W10 Insurance Companies

FIMA 101
BANKING AND
FINANCIAL INSTITUTIONS
Compiled by:
Assoc. Prof. Bernadette M. Panibio
Department of Financial Management
College of Accountancy and Finance
Polytechnic University of the Philippines
FIMA 101 BANKING AND FINANCIAL INSTITUTIONS
By: Assoc. Prof. Bernadette M. Panibio
Week 10 – Insurance Companies
Lessons:
- Classifications
- Functions
- Products/Services
At the end of the lesson, the student is expected to:
- Classify insurance companies based on their functions

- Compare the functions and products/services of insurance
companies
PUP – CAF - DFM 1

Forerunners of Insurance in the Philippines
The “Bayanihan” System where members of a community contribute their time and
resources to assist a member in need of help and the “Paluwagan” System where people
give their contributions (paluwagan), in which the funds will be accumulated, and is to be
used when someone needs help are considered to be the forerunners of modern
insurance in the Philippines. The Äbuloy” System is also a practice in the country whereby
friends and relatives of a deceased member give cash donations to the grieving family for
burial expenses
Insurance in the Philippines
In its present form, insurance was first introduced in the Philippines in March 1829 when
Lloyd’s of London appointed Stracham, Murray & Co., Inc. as its local representative.
Sometime in 1839, the group of Russell and Sturgis was appointed by the Union
Insurance Society of Canton to act as their insurance agents in Manila. Business was
limited to non-life insurance.
It was only in 1898, that life insurance was introduced in the Philippines when the Sun
Life Assurance of Canada began doing business.
The first domestic non-life insurance company was the Yek Tong Lin Fire and Marine
Insurance Company (now known as the Philippines First Insurance Company) which was
established on June 8, 1906.
In 1910, the first domestic life insurance company, the Insular Life Assurance Company,
Ltd., was organized.
PUP – CAF - DFM 2

Law of Large Numbers

LOA LOP
The Law of Large Numbers is sometimes referred to as the “Law of Average” or the “Law
of Probability”. It is a mathematical law which states that when the number of
similar(homogenous) independent exposure units is increased, the relative accuracy of
predictions about future outcomes (losses, in this case) is also increased.
This law is the theoretical basis of the business of insurance, for the impossibility of
predicting the occurrence of a loss in an individual case is replaced by the ability to predict
collective losses when considering a large number of cases. It is the law of large numbers
which insurers use in calculating their probable loss experience in their business.
Important Words and Phrases
Insurance
 A social device which combines the risks of individuals into a group, using funds
contributed by members of the group to pay for losses.
 A device for reducing risk by combining a sufficient number of exposure units to
make their individual losses collectively predictable. The predictable loss is then
shared proportionately by all units in the combination
 Insurance is defined as a contract, which is called a policy, in which an individual
or organization receives financial protection and reimbursement of damages from
the insurer or the insurance company. At a very basic level, it is some form of
protection from any possible financial losses.
Most definitions of insurance include three important points:
 There is a transfer of risk from the insured to the insurer

 The insureds contribute to a common fund from which losses are paid
 The insurer pools or combines a large number of separate exposure units.
The basic principle of insurance is that an entity will choose to spend small periodic
amounts of money against a possibility of a huge unexpected loss. Basically, all the
policyholders pool their risks together. Any loss that they suffer will be paid out of their
premiums which they pay.
PUP – CAF - DFM 3

Insurer
 An insurer is the company or person who promises to reimburse
 Every corporation, partnership, or association, duly authorized to transact
insurance business as elsewhere provided in Insurance Code
Insured (sometimes called the assured)

The one who receives the payment, except in the case of life insurance, where payment
goes to the beneficiary named in the life insurance contract.
Risk
Uncertainty concerning loss
Peril
The cause of loss; a loss producing agent like fire, lightning, earthquake, collision,
computer breakdown, typhoon, etc.
Hazard
Condition that tends to create or increase the chance of loss from a given peril. Ex.: low
lying areas, storing flammable materials within building, open sided buildings, defective
signal/tail lights
Physical Hazard
Objective characteristics that increase the chance of loss Ex. manufacturer of
combustible goods
Moral Hazard
Subjective characteristics of the Insured. Ex. dishonesty, credit standing, past losses
Morale Hazard
Characterized by carelessness or indifference to loss because of insurance coverage.
Ex. Poor housekeeping, lack of loss prevention
Contract of Insurance
An agreement whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event
PUP – CAF - DFM 4

Policy
The written instrument in which a contract of insurance is set forth
Premium
Is the consideration paid by the insured—usually annually or semiannually—for the
insurer’s promise to reimburse.
Functions of Insurance Company
Provides Reliability
The main function of insurance is that eliminates the uncertainty of an unexpected and
sudden financial loss. This is one of the biggest worries of a business. Instead of this
uncertainty, it provides the certainty of regular payment i.e. the premium to be paid.
Protection
Insurance does not reduce the risk of loss or damage that a company may suffer. But it
provides a protection against such loss that a company may suffer. So at least the
organization does not suffer financial losses that debilitate their daily functioning.
Pooling of Risk
In insurance, all the policyholders pool their risks together. They all pay their premiums
and if one of them suffers financial losses, then the payout comes from this fund. So, the
risk is shared between all of them.
Legal Requirements
In a lot of cases getting some form of insurance is actually required by the law of the land.
Like for example when goods are in freight, or when you open a public space getting fire
insurance may be a mandatory requirement. So, an insurance company will help us fulfill
these requirements.
Capital Formation
The pooled premiums of the policy holders help create a capital for the insurance
company. This capital can then be invested in productive purposes that generate income
for the company.
PUP – CAF - DFM 5

Regulatory Bodies and Legislative Guidance
Insurance is regulated by various laws and regulations. The Insurance Code (the Code)
is the main piece of legislation governing the insurance business. It grants the Insurance
Commissioner “the duty to see that all laws relating to insurance, insurance companies
and other insurance matters, mutual benefit associations, and trusts for charitable uses
are faithfully executed and to perform the duties imposed upon him by the Code,”
including the “sole and exclusive authority to regulate variable contracts as defined by
law and to provide for the licensing of persons selling such contracts, and to issue
reasonable rules and regulations governing the same. The Insurance Commissioner is
empowered to issue such rulings, instructions, circulars, orders and decisions as may be
deemed necessary to secure the enforcement of the provisions of the Insurance Code,”
and such issuances of the Insurance Commissioner are part of the regulatory scheme
governing the insurance industry in the Philippine jurisdiction. Decisions by the Insurance
Commissioner are appealable to the Secretary of Finance.
Other government agencies involved in the regulation of insurance and reinsurance in the
Philippines include the Securities and Exchange Commission of the Philippines (SEC)
and the Bangko Sentral ng Pilipinas (BSP, the Central Bank of the Philippines). The Anti-
Money Laundering Council (AMLC) and the Philippine Competition Commission (PCC)
also have regulations that are applicable to or affect the insurance industry.
As the government agency tasked to regulate corporations, partnerships and

associations, entities intending to engage in the business of insurance must submit to the
jurisdiction of the SEC and obtain the license for the appropriate structure in order to be
entitled to conduct insurance and reinsurance in the Philippines.
The PIC exercises primary authority over insurance companies which are deemed special
corporations under the Revised Corporation Code which governs corporations,
partnerships and associations.
The BSP is the central monetary authority of the Philippines and supervises the
operations and activities of banks and certain non-bank financial institutions. Certain
issuances of the Monetary Board of the BSP affect the insurance industry because of, for
instance, the inclusion of bancassurance in the Insurance Code.
PUP – CAF - DFM 6

Insurance companies, pre-need companies, and all other persons supervised or

regulated by the PIC are considered “covered persons” under the Anti-Money Laundering
Act of 2001 and the Terrorism Financing Prevention and Suppression Act of 2012. The
Anti-Money Laundering Council, of which the Insurance Commissioner is a member, is
tasked with implementing these laws, and may promulgate pertinent rules and regulations
which will affect companies regulated by the PIC, including those engaged in insurance
and reinsurance.
The PCC, created under the Philippine Competition Act, is tasked with the implementation
of that Act, including the review of proposed mergers and acquisitions to the extent that
the relevant transaction exceeds certain thresholds set out by law and regulations. This
means that proposed mergers and acquisitions involving companies engaged in
insurance and reinsurance may have to be submitted to the PCC for review and
clearance.
Principles of Insurance
Utmost Good Faith

A contract of insurance must be made based on utmost good faith. It is important that the
insured disclose all relevant facts to the insurance company. Any facts that would
increase his premium amount, or would cause any prudent insurer to reconsider the policy
must be disclosed. If it is later discovered that some such fact was hidden by the insured,
the insurer will be within his rights to void the insurance policy.
Insurable Interest
This means that the insurer must have some pecuniary interest in the subject matter of
the insurance. This means that the insurer need not necessarily be the owner of the
insured property but he must have some vested interest in it. If the property is damaged
the insurer must suffer from some financial losses.
Indemnity
Insurances like fire and marine insurance are contracts of indemnity. Here the insurer
undertakes the responsibility of compensating the insured against any possible damage
or loss that he may or may not suffer. Life insurance is not a contract of indemnity.
PUP – CAF - DFM 7

Subrogation
This principle says that once the compensation has been paid, the right of ownership of
the property will shift from the insured to the insurer. So the insured will not be able to
make a profit from the damaged property or sell it.
Contribution
This principle applies if there is more than one insurer. In such a case, the insurer can
ask the other insurers to contribute their share of the compensation. If the insured claims
full insurance from one insurer, he loses his right to claim any amount from the other
insurers.
Proximate Cause
This principle states that the property is insured only against the incidents that are
mentioned in the policy. In case the loss is due to more than one such peril, the one that
is most effective in causing the damage is the cause to be considered.
Types of Insurance
Public and Private Insurance
Sometimes a distinction is made between public and private insurance. Public (or social)
insurance includes Social Security, Medicare, temporary disability insurance, and the like,
funded through government plans. Private insurance plans, by contrast, are all types of
coverage offered by private corporations or organizations.
Types of Insurance for the Individual
Life Insurance
Life insurance provides for your family or some other named beneficiaries on your death.
Two general types are available: term insurance provides coverage only during the term
of the policy and pays off only on the insured’s death; whole-life insurance provides
savings as well as insurance and can let the insured collect before death.
Health Insurance
Health insurance covers the cost of hospitalization, visits to the doctor’s office, and
prescription medicines. Usually, the policy will contain a deductible amount; the insurer
will not make payments until after the deductible amount has been reached.
PUP – CAF - DFM 8

Disability Insurance
A disability policy pays a certain percentage of an employee’s wages (or a fixed sum)
weekly or monthly if the employee becomes unable to work through illness or an accident.
Homeowner’s Insurance
A homeowner’s policy provides insurance for damages or losses due to fire, theft, and
other named perils. No policy routinely covers all perils. The homeowner must assess his
needs by looking to the likely risks in his area—earthquake, flooding, and so on.
Automobile Insurance
Automobile insurance is perhaps the most commonly held type of insurance. The typical
automobile policy covers liability for bodily injury and property damage, medical
payments, damage to or loss of the car itself, and attorneys’ fees in case of a lawsuit.
Other Liability Insurance

In this litigious society, a person can be sued for just about anything: a slip on the walk,
a harsh and untrue word spoken in anger, an accident on the ball field. A personal liability
policy covers many types of these risks and can give coverage in excess of that provided
by homeowner’s and automobile insurance
Types of Business Insurance
Workers’ Compensation
Almost every business must insure against injury to workers on the job. Some may do
this through self-insurance—that is, by setting aside certain reserves for this contingency.
Other businesses purchase workers’ compensation policies, available through
commercial insurers.
Automobile Insurance
Any business that uses motor vehicles should maintain at least a minimum automobile
insurance policy on the vehicles, covering personal injury, property damage, and general
liability.
Property Insurance
No business should take a chance of leaving unprotected its buildings, permanent
fixtures, machinery, inventory, and the like. Various property policies cover damage or
loss to a company’s own property or to property of others stored on the premises.
PUP – CAF - DFM 9

Malpractice Insurance
Professionals such as doctors, lawyers, and accountants will often purchase malpractice
insurance to protect against claims made by disgruntled patients or clients.
Business Interruption Insurance

Depending on the size of the business and its vulnerability to losses resulting from
damage to essential operating equipment or other property, a company may wish to
purchase insurance that will cover loss of earnings if the business operations are
interrupted in some way—by a strike, loss of power, loss of raw material supply, and so
on.
Liability Insurance
Businesses face a host of risks that could result in substantial liabilities. Many types of
policies are available, including policies for owners, landlords, and tenants (covering
liability incurred on the premises); for manufacturers and contractors (for liability incurred
on all premises); for a company’s products and completed operations (for liability that
results from warranties on products or injuries caused by products); for owners and
contractors (protective liability for damages caused by independent contractors engaged
by the insured); and for contractual liability (for failure to abide by performances required
by specific contracts).
Life Insurance or Life Assurance

is a contract between a policy owner and an insurer, where the insurer agrees to pay an
insured’s designated beneficiary a benefit upon the occurrence of the insured individual’s
death or other event, covered by the policy such as terminal or critical illness occurs. In
return, the policy owner agrees to pay a stipulated amount called premium, at regular
intervals or in lump sums.
Three Great Services of Life Insurance
Family Protection
Life insurance solves the problems that would arise out a man’s early death by providing
a definite sum of money to replace his lost income for the benefit of his family. The family
is then protected from the financial difficulties immediately following the breadwinner’s
premature death.
PUP – CAF - DFM 10

Savings
Through the help of life insurance, one is able to regularly set aside an amount for the
premium which accumulates through the years to build up a fund guaranteed to be
completed whether the insured lives or dies. It gives him a secure and profitable method
of accumulating funds for illness, injuries or emergencies.
Retirement Income
Life insurance solves a man’s financial problems that come with old age by enabling him
to create a guaranteed source of fund when he grows old.
Classifications of Life Insurance Policies
Life insurance policies fall under four general classifications:
According to Nature
(Policies are differentiated based on the nature of benefits offered)
Temporary Policies
These policies offer only protection or death benefit over a limited period of time.
Permanent Policies
These policies offer death and living benefits within the insured’s lifetime. Living benefits
may be in the form of dividends, anticipated endowments, universal life policies, and cash
values.
According to Coverage
(Policies are differentiated based on the number of persons enjoying protection under a
specific policy)
Individual Policies
A policy which provides insurance protection to one person only
Joint Life
A policy which covers the lives of two or more persons. Under this policy the first death
which occurs among the lives covered effectively terminates the policy.

Group
Life insurance policy which covers the life of a group of people.
According to Participation in Divisible Surplus

(Policies are differentiated based on whether or not such are entitled to receive dividends)
Participating
A policy which entitles policyowners to receive dividends. Dividends are sourced from the
surplus earnings of the insurance company which the board of directors could decide to
share with policy owners with participating policies.
Non-participating
Does not share in the dividends
According to Line of Business

(Policies are differentiated based on the market segments to which a policy caters)
Ordinary
A policy which caters to the middle and upper income-earners. Premiums of this policy
are payable on an annual, semi-annual, or quarterly basis.
Industrial
A policy which caters to low income-earners. Premiums of this policy are payable on a
monthly, weekly, or daily basis.
Group
A policy which caters to the insurance needs of employee groups, unions, and the like,
the premiums of which are generally deducted from the salaries of employees
Types of Life Insurance in the Philippines:
 Term life insurance

 Whole life insurance
 Endowment life insurance

Term Insurance
A term policy is one that pays the face amount only in the event of death within a stated
number of years. As the name suggests, this type of insurance policy gives you coverage
for a specific “term” or specified number of years (usually 20 to 30 years). Like most
policies, a death benefit will be paid if the policyholder passes during the time period of
the active policy.
Term insurance is typically less expensive and has one of the lowest upfront costs
compared to other types of insurance. This is because it is bound by a specific time. It
also gives you the biggest bang for your buck if your focus is family protection in case of
untimely passing during the term. This is because you’re basically getting a pure life
coverage without all the additional charges for features involving investments. However,
the features that make it advantageous can easily become disadvantageous for you,
depending on your need.
When you get term insurance, you have limited coverage based on your specific term.
Term insurance premiums also escalate as you age due to greater sickness and mortality
risks that come with it. And because term insurance is typically pure life coverage, you
don’t get to build up capital like you would with other types of insurance. This means when
your policy expires, so does the money you put up to keep it active.
Whole Life Insurance

In contrast with term insurance, whole life will pay the face value whenever death occurs.
It gives the most permanent coverage over the insured’s entire lifetime for the least
amount of premium.
Endowment
An endowment plan is one of the more traditional types of life insurance plans that offer
protection and savings. It works by helping you save regularly over a specific period of
time, after which you will receive an amount upon maturity in a lump sum or in monthly
payouts. Endowment plans are in place to give the policyholder insurance coverage, as
well as a living benefit should they survive the policy. Should something happen to the
policyholder, the appointed beneficiary shall receive the returns as a death benefit.

Group Life Insurance
Insurance provided to members of a formal group, such as employees of a firm or

members of an association. Group insurance is distinguished from individual insurance
in which single policies are sold to one person at a time and from social insurance [i.e.,
social security], which is sponsored by the government
Group life insurance is typically offered as a piece of a larger employer or membership

benefit package. By purchasing coverage through a provider on a ‘wholesale’ basis for
its members, the coverage costs each individual worker/member much less than if they
had to purchase an individual policy. People who elect coverage through the group policy
receive a ‘certificate of credible coverage,’ which will be necessary to provide to a
subsequent insurance company in the event that the individual leaves the company or
organization and terminates their coverage.
Variable Unit-Linked Insurance (VUL)
Variable Universal Life Insurance. also known as Variable Unit-Linked Insurance or VUL,
is a permanent life insurance and investment rolled into one product. It provides living,
death, and disability benefits plus an investment component. In the Philippines, the usual
practice is that 5% of the VUL insurance premium goes to the cost of insurance, while
95% goes to investments.
It’s crucial to highlight the meaning of the terms, “variable” and “permanent” in VUL:
Variable means the investment returns vary depending on the rise and fall of the markets
where the premium is invested.
As a permanent insurance policy, VUL won’t expire and you’re insured for as long as you
keep paying your premiums. This makes it different from term life insurance which lasts
certain period, typically from 20 to 30 years.
For the past few years, VUL has been a popular financial product in the Philippines
because it offers financial protection for when the policyholder either dies too soon or
lives too long. This means your beneficiaries will receive the proceeds if you pass away
early. Or if you live beyond your 60s, you can use the investment returns from your VUL
plan to fund your retirement.

Health Insurance
There are two types of private health insurance in the Philippines: Health Maintenance
Organizations (HMO) and health insurance policies. While they both have the same end
goal, they deliver their services contrastingly. Each has their own share of benefits, but
they work differently depending on your situation.
PhilHealth
PhilHealth is the health insurance provider run by the government. It is an affordable and
progressive insurance program that extends financial assistance to all citizens seeking
medical help, whether employed or unemployed. Membership is compulsory for all
employees and half of the monthly contribution is covered by the employer while the other
half is deducted from the employees’ salary. The amount of financial assistance it extends
to its members will vary according to the disease.
Health Maintenance Organizations (HMO)

Health Maintenance Organizations (HMO) are private providers of healthcare insurance,
except they give you access to doctors within their network. Plans are usually
comprehensive and customizable but are only limited to a certain amount annually. The
bigger the premium the employer or individual is paying, the higher the annual allowance.
Non – Life Insurance
Non-life insurance is a type of insurance covering people, property, or legal liability. Also
known as general insurance, it is a policy that can provide you with compensation for
losses caused by certain financial events. Your insurance company will pay to cover some
or all of your losses based on your coverage.
The coverage period for this type of policy is usually one year, with the premiums paid on
a one-time basis. How much you have to pay for non-life insurance depends on your
policy coverage and the insurance company’s premium rates.

Benefits of Non-Life Insurance
It gives you peace of mind

Non-life insurance can protect you from uncertainties like damages and losses. Instead
of always thinking about the financial repercussions of car repair, theft, or hospitalization,
you will have more time enjoying life and spending time with your family
A non-life insurance policy ensures business stability

If you have business insurance in place, you may not have to shell out money for
employee-related risks, property damage, or legal liabilities. Your business can carry on
because your insurer will provide compensation based on your policy coverage.
It can secure you from the burden of loss

Losing personal properties during natural calamities can be daunting. You may even feel
helpless. However, with a non-life insurance policy, you can get enough money to help
you overcome the loss and rebuild your life.
It can help minimize expenses

Sure, you have to pay for the premiums, but non-life insurance may cover partial or full
payment for car repairs, hospital bills, property damages, and even losses. Without
insurance in place, these may cost you a lot more than what non-life insurance costs.
Motor Insurance
Any kind of insurance pertaining to the ownership, maintenance, or use of motor vehicle.
Contract of insurance against passenger and third-party liability for death or bodily injuries
arising from motor vehicle accident.
Classes of Motor Insurance
Physical Damage or Material Damage Insurance

Covers loss of or damage to the insured vehicle caused by the insured perils specified in
the policy
Liability Insurance
Refers to the injuries which the insured vehicle may do to people in other vehicles or to
members of the public in general, and to the damaging of real personal property of such

people. However, insurance against accidents to the insured named persons,

passengers, named or unnamed drivers may be incorporated in and form part of a motor
insurance. It may be said, therefore, that a motor insurance is a combination of property,
public liability and personal accident covers. In one single motor insurance policy, all
these risks may be simultaneously covered.
Fire Insurance
Fire insurance is a type of insurance that protects against financial loss due to a structure
destroyed by a fire. In simpler terms, fire insurance helps cover some or all expenses for
rebuilding your home, office, or any insured property that’s burned down.
Fire Insurance shall include insurance against loss by fire, lightning, windstorm, tornado
or earthquake and other allied risks, when such risks are covered by extension to fire
insurance policies or under separate policies (Insurance Code)
Fire Insurance Policy

A fire insurance policy is a written agreement between the insurance provider and the
policyholder, in which the insurer pays for the loss of use of the insured’s property
damaged by a fire up to an agreed amount. The contract also states the annual premium
that the policyholder should pay to the insurance company. Policies are valid for one year
and can be renewed every year. In the Philippines, a fire insurance policy is typically
offered as a stand-alone product. Some non-life insurance companies bundle it with more
extensive home insurance, property insurance, or casualty insurance package.
Marine Insurance
Marine Insurance includes:
 Insurance against loss of or damage to:
- Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise,
effects, disbursements, profits, moneys, securities, choses in action,
instruments of debts, valuable papers, bottomry, and respondentia interests
and all other kinds of property and interests therein, in respect to, appertaining
to or in connection with any and all risks or perils of navigation, transit or
transportation, or while being assembled, packed, crated, baled, compressed
or similarly prepared for shipment or while awaiting shipment, or during any
delays, storage, transhipment, or reshipment incident thereto, including war
risks, marine builder’s risks, and all personal property floater risks;

- Person or property in connection with or appertaining to a marine, inland

marine, transit or transportation insurance, including liability for loss of or
damage arising out of or in connection with the construction, repair, operation,
maintenance or use of the subject matter of such insurance (but not including
life insurance or surety bonds nor insurance against loss by reason of bodily
injury to any person arising out of ownership, maintenance, or use of
automobiles);
- Precious stones, jewels, jewelry, precious metals, whether in course of

transportation or otherwise; and
- Bridges, tunnels and other instrumentalities of transportation and

communication (excluding buildings, their furniture and furnishings, fixed
contents and supplies held in storage); piers, wharves, docks and slips, and
other aids to navigation and transportation, including dry docks and marine
railways, dams and appurtenant facilities for the control of waterways.
 Marine protection and indemnity insurance

- meaning insurance against, or against legal liability of the insured for loss,
damage, or expense incident to ownership, operation, chartering,
maintenance, use, repair, or construction of any vessel, craft or instrumentality
in use of ocean or inland waterways, including liability of the insured for
personal injury, illness or death or for loss of or damage to the property of
another person.
Engineering Insurance
Engineering Insurance is an insurance policy that covers a wide range of engineering
related risks. It is a comprehensive insurance that provides complete protection against
risks associated with erection, resting and working of any machinery, plant or equipment.
Casualty Insurance
Casualty insurance is insurance covering loss or liability arising from accident or mishap,
excluding certain types of loss which by law or custom are considered as falling
exclusively within the scope of other types of insurance such as fire or marine. It includes,
but is not limited to, employer’s liability insurance, motor vehicle liability insurance, plate
glass insurance, burglary and theft insurance, personal accident and health insurance as
written by non-life insurance companies, and other substantially similar kinds of insurance

Differences Between Life Insurance and Non-Life Insurance
Benefits of Maturity
Life insurance can be seen as an investment apart from insurance as it offers maturity
benefits after specific tenures. Non-life insurance, mostly, doesn’t give any maturity
benefits but just promises a payout amount in case of any loss due to unavoidable
circumstances.
Premium Payments
In case of life insurance, generally a fixed amount is to be paid annually, for a specific
tenure like 10 or 20 years. For non-life insurance, mostly the entire premium is paid in
one go when you are buying the policy.
Policy Duration
The duration of life insurance policy is generally long-term, whereas that of non-life
insurance is short term.
Role In Planning Finances

Life insurance can be an investment avenue for different financial goals such as money
for a child’s education, retirement corpus, etc. Non-Life insurance just protects your
valuables against any crisis.
Claim of Insurance Amount

In case of life insurance, the assured sum is paid either on the death of the insured person
or maturity of the policy. For non-life insurance, the loss is compensated in case of
unfortunate events, as per the policy terms and conditions.
Both, life insurance and non-life insurance have different applicability and benefits. Life
insurance helps you to protect your loved ones in your absence, whereas non-life
insurance protects your assets.

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FIMA 101

Week 10 – Insurance Companies

At the end of the lesson, the student is expected to:

- Classify insurance companies based on their functions

PUP – CAF - DFM 1

Forerunners of Insurance in the Philippines

Insurance in the Philippines

PUP – CAF - DFM 2

Law of Large Numbers

Important Words and Phrases

Most definitions of insurance include three important points:

 There is a transfer of risk from the insured to the insurer

PUP – CAF - DFM 3

Insured (sometimes called the assured)

PUP – CAF - DFM 4

Functions of Insurance Company

PUP – CAF - DFM 5

Regulatory Bodies and Legislative Guidance

As the government agency tasked to regulate corporations, partnerships and

PUP – CAF - DFM 6

Insurance companies, pre-need companies, and all other persons supervised or

Utmost Good Faith

PUP – CAF - DFM 7

Public and Private Insurance

Types of Insurance for the Individual

PUP – CAF - DFM 8

Other Liability Insurance

Types of Business Insurance

PUP – CAF - DFM 9

Business Interruption Insurance

Life Insurance or Life Assurance

Three Great Services of Life Insurance

PUP – CAF - DFM 10

Classifications of Life Insurance Policies

Life insurance policies fall under four general classifications:

PUP – CAF - DFM 11

According to Participation in Divisible Surplus

According to Line of Business

Types of Life Insurance in the Philippines:

 Term life insurance

PUP – CAF - DFM 12

Whole Life Insurance

PUP – CAF - DFM 13

Group Life Insurance

Insurance provided to members of a formal group, such as employees of a firm or

Group life insurance is typically offered as a piece of a larger employer or membership

Variable Unit-Linked Insurance (VUL)

PUP – CAF - DFM 14

Health Maintenance Organizations (HMO)

Non – Life Insurance

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Benefits of Non-Life Insurance

It gives you peace of mind

A non-life insurance policy ensures business stability

It can secure you from the burden of loss

It can help minimize expenses

Classes of Motor Insurance

Physical Damage or Material Damage Insurance

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people. However, insurance against accidents to the insured named persons,

Fire Insurance Policy

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- Person or property in connection with or appertaining to a marine, inland

- Precious stones, jewels, jewelry, precious metals, whether in course of