General insurance Government Authorisation

[Mataracy]

Insurance companies, are required to meet specific standards of organization , often higher ones than are set for general business organization.

Basically, the need is for methods which have the objectives of ascertaining the solvency, competence and integrity of the insuring organization.

Legislation normally specify the requirements or standards to be met before an insurance institution is formed, registered or licensed to transact insurance business.
The permission of the commissioner for insurance must be obtained before a new company before it can extend the scope of its operation yo a class of business it was not originally authorize to transact.

It should be noted that the licensing procedure is not dependent on financial requirements only.

Indeed the objective of licensing is officially to assure a preliminary method of lessening the chance of financial insolvency of the insurer, particularly during the more difficult formative years. On the basis of the same objective, a license may be denied for many other reasons, including bad faith or reputation of the proposed incorporators or management of an insurer.

General managerial ability is undoubtedly as important as capital and surplus requirements in achieving sustained financial stability for an insurer.

For that reason, no one should take the insurer's license as a guarantee against failure any more than an automobile driver's license is a guarantee against accident.

Why did insurance need authorisation by the Government before start operation?

 

[btaliat]

All businesses needed to register with corporate affairs commission before they can be called companies. Any business however thay fails to do this may not be regarded as companies because it means they are not recognized by law. And since what the insurance wants to do deals with citizens money and interest, they need government approval.

 

[Mandy96]

I am sure there is/ are government agencies who are in care of regulating how insurance companies works in each countries where they run their business. And I am sure they are in charge of approval and the scrutinize the way they set up their policies so as not to be a problem for the clients

 

[btaliat]

I am sure there is/ are government agencies who are in care of regulating how insurance companies works in each countries where they run their business. And I am sure they are in charge of approval and the scrutinize the way they set up their policies so as not to be a problem for the clients

You are very right. In my country, there is a corporate affairs commission, this body registers all the business in the country. And any country that had not registered can be closed up by government agents. After this, a business must still register under the appropriate sector that it belongs because each business has its own body or union.

 

[Jamoflondon]

Normally I don’t think big companies like this should be allowed in a state without the authorization of the country’s government. You don’t just establish such business, I mean it plays an important role asides the profit making parts. It’s worth it if an organization is set aside to regulate it

 

[Wisdom01]

There are so many scam insurance company available both offline and online , so the government needs to regulate them well and give them the approvals to operate so people would not get scammed by the insurance company, I think it's part of the reason the government actually choose authorization too