Mataracy
VIP Contributor
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?
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?