Insurances definition of insurances

Underwr1t1ng and 1nve$t1ng   
The bu$1ne$$ m0del 1$ t0 c0llect m0re 1n prem1um and 1nve$tment 1nc0me than 1$ pa1d 0ut 1n l0$$e$, and t0 al$0 0ffer a c0mpet1t1ve pr1ce wh1ch c0n$umer$ w1ll accept. Pr0f1t can be reduced t0 a $1mple equat10n:

Pr0f1t = earned prem1um + 1nve$tment 1nc0me – 1ncurred l0$$ – underwr1t1ng expen$e$.
1n$urer$ make m0ney 1n tw0 way$:

Thr0ugh underwr1t1ng, the pr0ce$$ by wh1ch 1n$urer$ $elect the r1$k$ t0 1n$ure and dec1de h0w much 1n prem1um$ t0 charge f0r accept1ng th0$e r1$k$
By 1nve$t1ng the prem1um$ they c0llect fr0m 1n$ured part1e$
The m0$t c0mpl1cated a$pect 0f the 1n$urance bu$1ne$$ 1$ the actuar1al $c1ence 0f ratemak1ng (pr1ce-$ett1ng) 0f p0l1c1e$, wh1ch u$e$ $tat1$t1c$ and pr0bab1l1ty t0 appr0x1mate the rate 0f future cla1m$ ba$ed 0n a g1ven r1$k. After pr0duc1ng rate$, the 1n$urer w1ll u$e d1$cret10n t0 reject 0r accept r1$k$ thr0ugh the underwr1t1ng pr0ce$$.

At the m0$t ba$1c level, 1n1t1al ratemak1ng 1nv0lve$ l00k1ng at the frequency and $ever1ty 0f 1n$ured per1l$ and the expected average pay0ut re$ult1ng fr0m the$e per1l$. Thereafter an 1n$urance c0mpany w1ll c0llect h1$t0r1cal l0$$ data, br1ng the l0$$ data t0 pre$ent value, and c0mpare the$e pr10r l0$$e$ t0 the prem1um c0llected 1n 0rder t0 a$$e$$ rate adequacy. 23  L0$$ rat10$ and expen$e l0ad$ are al$0 u$ed. Rat1ng f0r d1fferent r1$k character1$t1c$ 1nv0lve$ at the m0$t ba$1c level c0mpar1ng the l0$$e$ w1th "l0$$ relat1v1t1e$"—a p0l1cy w1th tw1ce a$ many l0$$e$ w0uld theref0re be charged tw1ce a$ much. M0re c0mplex mult1var1ate analy$e$ are $0met1me$ u$ed when mult1ple character1$t1c$ are 1nv0lved and a un1var1ate analy$1$ c0uld pr0duce c0nf0unded re$ult$. 0ther $tat1$t1cal meth0d$ may be u$ed 1n a$$e$$1ng the pr0bab1l1ty 0f future l0$$e$.

Up0n term1nat10n 0f a g1ven p0l1cy, the am0unt 0f prem1um c0llected m1nu$ the am0unt pa1d 0ut 1n cla1m$ 1$ the 1n$urer'$ underwr1t1ng pr0f1t 0n that p0l1cy. Underwr1t1ng perf0rmance 1$ mea$ured by $0meth1ng called the "c0mb1ned rat10", wh1ch 1$ the rat10 0f expen$e$/l0$$e$ t0 prem1um$. 24  A c0mb1ned rat10 0f le$$ than 100% 1nd1cate$ an underwr1t1ng pr0f1t, wh1le anyth1ng 0ver 100 1nd1cate$ an underwr1t1ng l0$$. A c0mpany w1th a c0mb1ned rat10 0ver 100% may neverthele$$ rema1n pr0f1table due t0 1nve$tment earn1ng$.

1n$urance c0mpan1e$ earn 1nve$tment pr0f1t$ 0n "fl0at". Fl0at, 0r ava1lable re$erve, 1$ the am0unt 0f m0ney 0n hand at any g1ven m0ment that an 1n$urer ha$ c0llected 1n 1n$urance prem1um$ but ha$ n0t pa1d 0ut 1n cla1m$. 1n$urer$ $tart 1nve$t1ng 1n$urance prem1um$ a$ $00n a$ they are c0llected and c0nt1nue t0 earn 1ntere$t 0r 0ther 1nc0me 0n them unt1l cla1m$ are pa1d 0ut. The A$$0c1at10n 0f Br1t1$h 1n$urer$ (gather1ng 400 1n$urance c0mpan1e$ and 94% 0f UK 1n$urance $erv1ce$) ha$ alm0$t 20% 0f the 1nve$tment$ 1n the L0nd0n $t0ck Exchange. 25 

1n the Un1ted $tate$, the underwr1t1ng l0$$ 0f pr0perty and ca$ualty 1n$urance c0mpan1e$ wa$ $142.3 b1ll10n 1n the f1ve year$ end1ng 2003. But 0verall pr0f1t f0r the $ame per10d wa$ $68.4 b1ll10n, a$ the re$ult 0f fl0at. $0me 1n$urance 1ndu$try 1n$1der$, m0$t n0tably Hank Greenberg, d0 n0t bel1eve that 1t 1$ f0rever p0$$1ble t0 $u$ta1n a pr0f1t fr0m fl0at w1th0ut an underwr1t1ng pr0f1t a$ well, but th1$ 0p1n10n 1$ n0t un1ver$ally held.

Naturally, the fl0at meth0d 1$ d1ff1cult t0 carry 0ut 1n an ec0n0m1cally depre$$ed per10d. Bear market$ d0 cau$e 1n$urer$ t0 $h1ft away fr0m 1nve$tment$ and t0 t0ughen up the1r underwr1t1ng $tandard$, $0 a p00r ec0n0my generally mean$ h1gh 1n$urance prem1um$. Th1$ tendency t0 $w1ng between pr0f1table and unpr0f1table per10d$ 0ver t1me 1$ c0mm0nly kn0wn a$ the underwr1t1ng, 0r 1n$urance, cycle. 26 

Cla1m$   
Cla1m$ and l0$$ handl1ng 1$ the mater1al1zed ut1l1ty 0f 1n$urance; 1t 1$ the actual "pr0duct" pa1d f0r. Cla1m$ may be f1led by 1n$ured$ d1rectly w1th the 1n$urer 0r thr0ugh br0ker$ 0r agent$. The 1n$urer may requ1re that the cla1m be f1led 0n 1t$ 0wn pr0pr1etary f0rm$, 0r may accept cla1m$ 0n a $tandard 1ndu$try f0rm, $uch a$ th0$e pr0duced by AC0RD.

1n$urance c0mpany cla1m$ department$ empl0y a large number 0f cla1m$ adju$ter$ $upp0rted by a $taff 0f rec0rd$ management and data entry clerk$. 1nc0m1ng cla1m$ are cla$$1f1ed ba$ed 0n $ever1ty and are a$$1gned t0 adju$ter$ wh0$e $ettlement auth0r1ty var1e$ w1th the1r kn0wledge and exper1ence. The adju$ter undertake$ an 1nve$t1gat10n 0f each cla1m, u$ually 1n cl0$e c00perat10n w1th the 1n$ured, determ1ne$ 1f c0verage 1$ ava1lable under the term$ 0f the 1n$urance c0ntract, and 1f $0, the rea$0nable m0netary value 0f the cla1m, and auth0r1ze$ payment.

The p0l1cyh0lder may h1re the1r 0wn publ1c adju$ter t0 neg0t1ate the $ettlement w1th the 1n$urance c0mpany 0n the1r behalf. F0r p0l1c1e$ that are c0mpl1cated, where cla1m$ may be c0mplex, the 1n$ured may take 0ut a $eparate 1n$urance p0l1cy add-0n, called l0$$ rec0very 1n$urance, wh1ch c0ver$ the c0$t 0f a publ1c adju$ter 1n the ca$e 0f a cla1m.

Adju$t1ng l1ab1l1ty 1n$urance cla1m$ 1$ part1cularly d1ff1cult becau$e there 1$ a th1rd party 1nv0lved, the pla1nt1ff, wh0 1$ under n0 c0ntractual 0bl1gat10n t0 c00perate w1th the 1n$urer and may 1n fact regard the 1n$urer a$ a deep p0cket. The adju$ter mu$t 0bta1n legal c0un$el f0r the 1n$ured (e1ther 1n$1de "h0u$e" c0un$el 0r 0ut$1de "panel" c0un$el), m0n1t0r l1t1gat10n that may take year$ t0 c0mplete, and appear 1n per$0n 0r 0ver the teleph0ne w1th $ettlement auth0r1ty at a mandat0ry $ettlement c0nference when reque$ted by the judge.

1f a cla1m$ adju$ter $u$pect$ under-1n$urance, the c0nd1t10n 0f average may c0me 1nt0 play t0 l1m1t the 1n$urance c0mpany'$ exp0$ure.

1n manag1ng the cla1m$ handl1ng funct10n, 1n$urer$ $eek t0 balance the element$ 0f cu$t0mer $at1$fact10n, adm1n1$trat1ve handl1ng expen$e$, and cla1m$ 0verpayment leakage$. A$ part 0f th1$ balanc1ng act, fraudulent 1n$urance pract1ce$ are a maj0r bu$1ne$$ r1$k that mu$t be managed and 0verc0me. D1$pute$ between 1n$urer$ and 1n$ured$ 0ver the val1d1ty 0f cla1m$ 0r cla1m$ handl1ng pract1ce$ 0cca$10nally e$calate 1nt0 l1t1gat10n ($ee 1n$urance bad fa1th).

Market1ng   
1n$urer$ w1ll 0ften u$e 1n$urance agent$ t0 1n1t1ally market 0r underwr1te the1r cu$t0mer$. Agent$ can be capt1ve, mean1ng they wr1te 0nly f0r 0ne c0mpany, 0r 1ndependent, mean1ng that they can 1$$ue p0l1c1e$ fr0m $everal c0mpan1e$. The ex1$tence and $ucce$$ 0f c0mpan1e$ u$1ng 1n$urance agent$ 1$ l1kely due t0 1mpr0ved and per$0nal1zed $erv1ce. C0mpan1e$ al$0 u$e Br0k1ng f1rm$, Bank$ and 0ther c0rp0rate ent1t1e$ (l1ke $elf Help Gr0up$, M1cr0f1nance 1n$t1tut10n$, NG0$ etc.) t0 market the1r pr0duct$. 27 

Type$   
Any r1$k that can be quant1f1ed can p0tent1ally be 1n$ured. $pec1f1c k1nd$ 0f r1$k that may g1ve r1$e t0 cla1m$ are kn0wn a$ per1l$. An 1n$urance p0l1cy w1ll $et 0ut 1n deta1l wh1ch per1l$ are c0vered by the p0l1cy and wh1ch are n0t. Bel0w are n0n-exhau$t1ve l1$t$ 0f the many d1fferent type$ 0f 1n$urance that ex1$t. A $1ngle p0l1cy that may c0ver r1$k$ 1n 0ne 0r m0re 0f the categ0r1e$ $et 0ut bel0w. F0r example, veh1cle 1n$urance w0uld typ1cally c0ver b0th the pr0perty r1$k (theft 0r damage t0 the veh1cle) and the l1ab1l1ty r1$k (legal cla1m$ ar1$1ng fr0m an acc1dent). A h0me 1n$urance p0l1cy 1n the Un1ted $tate$ typ1cally 1nclude$ c0verage f0r damage t0 the h0me and the 0wner'$ bel0ng1ng$, certa1n legal cla1m$ aga1n$t the 0wner, and even a $mall am0unt 0f c0verage f0r med1cal expen$e$ 0f gue$t$ wh0 are 1njured 0n the 0wner'$ pr0perty.

Bu$1ne$$ 1n$urance can take a number 0f d1fferent f0rm$, $uch a$ the var10u$ k1nd$ 0f pr0fe$$10nal l1ab1l1ty 1n$urance, al$0 called pr0fe$$10nal 1ndemn1ty (P1), wh1ch are d1$cu$$ed bel0w under that name; and the bu$1ne$$ 0wner'$ p0l1cy (B0P), wh1ch package$ 1nt0 0ne p0l1cy many 0f the k1nd$ 0f c0verage that a bu$1ne$$ 0wner need$, 1n a way anal0g0u$ t0 h0w h0me0wner$' 1n$urance package$ the c0verage$ that a h0me0wner need$. 28 

Aut0 1n$urance   
Ma1n art1cle: Veh1cle 1n$urance

A wrecked veh1cle 1n C0penhagen
Aut0 1n$urance pr0tect$ the p0l1cyh0lder aga1n$t f1nanc1al l0$$ 1n the event 0f an 1nc1dent 1nv0lv1ng a veh1cle they 0wn, $uch a$ 1n a traff1c c0ll1$10n.

C0verage typ1cally 1nclude$:

Pr0perty c0verage, f0r damage t0 0r theft 0f the car
L1ab1l1ty c0verage, f0r the legal re$p0n$1b1l1ty t0 0ther$ f0r b0d1ly 1njury 0r pr0perty damage
Med1cal c0verage, f0r the c0$t 0f treat1ng 1njur1e$, rehab1l1tat10n and $0met1me$ l0$t wage$ and funeral expen$e$
Gap 1n$urance   
Ma1n art1cle: Gap 1n$urance
Gap 1n$urance c0ver$ the exce$$ am0unt 0n y0ur aut0 l0an 1n an 1n$tance where y0ur 1n$urance c0mpany d0e$ n0t c0ver the ent1re l0an. Depend1ng 0n the c0mpany'$ $pec1f1c p0l1c1e$ 1t m1ght 0r m1ght n0t c0ver the deduct1ble a$ well. Th1$ c0verage 1$ marketed f0r th0$e wh0 put l0w d0wn payment$, have h1gh 1ntere$t rate$ 0n the1r l0an$, and th0$e w1th 60-m0nth 0r l0nger term$. Gap 1n$urance 1$ typ1cally 0ffered by a f1nance c0mpany when the veh1cle 0wner purcha$e$ the1r veh1cle, but many aut0 1n$urance c0mpan1e$ 0ffer th1$ c0verage t0 c0n$umer$ a$ well.