countries.

4.1. Insurance development tendencies on the international level.

4.2. The Insurance Market of the USA.

4.3. The Insurance Market of Great Britain.

4.4. The Insurance Market of Germany.

4.5. The Insurance Market of Switzerland.

4.6. The Insurance Market of Russia.

4.7. The Insurance Market of Moldova.

4.1. Insurance development tendencies on the international level.

The modern level of development of insurance business in industrially advanced Western countries is characterised by enhancing the tendencies to monopolisation in insurance business and concentration of capital.

The new role of insurance companies is to pay more attention to crediting definite areas and branches of economic activities. Insurance companies play the leading role after commercial banks as to the amount of assets and possibilities of their using as a loan capital. The character of funds accumulated gives these companies the possibility to use these funds for long-term capital investments through the security market. Banks dealing with comparatively short-term finance dont have such possibilities.

It is typical for insurance market to have a big part of insurance payments in gross national product. So, in the USA, Great Britain and Japan it makes up more than 8%, in Switzerland 7.5%, in Germany and Holland about 6% of GNP. Monetary funds accumulated through insurance serve as a source of large investments. The State regulation of insurance activities abroad means, in general, the control of financial operations of insurance companies.

The analysis of the position and the tendencies of the development of insurance in the USA and the European Community countries make it possible to note the process of active concentration of insurance capital and internationalisation of insurance business. The process of internationalisation spread all over European insurance market.

The legislative acts of Great Britain, Germany, Italy, France and some EC countries, which regulate the insurance activities, have some differences, but according to the EC Council directives these countries have to adapt their national legislation to general rules of common insurance alliance within the framework of EC. Specifically it relates to motor transport owners responsibility insurance.

Joint-stock companies are the main organisational form of insurance activities abroad.

In many countries the communities of mutual insurance are highly spread. As a rule they are organised according to production sign. For example, farmers of a definite region can organise such mutual insurance. Such communities act as mutual assistance and profit making is not their task as joint-stock companies do.

Some countries have different juridical organisational forms of organising insurance communities. For example in the USA and Germany joint-stock companies prevail, in France the companies of mutual insurance, in Great Britain the associations of mutual insurance function together with insurance companies. Insurance intermediaries have a strong position on insurance market of Great Britain. They operate in the form of a sole proprietorship. Cooperative insurance is widely spread in Italy and Spain; in Germany, Great Britain, France and Japan insurance companies operate together with state capital, whose activity is mostly restricted to foreign economic sphere.

Despite the damage caused to the business world as a result of terrorist act of September 11, 2001, the insurance business in the USA and other countries wont fail. The USA insurance market is amounted to $3 trillion. $40 45 billion which American underwriters should pay come to 3% of the total sum, which is comparatively small in general. However every insurance company reserves money necessary for current payments. If the volume of payment unexpectedly increases there arises the necessity to extract money invested into securities, bank deposits, etc.

At present many insurance companies experience low profitability. It is quite dangerous for other juridical persons of the market economy as underwriters play a very important role in their business. The West gets used to insure everything including bankruptcy consequences, that is why the legislation of any civilised country protects underwriters as a last instance in property protection.

World reinsurance companies such as Munich Re, Swiss Re tend to increase reinsurance to 15% for big risks. The largest European underwriter Lloyds in its turn changes its policy in the area of terrorist acts insurance. Now they establish the limit to $50 million payment under such kinds of insurance.

4.2. The Insurance Market of the USA.

There are more than 8000 property insurance companies and about 2000 life insurance companies in the USA, while in the countries of European Economic Community only 4200. The American insurance monopolies control about 50% of the whole insurance market of developed countries in the world.

The insurance industry of the USA is the only industry, which is not subject to antimonopoly legislation of the country.

Every state has its own insurance supervision and its own regulation body. There is neither a single federal legislation about the insurance and nor a single federal body on insurance activities supervision. Every state puts forward its own requirement to a minimum capital level, kinds of future companies; it regulates in general the insurance activity by giving licenses to brokers, agents and insurance companies themselves.

There are two types of insurance companies in the USA: joint-stock companies and mutual insurance companies. There are no federal insurance companies. The shares of stock companies may be acquired both by physical and juridical persons.

Insurance companies carry out three types of insurance:

1) Personal

2) Commercial

3) Property

Personal insurance is widely used in the USA. It is divided into life insurance, rent and pension insurance, accident and disease insurance. Life insurance in its turn is subdivided into death insurance and living till death insurance. The annual premium on life insurance makes up about 9 billion dollars USA.

The second important kind of insurance in the USA is credit financial insurance. This importance is explained by a wide variety of credit payments in the field of trade and services in the country.

Property insurance and the insurance of responsibility of big trade and industrial companies in the USA bring about 8 billion dollars of insurance premiums every year.

A major peculiarity of big life insurance companies of the USA is the fact that billions of dollars from different pension funds are passed over to them. The task of insurance companies in this case is not only to secure these funds but to ensure the capital gain of these funds as well. The insurance premium interest is charged for operating these funds. Even a small amount of 0.1% interest charged from the sum being under operation brings about millions of dollar profit. Huge investment resources make insurance companies a major financial controlling centre regarding industrial corporations.

The insurance system of the USA is also characterised by the participation of different middlemen in the insurance, i.e. the Insurance Policy is not accepted direct but through an insurance agent or broker. The number of brokers and agents in the country makes up 0.5 million people. Both individuals and large specialised firms deal in brokerage. For example one of the largest life insurance companies Prudential accounts for about 22 thousand insurance brokers. Marsh & McLenan, Alexander & Alexander, French Hall, Fred G. James and others may be enumerated as independent brokerage firms.

Some companies, especially brokerage companies, have special subdivisions dealing with the analysis of other companies activities. The major factors on which the analysis is made are: financial situation, claim payments, level of services, safety and loss prevention, flexibility in the activity of the company, cost of services (minimal prices).

The electronic bank of all insurance companies is widely used in the USA. It gives the possibility to divide the companies according to their risks, premium sizes and so on.

The largest insurance companies of the world and first of all of the USA are the financial conglomerates: besides insurance activities they can also deal with crediting, organising checking services for their clients, issuing credit cards, as well as operate with real estate, securities and capital through their branches on their clients behalf. The internationalisation of insurance business is going on.

The leading companies of the insurance market of the USA.

The largest transnational property insurance company State Farm Mutual Automobile Insurance Company headed the list for premium collection not only in the USA but in the world as well. It was set up in 1922 in Illinois. This is a company dealing with mutual transport insurance, property insurance, accident and aviation insurance and reinsurance.

Signa is one of the leading widely diversified insurance corporations.

American International Group is one of the leading international diversified insurance groups and the largest underwriter against trade and industrial risks in the USA. It started operating in 1919 in Shanghai. Now its a holding company, which holds 44 branches in 130 countries of the world. Staff is about 28 thousand people.

The largest companies of the USA are also: Metropolitan Life Insurance Co, Continental Corporation, Prudential Insurance Company of America, Allstate Insurance Company.

The foreign business of American monopolies and foreign companies activities in the USA bring about 2 trillion $ premiums.

The activities of all underwriters in the USA are thoroughly analysed by consulting companies: A.M.Best, Moody S., Standart & Poors, which issue their activities catalogues quarterly. They publish the official ratings of insurance companies relating to their reliability and payability. The major factors for analysing are: financial situation, payments of claims and the level of services, safety and loss preventing, flexibility and cost of services. The level of losses, income and the efficiency of investment interests and the level of debts are considered the main criteria of the insurers activities.

4.3. The Insurance Market of Great Britain.

Within many years the insurance business of Great Britain is concentrated in London being the world financial centre. The largest London international insurance market services financial flows of a number of countries and companies. The representations and subsidiaries of the world largest insurance companies are located in London. Within many decades and up till now English insurance market dictated rules and conditions of insurance.

The English insurance market is unique on some criteria. So, having a comparatively small size of domestic insurance market (5.3%), its share in international operations makes up nearly 20% of total world insurance business. The British insurance companies operate in 43 countries.

Nearly the tenth part of all insurance premiums in the world enters the British insurance corporations accounts.

Personal insurance in Great Britain is concentrated in specialised insurance companies and pension funds, as well as in investment companies effecting the sale of real estate to the people. A stable increase of insurance premiums takes place within the recent ten years. It has happened thanks to the alteration of pension legislation in Great Britain, which, in its turn, has created economic stimuli to acquire Policies of private pension insurance by able-bodied population.

The property insurance among people is presented by a number of traditional kinds. They are the insurance of automobiles and house-holding property. The property insurance is also characterised by stable rates of development.

The basis structure of London insurance market Lloyds is presented by 400 insurance syndicates, which join physical persons underwriters carrying out the insurance business of a corporation. The underwriters bear unlimited responsibilities for obligations under the terms of insurance contracts within the framework of the syndicate. Lloyds operates on 5 major markets marine, property, aviation, automobile and short-term life insurance.

Marine insurance makes up 40% of all insurance premiums, received by the corporation, the biggest part comes from international operations.

Annually more than 5 trillion pounds are accumulated by insurance offices of Great Britain.

Insurance contracts in Great Britain are made by insurance companies direct, as well as through underwriters agents and middlemen.

Large international insurance brokers and independent insurance agencies, working on a commission basis, play an important role on the insurance market of Great Britain.

The legislative basis of insurance activity of Great Britain is the law about the insurance companies, which was passed in 1982, with further alterations and amendments.

The insurance legislation of Great Britain is in harmony with new insurance instructions of EC. The special Law of the Lloyds insurance corporation, passed in 1982, regulates the insurance activity of this corporation.

The functions of the insurance control body in Great Britain are performed by the Insurance Department of Trade and Industry.

The activities of insurance middlemen in Great Britain also subject to regulation and licensing. First of all it refers to the activities of insurance and reinsurance brokers. In accordance with Insurance Brokers Act, 1977 there has been established the Insurance Brokers Registration Council, IBRC in Great Britain. This body regulates and supervises the activities of insurance brokers operating on the British insurance market. The IBRC also holds the State Register of insurance brokers.

There is also a special organ of British insurance market Policyholders Protection Board which has been established in accordance with the Policyholders Protection Act, 1975. Due to this Act there have been created all the necessary conditions for setting up a special compensation fund for insurers which is formed for the account of all monetary charges of insurance companies having licenses and performing insurance activities in Great Britain. In case of insurance company failure monetary means of the compensation fund will be used for full or partial compensating of their losses under the agreements of obligatory insurance.

Insurance Company Act, 1982 establishes minimal requirements to the level of underwriters paying capacity. The technique of calculation of the level of paying capacity corresponds to the requirements of EC directives on the matters of insurance activity. All insurance companies are obliged to make an annual financial report. The financial report by all means goes through the independent audit procedure.

There exists a compulsory responsibility insurance of car owners, air transporters, riders, domestic animals owners. Besides there has been envisaged a compulsory insurance of professional responsibility for lawyers, accountants, insurance brokers as well as for operators of atomic energy units.

4.4. The Insurance Market of Germany.

The insurance market of Germany is characterised by its dynamical development. Annual increase of insurance premiums makes up 10% in Germany. Personal insurance accounts for 37% within the framework of National Insurance market. Medical insurance, which is less popular than in other European countries, accounts for 12% of total volume of insurance premiums. Property insurance makes up 51% of Germany insurance market.

The insurance market in Germany is divided into the system of State Social Security and private sector of insurance services.

Private insurance includes joint stock insurance associations which belong to their stockholders, associations of mutual insurance and state insurance corporations.

The private sector of insurance compete with commercial banks, which try to organise insurance service for their clients using operation halls of commercial banks. In general the profitability of insurance of physical persons is higher than that of juridical persons. The sector of private person insurance takes 87% of German insurance market, the sector of juridical persons insurance takes 13%. Dividends on stocks of insurance companies are rather stable, but a little bit lower than those in other West-European countries.

Federative structure of Germany is a very important factor to develop the channelling of insurance services towards consumers. Regional insurance agents are present in all federal lands of Germany. The main source of attracting clients are independent insurance brokers, working for different insurance companies. The direct sale of insurance policies from offices is also wide spread.

Compulsory insurance in Germany has a limited character. Federal legislation requires compulsory insurance of an employee by the employer for damage suffered from production trauma or harmful working conditions. It also requires compulsory responsibility insurance for car owners, air carriers insurance, accountants and hunters insurance and so on. Some federal lands require compulsory fire insurance.

Insurance business in Germany is strictly limited by Federal Insurance Supervision Act, 1983, with subsequent amendments adopted in December 1985 and October 1990.

All underwriters operating in Germany are obliged to follow the level of payability according to legislation adopted in regards to insurance companies of EC countries. There are additional requirements for foreign underwriters operating in Germany.

Germany has accumulated a considerable experience in reinsurance. The biggest reinsurance company is Cologne reinsurance company, whose premiums account for 2 billions Euro, and Munich reinsurance company, which is the biggest reinsurance company in the world. It offers reinsurance protection, and skilled assistance in the problems of insurance and reinsurance.

German insurance market is divided into 39 insurance groups. Ten of them collect 51% of total premiums. The first place is taken by insurance group Alliance. Its market share is more than 20%. Alliance company is included into a list of 10 biggest world companies. Other big insurance companies are insurance company Colony, concern Gerling. The Folksfurzorge group controls 5% of the total market. Companies dealing with reinsurance have higher concentration. In this field 5 firms possess almost 75% of total premiums.

The stability of these monopolists is based on accumulated financial resources. In general only 13% of companies financial resources are paid to policyholders, the main part of them are capital investments. Capital investments of insurance companies provide 25% of all investments into national economy, and their profit forms 1/5 of gross revenue of insurance agents.

The typical feature of recent years is international character of German insurance companies activities. The process of developing foreign markets began in 1950. Even then reinsurance companies were more active than primary insurance companies.

All operations abroad are executed by branches and through controlled foreign companies. The greater part of foreign branches is situated in West-European countries. In other countries there prevails participation in local insurance companies. In general, German insurance companies have representations in 17 countries.

4.5. The Insurance Market of Switzerland.

Insurance market in Switzerland is highly developed. There are 117 insurance companies in the country, including 23 personal insurance companies, 82 companies of general insurance and 12 reinsurance associations.

The characteristic feature of Switzerland insurance market is a combination of national and foreign capitals. Insurance companies are often transnational corporations with vast foreign interests.

The biggest insurance company is Zurich Ferziherungsgezelishaft. The company is a leader of powerful insurance group including 34 subsidiaries in the country and abroad. The Zurich group also includes Vita the third company for personal insurance, as well as Albina and Turegum public insurance companies. Zurich concern occupies the strongest positions in the USA, 6 subsidiaries control practically all kinds of insurance there. There is Zurich American among them, its premiums allowed it to be listed in 40 main American insurance companies. There are subsidiaries in Germany, Canada, Great Britain and many other countries.

Swiss companies occupy the strongest positions in reinsurance business. They account for more than half of all premiums from abroad. Inside the country more than half of all premiums is from personal insurance.

Switzerland has the highest index of collecting premiums per capita. A Swiss family spends 15% of family income on insurance policies. It is the main item of family expenditures. An average Swiss family spends on insurance more money than on food. Entrepreneur insurance is also highly developed. Practically all industrial, trade, transport enterprises are the clients of insurance companies.

The successful activities of Swiss insurance companies are explained by their active investment policy. More than half of all assets of insurance companies is invested in loans and securities.

4.6. The Insurance Market of Russia.

In 1992 Rosgosstrah was formed on the basis of Gosstrah. According to the Presidents Act of January 29, 1992 all state and municipal insurance institutions were transformed into joint-stock insurance companies of open and close type and insurance limited partnerships. All insurance companies in Russia were divided into two types depending on the formation of authorised capital:

joint-stock, cooperative and other companies;

joint-stock companies with some participation of the state capital.

The legislative basis of Russian insurance market is Russian Federation Act About Insurance passed in January 12, 1993. The Department of Insurance Supervision of RF Ministry of Finance performs the control function for the supervision of insurance activities.

Public companies, more than any other companies, serve all categories of clients. The overwhelming majority of public companies serve and conclude agreements with physical persons, joint-stock companies of open type have clients both among state enterprises and commercial businesses.

The Russian market is as greatly monopolised as it was before. 100 companies account for 60% returns and two largest underwriters Rosgosstrah and joint-stock company Ingosstrah account for 25% of total insurance premiums.

The characteristic feature of insurance market is the essential exceeding of the amount of collected premiums over the volume of payments. The average level of payment works out at 70%, which is incomparable to the world level of 90% and more. In fact Russian underwriters exceedingly evaluate the undertaken risks and the probability of insurance incidents. The high share of insurance premiums remaining at the disposal of the company enables it not to search other variants of profitable and reliable investing.

Less than 10% of potential risks is being insured (against 90 95% in the majority of advanced countries), 90% enterprises property is not secured by insurance protection.

The most well-known insurance companies in Russia are Rosno, Afes, Ingosstrah, Energogarant, Lukoil.

4.7. The Insurance Market of Moldova.

At present in Moldova there are about 40 insurance companies having licences to fulfil the insurance activities on the territory of Moldova. In general insurance companies were formed as multi-branch organisations and they have licences for different kinds of insurance activities.

For many years the insurance in Moldova was done by the Gosstrah that was the monopolist on the local insurance market. In the beginning of 1990 there was the demonopolization of the insurance market. The joint-stock insurance company Asito has appeared. Many private insurance companies began to be formed and by the middle of 1990 they have achieved big and essential results.

Now Joint Insurance Company QBE-ASITO possesses 70% of all operations effected on the National Insurance market of Moldova. Thus the majority of the underwriters are small and weak.

Eight insurance firms have approximately 9% of the market portfolio of shares that belong to private foreign investors (England, Ireland, Russia, Ukraine, Romania, Bulgaria, Malta). These companies are: QBE-ASITO, AFES-M, ARTAS, ASSIND, BOIANA, DELTA, GALAS, PROTECT-IMPEX, SAIMEX and others.

In accordance with the rating, being held by the insurance supervision of the republic, the most reliable companies of Moldova are: QBE-ASITO, AFES-M, MOLDOVA-ASTROVAZ, CARAT, ORATEH, AUTO, DONARIS-GROUP, PROTECT-IMPEX, GALAS, ASIVIT.The insurance activity in RM is effected on the basis of The laws about the Insurance and is controlled by the State Insurance Supervision.

Moldova Republic legislation stipulates for the contracts of insurance being concluded abroad only those kinds of activities which are not under national underwriters insurance. Foreign companies are allowed to open representations in Moldova which have the right to fulfil the insurance activities on the territory of the republic, having licences given by the State Insurance Supervision body.

In Moldova the Regulation of the insurance broker is established. It arranges relations between the insurers, underwriters and brokers. However, today only three broker firms have been established and registered, and the majority of policies are distributed through the insurance agents.

The questions for the control:

1. Enumerate and characterise the organisational forms of insurance most spread all over the world.

2. Characterise the most advanced insurance markets.

3. Speak on peculiarities of the USA insurance market.

4. Enumerate types of insurance most often applied in the USA.

5. Characterise the methods of state regulation of insurance activities in Great Britain.

6. Speak on international Insurance Corporation Lloyds.

7. Characterise insurance and reinsurance markets in Germany.

8. Enumerate and characterise types of voluntary and obligatory insurance in Germany.

9. Speak on peculiarities of insurance market in Switzerland.

10. Enumerate and describe types of insurance, which are practicable in Russia.

11. Enumerate the leading insurance companies operating on Moldova market.

12. Speak on state regulation of insurance activities in Moldova.

The literature:

1. Law of RM of 15 July 1993 The Official Monitor of the RM 12, December 1993.

2. , a book under edition of professor Reitman L.I., The bank and exchange scientific consultative center, M., 1992.

3. Basacov I.I. , Rostov-on-the-Don, , 1999.4. Serbinovski B.U., Garikusha V.N. , Rostov-on-the-Don, , 2000.5. under edition of L.I. Korchevskaia, .. Turbina, ., (, 96.6. Zubritski V.P., Enikov I.G. , ASEM, Kishinev, 2000.Theme 5. Property Insurance.

5.1. Physical persons property insurance.

5.2. Juridical persons property insurance.

5.3. The conclusion of insurance contract.

5.4. The measuring of damage and compensation.

5.1. Physical persons property insurance.

According to the terms of property insurance contract the following kinds of property can be insured:

household property;

buildings of different character (living, countryside) which are constantly located and consist of foundation, walls and roof;

dwelling fund flats and rooms in condominiums owned by an insurer;

personal property clothes, shoes, portable audio and video devices, musical instruments and other home utensils.

Physical persons property can be insured against:

fire;

flood;

damage;

illegal actions of the third parties.

Insurance contract can be concluded against all risks or particular risk only (its up to the insurer). If the insurer is insured against particular risks, he will have no compensation for other risks.

Items of property which cant be insured, are the following:

1) property in officially claimed area of natural disaster;

2) unsafe property to be pulled down, property that requires general reconstruction and property that is more than 60% worned out;

3) property in subsidiary spaces for communal use;

4) home and decorative plants, domestic animals and birds;

5) money and securities, documents, manuscripts, precious metals ingot;

6) equipment, machine-tools and other items of property, used in producing goods;

7) property bought or produced for the subsequent selling;

8) agricultural, viticulture and live-stock-breeding production;

9) means of transport;

10) shops and other industrial areas.

The compensation will not be paid in case of:

1) military operation and civil riots;

2) nuclear accident;

3) bad intention or negligence from the insurer or insurant;

4) collapse of buildings and their parts;

5) stealing of property in time of insurance case or immediately after it;

6) non-observance of instructions on keeping the insured property, if it was used for improper purpose.

Property can be considered insured if it is located in the place, stipulated in the Insurance Policy (except personal property). In case of moving to another place the insurance contract remains in force if the underwriter was informed in advance.

The insurance sum is defined within the framework of real value of property. This value is defined, taking into consideration its price at the given date and deducting depreciation.

The insurance sum should not be changed in case of inflation and price growing.

5.2. Juridical persons property insurance.

This type of insurance can be applied to juridical persons property, which can be damaged as a result of the insurance case.

According to the insurance contract, the juridical person can be insured against

fire;

theft;

natural disaster;

malicious mischief from the third persons;

explosion of steam-boilers, gas-pipers, machines and similar devices;

damage of the insured property by water from sewage, heating and firefighting system;

breaking of windows, mirrors and shop-windows.

The damage will not be compensated, if it is resulted from:

military operations, civil riots;

if the property was damaged in accordance with civil and military authorities decisions;

nuclear accidents;

the insurers bad intention or negligence;

spontaneous combustion, fermentation, decay and other natural processes in the insured property;

collapse of buildings and their parts, unless this collapse is caused by the insurance case;

propertys theft in time of the insurance case or immediately after it.

Property can be considered insured if it is owned by the insurer, bought by the insurer on credit and served as a collateral for this credit.

Items of property, that cant be insured, are the following:

1) cash in the form of national and foreign currency;

2) stocks, bonds and other securities;

3) manuscripts, drafts, designs and other documents, books in accountancy;

4) models, patterns, samples and so on;

5) precious metals ingot and precious stones without mounting;

6) information keeping devices in computer systems and the like;

7) stamps, coins, pictures, sculptures and other works of art;

8) explosive substances;

9) goods in stock and taken on commission;

10) means of transport;

11) objects, which are in the insured space, but not owned by the policyholder.

A special contract, including inventory, can be concluded in respect of these items.

The basis for measuring insurance sum is a real value of the insured property at the moment of concluding the contract (taking into consideration its depreciation).

A real value is defined:

1) for equipment, machine-tools by a real price on similar objects;

2) for buildings by a real price on a similar building in a given locality;

3) for products, manufactured by the policyholder by a real cost;

4) for different things of value, bought by the insurer by a real price (including overheads).

Any movable property is considered insured in areas, stated by the contract.

5.3. The conclusion of insurance contract.

The insurance contract is concluded on the basis of the formal letter from the insurer.

The insurance contract is confirmed by the Insurance Policy.

Premiums can be paid in a lump sum or at agreed dates. Insurance contract comes into force after the first premium is paid, but not before the date, stipulated by the contract.

The underwriters responsibilities:

1) to make the insurer aware of general terms;

2) to pay compensation in the insurance case;

3) to pay compensation in advance (if the amount of compensation is clear and investigations are not completed within 3 months period);

4) to compensate the expenses, caused by preventing damage;

5) to keep in secret all kinds of information obtained in the process of insurance.

The insurers responsibility:

1) at the moment of concluding the contract to inform the underwriter about all circumstances, influencing the insurance risk;

2) to inform the underwriter about other insurance contracts on the object;

3) to pay premiums in due time;

4) to keep official and agreed rules of security;

5) if insurance case takes place, the insurer should inform about the possible steps in order to prevent the insurance case or to reduce the damage;

6) to keep the damaged property as it is.

The underwriters responsibilities are cancelled if:

period of contract is expired;

compensation is paid completely;

the contract is not valid.

If the compensation is paid partly, the contract remains in force, but the present compensation could be the difference between total insurance sum and the compensation already paid. If the contract is concluded for more than 1 year and some compensation is paid during this year, it remains in force for the total sum.

5.4. The measuring of damage and compensation.

Compensation is paid:

if the property is fully destroyed, total insurance sum is paid after deducting the value of the remains;

if the property is partly damaged, the compensation will be equal to the sum of restoring expenses.

Restoring expenses include:

expenses on materials, spare parts and payment for workers;

delivery expenses;

other expenses, connected with improving the objects;

expenses connected with temporary or additional repairing.

Full destruction takes place if remaining cost and expenses for restoring taken together exceed of the insured object.

The insured object is considered damaged, if restoring expenses and remaining cost do not exceed the real cost of the insured object (at the moment of insurance case).

Compensation includes the insurers expenses on saving the insured property and reducing the damage.

In all cases compensation, including expenses on reducing the damage and restoring the damaged property, should not exceed the insurance sum.

The underwriter, who paid compensation, has the right to claim the sum from the third party, responsible for caused damage.

If the insurer has already received the compensation from the third party, the insurance company should only pay the difference between the sum stated in the insurance contract and the sum received.

The questions for the control:

1. Enumerate the objects and risks of physical persons property insurance.

2. Give types of property which are not subject to insurance coverage under the conditions of insurance of physical persons property.

3. Speak how the insurance sum and insurance premium are determined under juridical persons property insurance.

4. Enumerate the risks taken for insurance under juridical persons property insurance.

5. Speak what property is not taken for insurance under the conditions of juridical persons property insurance.

6. Speak on the regulations of concluding the insurance contract on property types of insurance.

7. Enumerate the liabilities of an insurer and an underwriter on the conditions of property types of insurance.

8. Speak on principles of determination of the size of damage and insurance reimbursement in property insurance.

The literature:

1. Law of RM of 15 July 1993 The Official Monitor of the RM 12, December 1993.

2. , a book under edition of professor Reitman L.I., The bank and exchange scientific consultative center, M., 1992.

3. Basacov I.I. , Rostov-on-the-Don, , 1999.4. Serbinovski B.U., Garikusha V.N. , Rostov-on-the-Don, , 2000.5. under edition of L.I. Korchevskaia, .. Turbina, ., (, 96.6. Rules and conditions for property and personal types of insurance responsibility and financial risks, elaborated by the insurance stock company QBE-ASITO.Theme 6. International Practice of Transport Insurance.

6.1. Motor-vehicle insurance.

6.2. Vessel insurance

6.3. Marine freight insurance

6.4. Containers insurance

6.5. Air-craft insurance

6.1. Motor-vehicle insurance.

Motor-vehicle insurance is one of the kinds of transport insurance whose objects are mechanised and other means of transport. This kind of insurance is voluntary.

Motor-vehicle insurance under which the underwriter repays the losses suffered by the insurer when the vehicle itself was damaged or destroyed is called casco insurance.

In practice however motor-vehicle insurance is a combined insurance under which not only the motor-vehicle but auto-owner responsibility are insured as well as luggage and additional equipment. While insuring luggage insurance coverage is not applied to antique objects, precious metals and stones, objects of religious cults, collections, paintings, manuscripts, banknotes, securities, documents and photos as well as to objects which neither belong to the insurer or family members nor sale due to entrepreneur activities.

In practice there are different variants of vehicle insurance.

1) complete casco: loss repayment against all insurance accidents.

2) partial casco: loss repayment against all insurance accidents except glass damage.

3) insurance against theft: damage suffered due to theft or car stealing.

4) transit insurance: repayment of loss suffered due to breakdown, stealing while the vehicle is transported by the insurer from the place of purchase to the place of destination.

Losses being occurred due to military actions, civil war, popular uprising or radioactive pollution are not repaid whatever variant of insurance is exercised.

Cars and other vehicles can be insured within the limits of their actual cost. According to the insurers wish additional equipment and luggage can be insured together with the vehicle or separately. While insuring the car the driver and passengers can also be insured against the accident. According to the conditions of insurance agreement these persons are insured against long or constant disability or death.

The insurance of the driver and passengers can be exercised according to the system of places or to the lumpsum system. It is stipulated that the insurance sum is established for each place in the car. The total number of insured places are determined according to the motor-vehicles technical passport data. Under lumpsum system the total insurance sum is established for all passengers and the driver. Each of them is considered to be an insured person having a definite share from the total insurance sum.

As a rule an insurance agreement is concluded for the period of one year or from one to eleven months.

When concluding an agreement, the insurer is obliged to present information about the motor-vehicle, the model, the year of car output, power and volume of the engine, colour, registration member and so on. If the insurer doesnt present full and authentic information, which affects the determination of risk or the amount of insurance premium, the underwriter has the right to consider the insurance agreement to be invalid.

As a rule, documents which are regarded to be the basis for the determination of the amount of insurance premium for locally produced motor-vehicles are the data from corresponding price-lists. As to foreign made motor-vehicles the corresponding documents are the invoice of manufacturing works of the official dealer as well as home and foreign catalogues.

The amount of insurance premium is calculated according to the rates being set up depending on the model of motor-vehicle or variant of insurance.

The insurance agreement under which the insurance reimbursement is paid remains valid until the period of insurance expires. The underwriters liabilities for insurance repayment are established as difference between insurance sum and repaid insurance reimbursement.

Insurance reimbursement for destroyed, damaged or stolen automobile or another motor vehicle, additional equipment or luggage is repaid in the size of suffered damage but not more than the corresponding insurance sum.

When the motor-vehicle is destroyed the damage is determined in size of its cost at actual retail prices after deducting the depreciation sum and the cost of remainders with due regard for their depreciation as a result of the given insurance case. The complete loss is acknowledged if the cost of restoring repair of the motor-vehicle (including the cost of transportation to the place of repairing) makes up 75% of the insurance sum or the actual cost of the motor-vehicle for the moment of concluding the agreement.

In case of damage of the motor-vehicle the size of damage equals to the cost of repair at actual tariffs. The sum of damage includes expenses for the replacement of damaged spares during the repairing works; the cost of remainders suitable for further using (with due regard for their depreciation) is deducted. Besides the sum of damage includes expenses for rescuing, repairing, transportation of damaged motor-vehicle to the nearest car servicing or parking.

When the insurance case happens the insurer is obliged:

take all possible measures to rescue the automobile, passengers;

immediately inform the competent bodies about it (the road police);

to inform in written form the insurance company which concluded the insurance agreement about the accident;

to show the insurance company the damaged automobile or its remainders before the repair.

The underwriter is obliged:

to examine the automobile on the day of receiving the notification;

to effect the payment of insurance reimbursement within the stipulated period of time.

In case the automobile was returned to the insurer after the insurance reimbursement had been paid, the insurer is obliged to return the corresponding amount of received reimbursement after deducting the cost of stolen spares and repair of the motor-vehicle.

6.2. Vessel insurance.

Different conditions and terms of insurance coverage uniting a definite group of risks are applied in practice of vessel insurance:

Responsibility for loss of or damage to the vessel. It means that losses as a result of damage or wreck of the vessel due to calamities, collision, Masters error as well as expenses for vessels rescuing are subject to reimbursement.

Responsibility for complete loss of the vessel only stipulates the reimbursement of losses against complete destruction, its missing, as well as expenses for vessels rescuing.

The above conditions of vessels insurance are basis ones for the contract. They can be expanded by including other risks in them when parties agreed to it.

While insuring vessels there may be applied premium rates individually for each vessel. They depend on the model of the vessel, conditions of insurance, the place of moving, season, type of cargo, etc.

Vessels as subject to tough examination once per 12 years and once per 4 year they are subject to usual examination with the purpose of determining whether the vessel is a source of high danger. The main characteristics of the vessel is its seaworthiness. If the insurer knew about possible unseaworthiness of the vessel when it was in the port or when it was leaving it, the underwriter can terminate the contract of insurance, lessen the sum of insurance reimbursement or decline its payment at all.

Insurance coverage exceptions:

evil intent or tough carelessness of the insurer and beneficiary;

vessels unseaworthiness known to the insurer or the beneficiary before the vessel leaves the port;

depreciation and corrosion of the vessel, its spares, machines and equipment;

running of the vessel under the conditions which were not stipulated by its ice type (except cases when the vessel changed its route for rescuing peoples lives);

direct or indirect influence of radiation;

losses and expenses associated with damage caused to the environment, health of passengers and the crew;

any indirect losses of the insurer.

The insurance contract is concluded for the time or for the voyage.

In the first case the insurer should inform about the place of movement and about the required period of policy operation. In the second case the insurer informs about the places of departure and destination, the length of route, the places of entering any other ports.

Insurers liabilities when the vessel is damaged:

to notify urgently the underwriter about the insurance case;

to give the underwriter the possibility to examine the damaged vessel;

to agree with the underwriter the choice of the dock for the repairing.

When the vessel is completely crashed the insurance sum is paid provided:

it is sink, completely lost for the insurer or destroyed;

it disappeared (in case of the lack of information about it within 3 months);

it was completely ruined.

The insurance reimbursement is determined taking into account the actual cost of the vessel but not higher than the stipulated insurance sum.

6.3. Marine freight insurance.

Agreement of Marine Freight Insurance is concluded on the basis of the written statement of the insurer, where the following clauses should be stated: exact naming of cargo, kind of packing, number of places, weight of cargo, the number and the date of the bill of lading or of some other transport documents; naming the year of shipbuilding, flag and tonnage of the vessel; method of placing; the place of sailing, transfer of cargo and its destination; the date of the vessels sailing, insurance amount of cargo, insurance conditions.

These requirements in this or that modification correspond to the Standard Conditions of London Institute Underwriters the most authoritative International Insurance Organisation in the sphere of Marine Insurance.

The responsibilities for all risks are the widest, though they dont cover all the risks. Some risks are excluded: damage to and loss of cargo due to any military, pirate actions, confiscation, arrest or distraction of cargo on the authorities demand (these risks can be insured additionally); radiation, infringement of the rules of cargo transportation and storage, lack of cargo while packing is not damaged, etc.

The responsibilities for private accident, in contrast to the first variant, are a definite list of risks under which the underwriter bears the responsibility, but the volume of underwriters responsibility is less here.

The responsibility for loss or damage only in case of a shipwreck coincides, on the whole, with the responsibility for the private accident. The difference is that in the latter case the underwriter bears the responsibility only for the complete loss of cargo, as to the damage to the cargo the underwriter is responsible for it only in case of the shipwreck.

In all above cases the underwriter compensates losses and expenses associated with the wreck and all necessary charges for cargo rescuing and of loss lessening.

The international trade unifying terms of loss and types of trade contracts have been elaborated. Four basic types of trade deals (CIF, CAF, FOB and FAS) are most widely spread.

Under CIF terms (cost, insurance, freight) Sellers are obliged to deliver goods to the port, to load them on board the vessel, to pay freight, to ensure the cargo against marine risks in transit and to send buyers all necessary documents.

Under CAF terms (cost and freight) Sellers undertake to conclude and to pay the contract of marine transportation of goods to the place of destination and to deliver the goods on board the vessel. Buyers should ensure goods.

Under FOB terms (free on board) Sellers deliver and load goods on board the vessel which is hired by Buyers and the Buyers should ensure goods in transit.

Transactions on FAS terms (free alongside ship) are similar to those on FOB terms, the difference is that under FAS terms Sellers deliver goods to the quay and the risks pass on to correspondingly.

6.4. Containers insurance.

International practice shows that the most effective, from the point of view of cargo storage, is their transportation in special containers.

Containers insurance has its specific features. The objects of insurance are containers where the cargo is placed and in this capacity they are a part of the vessel. Their insurance is exercised under special insurance contracts usually concluded on standard English conditions. The volume of insurance coverage may be different at that.

Under the insurance of containers against all risks, the underwriter is responsible for all risks of their complete loss within the period of insurance.

The underwriter is not responsible for the depreciation or gradual worsening of containers quality as well as for their loss, damage and possible expenses caused by the delay in voyage. Losses because of containers damage are reimbursed in the sum which does not exceed the cost of restoration of damaged or lost parts after deducting their depreciation interest.

Under containers insurance against complete loss they reimburse losses against containers destruction as well as against containers share in the shipwreck as well as expenses incurred for the rescuing of containers and lessening the losses. Charges for containers repairing are not subject to reimbursement under given conditions.

The insurance agreement is concluded on the basis of the written statement of the insurer which must include the following information about the object of insurance: the type of the container, volume, cost, the naming of the vessel-carrier, the date of the vessels voyage, the place of departure, the place of destination, etc.

6.5. Aircraft insurance.

Aircraft insurance contract is an agreement about underwriters reimbursement of damage suffered by insured air-transport when an insurance case happens.

Aircraft may be insured on the conditions of complete loss only and against all risks.

Under insurance only against complete loss when the insurance case happens the insurer is paid the insurance reimbursement of total insurance sum (if the cost of its restoration and rescuing exceeds 75% of the agreed insurance sum).

Under aircraft insurance against all risks the insurer is paid the insurance reimbursement not only when the aircraft is crashed, but when it has been damaged due to any causes besides those specially agreed on as exceptions in the Policy.

In international practice Aircraft Insurance Policy against crash and damage is applied. It doesnt contain a detailed enumeration of all risks covered by insurance. It gives a list of exceptions, addenda and special conditions after a statement about the insurance of aircraft against all risks and quite brief general provisions.

Damage is not covered if it has happened due to depreciation, corrosion, design defects, breakage of electrical equipment or mechanical breakage of some mechanisms, spares or parts. In this case if the aircraft is damaged as a result of it, the

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ACADEMY OF ECONOMIC STUDIES OF MOLDOVA Doctor of Economic Sciences, professor L. Cobzari, T.Vîsoţkaia, A.Goncearenco, E.Drobîshev, A.Pociumban, A.Romanova “International insurance” Lecture course
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