Collective Policies

This is a method of co-insurance and involves number of insurers sharing a risk amongst themselves. Hence many insurers participate on the same risk. A single policy is prepared and the different companies normally described as co- companies are shown in relation to the percentage underwritten by each. The company issuing the policy is called the Leading Office. This is insurer which takes largest percentage of the risk. It also has the responsibility of dealing with correspondence, surveys, underwriting, preparing the policy, endorsements and all other management issues.

The co- insurers simplify their agreement to the terms of the policy by returning a signed slip. They pay to the leading office a fee based on their share of premium in recognition of the services rendered by the latter. This is usually 2.5% of the co – insurers share of premium.

A collective policy may be issued where:

• The total sum insured on a certain risk is so large that it cannot be prudent for it to be accessed by one insurer
• It is the wish of the insured or the broker dealing with the risk interest several insurers

The advantages of collective policies

• There is economy in policy preparation
• Ach endorsement is dealt with by leading office, which prepares only one policy document for all insurers
• Only one set of renewal papers are needed
• In the event of loss, the leading office appoints the loss adjuster and deals with all aspects of the claim