INSURANCE
Friends today I
will explain about Insurance. Its Early methods and about Modern Insurance . i
will also explain its characteristics and social Effects. So lets begin,
Insurance is a means of protection from financial loss. It is a form of risk
management primarily used to hedge against the risk of a contingent, uncertain
loss.
The insured
receives a contract, called the insurance policy, which details the conditions
and circumstances under which the insured will be financially compensated. The
amount of money charged by the insurer to the insured for the coverage set
forth in the insurance policy is called the premium.
If the insured
experiences a loss which is potentially covered by the insurance policy, the
insured submits a claim to the insurer for processing by a claims adjuster.
History of
Insurance:
Its Early methods:
Methods for transferring or
distributing risk were practiced 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 practiced by early Mediterranean
sailing merchants.
Modern insurance
Insurance became far more sophisticated
in Enlightenment era Europe, and specialized varieties developed.
Lloyd's Coffee
House was the first
organized market for marine insurance.
Property insurance as we know it today can be traced to
the Great Fire of London, which in 1666
devoured more than 13,000 houses. The devastating effects of the fire converted
the development of insurance "from a matter of convenience into one of
urgency, 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".
The first life
insurance policies were taken out in the early 18th century. The first company
to offer life insurance was the Amicable Society for a Perpetual Assurance
Office, founded in London in 1706 by William Talbot and Sir Thomas Allen.
Edward Rowe Mores established the Society for Equitable Assurances on Lives and
Survivorship in 1762.
It was the world's first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based".
It was the world's first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based".
Principles
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.
Insurability
Risk which can
be insured by private companies typically shares seven common characteristics:
1) Large number of similar exposure units:
2) Definite loss: The loss takes place at a known time, in a known place, and from a known cause.
3) 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.
4) Large loss: The size of the loss must be meaningful from the perspective of the insured.
5) 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, then it is not likely that the insurance will be purchased, even if on offer.
6) Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost.
7) 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.
1) Large number of similar exposure units:
2) Definite loss: The loss takes place at a known time, in a known place, and from a known cause.
3) 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.
4) Large loss: The size of the loss must be meaningful from the perspective of the insured.
5) 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, then it is not likely that the insurance will be purchased, even if on offer.
6) Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost.
7) 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.
Social effects
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.
