What Is Insurance?

As we all know a method of risk prevention is to insure a risk to the insurance firm . This method is taken into account the foremost important method in tackling risk. Therefore many of us think that risk management is that the same as insurance. Though the particular circumstances aren’t so.

Insurance means the insurance transaction, which involves two parties, the insured and therefore the insurer. Where the insurer guarantees the insured , that he are going to be reimbursed for a loss which he may suffer, as a results of an occasion that might not necessarily occur or which couldn’t be determined when or when it occurred. because the insured within the obligation to pay some money to the insurer, the quantity of proportion of the sum insured, commonly called “premium”.

Viewed from several angles, the insurance features a sort of goals and techniques of splitting, among others:

A. From an economic perspective, then:

The goal:

Reducing the uncertainty of the results of operations undertaken by an individual or company so as to satisfy the requirements or achieve goals.

Technique:

By transferring the danger to the opposite party and therefore the other party combining a substantial amount of risk, so it are often estimated with more precise the magnitude of the likelihood of loss.

B. In terms of Law, then:

The goal:

Transferring the risks faced by an object or a commercial activity to a different party.

Technique:

Through premium payments by the insured to the insurer within the indemnity contract (insurance policy), then the danger of transferring to the insurer.

C. In terms of Trade, then:

The goal:

Share the risks faced to all or any participants of the insurance program.

Technique:

Transferred risk from individuals / companies to financial institutions engaged in risk management (insurance companies), which can share the danger to all or any participants of the insurance it handles.

D. From a societal standpoint, then:

The goal:

Bear losses jointly among all participants of the insurance program.

Technique:

All group members (group members) of the insurance program contribute (in the shape of premiums) to sympathize losses suffered by a / a number of its members.

E. In terms of Mathematics, then:

The goal:

Predict the magnitude of the likelihood of risk and therefore the outcome of the forecast is employed to divide the danger to all or any participants (group of participants) insurance program.

Technique:

Calculates the probability supported applied mathematics (“Probability Theory”), performed by the actuary also as by the underwriter.