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Insurance can have various effects on society through the way that it changes who bears the cost of losses and damage. On one hand it can increase fraud, on the other it can help societies and individuals prepare for catastrophes and mitigate the effects of catastrophes on both households and societies. Insurance can influence the probability of losses through moral hazard, insurance fraud, and preventive steps by the insurance company. Insurance scholars have typically used morale hazard to refer to the increased loss due to unintentional carelessness and moral hazard to refer to increased risk due to intentional carelessness or indifference. Insurers attempt to address carelessness through inspections, policy provisions requiring certain types of maintenance, and possible discounts for loss mitigation efforts. While in theory insurers could encourage investment in loss reduction, some commentators have argued that in practice insurers had historically not aggressively pursued loss control measures particularly to prevent disaster losses such as hurricanes - because of concerns over rate reductions and legal battles. However, since about 1996 insurers began to take a more active role in loss mitigation, such as through building codes.[7
History of insurance
Main article: History of insurance In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread. Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea.
Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices. The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much." A thousand years later, the inhabitants of Rhodes invented the concept of the general average. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were deliberately jettisoned in order to lighten the ship and save it from total loss. The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.
Arthur Duck. Edward Lloyd opened a coffee house that became a popular haunt of ship owners. but in 1681 Nicholas Barbon. and ships' captains. and eleven associates. the 'Insurance Office for Houses'. but it operates rather differently than the more familiar kinds of insurance. Toward the end of the seventeenth century." A number of attempted fire insurance schemes came to nothing. For example. pictured in 1991. at the back of the Royal Exchange.000 houses. Of the value of £100 each. Initially. the will of the English colonist Robert Hayman mentions two "policies of insurance" taken out with the diocesan Chancellor of London. a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667. merchants. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency. 5. Hayman's will was signed and sealed on 17 November 1628 but not proved until 1633. . and thereby a reliable source of the latest shipping news. Today. is one of the world's leading and most famous insurance markets Some forms of insurance had developed in London by the early decades of the 17th century. one relates to the safe arrival of Hayman's ship in Guyana and the other is in regard to "one hundred pounds assured by the said Doctor Arthur Ducke on my life". established England's first fire insurance company.000 homes were insured by Barbon's Insurance Office.Lloyd's of London. which in 1666 devoured more than 13. and those willing to underwrite such ventures. Lloyd's of London remains the leading market (note that it is an insurance market rather than a company) for marine and other specialist types of insurance. In the late 1680s. London's growing importance as a centre for trade increased demand for marine insurance. It became the meeting place for parties wishing to insure cargoes and ships. Insurance as we know it today can be traced to the Great Fire of London.
certain legal claims against the owner. In 1752. such as all wooden houses. in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs. In the United States. Benjamin Franklin helped to popularize and make standard the practice of insurance. in 1732. For example. A single policy may cover risks in one or more of the categories set out below. also called professional indemnity (PI). such as the various kinds of professional liability insurance. and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.S. An insurance policy will set out in detail which perils are covered by the policy and which are not. regulation of the insurance industry is highly Balkanized. Specific kinds of risk that may give rise to claims are known as perils.  Auto insurance Main article: Vehicle insurance . with primary responsibility assumed by individual state insurance departments. A home insurance policy in the U. particularly against fire in the form of perpetual insurance.  Types of insurance Any risk that can be quantified can potentially be insured. state insurance commissioners operate individually. Business insurance can take a number of different forms. which packages into one policy many of the kinds of coverage that a business owner needs. vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). typically includes coverage for damage to the home and the owner's belongings.The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston). though at times in concert through a national insurance commissioners' organization. he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Not only did his company warn against certain fire hazards. some have called for a dual state and federal regulatory system (commonly referred to as the Optional federal charter (OFC)) for insurance similar to that which oversees state banks and national banks. and the business owner's policy (BOP). which are discussed below under that name. South Carolina. Below are non-exhaustive lists of the many different types of insurance that exist. In recent years. Franklin's company was the first to make contributions toward fire prevention. Whereas insurance markets have become centralized nationally and internationally. it refused to insure certain buildings where the risk of fire was too great.
 Home insurance A home is destroyed by fire in Essex. In some countries. The policy may include inventory. 3. Maintenance-related issues are typically the homeowner's responsibility. or this can be bought as a separate policy. Most countries. Medical coverage. When a car is used as collateral for a loan the lender usually requires specific coverage. 2. such as the United Kingdom. rehabilitation and sometimes lost wages and funeral expenses. of these coverages. . Property coverage. but not all. In some geographical areas. such as in a traffic collision. for the cost of treating injuries.A wrecked vehicle in Copenhagen Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own. such as flood or earthquake. Coverage typically includes: 1. England Main article: Home insurance Home insurance provides coverage for damage or destruction of the policyholder's home. the policy may exclude certain types of risks. for the legal responsibility to others for bodily injury or property damage. that require additional coverage. Liability coverage. require drivers to buy some. for damage to or theft of the car. especially for people who rent housing.
Short-term and long-term disability policies are available to individuals. In the U. including pets. is compulsory in some countries • • Disability insurance policies provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. and Canada. Short-term disability insurance covers a person for a period typically up to six months. Dental insurance.  Health insurance Main articles: Health insurance and Dental insurance Great Western Hospital. such as the UK's National Health Service will cover the cost of medical treatments. up until such time as they are considered permanently disabled and thereafter. but considering the expense. long-term policies are generally obtained only by those with at least six-figure incomes. Long-term disability insurance covers an individual's expenses for the long term. or employers' liability insurance. paying a stipend each month to cover medical bills and other necessities.  Accident. Insurance companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled. sickness and unemployment insurance Workers' compensation. is protects policyholders for dental costs. Swindon Health insurance policies issued by publicly-funded health programs. It provides monthly support to help pay such obligations as mortgage loans and credit cards. along with health insurance. .S.insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household. dental insurance is often part of an employer's benefits package. lawyers. such as doctors. etc. like medical insurance.
such as auto. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. not necessarily tied to any specific property. are the mirror image of life insurance. they are the complement of life insurance and.  Life Main article: Life insurance Life insurance provides a monetary benefit to a decendent's family or other designated beneficiary. Some policies. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources.• • • Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies. Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss. . It is a broad spectrum of insurance that a number of other types of insurance could be classified. often taken as an adjunct to life insurance. such as annuities and endowment policies. are financial instruments to accumulate or liquidate wealth when it is needed. are regulated as insurance. • • Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. and require the same kinds of actuarial and investment management expertise that life insurance requires. For example. funeral and other final expenses. workers compensation. Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury. which may be taken by the insured if the policy is surrendered or which may be borrowed against. Certain life insurance contracts accumulate cash values. from an underwriting perspective. a company can obtain crime insurance to cover losses arising from theft or embezzlement. and some liability insurances. Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession.  Casualty Main article: Casualty insurance Casualty insurance insures against accidents. and may specifically provide for income to an insured person's family. In that sense. burial.
the tax on interest income on life insurance policies and annuities is generally deferred. Airports may also appear under this subcategory. The term property insurance may. theft or weather damage. Moreover. such as passenger and third-party liability..In many countries. like casualty insurance. be used as a broad category of various subtypes of insurance. in some cases the benefit derived from tax deferral may be offset by a low return. the tax law provides that the interest on this cash value is not taxable under certain circumstances.S. IRAs. Roth IRAs) may be better alternatives for value accumulation. etc. 401(k) plans. This depends upon the insuring company. the type of policy and other variables (mortality. such as the U. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.  Property Main article: Property insurance This tornado damage to an Illinois home would be considered an "Act of God" for insurance purposes Property insurance provides protection against risks to property. some of which are listed below: US Airways Flight 1549 was written off after ditching into the Hudson River • Aviation insurance protects aircraft hulls and spares. However. market return. other income tax saving vehicles (e. home insurance. flood insurance. inland marine insurance or boiler insurance. earthquake insurance. This may include specialized forms of insurance such as fire insurance.S..). and the UK. In the U. including air traffic control and refuelling operations for international airports through to smaller domestic exposures. . and associated liability risks.g. such as fire.
or homeowners insurance (often abbreviated in the real estate industry as HOI). or equipment breakdown insurance) insures against accidental physical damage to boilers. also commonly called hazard insurance. Such risks include crop loss or damage caused by weather. • • • • Hurricane Katrina caused over $80bn of storm and flood damage • Flood insurance protects against property loss due to flooding. Most ordinary home insurance policies do not cover earthquake damage. Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops. Most homeowners' insurance covers only owner-occupied homes. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials. Landlord insurance covers residential and commercial properties which are rented to others. Home insurance. fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril. • • . drought.• Boiler insurance (also known as boiler and machinery insurance. Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. or disease. Fidelity bond is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. frost damage. do not provide flood insurance in some parts of the country. Rates depend on location and hence the likelihood of an earthquake. as well as the construction of the home. the federal government created the National Flood Insurance Program which serves as the insurer of last resort. Builder's risk insurance insures against the risk of physical loss or damage to property during construction. hail. Many insurers in the U. is the type of property insurance that covers private homes. as outlined above. It usually insures a business for losses caused by the dishonest acts of its employees.S. In response to this. insects. Earthquake insurance policies generally feature a high deductible. equipment or machinery. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded.
the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal Program providing a transparent system of shared public and private compensation for insured losses resulting from acts of . Many marine insurance underwriters will include "time element" coverage in such policies. marine cargo insurance typically compensates the owner of cargo for losses sustained from fire. • • The demand for terrorism insurance surged after 9/11 • Terrorism insurance provides protection against any loss or damage caused by terrorist activities. shipwreck. When the owner of the cargo and the carrier are separate corporations. and of cargo in transit. in the wake of 9/11. In the U. which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss. regardless of the method of transit. etc. Surety bond insurance is a three-party insurance guaranteeing the performance of the principal. but excludes losses that can be recovered from the carrier or the carrier's insurance.S. Periodic payments are made directly to the insured until the home is rebuilt or a specified time period has elapsed.. Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder's home uninhabitable.Fire aboard MV Hyundai Fortune • Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland waterways.
. Windstorm insurance is an insurance covering the damage that can be caused by wind events such as hurricanes. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Directors and officers liability insurance (D&O) protects an organization (usually a corporation) from costs associated with litigation resulting from errors made by directors and officers for which they are liable. a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property. Environmental liability insurance protects the insured from bodily injury.terrorism. health. Liability policies typically cover only the negligence of the insured. and will not apply to results of wilful or intentional acts by the insured. automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives. The subprime mortgage crisis was the source of many liability insurance losses • • • Public liability insurance covers a business or organization against claims should its operations injure a member of the public or damage their property in some way. release or escape of pollutants. •  Liability Main article: Liability insurance Liability insurance is a very broad superset that covers legal claims against the insured. • Volcano insurance is a specialized insurance protecting against damage arising specifically from volcanic eruptions. property damage and cleanup costs as a result of the dispersal. or property. Many types of insurance include an aspect of liability coverage. For example. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).
protects insured professionals such as architectural corporations and medical practictioners against potential negligence claims made by their patients/clients. disability. In car insurance. Coverage is typically for mortality as a result of accident. or death. also called professional indemnity insurance (PI). Professional liability insurance. Many credit cards offer payment protection plans which are a form of credit insurance. Professional liability insurance may take on different names depending on the profession. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game. All-risk insurance is different from perilspecific insurance that cover losses from only those perils listed in the policy. real estate agents and brokers. except those noted in the policy. professional liability insurance in reference to the medical profession may be called medical malpractice insurance. or a hole-in-one at a golf tournament. third-party administrators (TPAs) and other business professionals.• • • Errors and omissions insurance is business liability insurance for professionals such as insurance agents. although the name "credit insurance" more often is used to refer to policies that cover other kinds of debt.  Credit Main article: Credit insurance Credit insurance repays some or all of a loan when certain circumstances arise to the borrower such as unemployment. Mortgage insurance is a form of credit insurance.  Other types • All-risk insurance is an insurance that covers a wide-range of incidents and perils. For example. • • Mortgage insurance insures the lender against default by the borrower. architects. Prize indemnity insurance protects the insured from giving away a large prize at a specific event. High-value horses may be insured under a bloodstock policy • Bloodstock insurance covers individual horses or a number of horses under common ownership. . all-risk policy includes also the damages caused by the own driver.
Collateral protection insurance (CPI) insures property (primarily vehicles) held as collateral for loans made by lending institutions. it is known as "the event". Kidnap and ransom insurance is designed to protect individuals and corporations operating in high-risk areas around the world against the perils of kidnap. Cover is available for mortality or economic slaughter as a result of accident. This coverage typically includes expenses related to medical treatment and loss of wages. illness or disease but can extend to include destruction by government order. and all employees or subcontractors hired on overseas government contracts. In special cases. citizens.S. liability and business pursuits. There are two main types of legal expenses insurance: before the event insurance and after the event insurance. Therefore it is used only in extreme cases where maximum security of funds is required. Green Card holders. and prospective foal. wrongful detention and hijacking. for example.S.• • • • • • • • illness or disease but may extend to include infertility. after a covered peril interrupts normal business operations. U. extortion. Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles. a government may authorize its use in protecting semi-private funds which are liable to tamper. property.S. Defense Base Act (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the U. fish farms or any other animal holding.S. in-transit loss. health. residents. Business interruption insurance covers the loss of income. DBA is required for all U. veterinary fees. as well as disability and death benefits. aquariums. Livestock insurance is a specialist policy provided to. and Canada. When something happens which triggers the need for legal action. Legal expenses insurance covers policyholders for the potential costs of legal action against an institution or an individual. Depending on the country. Media insurances can protect newspapers against libel claims . U. and the expenses incurred. foreign nationals must also be covered under DBA. Locked funds insurance is a little-known hybrid insurance policy jointly issued by governments and banks. The terms of this type of insurance are usually very strict. It is used to protect public funds from tamper by unauthorized parties. commercial or hobby farms.
Under this . against risks such as defamation. which covers certain losses such as medical expenses. water. Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. sometimes subject to a minimum and maximum premium. loss of personal belongings. guarantees. (See the nuclear exclusion clause and for the U. Purchase insurance can cover individual purchase protection. the Price-Anderson Nuclear Industries Indemnity Act. Such insurance is normally very limited in the scope of problems that are covered by the policy. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks.) Pet insurance insures pets against accidents and illnesses. Purchase insurance is aimed at providing protection on the products people purchase. with the final premium determined by a formula. care plans and even mobile phone insurance. Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. travel delay. free and clear of liens or encumbrances. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.S. Travel insurance is an insurance cover taken by those who travel abroad. as well. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction. Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. or land due to the sudden and accidental release of hazardous materials from the insured site. Coverage is also afforded for liability to third parties arising from contamination of air. and personal liabilities. The final premium is based on the insured's actual loss experience during the policy term.  Insurance financing vehicles • • • • Fraternal insurance is provided on a cooperative basis by fraternal benefit societies or other social organizations. No-fault insurance is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident. Retrospectively-rated insurance is a method of establishing a premium on large commercial accounts. Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee. Intentional acts are specifically excluded. some companies cover routine/wellness care and burial. warranties.• • • • • • • Media liability insurance is designed to cover professionals that engage in film and television production and print.
that requires participation by all citizens. the insurance company becomes liable for losses that exceed certain limits called deductibles.• • • • plan. complicated topic that engenders tremendous debate. Under a stop-loss policy. the current year's premium is based partially (or wholly) on the current year's losses.  Closed community self-insurance Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer. Self insurance is usually used to pay for high-frequency. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Social insurance can be many things to many people in many countries. By forcing everyone in society to be a policyholder and pay premiums. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Financial reinsurance is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk. for small. which can be further studied in the following articles (and others): o National Insurance o Social safety net o Social security o Social Security debate (United States) o Social Security (United States) o Social welfare provision Stop-loss insurance provides protection against catastrophic or unpredictable losses. Such losses. A number of religious groups. it ensures that everyone can become a claimant when or if he/she needs to. and contingencies. The rating formula is guaranteed in the insurance contract. Numerous variations of this formula have been developed and are in use. Formal self insurance is the deliberate decision to pay for otherwise insurable losses out of one's own money. This is a large. Reinsurance is a type of insurance purchased by insurance companies or selfinsured employers to protect against unexpected losses. and others). But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance. depend on support . premium taxes. or by simply forgoing the purchase of available insurance and paying out-of-pocket. unemployment insurance. While this is true for all insurance. acquisition expenses. although the premium adjustments may take months or years beyond the current year's expiration date. low-severity losses. health insurance. if covered by conventional insurance. frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords. including the Amish and some Muslim groups. This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis. cost of putting the policy on the books. plus retirement savings. Along the way this inevitably becomes related to other concepts such as the justice system and the welfare state. which assigns explicit numerical values to risk. mean having to pay a premium that includes loadings for the company's general expenses. disability income insurance.
the cost of repair would be met from public funds because.provided by their communities when disasters strike. which sell life insurance. They are broadly referred as being all insurance placed with non-admitted insurers. this tacit form of insurance can work. By contrast. The main reason for the distinction between the two types of company is that life. Some further justification is also provided by invoking the moral hazard of explicit insurance contracts. General insurance companies can be further divided into these sub categories. If a government building was damaged. such as one year. The Crown (which. They use pattern or "cookie-cutter" policies without variation from one person to the next. non-life insurance cover usually covers a shorter period. or property/casualty insurance companies. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind.  Insurance companies Insurance companies may be classified into two groups: • • Life insurance companies. homes or businesses. In supportive communities where others can be trusted to follow community leaders. life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. These companies have more flexibility and can react faster than standard insurance companies because they are not required to file rates . this was cheaper than paying insurance premiums. in the long run. They are regulated by state laws that can restrict the amount they can charge for insurance policies. Since many UK government buildings have been sold to property companies. and rented back. In this manner the community can even out the extreme differences in insurability that exist among its members. general. for practical purposes. They usually have lower premiums than excess lines and can sell directly to individuals. and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many decades. In the United Kingdom. Non-admitted insurers are not licensed in the states where the risks are located. meant the civil service) did not insure property such as government buildings. Excess line insurance companies (also known as Excess and Surplus) typically insure risks not covered by the standard lines market. which sell other types of insurance. annuities and pensions products. standard line insurance companies are "mainstream" insurers. In the United States. Non-life. this arrangement is now less common and may have disappeared altogether. • • Standard lines Excess lines In most countries. These are the companies that typically insure autos. annuity.
However. such as bonds. motor and medical aid expenses. employee benefits. public and product liability. with huge reserves. in the late 20th century. they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices. This can be understood against the following background: . Demutualization of mutual insurers to form stock companies. State laws generally require insurance placed with surplus line agents and brokers not to be available through standard licensed insurers. Insurance companies are generally classified as either mutual or stock companies. Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. as well as the formation of a hybrid known as a mutual holding company. The reinsurance market is dominated by a few very large companies. and of an "association" captive (which self-insures individual risks of the members of a professional. they still have substantial regulatory requirements placed upon them. M. It also rates financial instruments issued by the insurance company. of a "mutual" captive (which insures the collective risks of members of an industry). A reinsurer may also be a direct writer of insurance risks as well. notes. became common in some countries. Reinsurance companies are insurance companies that sell policies to other insurance companies. and Lloyd's organizations. Insurance companies are rated by various agencies such as A. The ratings include the company's financial strength. The types of risk that a captive can underwrite for their parents include property damage. allowing them to reduce their risks and protect themselves from very large losses. which measures its ability to pay claims. such as the United States. in which policyholders reciprocate in sharing risks. while stockholders (who may or may not own policies) own stock insurance companies. it is an in-house self-insurance vehicle. economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Captives may take the form of a "pure" entity (which is a 100% subsidiary of the selfinsured parent company). Additionally. Mutual companies are owned by the policyholders. Other possible forms for an insurance company include reciprocals.and forms as the "admitted" carriers do. Captives represent commercial. and securitization products. Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. Best. commercial or industrial association). The captive's exposure to such risks may be limited by the use of reinsurance. professional indemnity. employers' liability. In short.
Like a mortgage broker. A number of independent rating agencies provide information and rate the financial viability of insurance companies. Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. the viability of the insurance carrier is very important. These companies often have special expertise that the insurance companies do not have.  Across the world Life insurance premiums written in 2005 Non-life insurance premiums written in 2005 . An insurance premium paid currently provides coverage for losses that might arise many years in the future. difficulties in insuring certain types of fortuitous risk. the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client. The financial stability and strength of an insurance company should be a major consideration when buying an insurance contract. In recent years. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. insufficient credit for deductibles and/or loss control efforts. Similar to an insurance consultant. For that reason. However. a number of insurance companies have become insolvent. leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). There are also companies known as 'insurance consultants'. an 'insurance broker' also shops around for the best insurance policy amongst many companies. differential coverage standards in various parts of the world. rating structures which reflect market trends rather than individual loss experience. with insurance brokers.• • • • • heavy and increasing premium costs in almost every line of coverage.
So far the extent of losses on both sides has been limited although investment returns fell sharply following the bankruptcy of Lehman Brothers and bailout of AIG in September 2008. Advanced economies account for the bulk of global insurance. The US and Japan alone accounted for 40% of world insurance. exposed to similar risks.Global insurance premiums grew by 3. with "periodic proposals for federal intervention". Insurance policy helps in not only mitigating risks but . The National Conference of Insurance Legislators (NCOIL) also works to harmonize the different state laws. For the first time in the past three decades. premium income declined in inflation-adjusted terms. Insurance is system by which the losses suffered by a few are spread over many. created a single insurance market in Europe and allowed insurance companies to offer insurance anywhere in the EU (subject to permission from authority in the head office) and allowed insurance consumers to purchase insurance from any insurer in the EU. followed in 1998 by the formation of China Insurance Regulatory Commission (CIRC). insurance is regulated by the states under the McCarran-Ferguson Act. The vast majority of insurance companies had enough capital to absorb losses and only a small number turned to government for support. with nonlife premiums falling by 0.753bn.3 trillion. the People's Insurance Company of China.5%. Their markets are however growing at a quicker pace. INSURANCE Life is a roller coaster ride and is full of twists and turns. followed by North America $1. which has broad regulatory authority over the insurance market of China. You cannot take anything for granted in life.  Regulatory differences In the United States. much higher than their 7% share of the global population. In the European Union. Europe was the most important region in 2008.4% in 2008 to reach $4. which was eventually suspended as demand declined in a communist environment.346bn and Asia $933bn. both passed in 1992 and effective 1994. the Third Non-Life Directive and the Third Life Directive. Insurance policies are a safeguard against the uncertainties of life. In 1978. and a nonprofit coalition of state insurance agencies called the National Association of Insurance Commissioners works to harmonize the country's different laws and regulations.8% and life premiums falling by 3. The top four countries generated more than a half of premiums. market reforms led to an increase in the market and by 1995 a comprehensive Insurance Law of the People's Republic of China was passed. Insurance is a protection against financial loss arising on the happening of an unexpected event. The financial crisis has shown that the insurance sector is sufficiently capitalised. With premium income of $1. The insurance industry in China was nationalized in 1949 and thereafter offered by only a single state-owned company. The insurance industry is exposed to the global economic downturn on the assets side by the decline in returns on investments and on the liabilities side by a rise in claims. Emerging markets accounted for over 85% of the world’s population but generated only around 10% of premiums.
Thus. Within this contract. takes place and until such an event arises. As you read through this article the importance of having insurance will become apparent. you buy peace of mind. Needs some sort of insurance cover incase of tragic events. no matter how careful. Types of Insurance Insurance policies cover the risk of life as well as other assets and valuables. thus creating a high importance for us. To grasp the concept one must understand what Insurance actually is: Insurance is a. Insurance is here to ensure and absorb that responsibility is accidents do occur. Remember that first and foremost. natural disaster. promote and ensure orderly growth of the insurance industry. By buying life insurance. earthquake. such as. helps you pay for commonly incurred expenses and provides the initial means of backup in cases of illness. It is in fact a very wise investment. the insurer or the insurance company. we mistakenly forget the importance of insurance. this isn’t bulletproof. jewelry et al. Life Insurance covers the risk involved in a person's life. which means to financially compensate for losses that occur uncertainly through accident. On the basis of the risk they cover. the person seeking the cover. so at least be prepared for them and their aftermath by taking insurance policies. If your on the boat where you currently do not have any insurance don’t put it off. Not just for yourself but for everyone around you and their belongings. then an unfortunate event. home. So the question to ask yourself is – Am I Protected? Protected enough to ensure the safety of you and your family? Or does your current insurance protect you enough to cover everything you have attained? Every person. Insurance is a very important part in everyone’s daily living.” or “an amount paid to someone after such . disease. and the insured. death etc. Insurance Kind of Investment Insurance is an attractive option for investment but most people are not aware of its advantages as an investment option. Only small steps can be taken to minimize the risks to our possessions but again. As the term suggests. etc. accident. theft. illness. insurance is about risk cover and protection. What Is Insurance? Insurance is a contract between two parties. while General Insurance provides financial protection against unforeseen events. such insurance offers you protection. “Promise of reimbursement in cases of loss. insurance policies can be classified into two categories: Life Insurance and General Insurance. the insurer agrees to pay the insurer for financial losses arising out of any unforeseen events or risk in return for a regular payment of premium.also provides a financial cushion against adverse financial burdens suffered. these insurance plans are also called as a Risk Cover Plans. like accident. automobiles. The Government of India has offered tax incentives to life insurance products in order to facilitate the flow of funds into productive assets. Insurance also serves as an excellent tax saving mechanism. flood. Imagine working day in and day out for yourself and your family to provide them with the necessities of living. As you can not fight against these man-made and natural calamities. Insurance Regulatory & Development Authority Insurance Regulatory & Development Authority is regulatory and development authority under Government of India in order to protect the interests of the policyholders and to regulate.
The chances are you just might have an unexpected encounter one day and if you’re uninsured – it is you who will have to pay for the repairs and or replacements of the vehicle and or its parts. Learn more about Insurance. It’s designed to protect you and your loved ones from unforeseen strife. Personal insurance. The ones who are uninsured say that. Having this home and contents insurance enables you to replace. Make.” this can be true thus it’s important to find the right plan and policy for you. A look over Car-Auto insurance. cost. fix.accidents or disasters occur in their lives. and home and contents protection. By law in some countries Car-Auto insurance is required. Premium payments can differ for car insurance. year. Short term will provide any income replacement protection. this can be received from one week of disability up to a 6month term. Trying to purchase insurance with a current illness etc may have hindered your ability to gain the protection you want as you now have a pre-existing condition. Life insurance. auto-car. “it costs to much. Picture the scenario if a serious accident did occur and the sad reality kicked in that the accident caused disability – would you be able to cover newly accrued expenses? Disabilities are health related therefore there will be lesser job opportunities and earning opportunities available to you. Insurance comes in many forms. if you have a mortgage your bank will ask you to get some sort of homeowners insurance. Home and contents insurance. repair the items which would otherwise be to expensive for yourself to pay for. For every different type of situation there is a different type of insurance and protection coverage. Life insurance offers protection to your family. the life insurance policy will act as a money resource to pay off other debts. it’s just a matter of time before you eventually get caught up in one. Stop by InsuranceCarLifeHome’s site where you can find out all about Health Insurance and what it can do for you. When deciding on what insurance to take out and what plans to get involved in its important to weigh up your current needs and what you want and or need to protect in order to maintain your suitable lifestyle.” Insurance is a policy developed to make sure that you are no worse off after an accident than you were before it had even happened. you certainly can’t afford to carry the risk around. liability insurance. if it isn’t and you own a vehicle. owning a nice house and fully furnishing it up is not the end of the road. . Knowing what kinds of insurance plans and policies which are available is a must to make correct decisions so you do not go overboard on premium payments etc which may in fact be of little value to you. Car model. Let’s look into the disability insurance policy a bit more in-depth: Two different plans. mortgage etc. Disability insurance. Having an established recurring income is a must have to maintaining a lifestyle. Car accidents occur frequently worldwide. Short and long term. I personally strongly recommend you get some protection. for instance. for their sake and yours. Long term is a type of disability protection which starts from that 6month mark and beyond. insurance can protect your income if such accidents did occur as stated above. The reality with health insurance is that if you are unable to pay the premiums. the variables include your age.
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