Main article: Indemnity
The technical definition of "indemnity" means to make whole again. There are two types of insurance contracts;
an "indemnity" policy and
a "pay on behalf" or "on behalf of"[3] 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)[4].
Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language[5].
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: the 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 (i.e., reserves), the remaining margin is an insurer's profit.
Tuesday, February 3, 2009
Principles of insurance
Commercially insurable risks typically share seven common characteristics.[1]
A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.[2] The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
Definite Loss. The event that gives rise to the loss that is subject to insurance should, at least in principle, take 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, 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 little 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 anyone will buy insurance, 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. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer's appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. 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
A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.[2] The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
Definite Loss. The event that gives rise to the loss that is subject to insurance should, at least in principle, take 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, 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 little 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 anyone will buy insurance, 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. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer's appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. 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
Insurance
From Wikipedia, the free encyclopedia
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This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (May 2008)
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance; an insured is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
Contents[hide]
1 Principles of insurance
2 Indemnification
3 Insurers' business model
3.1 Underwriting and investing
3.2 Claims
4 History of insurance
5 Types of insurance
5.1 Auto insurance
5.2 Home insurance
5.3 Health
5.4 Disability
5.5 Casualty
5.6 Life
5.7 Property
5.8 Liability
5.9 Credit
5.10 Other types
5.11 Insurance financing vehicles
5.12 Closed community self-insurance
6 Insurance companies
7 Global insurance industry
8 Controversies
8.1 Insurance insulates too much
8.2 Complexity of insurance policy contracts
8.3 Redlining
8.4 Insurance patents
8.5 The insurance industry and rent seeking
8.6 Criticism of insurance companies
9 Glossary
10 See also
11 Notes
12 External links
Jump to: navigation, search
This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (May 2008)
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance; an insured is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
Contents[hide]
1 Principles of insurance
2 Indemnification
3 Insurers' business model
3.1 Underwriting and investing
3.2 Claims
4 History of insurance
5 Types of insurance
5.1 Auto insurance
5.2 Home insurance
5.3 Health
5.4 Disability
5.5 Casualty
5.6 Life
5.7 Property
5.8 Liability
5.9 Credit
5.10 Other types
5.11 Insurance financing vehicles
5.12 Closed community self-insurance
6 Insurance companies
7 Global insurance industry
8 Controversies
8.1 Insurance insulates too much
8.2 Complexity of insurance policy contracts
8.3 Redlining
8.4 Insurance patents
8.5 The insurance industry and rent seeking
8.6 Criticism of insurance companies
9 Glossary
10 See also
11 Notes
12 External links
Sunday, February 1, 2009
Our mission is to continuously improve ourselves to become a leading, profitable Company, meeting the needs of our customers and enhancing the value of our shareholders’ investment. We will accomplish this by using the strengths of our people and the application of innovative science for the development of new insurance products and services that are high in quality and competitive in price
Family & Individual Health Insurance
Saturday, January 31, 2009
JEEAALA
INTRODUCTIONAt Beema-Pakistan the recruitment department is geared to offer people a serious career into the insurance industry. These prospectus provide an insight into the ‘career-course’ charted out for all those who are keen to enter this (nonbanking) financial world.PRE-QUALIFICATIONThe pre-qualification criteria for a JEEAALA is simple. One has to be: an adult, socially inclined, HSC pass (min), fluent in (at least) one local language plus basic writing / reading ability in English, sound health, free of criminal record, honest, diligent, determined, ambitious to make a name in the insurance industry, and must have filled our bio-sketchform satisfactorily.ENTRANCEYour entrance into a 'career-course' is charted out stepwise as follows:
See a film on your career highway first at our recruitment center.
You are required to apply in your own handwriting (Urdu/English) for a job as a Beema-Pakistan’s JEEAALA, clearly declaring (i) your willingness to abide by all company rules; and (ii) evidencing all pre-qualification requirements. Applications must accompany all available support documentation.
You are required to take an interview with the Administrator of Recruitment on any five days of the week between 9 am to 5 pm without prior appointment. Just walk-in! There are no gender bars.
Prior to the interview you are required to sit at the recruitment office and fill the biographical sketch form in your own hand.
Post interview you are required take 9 hours (minimum) of training presently held every Saturday from 1 pm through 6 pm.
Once you have cleared the above stages you are deemed to be ready to obtain an 'insurance agents' license. You obtain an 'insurance agents' license from, Beema-Pakistan at your cost.
Upon obtaining the insurance agents license you are deemed to have become part of the Beema-Pakistan fraternity. You are now required to obtain a ‘MUAVIN’ card, and more, secure your monthly income for life!
Beema-Pakistan inducts people in a career with their income secured for life, from day one. Onobtaining your "MUAVIN" card you
make your first insurance commission, and
secure your first monthly income for life (WAZIFA).
A WAZIFA passbook is obtained by you, at your cost, which will be your companion for life irrespectiveof your remaining an insurance person or not! Your entitlement to WAZIFA, documents all your sales,and, pays you for each one of them through your life, every month!
HGHWAY & DESTINATIONOnce you are an insurance agent, a recipient of WAZIFA and a MUAVIN card holder you would have only crossed the first milestone of your career highway. This will take you eventually, to become an independent business person - a franchisee under the Beema-Pakistan. ‘SITARA’ plan.As you progress with sales you are required to gather:
a client base, that you can return to with new products, and renewed business; and
a WAZIFA purse of Rs.500/- per month to qualify as a Field Manager. Field Managers (and up) are offered 'captive outlets' by Beema-Pakistan and are placed on the pay-roll of a franchisee. This employed status increases on the following table:
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