Conventional Insurance Case Study

801 Words4 Pages
Insurance Companies are incorporated under the Companies Act 1965, engaged in the insurance businesses. It was enacted under the Insurance Act 1963. They design financial scheme to provide members or participants and their dependants or families with security in the form of medical, death, as well as disability benefits. Conventional insurance policies provide protection from catastrophic events that would normally bankrupt a business or family. The insurance company absorbs the risk of this loss and pays a claim when individual or business facing insecure events, Smith (2003). Without conventional insurance, we need to insure for the risk by ourselves. This transfer decreases the probability that we will experience serious financial trouble due to a catastrophic or other unexpected event. For example like life insurance, it will reduce the risk that our family wont be able to pay ordinary expenses if we die before we have saved enough money to pay all outstanding debts as amount we need to pay for significant medical treatment is out of our own pocket. In conventional insurance business, the shareholders of the company solely benefited from the profits generated from the investment assets thus create larger margin of profits and income from the insurance transactions for the shareholders. Furthermore, if compared to Takaful companies as their participants share their profits or surplus with the companies or operators. Conventional Insurance operates since 1965 whereas Takaful Insurance was established and began operation in August 1985. These 20 years of difference in operational activities creates a better foundation and product services to the conventional insurance operators. Conventional Insurance provide schemes with implem... ... middle of paper ... ... mechanism of conventional insurance, the insured substitutes certainly for uncertainly. While for the General Insurance Company Limited, it is known as general insurance company which provides insurance products and services. It covers all risks except risk of lives. It operates on the principle of pooling of risks by bringing together a sufficiently large member of people who need or seek protection from loss of property or income, arising from accidents, burglaries, fires or unexpected events. It also provides auto insurance products such as motor vehicle, private car, private and public commercial, passenger vehicles, and motor cycle and trade. The main economic function of this business is to narrow the area of risks borne by the entrepreneur through the conversion of part of his risks into a contractual cost or premium, which forms part of pooled risks.
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