CHAPTER
ONE
GENERAL
INTRODUCTION
1.0
INTRODUCTION
Insurance is a promise of
compensation for specific potential future losses such as damage, illness or
death in exchange for a periodic payment. It is designed as a risk management
mechanism to protect the financial well being of an individual, company or
other entities in the case of unexpected loss.
Some forms of insurance are required
by law while others are optional. Agreeing to the terms of an insurance policy
creates a contract between the insured and the insurer in exchange for payments
from the insured called PREMIUM. The insurer agrees to pay the policy holder a
sum of money upon the occurrence of a specific event. In most cases, the policy
holder pays part of the loss called the DEDUCTIBLE and the insurer pays the
rest.
There are different types of
insurance such as life insurance, health insurance, auto insurance, property
insurance, travel insurance, etc. This
project centers on auto or vehicle insurance.
Vehicle insurance is an insurance
policy purchased for cars, trucks and other road vehicles. The primary use is
to provide financial protection against physical damage and/or bodily injury
resulting from traffic collisions and against liability that could also arise therefrom.
Auto insurance is the most widely
purchased type of insurance coverage. It is applicable to all types of
automobiles and their drivers. It covers physical damage caused to your vehicle
and other vehicles you might come in contact with. It offers
liability protection. This means that if you are involved in an accident
and another person is injured, your vehicle insurance policy will cover a
portion of the person’s medical expenses.
1.1.0
STATEMENT OF
PROBLEM
Prior to this period,
insurance services involved the physical participation of both the insurer and
the insured which is the traditional way of carrying out insurance services.
Since work carried out in an insurance company is done manually, clients’
documents may be difficult to store and maintain due to human errors. There is
also high risk of fraudulent activities due to freedom of human discretion.
But this research work
provides basic insurance services online, thereby reducing the tedium of the
traditional method of performing insurance services. It also aids proper
storage and maintenance of clients’ documents. Furthermore, it aids structured
document representation and eliminates the tedium of performing monotonous
transactions.
1.2.0
OBJECTIVES OF
STUDY
This web based application provides
the following benefits:
i.
Fully
automated insurance application processing.
ii.
Online
information and application form for registration.
iii.
Decreased
processing time and form errors.
iv.
Displays
detailed information about the different types o insurance policies provided.
v.
Premium
rates offered by the insurance policies are displayed to the user.
vi.
Minimize
multiple fraudulent claims.
vii.
Provides
authentic, qualitative and comprehensive data on insurance for national policy formulation.
viii.
Provides
easy verification of all policies issued.
ix.
Facilitates
recovery of stolen vehicles.
x.
Enhances
transparency and accountability among stakeholders, thereby restoring confidence
in the insuring public.
1.3.0
RESEARCH
METHODOLOGY
During the course of this research,
interviews were conducted with insurance brokers, insurance underwriters and
also with those in the department of indemnity and claims. Interview was also
conducted with an ICT practitioner (programmer). Information was also gotten
online and from major insurance literature.
1.4.0
SCOPE AND
LIMITATION OF STUDY
The project is to create a web based
application for insurance services in order to bring insurance online and
eliminate the tedium of performing monotonous transactions. The scope covers
the activities involved in acts insurance which are; the insurance policies
provided, online registration, premium rates and payment online, laying of
claims, ability to views account details of a customer and the history of all his payments.
Limitation of this research work is that
the system cannot cover or replace the importance of resources such as loss adjusters who process
claims or underwriters who define premium rates.
1.5.0
DEFINITION OF
TERMS
DEDUCTABLE:
is a fixed contribution that must be paid each time a car in repaired using an
automotive insurance police. It is also referred to as EXCESS.
COMPULSORY:
is a minimum excess payment the insurer will accept on the insurance
policy. It varies according to the personal details, driving record and
insurance company.
VOLUNTARY EXCESS: to reduce the insurance premium,
the insured may offer to pay a higher excess than the compulsory excess
demanded by the insurance company. Hence, the voluntary excess is the extra
amount over and above the compulsory excess that has been agreed to be paid in
the event of a claim on the policy.
PREMIUM: is the money to be paid for an
insurance policy. It is the amount of money charged by an insurance company for
coverage.
INSURED: is a person or an organization covered
by insurance.
INSURER: is a person or company that
underwriters an insurance risk. He is also the party in an insurance contract
undertaking to pay compensation.
INDEMNITY: is pitting back the insured in the
condition he was before the loss occurred.
UNDERWRITER: is a person or firm that assumes
financial risk on behalf of another. An underwriter is defined as a person who
accesses the risks to be covered by an insurance policy or a person who
underwrites a security issue.