BA ISAGO UNIVERSITY

BCOM(HON) RISK MANAGEMNET AND INSURANCE

INSURANCE LAW, ASSIGNMENT 2

PEARL MOTHOBISO, NNETE GABORONE, MAIPELO SENTHUMOLENG, MAVIS KENOSI
LEINA RALONTSHWANE&BONOLO RAMOSHIBIDU
a) Explain fully what the following definitions emphasize."Communication is the sum of total of all
things one person does when he wants to create understanding in the mind of another.It is a bridge of
meaning.It involves a systematic and continuous process of telling,listening and understanding"-Louis
A.Allen

b)Draft a letter to the manager of a nationalized bank seeking a loan for a small-scale enterprise(10)

AGENCY
An agreement in terms of which one party(agent) undertakes to perform a task on behalf on
another(principal).

LAW OF AGENCY
Juristic relationship between the principal and the agent whereby the principal expressly or
implicitly authorizes the agent to work under his or her control and on their behalf. The agent is
required to negotiate on behalf of the principal to bring the third party and principal into
contractual relationship.

INSURANCE INTERMEDIARIES
Are brokers and agents who represent consumers in insurance transactions. They focus on
matching their client’s needs with the most suitable insurance products.
TYPES OF INSURANCE INTERMEDIARIES-
Insurance broker
Insurance agent
Reinsurance broker
Banc-assurance
Loss adjusters
Surveyors
Insurance consultant
Micro insurance agents
Lloyd brokers
1-INSURANCE BROKER; Is someone of an entity who represent the client with their insurance
transactions. This person is an independent insurance agent who may work with many insurance
companies to find the very best available for his or her clients. Function is to renew or amend
policies. Payment of fees(premium).

2-INSURANCE AGENT; Is a professional who represent an insurance company in selling and

servicing policies. Function is to ensure that the proposal made by insured is given to the insurer
and vice versa. An agent has to explain all terms and conditions of the contract before the insured
make a proposal.

3-REINSURANCE BROKERS; They advise their clients to insure larger risks with larger
insurance companies. Insure twice.

4-BANCASSURANCE; Is the partnership between a bank and an insurance company whereby

the insurance company uses the bank sales and channels to sell insurance products. That is if the
bank loans you money for a house, they insist on it being insured to protect their interest, often
they will arrange insurance cover for you and take commission from the insurance company.
They win both ways in the sense that they charge you interest on the loan and the costs of
insurance premium for which they get commission as well.
5) INSURANCE COSULTANTS: This are people who helps businesses identify risks and
choose appropriate insurance policies to cover potential liabilities, they also assist clients in
planning , organizing, preparing and researching their insurance policies

GENERAL PRINCIPLES OF LAW OF AGENCY

AUTHORITY (explained and how it applies to insurance intermediaries; insurance agent)

This is the power to enforce rules or give orders
In law of agency there are the following:
1) Authorisation - An agent has to have authority to conclude juristic acts. The principal
authorises the agent to represent him/her either expressly and implicitly. The law of agency
applies to insurance intermediaries for instance if an insurance agent is authorised by the
principal to perform and complete specific tasks on their behalf to the third party.
2) Delegation of authority – the agent may delegate authority to a sub-agent to perform a juristic
act for the principal. For instance the agent has an authority to delegate duties to a sub-agent.
3) Termination of authority – agreement may be terminated anytime and at any stage by mutual
agreement between the principal and agent. An agency may be terminated in the following
ways:
a) Completion of agency-this is when the agency comes to an end by virtue of the insurance
agent completing the task which was initially agreed between the insurance agent and the
principal.
b) Death – when either party dies the agency comes to an end that is when the principal dies
or the insurance agent dies.
c) Lapse of time-when authoritity given to the insurance agent expires, agency is
terminated.
d) Special relationship- if the agency existed from a special relationship, when it ceases the
agency is terminated.
e) Dissolution of a company- when a company either being the principal or the insurance
agent is insolvent, the agency comes to an end.
f) Termination of sub-agent- if the principal terminates authority of the insurance agent it
means that the sub-agent authority is also terminated.
g) Destruction of subject matter- if the object insured against is destroyed it means the third
party will compensate the principal therefore the agency comes to an end.

ESTOPPEL (explained and how it applies to insurance intermediaries; bancassurance)

This is whereby a person by his conduct or words spoken, or written willfully leads another to
believe that a certain person is acting as his agent, he is forbidden later on to deny the truth of the
fact that such a person is acting as his agent. This is an agency of law which applies in most
insurance intermediaries such as banc-assurance in the sense that the insurance company in the
presence of a principal gives them the impression either written spoken or by conduct that they
are in a partnership with that particular bank willingly leading the principal to enter into a
contract with them. It will be upon the principal knowledge that the bank is an agent of that
insurance company and the principal will enter into a contract with that particular insurance
company knowing that they can use the bank’s assets such as loans acquired to buy assets.

RATIFICATION (explained and how it applies to insurance intermediaries: insurance

consultant)

This is validation. It is acceptance of an act originally done without instruction. That is if an

insurance consultant organizes and prepares an insurance policy for the principal without their
authority. The principal can choose to either accept or reject. When the principal accepts the
transaction, the act is ratified and the insurance consultant becomes a consultant with
retrospective effect. This means the principal is bound by the acts already done by the insurance
consultant, that is the agency comes to existence from the moment the insurance consultant made
the transaction and not from the time the principal ratified.
Conclusion
All the principles of the law of agency apply to all the insurance intermediaries in different ways.
Above mentioned is just but a few intermediaries and how the principles apply.