Insurance is a financial loss protection method and a form of risk management, mainly used to hedge the risk of unexpected or unrecognized losses.
The entity providing insurance is called the name of the insurance company, and the individual or entity purchasing insurance is defined as the insured or the holder of the insurance policy.
The process of the insured includes the insured taking on smaller, guaranteed, and relatively known losses, in the form of the insured’s compensation committee to the insured in the event that the insured suffers losses Pay the insured. The insured’s ownership, ownership, or existing relationship produces insurable benefits.
The insured obtains a contract called an insurance policy, which details the insured’s terms and conditions (or tells insurance meaning) for compensation to the insured. The amount the insurer charges the policyholder for the coverage under the policy is called the premium.
If the insured suffers a loss that can be covered by the insurance policy, the insured submits a claim to the insurance company and the claims officer handles it.
The insured can hedge his own risk by participating in reinsurance. Another insurance company agrees to take some risks, especially if the main insurance company thinks the risks are really unbearable. Here’s the complete insurance meaning.
Modern Method for Insurance
With the development of professional brands, insurance became more complicated in the European Enlightenment.
The property insurance we know today can be traced back to the London Fire, which devoured more than 13,000 houses in 1666. The devastating impact of this blaze transformed the development of insurance “from a comfort issue to an emergency, and the change in opinion was also reflected in the location of the “Insurance Office” in Sir Christopher Wren’s new plan for London in 1667.
Many fire insurance plans were unsuccessful, but in 1681, economist Nicholas Barbon and 11 partners established the first fire insurance company behind the Royal Stock Exchange, the “Home Insurance Office” To protect and build brick houses.
His insurance office provided insurance for 5,000 houses. Insurance meaning is being elaborated in a detailed way at our site.
At the same time, the first insurance plan for commercial projects was provided. By the end of the 17th century, due to the demand for marine insurance, the growth of London as a trading center was increasing.
In the late 1680s, Edward Lloyd opened a coffee shop and became a meeting place for all parties in the shipping industry who wanted to get freight and ships, including those who wanted to get such projects. These informal beginnings led to the establishment of Lloyd’s insurance market in London and many freight shipments related to insurance companies.
The earliest life insurance policy was applied in the early 18th century. The first company to provide life insurance was a friendly association of permanent warranty offices, which was established in 1706 in London by William Talbot and Sir Thomas Allen.
Following the same principle, Edward Rowe Morris founded the Life and Life Equality Assurance Association in 1762.
It was the world’s first joint insurance company, and it created a lifetime dividend based on mortality, thereby establishing a “science and development insurance practice framework” and “a modern life insurance foundation on which all life insurance plans (or insurance meaning) will later be based.”
The first company to provide accident insurance was the Railway Passenger Insurance Company, which was established in the United Kingdom in 1848 to ensure an increase in the number of deaths in the new railway system.
By the end of the 19th century, Germany began to establish a national insurance plan for sickness and old age based on the traditional Prussian and Saxony social welfare plans that began in the early 1840s. Pensions, accident insurance, and medical care form the basis of the German welfare state. This is the insurance meaning in Germany.
In the UK, the Liberal government introduced more comprehensive legislation (define new insurance meaning) in the National Insurance Act of 1911. This gave the British working class the first payment system for sickness and unemployment insurance.
After the Second World War, under the influence of the Beveridge Report, the system was greatly expanded, forming the first welfare state modern.
The simple insurance meaning is “Insurance includes collecting funds (called risk exposures) from many insured entities to cover losses that some people may suffer.” Therefore, the insured entity can be protected from the risk of fees, because fees depend on the frequency and severity of the incident. In order to become an insurable risk, the insured risk must satisfy certain characteristics. Insurance as a financial intermediary is a commercial enterprise and a large part of the financial services industry, but a single entity can also insure itself by funding future potential losses. Here’s the insurance meaning that is discussed in detail.
Possibility of Insurance
The risks that private companies can insure usually have seven common characteristics:
A large number of similar risks: Since insurance is operated through centralized resources, most insurance policies are provided to a wide range of individuals, which allows insurance companies to benefit from a large number of laws in which the expected and actual losses similar.
With the exception of Lloyds of London, the company is known for ensuring the lives and health of actors, sports figures, and other celebrities, but all exposures will be different, which may lead to different insurance rates.
Obvious loss: The loss occurred at a known time, known location, and known cause. A typical example is the insured person’s single death due to life insurance. All fires, car accidents, and work-related injuries may make this standard easy to achieve. Other types of losses may only be specific in theory.
For example, occupational diseases may include long-term exposure to harmful conditions where the specific time, place, or cause cannot be determined. Ideally, the time, place, and cause of the loss should be clear enough so that a rational person with sufficient information can objectively verify these three elements.
Accidental loss: The event that constitutes a claim trigger must be accidental, or at least outside the control of the insurance beneficiary.
The loss must be pure, which means that it is the result of an event, and the event has only a chance of cost: events that contain speculative elements, such as daily business risks or even the purchase of lottery tickets, are usually not insurable.
Huge losses: From the perspective of the insured, the size of the loss should be meaningful, and the insurance premium should cover the expected cost of loss. In addition to issuing and managing insurance policies, adjust the loss, and provide the necessary capital reasonably to ensure that the insurance company can pay the claim cost.
For small losses, these final costs may be several times the expected loss costs. Unless the protection provided is of actual value to the buyer, there is no benefit in paying these fees.
Affordable Insurance Premiums
If the probability of a guaranteed event is too high, or the cost of the event is too high so that the insurance premiums generated are large relative to the amount of protection provided, then it is unlikely to buy insurance.
And since the accounting community has formally realized that in accordance with financial accounting standards, premiums cannot be so great that insurance companies do not have a reasonable opportunity to suffer huge losses. If there is no such loss opportunity, then the transaction may be in the form of insurance rather than the substance.
Calculated Insurance loss
If there is no formal calculation, at least two factors must be estimated: the probability of loss and the associated cost. The possibility of loss is usually an experimental practice, and the cost is related to the reasonable ability of the person who has a copy of the insurance policy and the evidence of the loss related to the claim presented in this article. Recover the amount of the loss.
The risk of catastrophic large losses is limited: Ideally, insurable losses are independent rather than catastrophic, which means that the losses will not occur at the same time, and the severity of personal losses is not sufficient to ensure that the insurance company goes bankrupt; the insurance company may be more willing to limit the risk of loss caused by an incident to a small part of its capital base.
Capital limits the ability of insurance companies to sell earthquake insurance and wind energy insurance in hurricane areas. In the United States, flood risk is borne by the federal government. In commercial fire insurance, you can find personal property whose total exposure value greatly exceeds any capital restrictions of a single insurance company.
The property is usually shared by many insurance companies or provided by an insurance company that transfers risk to the reinsurance market.
When a company insures a single entity, there are basic legal requirements and regulations. Many common insurance legal principles which define insurance meaning include:
Compensation: If certain losses occur, the insurance company will only compensate or compensate for the insured’s interests.
Interest Insurance: As stated in the textbook of the Legal Insurance Association which clears the insurance meaning, insurance companies have no right to recover and compensate the insured from the party that caused the injury, whether or not the insured sued him. Neglected damages payer (eg personal accident insurance)
Insurance companies usually must suffer losses directly. Regardless of property or life insurance, there must be an insurable interest. The concept requires the insured to enjoy a “share” in the loss or damage of life or insured property, that is, the “share” depends on the type of insurance involved, the nature of property ownership, or the relationship between people. The requirement for insurable interest is to distinguish between insurance and gambling.
Apportionment: According to some methods, insurance companies with similar obligations to the insured can also share the compensation.
Interrogation: The insurance company obtains the legal right to claim compensation on behalf of the insured; for example, the insured can sue the person responsible for the insured’s loss. Insurance companies can use special terms to allocate their replacement rights.
Causa Proxima or direct cause: the cause of loss (risk) must be included in the policy insurance agreement, and common causes should not be excluded
Mitigation measures: If any loss or injury occurs, the owner of the asset must try to limit the loss to a minimum, as if the asset were not insured.
“Indemnification or Compensation” refers to the complete return of the work, or as much as possible, to the position of the person before the specific event or risk. Therefore, life insurance is usually not considered as compensation insurance, but “accident” insurance (that is, to make a claim when a specific event occurs), and there are usually three types of insurance contracts that try to compensate the insurance meaning to the customer.
Insurance Payment policy
Usually, the result is from the perspective of the insured: the insurer pays for the losses and claims.
If the insured has a “repayment” policy, you can ask the insured to compensate for the loss, and then the insurance company will “compensate” for the loss and expenses, including the cost of claiming the insurance company’s permission.
According to the “pay on behalf” policy, insurance companies will defend and pay claims for the insured, they will not pay for anything. Most modern liability insurance is based on the “pay-as-you-go” language, which enables insurance companies to manage and control claims.
According to the “compensation” policy, insurance companies can usually “compensate” or “pay on behalf”, whichever is more beneficial to him and the insured during the processing of the claim.
Entities seeking to transfer risk (individuals, companies, associations of any kind, etc.) become “insureds” after the insurer assumes the risk. The insured adopts a contract called “general insurance”, which includes at least insurance contracts.
The following elements: Identify the participants (insured, insured, beneficiary), bonuses, coverage, designated loss events, coverage (ie, the amount that must be paid to the insured or beneficiary when a loss occurs) and exception Circumstances (uncovered events), it is said that the insured has “compensated” for the losses covered by the policy.
When the insured suffers a specific risk of loss, the underwriting scope authorizes the policyholder to file a claim with the insurance company and demand compensation for the amount of loss specified in the insurance policy.
The cost incurred by the insured to bear the risk is called the insurance premium. Many of the insured’s premiums are used to fund accounts designed for delayed payments (theoretically for a few claimants) and overhead costs. As long as the insurance company maintains sufficient funds dedicated to expected losses (called reserves), the remaining margin is the insurance company’s profit.