Forerunners of Insurance in the Philippines

Forerunners of Insurance in the Philippines

• The "Bayanihan" System, where community members contribute time and resources to help someone in need, is a forerunner of modern insurance in the Philippines.
• The "Paluwagan" System, where people contribute funds to be used when someone needs help, is also a forerunner of modern insurance.
• The "Äbuloy" System, where friends and relatives of a deceased member give cash donations to the grieving family for burial expenses, is another forerunner.

Insurance in the Philippines

• Insurance was first introduced in the Philippines in March 1829 by Lloyd's of London.
• The group of Russell and Sturgis was appointed by the Union Insurance Society of Canton to act as insurance agents in Manila in 1839.
• Business was limited to non-life insurance initially.

Insurance Basics

• Insurance is a form of protection from financial losses.
• Three key points of insurance:
  • Transfer of risk from the insured to the insurer.
  • 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 chooses to spend small periodic amounts of money against the possibility of a huge unexpected loss.

Key Insurance Terms

• Insurer: The company or person who promises to reimburse the insured.
• Insured (Assured): The one who receives the payment, except in life insurance, where payment goes to the beneficiary.
• Risk: Uncertainty concerning loss.
• Peril: The cause of loss (e.g. fire, lightning, earthquake).
• Hazard: Condition that tends to create or increase the chance of loss from a given peril (e.g. low-lying areas, storing flammable materials).
• Physical Hazard: Objective characteristics that increase the chance of loss (e.g. manufacturer of combustible goods).
• Moral Hazard: Subjective characteristics of the insured (e.g. dishonesty, credit standing, past losses).
• Morale Hazard: Characterized by carelessness or indifference to loss because of insurance coverage.

Insurance Products and Services

• Types of business insurance:
  • Workers' Compensation: Insurance against injury to workers on the job.
  • Automobile Insurance: Insurance covering personal injury, property damage, and general liability.
  • Property Insurance: Insurance covering damage or loss to a company's own property or to property of others stored on the premises.
  • Malpractice Insurance: Insurance for professionals to protect against claims made by disgruntled patients or clients.
  • Business Interruption Insurance: Insurance covering loss of earnings if business operations are interrupted.
  • Liability Insurance: Insurance covering various types of risks that could result in substantial liabilities.
• Life Insurance: 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.
• Three great services of life insurance:
  • Family Protection: Life insurance provides a definite sum of money to replace the lost income of the breadwinner.
  • Casualty Insurance: Insurance covering loss or liability arising from accident or mishap, excluding certain types of loss.
• Differences between life insurance and non-life insurance:
  • Benefits of Maturity: Life insurance offers maturity benefits after specific tenures, while non-life insurance mostly doesn't give any maturity benefits.
  • Premium Payments: Life insurance premiums are generally paid annually for a specific tenure, while non-life insurance premiums are mostly paid in one go.
  • Policy Duration: Life insurance policies are generally long-term, while non-life insurance policies are short-term.
  • Role in Planning Finances: Life insurance can be an investment avenue for different financial goals, while non-life insurance just protects valuables against crisis.
  • Claim of Insurance Amount: In life insurance, the assured sum is paid either on death of the insured person or maturity of the policy, while in non-life insurance, the loss is compensated in case of unfortunate events as per the policy terms and conditions.