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Why is insurance necessary?

The question contains the answer within itself. After all, life is fraught with tensions and apprehensions
regarding the future and what it holds for the individual.

Despite all the planning and preparation one might make, no one can accurately guarantee or predict
how or when death might result and the circumstances that might ensue in its aftermath.

We are not saying that life and existence are constantly fraught with danger and uncertainty. But then it
is essential that you plan for the future.

The chances for a fatality or an injury to occur to the average individual may not be particularly high but
then no one can really afford to completely disregard his or her future and what it holds.

People generally regard insurance as a scheme when and where you have to lose a lot to gain a little.

Nevertheless, insurance is still the most reliable tool an individual can use to plan for his future.

And just why is it necessary to plan for the future with Insurance?

An Overview
Insurance business is divided into four classes:

1) Life Insurance business

2) Fire

3) Marine

4) Miscellaneous Insurance.

Future of The Insurance Sector.

Wage and salary employment in the insurance industry is projected to increase 8 percent between 2002
and 2012, more slowly than the 16 percent average for all industries combined. While demand for
insurance is expected to rise, downsizing, productivity increases due to new technology, and a trend
toward direct mail, telephone, and Internet sales will limit job growth.

However, some job growth will result from the industry’s expansion into the broader financial services
field, and employment in the medical service and health insurance areas is anticipated to grow. Also,
thousands of openings are expected to arise in this large industry to replace workers who leave the
industry, retire, or stop working for other reasons.

Medical service and health insurance is the fastest-growing sector of the insurance industry. In recent
years, increasing health insurance premiums and relatively high unemployment have left some unable to
afford health insurance, but over the long term, significant growth is expected. As the share of the
elderly population rises, more people are expected to buy health insurance and long-term-care
insurance, as well as annuities and other types of pension products sold by insurance sales agents.

If legislation is passed to make health insurance affordable to more people, demand should increase
further for this type of insurance. Population growth will stimulate demand for auto insurance and
homeowners insurance. Population growth also will create demand for businesses to service the
needs of more people, and these businesses will need insurance as well.

Moreover, large liability awards are motivating growing numbers of individuals and businesses to
purchase liability policies to protect against lawsuits brought by people claiming injury or damage from a
product.
Many successful insurance companies will recognize the Internet’s potential as a powerful marketing
tool. Not only might this reduce costs for insurance companies, but it also could enable many clients to
turn to the Internet first to get information on their policies, obtain quotes, or submit claims.

As insurance companies begin to offer more information and services on the Internet, some
occupations, such as insurance sales agent, could experience slower employment growth.

Sales agents working in the property and casualty market, particularly in auto insurance, will be most
affected by increasing reliance on the Internet. Auto policies are relatively straightforward and can be
issued more easily without the involvement of a live agent. Also, auto premiums tend to cost more per
year than do other types of policies, so people are more likely to shop around for the best price. The
Internet makes it easier to compare rates among companies.

Insurance companies will continue to face increased competition from banks and securities firms
entering the insurance markets. As more of these firms begin to sell insurance policies, increasing
numbers of insurance sales agents will be employed in them, rather than in insurance companies. In
order to stay competitive, insurance companies have begun to expand their financial service offerings or
to establish partnerships with banks or brokerage firms.

Productivity gains caused by the greater use of computer software will continue to limit the growth of
certain jobs within the insurance industry. For example, the use of underwriting software that
automatically analyzes and rates insurance applications will limit the employment growth of
underwriters.

Also, computers linked directly to the databases of insurance carriers and other organizations have
made communications easier among sales agents, adjusters, and insurance carriers, so that all have
become much more productive. Furthermore, efforts to contain costs have led to an increasing reliance
on customer service representatives to deal with the day-to-day processing of policies and claims. In
addition, the Internet has made insurance investigators more productive by drastically reducing the
amount of time it takes to perform background checks, allowing investigators to handle an increasing
number of cases, but limiting their employment growth.
Sales agents and adjusters still are needed to meet face-to-face with clients, many of whom prefer to
talk directly with an agent, especially regarding complicated policies. Opportunities will be best for sales
agents who sell more than one type of insurance or financial service.

Adjusters will still be needed to inspect damage and interview witnesses, and although the number of
available jobs for actuaries will be limited due to the small size of the occupation, employment
opportunities should be good as stringent qualifying requirements resulting from the examination
system limit the number of new entrants.

Birth of Insurance

Around 6000 years ago, Babylonians, whose home in the Tigris – Euphrates
valley lay at the crossroads of early world traffic, had developed business practices to a high degree.
Babylon had become the clearinghouse of trade as all the important land trade routes converged in that
territory.

From Armenia in the north, China and India in the east, Egypt in the west, caravans came laden with
merchandise. Though Babylon built up a great commercial system, and her people were the first to
enjoy the fruits of political economy, their territory was surrounded by huge tracts of desert.

The travelers by land were exposed to the risk of robbery, which then was considered not so
abominable a means of livelihood and the same view held good for the piracy on the high seas.

Besides, during those days, the ships were entirely at the mercy of the winds. Under such conditions, till
the goods reached their destination, the consignor was constantly worried about its safety.

In fact, many traders could not meet the obligations of the principals and, as per their contracts, were
forced to become slaves along with their families. Human ingenuity was set to work and, in course of
time, a practice developed that debt of the trader, both principal and interest, should be absolved if
certain specified contingencies occur.

Research scholars claim that insurance was known and practiced in India even during the ancient Vedic
times. Manu the ancient scholar and lawgiver enjoined that a special change be made on goods carried
from one place to another to ensure their safe carriage, until it was finally handed over to the consignee
at the destination.

Recorded evidences testify that ancient India was a prominent maritime power. There were busy
seaports on the west coast at Broach, at Kaveripumpatnam in the south and Banga in the east. Traders
expressed difficulties in realizing money for the goods sent abroad.

Loans were advanced to traders at specified rates of interest depending on the risk run and the duration
of time for which money was required. Men skilled in sea voyages worked out risk premium rates.

On successful conclusion of the voyage, the borrower returned the loan along with interest, when the
eventuality insured against did not materialize but it often happened that he was unable to deliver the
goods in sound condition at the time and place specified or if he was robbed, he was absolved of his
liability.

If the cargo was lost due to the negligence of the crew, the loss was to be borne by all the
crewmembers, but when loss was caused by God, the members of the crew were not held responsible.

A carrier who failed to reach the destination, could not claim freight, but was exempted from
responsibility if loss was occasioned by an act of God. If the loss was due to “Piracy”, the cashier was not
protected.

Mark Twain, the great American humorist said in his speech on Accident Insurance,
“ There is nothing more beneficent than accident insurance. I’ve seen an entire family lifted out of
poverty and into affluence by the simple boon of a broken leg. I’ve had people come to me on crutches,
with tears in their eyes, to bless this beneficent institution.

In all my experience of life, I have seen nothing so seraphic as the look that comes into a freshly
mutilated man’s face when he feels his vest pocket with his remaining hand and finds his accident ticket
all right.”

We live in exciting times with changes and upheavals all around. New technologies, new inventions and
changes in the economic and financial scenario, all have thrown up new insurance needs; needs never
felt or heard before.

This type of evolutionary process, in the last few decades, has given hope to new types of need-based
insurance covers; public liability insurance, product liability insurance, indemnity for medical
practitioners for negligence, indemnity for chartered accountants and auditors for professional lapses,
etc. Further, covers are engineering insurance, erection insurance, loss of profit, cover against atomic
radiation and space travel and contracting AIDS.

We have had bizarre insurance covers. Lizza Minnelli the singing sensation had insured her voice and so
have Boy George and Michael Jackson. Mariene Dietrich and Betty Grable, Hollywood’s leading ladies
have insured their legs. A well-known comedian in the USA had a policy insuring those in his audience,
against anyone dying of laughter after hearing his Jokes!

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