A form of risk management as it may be called, insurance is especially meant for hedging the risk of an uncertain loss by an equitable transfer of the loss from one entity to another. Mainly two parties are involved in this system, - the insurer who sells the policy, and the insured (the policyholder), who may be a person or an entity like a business institution who buys the insurance policy. Insurance is thus an equipment of risk management by appraising and controlling risk in exchange of the insurer's consent in the form of a contract to compensate the insured in case of a financial loss.
Insurance is a particular type of agreement between insurance company and its customer. In which the insurance company agrees that on the happening of particular events and it will make a payment to its customer. It is the best way to decrease the financial impact of a risk for businesses and individuals. Insurance also means that an arrangement by which a company or a government agency gives a guarantee of allowance for particular loss, damage, illness or death in return for payment of a premium.
For example, in a vehicle insurance policy, the insurance company agrees that if the vehicle is damaged, the insurance company will pay the cost of repairing for it. Under an income protection policy, the insurance company concurs that if its customer is incapable to work, the insurance company will pay an agreed amount to the customer.
Insurance policy is a different type of contract because there are particular attributes that are not related to other contracts. In certain, an insurance policy is a contract of “utmost good faith”. This means that the insurance company and the insured person have certain commitments that do not exist in normal contracts. These include the duty of disclosure and the duty not to make any false statements in relation to a claim. This duty of good confidence is that insurance companies can reject to pay your claim if you have not mentioned all material information about the insurance company when you applied for or renewed the insurance.
Chartered Insurance Institute stated in study texts about different categories of risk, those are:
Financial risk - This means that the issue must have financial measurement
Pure risk - This means that the issue must be genuine and not related to gaming
Particular risk - This mean that these issues are not extensive in their effect.
Usually it is confirmed that only financial and particular issues are insurable. Premium means that the amount of money to be debited for a particular amount of insurance coverage. Risk management, the practice of evaluating and controlling risk, has derived as a separate field of study and practice. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
Indemnity is the way of paying certain amount to the insured persons by the insurance company or financial institutions. Here the third party insurance company or financial institutions do not involve directly or indirectly to the loss of insured persons, but the amount will be paid as an agreement between persons and insurance companies or financial institutions. The mode of payment will be in the form of cash, repairs, replacements, and reinstatements. For more information or understanding look at this example; Vehicle insurance is the good example of indemnification. Vehicle owners insured their vehicles against the damages, accidents, loss of the vehicle and etc, if the vehicle suffered with any insured kind of losses, the vehicle owners are liable to claim certain amount from insurance companies or financial institutions according to their agreements.
Indemnify means securing the future losses by insuring, we also define the indemnify as certain amount of insurance paid to the owners in the event of a loss. There are typically 3 types of insurance contracts or agreements which comes under to claim the amount as the indemnify.
According to the unofficial point of view the insurer is liable to pay the agreed insurance amount for the losses and damages.
A "reimbursement" policy: in this policy the insured person has to initially bare the expenses for the losses and damages by informing to the insurer and later the insured person claims the expenses from the insurer.
A "pay on behalf" or "on behalf of" policy: in this policy the insurer pay the expenses for the losses and the insured person no need to put the hand in pocket for money.
An "indemnification" policy: in this policy based on the requirements the insured person will pay the amount and later he collects from the insurer or the insurer pay the amount to the insured persons for the losses.
Risks can be determined by the private companies getting insured and shares seven common ways:
Large number of similar exposure units: The Operations of Insurance can be done by pooling resources; the insurance policies are only capable for the individual members of large classes so that it allows the insurers to get profited from the large numbers in which predicted losses are similar to the actual losses. Lloyd’s of London is a famous Life insurance company for the actors, sports figures and other famous peoples. In this all the figures are having different particulars, that which may lead to different premium rates.
Definite loss: These losses can be takes place at known times in a known place and also from the known cause. For example if a person gets insured after that in the time period of his Life insurance policy he died. Fire accidents, automobile accidents, and work injuries may lead to this category very easily. Cause of a disease leads to death for prolonged exposure to injurious conditions where specific time, place or cause is identifiable.
Accidental loss: The chance of claim to trigger the event of a whole or at least outside the control of a beneficiary for the insurance. If the reasons the customer to claim for the insurance of the event is pure then it means the only opportunity to pay.
Large loss: The loss of the size should be meaningful from the side of the insured person. So that the insurance premiums will cover both the expected cost of losses and also verifies the issuing amount to the insured person by the calculating of total capital and by adjusting losses will be able to pay claims, if the losses may be small, but if the costs are big than the several times the size of the expected cost of losses. Then there is a hard time in paying the costs unless the real protection is offered to a buyer.
Affordable premium: If the person who had insured the event is so high or else the cost of the event is so large, then the premium of the relatively insured will be large, though the event is protection offered, then it will be not like to purchase the insurance, if there is an offer. For this reason the accounting profession formally recognizes the event in financial accounting standards, the premium event should not be so large and also the insured person should be guaranteed to the insurer that there is no reasonable chance of a loss. if there is no such chance of loss then the person may have the form of insurance, but not substance
Calculable loss: There are generally two elements that can be esteemed, if the calculation is not done formally for the expectation cost and the related cost. Possibility of losses can be generally experienced by the insurer’s, while the cost is more than the Capability of a person to do in possession of a copy of the insurance policy and a proof of loss related to the event to claim under the insurance policy to make a relatively definite and a clear verification of the event to the amount of recoverable loss for the person who claims.
Limited risk of catastrophically large losses: In the policy of insurance company the losses are mostly like independent and non-tragic, that means all the customers should not be effect on the company at once and also that the single event losses should not be large enough to exhaust the insurer. The insurers may keep a limit range to the exposure of the loss of a single event to the small portion of their capital base. Some of the capital constrains that they do not ensure them that the event has a loss in earthquake, hurricanes and as well as wind the insurance policies doesn’t work. If there is a natural incident then it will be under the government such as in United States if there a flood occurs then the federal government will insure the people who are suffered in the floods. If there is any fire accident for the single property that whose values are totally exposed and the insurer will surplus the individual capital constraint. Such properties will be insured by different insurers, or to take the total risk into the reassurance market.
In Modern days any kind of risks can be potentially insured. Insurance companies provides different kinds of insurance policies in the market for insurer. Below we are discussing different kind of insurance types.
Vehicle insurance is a primary protection for vehicle owners against loss or damage of vehicle. Different types of auto insurance available for car, motorcycle, heavy vehicles and etc. These insurance policies cover damage, theft and repair.
Health insurance covers to medical related treatment cost. In Canada and USA dental insurance is a part of employer's benefits along with health insurance package. Health insurance companies provide various insurance policies for individuals, children’s, group and employees.
Life insurance policy protect to a family or nomine after death of the insured person. Term life insurance and whole life insurance are major insurance types. Before buying a life insurance check below points
Business insurance protects against loss of unexpected natural disaster, injured employees, partner death and lawsuit. Insurance covers depend upon the policy and insurance provider. Consider coverage options before buying insurance policy
Property insurance is insurance for homes or commercial proprieties to provide protection for insurer financially against damages of unexpected disaster. There are different types of insurance policies available for homeowners and renters.
Travel insurance covers financial loss that occurred while traveling either medical expenses, travel suppliers or losing belongings in your country or internationally, and it depend upon what type of insurance you have purchased. Very huge range of different types of travel insurance coverage’s available nowadays. Below are some of coverage options provided
Credit insurance is a payment protection insurance product, which is applicable for an insurer death, unemployment or disability. Who are not able to repays loan amount then this insurance will protect against loss. Major insurance types are mortgage insurance, trade credit insurance and credit card companies offering payment protection plans.
An insurance that is purchased by an insurance company from multi insurance companies is to share risk management. Facultative reinsurance and treaty reinsurance are basic methods of reinsurance. Benefits of reinsurance
Obamacare: Affordable Care Act has opened doors for pima county citizens to enroll for the health insurance through federal marketplace and you can avail this opportunity until 15th of feb 2015.
54 year old woman of Simsbury, Connecticut, a mother and senior vice president with MassMutual Insurance Company has been found dead. Police investigating untimely death of insurance executive.
Washington: NAIC announced that it has created a task force to help concerns related to Insurance in the sphere of cyber security. Main aim of this task force is to make recommendations to protect information collected by various insurance departments of related to consumers, cyber liability policies issued and the NAIC (National Association of Insurance Commissioners).
AmWINS, CRC, Swett & Crawford have formed a new officers and directors program at Lloyd's of london called executive risks facility.
Global insurance market is driving commercial rates to decrease by 14-16% due fierce competition as experienced by the industry leaders in 2014 and opened doors to boost the revenues with new products such as cyber insurance.
USA spends $7662 for each person and devotes 16.9% of its GDP to health care. According to OECD, expenditure per person is more than 2.6 times and GDP percentage is 1.8 times higher compared to 34 advanced industrialized countries. Competitive pressures to reduce the cost will transform health insurance sector.
Auto insurance bill passed in Ontario Legislature to reduce the car insurance premiums on an average of 15% by next August compared to 2013 summer prices. NPD voted against it as it takes away the right of motorists to sue the auto insurance companies against the denial of benefits.
Experts are of the opinion that we can use the terms "mortgage insurance" and "Life insurance" interchageably as they seem to be serving the same intended purpose such as covering the debts of the person in his expiry/Death.
Poydras Street Lease renewal shows Pan-American Life Insurance Group's commitment to new orleans state and quoted “We strive to have a positive impact on all the communities that we serve and that’s especially important here in our home city whether it is by creating Louisiana based jobs through our domestic business or being a socially responsible corporate citizen,” as explained by Jose S. Suquet, Chairman of the Board, President and CEO of Insurance Company.
MetLife, Prudential and Principal are the three major life insurance companies in USA and sustain the markets with huge targets in an underperforming market.
After the financial crisis life insurance companies especially US private equity firms performed well and that bull run may come to an end due to scrutiny by state insurance regulators and dried high value opportunities. State insurance regulatory authority worried that the equity firms shall focus more on short term profits rather than focusing on long term benefits of life insurance company and it's policyholders.
State Farm auto insurance company is about to raise prices across Louisiana state by 3.7 percent from Dec 08 2014. Auto insurance premiums are set to raise for liability, collision and comprehensive coverage.
Penalties are going to be too high, upto 2% of household income or $325 per person or $162 per child, if you don't own a health insurance in 2015. Use ObamaCare penalty calculator to get more insights about the insurance penalties in 2015
Prices of many new health insurance plans went up last week sue to Affordable Care Act. This Act allowed state regulation of insurance, regional variations in prices and envisioned several plans competing in local markets.
ICICI Lombard conducted health insurance survey called ‘Customer Perception on Health Insurance’ and diagnosed misconceptions such as earning member needs to have health insurance; Already have a cover from Employer is sufficient; There is no need to declare pre-existing disease at the time of policy and etc.