Questions

(i) For any two named general insurance products offered by a named
insurance company of your choice operating in the Zambia market.
Describe the nature of coverage/benefits and possible exclusions.
(ii) (ii) Explain how each of the insurance principles, namely; insurable
interest, utmost good faith, contribution and subrogation ensures
protection and compensation in a smooth and equitable way.
There are a number of general insurance policies available. The first part of this assignment
will describe Hospital Cash plan and general motor insurance plan from Madison General
Insurance.

Described herein is the Hospital Cash Plan offered by Madison General Insurance. The
Company assures to pay Daily Cash Benefits after spending more than 48hrs in hospital due to
Sickness or Bodily Injury subject to the waiting periods outlined. This means that no payment
will be made in respect of the first 48 hours in hospital. Hospital cash plan is aimed at covering
incidental expenses incurred during hospitalization which are normally not covered under
health insurance.

This plan has a number of attractive benefits which include cash pay-out as per selected plan
for each day spent in hospital when admitted for more than 72 hours. The maximum pay-out
per claim depends on the selected plan. Dread disease benefit/Chronic ailments cover.
Immediate accident cover. No medical examinations are required. There is an absolute freedom
of choice since cash can be used in anyway the plan holder wishes to that is paying school fees,
utility bills etc. Pre-existing conditions/ailments excluded (including HIV/Aids). Should there
be diagnoses of HIV/Aids or any chronic ailment after the commencement of the policy, the
plan will cover. It can cover shortfalls from medical aid. Premiums will be paid on an annual
basis and the amounts will depend on the plan selected.

The Plan covers hospitalisation which occurs within 30 (thirty) days of any injury or sickness.
The sickness or injury which was suffered during the currency of the Policy. The sickness or
injury which falls within the policy terms and conditions. Premiums are up to date

The coverage includes people from 3 months to 64 years. The policyholder has to submit the
duly filled claim form with requisite documents normally within 10 days from the date of
discharge to Madison General Insurance Company Zambia limited. These documents include
but not limited to doctor’s report or hospital’s reference letter, discharge summary, showing
date of admission, date of discharge, diagnosis and treatment summery.

The claim forms will be processed within 5 working days if all documents are attached and
submitted within 10 days after discharge. Hospital Cash Back Benefits will be payable for
hospitalisation at any registered hospital in the Republic of Zambia.

In the event of non-payment of Premiums, the Policy will automatically lapse. The three, six,
nine month waiting period starts upon payment of the premium.

This cover however excludes pregnancy and any pregnancy related illness, any psychological
or psychiatric disease or disorder, including Post Traumatic Stress Disorder will not be covered.
Confinement in an establishment which is not a Hospital will not result in a valid claim and
will not be covered. Operations, treatments and examinations for obesity, cosmetic purposes
or of the Insured Person’s own choosing which has no connection with any illness, will not be
covered. Any hospitalization for the removal of cysts and fibroids. Any persons below the age
of three months or older than sixty-four years. The driving of a motor vehicle while the blood
alcohol level of the insured Person is higher than that permitted by law and intentionally self-
inflicted injury or attempted suicide, while sane or insane, will not be covered (Madison
General, 2023).
The second general insurance product offered by madison general insurance is motor insurance
package. This package is inclusive of all reasonable plan starting with comprehensive to
executive, Full Third-Party Fire and Theft, Third party Liabilities to Motor Traders – Internal
And External Policies (Madison General, 2023).

Comprehensive policy covers the following circumstances:

Accidental /fire damage to your vehicle. Loss of vehicle or spare parts / accessories. Protection
and removal after accident. Third party liabilities (damage to property, death or injury). Riot
and strike cover (non-political). Medical expenses cover up to a stated limit (private cars only).
Personal accident cover for insured and spouse up to a stated limit (private cars only). Authority
to repair damage to vehicle up to a stated limit.

The Executive policy is designed for professionals, top executives and officers or diplomats.
MGen provides comprehensive cover at a favourable rate. However, the executive policy
reserves the right to deem who is eligible to be considered in this category.

The full third-party fire and theft policy covers loss or damage caused by fire, lighting,
explosion, theft, or attempted theft and third-party liabilities (property, death and / or injury).

The third-party Liabilities policy covers third party liabilities (property, death and / or injury)
only and motor traders – internal and external policies cover motor vehicles which are in the
custody/ care of motor traders against accidental / fire damage to the vehicle, liability to third
parties and theft of vehicle.

This section looked at general insurance plans from Madison General Insurance.

The second section of this paper will explain the insurance principles as they ensure protection
and compensation in a smooth and equitable way. The given principles are insurable interest,
utmost good faith, contribution and subrogation.

1. Principle of Insurable Interest

The principle of insurable interest is the core existence of insurance. This principle suggests
that the policyholder must suffer some type of financial loss if anything should happen to the
object, they are looking to insure that is to implicate that if damage or loss of the object in
question would not affect the policyholder financially, it cannot be insured.

In other words, for a risk to be insurable, the policyholder must have an interest in the risk
being insured, to distinguish between insurance and gambling, a risk must be of a financial and
reasonably quantifiable nature and the amount payable by the insurance policy in the event of
a claim must bear some relationship to the financial loss incurred (Chowa, 2023)

That is to say a breadwinner for a family can have life insured for the reason that in the event
of death or a loss of capability to work, the family would suffer financially. Similarly, one can
have a car, motorcycle, and/or boat insured. If the aforesaid item(s) is (are) lost the method of
transportation obvious would be hard hence raising a predicament culminating into financial
hardship position hence insurance to remedy that.
However, you could not have your neighbor’s car insured and profit in the event something
happened to the vehicle. There is absolutely no insurable interest in a neighbor’s car, therefore,
could not receive financial compensation if anything happened to it.

The entire purpose of the insurance is to compensate for a financial loss.

2. Principle of Utmost Good Faith (Uberrima Fides)

Utmost good faith, or “uberrima fides” in Latin, is the primary principle of insurance. In fact,
many would argue that utmost good faith is the most important insurance principle. Essentially,
this principle states that both parties involved in an insurance contract should act in good faith
towards one another. In other words, both parties should respect one another and not seek unjust
funds or insurance claims.

Uberrima fides - Latin for “utmost good faith”. This honesty principle is assumed to be
observed by the parties to an insurance, or reinsurance, contract. An alternative form is
uberrimae fidei: “of the utmost good faith”. The principle of honesty underlies all insurance
business. For example, misrepresentation or non-disclosure of any material fact in the proposal
can make the policy void. Each renewal of a general insurance policy actually constitutes a
new proposal, and the insured should disclose to the insurer any material changes during the
period covered by an insurance policy. The insurer faces a variety of moral hazards because
insureds may not abide by this legal principle and, if they do not, it may be hard for the insurer
to detect (Chowa, 2023).

Generally speaking, there are two parties in an insurance contract: the insurance company
issuing the policy (insurer) and the policyholder (insured). The principle of utmost good faith
states the insurer should provide a level of security and solidarity to the policyholder. On the
other hand, the policyholder should not submit false or scam claims in an attempt to gain money
from the insurance company. These stipulations can be increasingly important during a
personal injury case.

For example, under the principle of good faith, a policyholder must disclose the complete truth
regarding the subject matter of the insurance. So, for an auto insurance policy, a policyholder
cannot provide falsified or misrepresented information regarding medical records, accident
history, or a history of smoking or drinking. If the insurance company can prove a policyholder
provided falsified information and did not act in good faith, the insurance company can revoke
its liability in the insurance claim.

3. Principle of contribution

The principle of contribution often considered an extension of the principle of indemnity. To

better discuss the contribution principle, it would be prudent to extend the discussion to
indemnity principle. Principle of indemnity suggests the right on the heels of insurable interest
whose explanation suggests that an insurance contract is in itself not meant to make a profit.
The sole purpose of insurance is to compensate a policyholder against losses incurred from
unexpected events (Chowa, 2023).

As part of an insurance contract, the insurance company vows to compensate the insured person
for the amount of the loss or the insured amount agreed on in the contract (whichever is less).
From that background then, if multiple policies on the same item are had, the principle demands
that each policy pays its portion of the loss incurred but without making profit on the insured
item. In a consideration where two insurance policies on a new car are had a policy with X
Insurance Company that covers K30,000 in property damage and a policy with Y Insurance
Company that covers K50,000 in property damage. If in an auto accident that causes K50,000
worth of damage occurs, the policy demands that the loss be compensated between both X and
Y Insurance companies.

The share of the damage thereof as demanded by the principle would likely cover K19,000 to
X and Y K31,000. The principle recognises the fact that the more expensive policy is
responsible for the larger portion of the compensation. In the event where one policy was
falsely exhausted after an accident, the insurance company has the right to recover the excess
funds they have paid from the other insurance company. For example, if X paid the policy’s
full K30,000 towards damages, and Y only paid K20,000, X could legally recover their excess
expenses from Y.

The principle further addresses the issue of partial damage. If the car is insured for K10,000,
but the damages are only totalling to K3,000, insurance company will compensate only for
K3,000, not the K10,000 of the entire policy.

The principle ensures the compensation paid is not more than the amount of the loss, preventing
a policyholder from amassing a profit off damages. Of course, this is not to say that there won’t
be additional damages following an accident. Rather, the principle establishes that it is not in
the insurance company’s position to compensate policyholders for additional hardships. This
ensures that contribution to the policy meet apportioned damages whilst taking care of fairness.

4. Principle of Subrogation

This principle states that if your vehicle has been destroyed or totalled, your insurance company
will receive ownership over the insured object once they pay your compensation. This is
referred to as the insurance company’s subrogation rights.

This principle substitutes one party for another as creditor with a transfer of rights and
responsibilities. It applies within insurance when an insurer accepts a claim by an insured, thus
assuming the responsibility for any liabilities or recoveries relating to the claim. After the
insurance company pays your compensation for the insured item, they typically sell whatever
is salvageable to recover their losses. This means you can’t attempt to profit off the totalled
vehicle after you’ve been paid. Example If you receive a payment from an insurer for
replacement of your boat, following serious damage or loss, then the original boat becomes the
insurer’s property. The insurer may then be able to recover a salvage value, for its own benefit.

Further, the insurance company can also try to recover their losses by filing a lawsuit against
the at-fault party. So, if your motorcycle was totalled in a collision, you would remit ownership
of the vehicle to the insurance company, who could then sue the individual that caused your
collision. In this way, your insurance company can recover some or all of the funds they’ve
paid you.

By taking out the policy the risk is transferred to the insurance company. When the eventuality
happens, the burden of compensation is on the company at the same time the insurer can not
claim the damaged item to be his. The insurance can cover part of the payment by doing as
they deem it fit with item. They can further enquire to see who was at faulty in getting that item
to get damaged and may take legal action to cover for the compensation for the same damaged
item. To some extent the insurance company may raise enough to compensate the party.

The second section of this paper explained the insurance principles as they ensure protection
and compensation in a smooth and equitable way.
References

Chowa T. (2023). Mat3001 – Insurance and Alternative Risk Transfer, University of Zambia

Madison General Motor Insurance (2023) retrieved from

https://www.madison.co.zm/products/motor/

Madison General Insurance Hospital Cash plan (2023) retrived from

https://www.madison.co.zm/products/hospital-cash-plan/