Insurance Services
Commercial insurance practice in Tanzania
started in early 1920s. During those years, insurance operations in the country
were largely maintained as branches or agencies of foreign based insurance
companies.
Soon after independence the economy was
control by state, the Insurance
Act No.4 of 1967 passed effectively making it illegal for any insurance
company, other than state-owned National Insurance Corporation of Tanzania
Limited (NIC).
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| Fire in the Business Place |
The Act, among other things, provided for the establishment of
the Tanzania Insurance Regulatory Authority (TIRA), which took over the role of
its prototype, the Insurance Supervisory Department.
All insurance law and policy address issue of consume
rights and responsibilities for example according to section 131 of insurance
Act the insurer is required to pay claim within 45 days from the date of
receipt of executed discharge. According to Tanzania, Insurance Act 2009
sec 59 requires the insured to give full information to third party in order
for the third party to claim for indemnity. This brings advantage to business
owner to be recover in case of calamities occurred.
What is Insurance?
In brief, Insurance is an arrangement where
the heavy loss of an individual made to fall as lightly as possible to the
shoulders of many, this reduce the pain to one but many do suffer the paid.
It
involves payment of premium to an insurance company on the understanding that,
the insurance company will indemnity the insured in the event that something
happens to the insured property subject to the terms and conditions of the
insurance contact. It is just a transfer the risk of possible calamities into
an insurance company subject to payment of the regular premiums.
Purposes for Insure a Business
General any business
have own risk we cannot avoid risk but we can reducing it; remember that the higher
the risk the higher return. The only thing we can do is risk management as the
identification, analysis and economic control of those risks that can threaten
the assets or earning capacity of an enterprise.
Most of people conduct a
business without insurance when they get loss as result of calamities they
starting claiming Government. The main purpose of insurance is to transfer the
risk to the insurance company and the insurance company distribute the pain of
the risk to others.
When that risk happen base on the term and condition the
insurance company they compensate a business properties, this may either
reinstatement or indemnity. Insurance may be cover business against fire, accident,
flood, liability e.t.c
There are two type of
cover, which is Comprehensive, and Third Part Insurance. Third Part Insurance
means you insure yourself against any liability which may occur due to your
asset affecting another person asset, when payment is needed you may not use
your own resources but the cover will cater for this, this involve much in
motor vehicle. Comprehensive insurance cover both your property and third part
property.
As business owner its better you select comprehensive insurance.
These insurance activities have classified in different class type basing on
the asset and business type, such as Motor Vehicle Insurance, Engineering
Insurance, Goods in Transit Insurance, Marine Insurance, Fire (Loss of profit)
Insurance, Workmen Compensation Insurance.
The benefits of insurance:-
- Peace of Mind: The knowledge that
Insurance exists to meet the financial consequences of certain risks,
provides a form of peace of mind.
- Loss control: - Companies have developed
considerable expertise in the Technology of different forms or loss
control.
- Social Benefits: - The fact that the owner
of a business has the funds available to recover from loss stimulates the
business activity, jobs maintained and goods or services can still sold.
Thus, people maintain their job and source of their income.
- Investment of Funds: Insurance companies
have at their disposal, large amounts of money. This arises because
there is a time gap between the receipt of premium and the payment of a
claim.
Determinant of Premium
Premium is the
amount/instalment paid the insured over the tenure of contact the amount
depends on,
i)
Type of
Asset with the risk attaching on it for example house have lower premium due to
low chance of theft compare to car which premium is a bit high due to high risk
of theft and accident.
ii)
Degree of
Exposure to the risk the more asset is exposed to the risk the higher premium
imposed
iii)
The amount
of money spending to purchase an item, the higher the amount spent the higher
the premium charged.
iv)
The type
of cover for example third part has slight lower premium
Main Premium Rates
Due to business
competition the insurance authority in Tanzania release the order to guide the
premium rate especially the minimum amount the aim is to make sure the
insurance company have abilities in term of financially to paid insurer on time
and reasonable amount in case any risk happen. The order cited as The Insurance (Minimum Premium Rate) Order, 218.
According to the
Order, the determination based on percentage of the claim fee, which start with
4.25% but the Order set a minimum
premium for commercial vehicle as TZS 500,000/ for comprehensive while third
part is TZS 300,000/ both VAT exclusive, and sometime the rate per seat
especially public transport.
Engineering Insurance on machine breakdown premium
starting with 0.5% of claim fee, Goods on Transit premium start with 0.35% of
claim. The marine rate start with 0.25% with minimum TZS 500,000/, the premium
charged per annual.
General to insure the
business asset is very important as the assurance to conduct business sustainable
with a comfortable mind.
The business will be stable, as it compensated when risk
occurred. Current insurance company start to insure even agriculture investment
this is very advantage to the farmers.
It very important to the investor to
have a budget of insurance in order to secure business against risk, because it
is uncertainty no one know tomorrow what is happen on your business.
asante kwa kutuelimisha
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