‘Business insurance’ is a general term that covers the different types of insurance policies that are advisable or may be a legal requirement for your business or enterprise.
Business insurance options include:
Business premises insurance, also known as commercial buildings insurance
Business assets insurance, also known as business contents insurance
Public liability insurance
Employers‘ liability insurance
Professional indemnity insurance
Other specialist policies
The level of cover available for each different type of policy is subject to the individual policy terms of each insurance company. You should always check the policy documents to see what's included as standard and what is considered an ‘optional extra’ i.e. available at an additional cost.
In this part of our guide we look at insurance for business premises and contents.
Insuring your business premises
If you have business premises then a business premises insurance policy will cover your commercial buildings against a range of risks, for example fire, explosion, storm damage and flooding. Some insurance companies offer ‘all risk’ insurance which provides cover for other damage and loss as specified in the policy terms, including accidental damage cover.
What level of cover will I need?
When you take out a business premises insurance policy you will need to insure the premises for the full rebuilding cost, also known as the ‘reinstatement value’, rather than the market value. The reinstatement value is the cost of rebuilding the property in the event of a total loss; your insurance company may give you the option to add on an additional percentage to protect against underestimates and index linking.
Don't be tempted to under-insure in order to cut costs, as should you need to claim then you will be limited to the amount you insured the premises for regardless of whether the actual loss or damage is more.
What if I am a tenant?
If you are a tenant then it may be your landlord who is responsible for insuring the premises, unless the business has a shop front, in which case the responsibility for acquiring suitable insurance cover will normally lie with the tenant. If your landlord is responsible for insuring the premises and your lease complies with the Code for Leasing Business Premises in England and Wales 2007 then the insurance should be fair, reasonable and represent value for money. You have the right to request details of any commission received by your landlord and the details of the relevant insurance policies relating to the premises.
What if I am a landlord?
If you are a landlord then there will be a variety of policy options available to you, including policies for premises that are unoccupied or let.
Insuring business assets or equipment
Insurance for business assets or equipment is also known as business contents insurance. It's designed to cover items such as stock, machinery or equipment and other contents.
What are my policy options?
When it comes to insuring business assets or equipment you will have a number of options open to you. In terms of cover, you'll normally have the choice of ‘replacement as new’ insurance or ‘indemnity’ insurance.
Replacement as new policies are also referred to as ‘new-for-old cover’ and, if the claim is valid, the policy will meet the full cost of replacing items if they are stolen or destroyed; alternatively, the cost of repair will be met if the items are damaged. Unlike replacement as new policies, ‘indemnity’ policies deduct the cost of wear and tear so that the policyholder is put back in the same state or financial position they were in prior to the loss.
There is also the option to take out a ‘business interruption’ policy to insure against loss of profits and increased overheads resulting from, for example, key pieces of equipment or machinery being damaged or stolen.
Working from home
If you operate your business from your home, or work from home on a regular basis, then you may need a specialist insurance policy as standard home insurance will not provide cover for business-related risks.
In the next part of our guide we explain what public liability insurance is and why it's necessary.
The President of Pakistan had promulgated the Insurance Ordinance, 2000 on 19th August 2000 repealing the Insurance Act 1938. The objectives of this ordinance are said to be:
* To regulate the business of the Insurance industry.
* To ensure the protection of the interest of insurance policyholders.
* To promote sound development of the insurance industry.
The new ordinance has divided life insurance business and non life insurance business into following classes:
LIFE INSURANCE BUSINESS:
1. Ordinary Life Business.
2. Capital Redemption Business.
3. Pension Fund Business.
4. Accident and Health Business. 
NON-LIFE INSURANCE BUSINESS:
1. Fire and Property Damage Business.
2. Marine, Aviation and Transport Business.
3. Motor Third Party Compulsory Business.
4. Liability Business.
5. Worker’s Compensation Business.
6. Credit and Surety-ship Business.
7. Accident and Health Business.
8. Agriculture Insurance including Corp, Insurance.
9. Miscellaneous Business.
A public company or a body corporate can start insurance business in Pakistan. A certificate of registration as insurer will be obtained within six months for life business and non-life business separately. The registered insurer will meet the requirements of minimum paid up capital, statutory deposits, solvency, requirements, and reinsurance: arrangement appointment of auditors and to comply with Provisions of this Ordinance.
A registered insurer shall have to pay an annual supervision fee to SECP at the rate of Rs. 1 per thousand of gross premium written in Pakistan during the calendar year with a minimum of Rs. 100,000.
For sound and prudent management fit and proper persons with appropriate experience and qualification will be employed to conduct their duties with due diligence and skill. The minimum paid- up-capital required for registered insurer is as under:
LIFE INSURANCE BUSINESS: 150 MILLION RUPEES.
1. 100 Million Rupees will be attained up to 31st December 2002.
2. 150 Million Rupees will be attained up to 31st December 2004.
NON-LIFE INSURANCE BUSINESS:. 80 MILLION RUPEES.
1. 50 Million Rupees will be attained up to 31st December 2002.
2. 80 Million Rupees will be attained up to 31st December 2004.
Every insurer will maintain a minimum deposit equal to 10% of its Paid-Up-Capital with State Bank of Pakistan. The deposit in excess of amount required can be asked for with permission from SECP for refund.
REINSURANCE ARRANGEMENTS
The insurers will maintain assets in excess of liabilities to meet solvency requirement as per this Ordinance. Insurance companies will maintain adequate reinsurance arrangements.
The insurers will submit the quarterly returns on the prescribed form to SECP. The auditors shall be appointed by the commission to audit the accounts of insurer’s. Actuary report for life insurance business shall be necessary. If any return is considered inaccurate or defective the Commission can call for further information, call upon insurer; examine any officer of insurer (or decline to accept the return).
If an insurer is likely to become unable to meet liabilities the commission can investigate the affairs of an insurer. If necessary the services of an auditor or actuary can be hired for investigation by the commission. The Commission has the power to prescribe maximum level of acquisition costs and management expenses.
For corporatization of public sector insurance corporation the National Insurance Corporation, has been converted and registered as National Insurance Company Limited. The Pakistan Insurance Corporation will be converted and registered as Pakistan Reinsurance Company Limited. These Corporations will be converted into public limited companies within a period of one year from the issuance of this Ordinance. These will continue to conduct their present business until the Federal Government ceases to hold a controlling ownership interest in them.
There are provisions for appointment of agents and brokers. The brokers should have obtained license from the commission. The requirements of Paid-Up-Capital, statutory deposit professional indemnity insurance and other matters are to be prescribed by the Government for registration of brokers.
The Commission should license the persons acting as insurance surveyors. A person can apply for a license after fulfilling the following conditions:
* The person is a company with a prescribed minimum share capital.
* The person carries professional indemnity liabilities.
* The person should be a member of the approved professional Association.
* The Person complies with the conditions to be prescribed.
In addition to Authorized the Commission will register surveying Officers according to the prescribed procedure.
Special provisions have been laid down for protection of policyholder’s interest. The Government of Pakistan will appoint the insurance Tribunal and the Insurance Ombudsman. This Ordinance also provides for appointment of administrator and winding-up of an insurer. The penalties for offence against the Ordinance are also prescribed.
This ordinance has almost changed the insurance structure of Pakistan. Wide-ranging powers have been granted to the Federal Government and SECP. This will promote sound development of insurance industry. New types of insurance will be introduced in the country like credit Insurance and Crop Insurance etc. The culture of Insurance Broker will be introduced in the market. The small insurance companies may amalgamate with large companies or those may be converted into broker houses.
The process of implementation of new insurance law is very slow. In fact the new law is the outcome of the findings and recommendations of the National Insurance Reforms Commission which worked in 1988-89 and presented its reports in 1990. Under the Capital Market Development Programme the ADB supported Pakistan and consultants were engaged in 1997. The consultants presented the draft bill of Insurance Act, 1999 in July 1999. At lasts on 19th August 2000 the President of Pakistan Promulgated the Insurance Ordinance, 2000 repealing the Insurance Act, 1938.
Almost all the sections of this ordinance are to be implemented by forming insurance Rules and Regulations. For this purpose the Federal Government and SECP have been given wide-ranging powers. The Federal Government through notification published in the official gazette, can make rules to carry out the purpose of this ordinance. The powers of the Federal Government have been delegated to SECP who can make rules required to be made under the ordinance. The SECP has also been authorized to make Insurance Regulations required for implementation of this Ordinance.
The formation of Insurance Rules and Regulations are necessary to implement the Insurance ordinance 2000 in letter and spirit. The SECP has published in Gazette of Pakistan a Draft Notification in February 2002 with the title of "Draft Insurance Rules, 2002" for information of all persons likely to be affected and notice has been given that these draft Rules shall be taken into consideration after 30 days of its publication in the official Gazette. The SECP will consider any objection or suggestion received from any person in respect of this draft before expiry of the said period.
Draft Insurance Rules although have been prepared and hoped to be finalized and implemented within a period of one month. However still the Insurance Regulations are required to be made.
In the recent past the economic environment for trade and industry was sluggish, unemployment was on rise, inflation and price spiral was soaring, exports were stagnant, imports were rising and number of sick industries was shooting up. In such conditions the stock markets of the country were not attracting investments both foreign and local. So, it was difficult for insurance companies to generate further capital.
On analysis of 39 insurance companies registered at Karachi Stock Exchange, only 9 companies have the capital more than the amount required as per Insurance Ordinance, 2000. There are other 22 companies, which have Paid-up Capital as required for brokers. Ihese companies can easily convert themselves into brokerage houses or they can also make mergers.
However, now the economic environment of the country is changing. The foreign exchange remittances have been increased and the exchange rates have been stabilized. The sick industries are being revived through CIRC (corporate and Industrial Restructuring Corporation). The public and private sectors are expected to be involved in the reconstruction of Afghanistan. The Motorway and other highway projects are being completed. The construction of the third seaport at Gwadar has also been started. Foreign investments are also anticipated.
SUGGESTIONS;
These economic activities will obviously generate business for insurance companies. To meet the future requirements of the country the following suggestions are made:
* The Insurance Ordinance 2000 should be implemented completely. For this purpose the new Insurance Rules and Regulations should be finalized and enforced in the country without further delay.
* New reinsurance companies should be established in the private sector to increase the capacity for retention of more and more business within the country.
* Establishing R&D division under the IAP should carry out the Research and Development work.
* To provide sound and prudent management for insurance companies technically qualified and professional people should be employed. The Insurance Institutes should be reactivated. The Associationship and Fellowship of Chartered Insurance Institute, London and Chartered Property and Causality Underwriters, USA must be recognized as the basic qualification for sound and prudent management of insurance companies.
* As per WTO requirement there should be no restrictions to market access. For this purpose the foreign insurers and reinsurers should be encouraged to come and invest in Pakistan. With broad equity basis our insurance Companies will be fully competent to compete with them.
* The surveyors having technical qualification should only be allowed to join this profession so that quality work could be provided the limit for settlement of claims on self-assess-ment basis should not be more than Rs. 5,000 to Rs. 10,000.
* All the hisurance companies should jointly create awareness among general public about the essential requirement of insurance in the day-to-day life of each individual and business houses.
* As it is very expensive for Pakistani people to get training and higher education from U.K. and U.S.A., our own public and private educational institutions should take initiative to provide higher education in insurance. However much of the burden lies on the shoulders of Pakistan Insurance Institute to start its own recognized professional insurance degree.
Permanent life insurance is the umbrella term used for types of life insurance that do no expire. They combine a death benefit with a savings portion and are deemed as profit policies. The savings element builds to provide the policy with a case value against which the policy holder can borrow money or take an income in way of regular withdrawals. A withdrawal will be made to cover a future financial implication such as paying off a loan or paying college fees for a child.
There are two main types of permanent life insurance which are universal life insurance and whole of life insurance. Below we will talk more about both of these.
The policy is taken out with an insurer and premiums paid periodically, most commonly monthly. The premium will cover the cost of the life insurance and the remainder of this is credited to a cash value that the policy accumulates. Each month this cash value is also credited with interest and the policy is debited, also each month, with the cost of the insurance and any other fees that the insurer stipulates, such as admin fees, if there has been no premium payment that month. The insurer will decide how much interest is applicable to be credited to the value but this is usually related to certain financial index rates.
As there is a cash value to this type of life insurance it is possible for there to be features such as a policy loan, or for the policy holder to take periodic withdrawals from the policy.
As far as premiums go they are most commonly paid periodically such as monthly, quarterly or annually which can be fixed or flexible. However it is also possible for there to be a single up-front premium at the start of the policy.
There are risks involved with taking out Universal life insurance because of it being a potentially profitable policy. These need to be studies carefully before you take out his type of life insurance and each insurer will have literature available clearly highlighting the risks.
The obvious benefits of life insurance are to cover financial implications upon the death of somebody who is financially depended upon, more often with life term insurance policies because they have no case value. However there are also living benefits of life insurance and many people use life insurance, and in particular cash value life insurance as a source of benefit to the owner of the policy (as opposed to the death benefit which is provides benefit to the beneficiary as we have mentioned in life term assurance). These benefits include loans, withdrawals, collateral assignments, split dollar agreements, pension funding, and tax planning
