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.
Senin, 25 Juli 2011
Sabtu, 23 Juli 2011
Indemnification
To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, life insurance is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally two types of insurance contracts that seek to indemnify an insured:
an "indemnity" policy, and
a "pay on behalf" or "on behalf of" policy.
The difference is significant on paper, but rarely material in practice.
An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000).
Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner in the above example) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language.
An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance policy. Generally, an insurance contract includes, at a minimum, the following elements: identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy.
When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims — in theory for a relatively few claimants — and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit.
an "indemnity" policy, and
a "pay on behalf" or "on behalf of" policy.
The difference is significant on paper, but rarely material in practice.
An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000).
Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner in the above example) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language.
An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance policy. Generally, an insurance contract includes, at a minimum, the following elements: identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy.
When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims — in theory for a relatively few claimants — and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit.
From : http://en.wikipedia.org/wiki/Insurance
Kamis, 21 Juli 2011
Legal of Insurance
When a company insures an individual entity, there are basic legal requirements. Several commonly cited legal principles of insurance include:
Indemnity – the insurance company indemnifies, or compensates, the insured in the case of certain losses only up to the insured's interest.
Insurable interest – the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved. The concept requires that the insured have a "stake" in the loss or damage to the life or property insured. What that "stake" is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons.
Utmost good faith – the insured and the insurer are bound by a good faith bond of honesty and fairness. Material facts must be disclosed.
Contribution – insurers which have similar obligations to the insured contribute in the indemnification, according to some method.
Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for insured's loss.
Causa proxima, or proximate cause – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be excluded
Principle of loss minimization - In case of any loss or casualty, the asset owner must attempt to keep the loss to a minimum, as if the asset was not insured.
Indemnity – the insurance company indemnifies, or compensates, the insured in the case of certain losses only up to the insured's interest.
Insurable interest – the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved. The concept requires that the insured have a "stake" in the loss or damage to the life or property insured. What that "stake" is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons.
Utmost good faith – the insured and the insurer are bound by a good faith bond of honesty and fairness. Material facts must be disclosed.
Contribution – insurers which have similar obligations to the insured contribute in the indemnification, according to some method.
Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for insured's loss.
Causa proxima, or proximate cause – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be excluded
Principle of loss minimization - In case of any loss or casualty, the asset owner must attempt to keep the loss to a minimum, as if the asset was not insured.
From : http://en.wikipedia.org/wiki/Insurance
Selasa, 19 Juli 2011
Insurability
Risk which can be insured by private companies typically share seven common characteristics:
Large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates.
Definite loss: The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable.
Large loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.
Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S. Financial Accounting Standards Board standard number 113)
Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
Limited risk of catastrophically large losses: Insurable losses are ideally independent and non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capital constrains insurers' ability to sell earthquake insurance as well as wind insurance in hurricane zones. In the U.S., flood risk is insured by the federal government. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.
Large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates.
Definite loss: The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable.
Large loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.
Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S. Financial Accounting Standards Board standard number 113)
Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
Limited risk of catastrophically large losses: Insurable losses are ideally independent and non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capital constrains insurers' ability to sell earthquake insurance as well as wind insurance in hurricane zones. In the U.S., flood risk is insured by the federal government. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.
From : http://en.wikipedia.org/wiki/Insurance
Minggu, 17 Juli 2011
Principles Of Insurance
Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.
From : http://en.wikipedia.org/wiki/Insurance
Jumat, 15 Juli 2011
Insurance
Insurance is a risk management technique primarily used to hedge against the risk of a contingent, uncertain loss that may be suffered by those individuals or entities who have an insurable interest in scarce resources, by transferring the possibility of this loss from one interested person, persons, or entity to another. The scarce resources referred to here fall into three divisions: human resources, financial resources, and capital, or tangible resources. In the context of insurance, scarce resources are also known as "exposures," because they are "exposed" to perils, those things, or forces, which cause destruction or reduction, in the usefulness, or value, of an exposed resource. Human resources are thus exposed to perils such as illness or death; financial resources to legal judgements that may result from negligent acts, and capital resources to physical perils such as fire, theft, windstorm, and vandalism, to name but a few. A hazard is the cause of a peril. It is that thing or condition which increases the likelihood of a peril. Thus perils and hazards are identified by the exposure that they threaten. For example a slippery roadway could be viewed as a financial hazard, capital hazard, or human hazard by automobile owners, and rightly so, since this condition increases the likelihood of an automobile accident that might result in an unfavorable legal judgement, automobile damage, and bodily injury.
In the context of commercial trade, insurance is further defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for consideration, payment, in the form of a risk premium. The insurance premium develops at an actuarily-determined rate. This rate is a factor used to determine the amount of premium to charge for a certain limit, and type, of insurance on the scarce resource. The premium can further be viewed as a guaranteed, known, relatively small financial loss to the insured, paid to the insurer, in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a loss to the insured resource(s). The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be indemnified.
In the context of commercial trade, insurance is further defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for consideration, payment, in the form of a risk premium. The insurance premium develops at an actuarily-determined rate. This rate is a factor used to determine the amount of premium to charge for a certain limit, and type, of insurance on the scarce resource. The premium can further be viewed as a guaranteed, known, relatively small financial loss to the insured, paid to the insurer, in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a loss to the insured resource(s). The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be indemnified.
From : http://en.wikipedia.org/wiki/Insurance
Rabu, 18 Mei 2011
Understanding Insurance 09
CLASSIFICATION OF INSURANCE COMPANIES
Based on the classification of insurance companies located in Indonesia, can be grouped as follows:
1. According to an insurance company branches
a. General insurance (loss) on property and fire.
b. Insurance miscellany of marine insurance, accident, car insurance, and theft.
c. Life insurance is about death and disability.
2. According to John H. Magee (Abbas A. Salim, 1985, p.. 1)
a. Social Insurance (social security) is a compulsory insurance which indicated that any person or resident
must have in order to have security for old age (Old Age). Carried out with such force to cut salaries.
Other social security treatment of the sick, accident.
b. Voluntary insurance is an insurance that carried no force.
c. Government insurance is an insurance run by government
d. Commercial insurance is insurance that aims to protect a person or family as well as companies from
the risks that may cause harm. While the insurance company's objectives in this regard is to make
a profit.
Senin, 16 Mei 2011
Understanding Insurance 08
TARGET INSURANCE
Micro-economic actors (Domestic) and macro-economic actors (World Business and Government) that have a desire to reduce the likelihood of losses that are not known for certain in the future through insurance business.
Micro-economic actors (Domestic) and macro-economic actors (World Business and Government) that have a desire to reduce the likelihood of losses that are not known for certain in the future through insurance business.
Sabtu, 14 Mei 2011
Understanding Insurance 07
PURPOSE OF INSURANCE
The purpose of the community as a customer insurance companies to reduce certain risks (eg death) and possible (eg accident) occurred in the community with a means of taking the risk on insurance companies or the risks that occur in society will be borne by the insurer. The objective in detail, namely:
- The coverage can be avoided losses that would provide certain benefits in the form of reduced losses and reduced costs related to insurance coverage.
- Prevention and protection to minimize the losses that occur can be pengeliminiran causes that may cause harm, protection of the product or person to be harmed, harm reduction, and protection for products that have been damaged are not getting damaged.
- Provide certain benefits to the community who follow the insurance because by knowing the amount of risk that happen to know the amount of losses suffered.
Selasa, 10 Mei 2011
Understanding Insurance 06
OBJECT INSURANCE
Object is the object of insurance and services, body and soul of human health, legal liability, and all other interests that could be lost, damaged, compensation and / or diminished their value
Minggu, 08 Mei 2011
Understanding Insurance 05
PROHIBITION OF THE INSURANCE BUSINESS
- Insurance Broker Company, are prohibited from placing insurance coverage on insurance companies that do not have permission
- Insurance Broker Company, are prohibited from placing insurance coverage to an insurance company as an affiliate of the insurance brokerage firms in question, unless the prospective insured has been aware of any such affiliation
- Insurance Loss Appraisal of the Company, are prohibited from assessing insurance objects are insured with insurance companies as an affiliate of the company concerned insurance loss adjusters
- Actuarial Consultant Company, prohibited from providing services to insurance companies as an affiliate of the relevant actuarial firm
- Insurance agents, are prohibited from acting as an agent of an insurance company that has no business license
Jumat, 06 Mei 2011
Understanding Insurance 07
PURPOSE OF INSURANCE
The purpose of the community as a customer insurance companies to reduce certain risks (eg death) and possible (eg accident) occurred in the community with a means of taking the risk on insurance companies or the risks that occur in society will be borne by the insurer. The objective in detail, namely:
- The coverage can be avoided losses that would provide certain benefits in the form of reduced losses and reduced costs related to insurance coverage.
- Prevention and protection to minimize the losses that occur can be pengeliminiran causes that may cause harm, protection of the product or person to be harmed, harm reduction, and protection for products that have been damaged are not getting damaged.
- Provide certain benefits to the community who follow the insurance because by knowing the amount of risk that happen to know the amount of losses suffered.
Understanding Insurance 04
SCOPE OF INSURANCE BUSINESS
- Insurance company can only organize the business in general insurance including reinsurance.
- Life insurance company can only conduct business in life insurance, health insurance, personal accident insurance, annuity business, as well as a pension fund management institution in accordance with laws and regulations.
- Reinsurance company can only organize a re-insurance business.
- Insurance brokers to conduct business only with the act represents insurance companies in the context of transactions relating to insurance contracts.
- Reinsurance brokers to conduct business only with the act represents a reinsurance company in the context of transactions relating to reinsurance contracts.
- Insurance company loss adjuster can only organize a service business valuation losses against loss or damage that occurs in object insurance.
- Actuarial consulting firm may only conduct business in the field of actuarial services.
- The company can only organize insurance agent insurance marketing services for insurance companies who have permission of the Minister of Finance of the Republic of Indonesia.
Understanding Insurance 03
TYPE OF BUSINESS
Type of business insurance are:
- General insurance business, provide services in risk control against loss, loss of benefits, and legal liability to third parties arising from events uncertain.
- Life insurance business, provide services in risk reduction associated with the life or death of an insured person.
- Reinsurance business provides services in insurance coverage against the risks faced re-insurance companies and insurance companies.
Types of supporting insurance business consists of:
- Insurance brokerage business, providing services keperantaraaan in handling insurance coverage and indemnity insurance settlement by acting for the interests of the insured.
- Reinsurance brokerage business, providing services keperantaraaan in reinsurance and indemnity reinsurance handling of the settlement by acting for the interests of insurance companies.
- Business insurance loss assessment, provides an assessment of the losses on the object of insurance.
- Actuarial consulting business, providing actuarial consulting services.
- Business insurance agents, providing brokerage services in the marketing of insurance services for and on behalf of the insurer.
Understanding Insurance 02
BUSINESS INSURANCE
Insurance business is a business activity engaged in insurance business and supporting business insurance.
- Business insurance is a financial services business who collect funds from the public through insurance premiums by providing protection to members of the public service users insurance against possible losses due to something that is not inevitable or against life or death of someone. Form of compensation in the form of insurance payments to service users unfortunately insurance.
- Supporting insurance business is a business that provides services for brokerage, insurance loss appraisal, and actuarial services to support business activities of insurance companies in insurance activities.
Understanding Insurance 01
According to Republic Act No. 2 of 1992 on Insurance Business, Insurance or coverage is
agreement between two or more parties, where the insurer is binding to the insured, by accepting the insurance premium which aims to provide:
agreement between two or more parties, where the insurer is binding to the insured, by accepting the insurance premium which aims to provide:
1. Reimbursement to the insured for loss, damage, or loss of expected profit.
2. Legal liability to third parties that may be suffered by the insured, arising from an event that is uncertain.
3. Payment of money based on death or life of an insured person.
While business insurance is a form of non-bank financial institutions which promised protection to the insured (the insured party something) so if anything happens to the insured in the future, the insured will get the money to change (reduce) the loss of the insurer (insurance agency).
Kamis, 05 Mei 2011
About Insurance
There are various types of insurance, of insurance you should take the law, such as car insurance, with policies that it's a good idea to have for those who are 'nice to have' rather than necessity.
When you take an insurance policy, then you have to pay premiums to your insurance company. If you have never filed a claim, then you never get the money back, but the money was collected with a premium of others who have taken insurance with certain companies.
but the idea behind insurance is that everyone pays the money, knowing that only some of them will need to file a claim. If you have to make a claim, the money that comes from your pool of other policies and premiums.
There are two kinds of insurance are life insurance and general insurance.
Another principle applies to all types of insurance:
Insurance can provide compensation only for the value of assets. He could not cover the entire value losses, losses may not be accidental and not inevitable. Obviously, you can not buy fire insurance for homes that have been burned as well as life insurance for someone in his bed.
There are some risks which have financial implications so large that they can be handled only by the state. These risks (mainly arising from war or the major escape of nuclear or radioactive material) is usually not covered by insurance.
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