What is insurance...?

07-January-2008
enepalionline.com | Article |

Know about Insurance ................. What is insurance...?

Insurance:

Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care.

Principle of Insurance:

1. There must be a larger number of similar objects so the financial outcome of insuring the pool of exposures is predictable. Therefore they can calculate a "fair" premium.
2. The losses have to be accidental and unintentional from the point of view of the insured.
3. The losses must be measurable, identifiable in location, time, and be definite. They also want the losses to cause economic hardship. That is, so the insured has an incentive to protect and preserve the property to minimize the probability that the losses occur.
4. The loss potential to the insurer must be non-catastrophic. It cannot put the insurance company in financial jeopardy.

Insurer’s Business Model

History of insurance

In some sense we can say that insurance appears simultaneously with appearance of human society.

The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants.

Achaemenian monarchs 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 special gifts

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which acted to care for the 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 in case of emergency.

Insurance became far more sophisticated in post-RenaissanceEurope, and specialized varieties developed.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster Nicholas Barbon opened an office to insure buildings. In 1680 he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.

The first insurance company in the United States provided fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732.

In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual State insurance departments.

Types of Insurance:

Any risk that can be quantified probably has a type of insurance to protect it. Among the different types of insurance are:

• Automobile insurance
• Aviation insurance
• Boiler insurance
• Casualty insurance
• Credit insurance
• Directors and Officers Insurance (KeyMan)
• Financial loss insurance
• Health insurance
• Income protection insurance
• Liability insurance
• Purchase insurance
• Life insurance
• Total permanent disability insurance
• Locked Funds Insurance
• Marine Insurance
• Nuclear incident insurance
• Environmental Liability Insurance
• Pet Insurance
• Political risk insurance
• Professional Indemnity Insurance
• Property insurance
• Terrorism insurance
• Title insurance
• Travel insurance
• Workers' compensation

A single policy may cover risks in one or more of the above categories. For example, car insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from say, causing an accident).

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Source: Online