The Greeks and Romans introduced burial insurance c. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times. Property insurance provides protection against risks to property, such as fire , theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance , earthquake insurance , home insurance , inland marine insurance or boiler insurance.
The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below:. Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage.
For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property.
The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification payment on behalf of the insured with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured. Often a commercial insured's liability insurance program consists of several layers.
The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insured to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure.
Above the primary insurance or self-insured retention, the insured may have one or more layers of excess insurance to provide coverage additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies policies that contain their own terms, conditions, and exclusions , "follow form" excess insurance policies that follow the terms of the underlying policy except as specifically provided , and "umbrella" insurance policies excess insurance that in some circumstances could provide coverage that is broader than the underlying insurance.
Credit insurance repays some or all of a loan when the borrower is insolvent. Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of religious groups, including the Amish and some Muslim groups, depend on support provided by their communities when disasters strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind.
In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the moral hazard of explicit insurance contracts. In the United Kingdom , The Crown which, for practical purposes, meant the civil service did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums.
Since many UK government buildings have been sold to property companies and rented back, this arrangement is now less common and may have disappeared altogether.
What U.S. life insurance agents can learn from China
In the United States, the most prevalent form of self-insurance is governmental risk management pools. They are self-funded cooperatives, operating as carriers of coverage for the majority of governmental entities today, such as county governments, municipalities, and school districts. Rather than these entities independently self-insure and risk bankruptcy from a large judgment or catastrophic loss, such governmental entities form a risk pool. Such pools begin their operations by capitalization through member deposits or bond issuance. Coverage such as general liability, auto liability, professional liability, workers compensation, and property is offered by the pool to its members, similar to coverage offered by insurance companies.
However, self-insured pools offer members lower rates due to not needing insurance brokers , increased benefits such as loss prevention services and subject matter expertise. Of approximately 91, distinct governmental entities operating in the United States, 75, are members of self-insured pools in various lines of coverage, forming approximately pools. Although a relatively small corner of the insurance market, the annual contributions self-insured premiums to such pools have been estimated up to 17 billion dollars annually.
Insurance companies may sell any combination of insurance types, but are often classified into three groups: . In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many decades.
By contrast, non-life insurance cover usually covers a shorter period, such as one year. Insurance companies are generally classified as either mutual or proprietary companies. Demutualization of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century.
However, not all states permit mutual holding companies. Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.
Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers.
In short, it is an in-house self-insurance vehicle. Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.
The types of risk that a captive can underwrite for their parents include property damage, public and product liability, professional indemnity, employee benefits, employers' liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance. Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:.
Other possible forms for an insurance company include reciprocals , in which policyholders reciprocate in sharing risks, and Lloyd's organizations. Admitted insurance companies are those in the United States that have been admitted or licensed by the state licensing agency. The insurance they sell is called admitted insurance. Non-admitted companies have not been approved by the state licensing agency, but are allowed to sell insurance under special circumstances when they meet an insurance need that admitted companies cannot or will not meet.
There are also companies known as "insurance consultants". Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client. Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions.
Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have. The financial stability and strength of an insurance company should be a major consideration when buying an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses.
A number of independent rating agencies provide information and rate the financial viability of insurance companies. Insurance companies are rated by various agencies such as A. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.
Global insurance premiums grew by 2. The return to growth and record premiums generated during the year followed two years of decline in real terms. Life insurance premiums increased by 3. While industrialised countries saw an increase in premiums of around 1.
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The global insurance industry was sufficiently capitalised to withstand the financial crisis of and and most insurance companies restored their capital to pre-crisis levels by the end of With the continuation of the gradual recovery of the global economy, it is likely the insurance industry will continue to see growth in premium income both in industrialised countries and emerging markets in Advanced economies account for the bulk of global insurance.
Europe has however seen a decline in premium income during the year in contrast to the growth seen in North America and Asia. The top four countries generated more than a half of premiums. Their markets are however growing at a quicker pace. In the United States, insurance is regulated by the states under the McCarran-Ferguson Act , with "periodic proposals for federal intervention", and a nonprofit coalition of state insurance agencies called the National Association of Insurance Commissioners works to harmonize the country's different laws and regulations. In the European Union , the Third Non-Life Directive and the Third Life Directive, both passed in and effective , created a single insurance market in Europe and allowed insurance companies to offer insurance anywhere in the EU subject to permission from authority in the head office and allowed insurance consumers to purchase insurance from any insurer in the EU.
The insurance industry in China was nationalized in and thereafter offered by only a single state-owned company, the People's Insurance Company of China , which was eventually suspended as demand declined in a communist environment. In , market reforms led to an increase in the market and by a comprehensive Insurance Law of the People's Republic of China  was passed, followed in by the formation of China Insurance Regulatory Commission CIRC , which has broad regulatory authority over the insurance market of China. Insurance is just a risk transfer mechanism wherein the financial burden which may arise due to some fortuitous event is transferred to a bigger entity called an Insurance Company by way of paying premiums.
This only reduces the financial burden and not the actual chances of happening of an event. Insurance is a risk for both the insurance company and the insured. The insurance company understands the risk involved and will perform a risk assessment when writing the policy. As a result, the premiums may go up if they determine that the policyholder will file a claim.
If a person is financially stable and plans for life's unexpected events, they may be able to go without insurance. However, they must have enough to cover a total and complete loss of employment and of their possessions.
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Some states will accept a surety bond, a government bond, or even making a cash deposit with the state. An insurance company may inadvertently find that its insureds may not be as risk-averse as they might otherwise be since, by definition, the insured has transferred the risk to the insurer , a concept known as moral hazard. This 'insulates' many from the true costs of living with risk, negating measures that can mitigate or adapt to risk and leading some to describe insurance schemes as potentially maladaptive.
For example, life insurance companies may require higher premiums or deny coverage altogether to people who work in hazardous occupations or engage in dangerous sports. Liability insurance providers do not provide coverage for liability arising from intentional torts committed by or at the direction of the insured. Even if a provider desired to provide such coverage, it is against the public policy of most countries to allow such insurance to exist, and thus it is usually illegal.
Insurance policies can be complex and some policyholders may not understand all the fees and coverages included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted detailed statutory and regulatory regimes governing every aspect of the insurance business, including minimum standards for policies and the ways in which they may be advertised and sold.
For example, most insurance policies in the English language today have been carefully drafted in plain English ; the industry learned the hard way that many courts will not enforce policies against insureds when the judges themselves cannot understand what the policies are saying. Typically, courts construe ambiguities in insurance policies against the insurance company and in favor of coverage under the policy. Many institutional insurance purchasers buy insurance through an insurance broker.
While on the surface it appears the broker represents the buyer not the insurance company , and typically counsels the buyer on appropriate coverage and policy limitations, in the vast majority of cases a broker's compensation comes in the form of a commission as a percentage of the insurance premium, creating a conflict of interest in that the broker's financial interest is tilted towards encouraging an insured to purchase more insurance than might be necessary at a higher price.
A broker generally holds contracts with many insurers, thereby allowing the broker to "shop" the market for the best rates and coverage possible. Insurance may also be purchased through an agent. A tied agent, working exclusively with one insurer, represents the insurance company from whom the policyholder buys while a free agent sells policies of various insurance companies. Just as there is a potential conflict of interest with a broker, an agent has a different type of conflict.
Because agents work directly for the insurance company, if there is a claim the agent may advise the client to the benefit of the insurance company.
Agents generally cannot offer as broad a range of selection compared to an insurance broker. An independent insurance consultant advises insureds on a fee-for-service retainer, similar to an attorney, and thus offers completely independent advice, free of the financial conflict of interest of brokers or agents. However, such a consultant must still work through brokers or agents in order to secure coverage for their clients.
In the United States, economists and consumer advocates generally consider insurance to be worthwhile for low-probability, catastrophic losses, but not for high-probability, small losses. Because of this, consumers are advised to select high deductibles and to not insure losses which would not cause a disruption in their life. However, consumers have shown a tendency to prefer low deductibles and to prefer to insure relatively high-probability, small losses over low-probability, perhaps due to not understanding or ignoring the low-probability risk.
This is associated with reduced purchasing of insurance against low-probability losses, and may result in increased inefficiencies from moral hazard. Redlining is the practice of denying insurance coverage in specific geographic areas, supposedly because of a high likelihood of loss, while the alleged motivation is unlawful discrimination. Racial profiling or redlining has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry.
In July , The Federal Trade Commission FTC released a report presenting the results of a study concerning credit-based insurance scores in automobile insurance.
The study found that these scores are effective predictors of risk. It also showed that African-Americans and Hispanics are substantially overrepresented in the lowest credit scores, and substantially underrepresented in the highest, while Caucasians and Asians are more evenly spread across the scores. The credit scores were also found to predict risk within each of the ethnic groups, leading the FTC to conclude that the scoring models are not solely proxies for redlining. The FTC indicated little data was available to evaluate benefit of insurance scores to consumers.
All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available. In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores , gender , occupation , marital status , and education level. However, the use of such factors is often considered to be unfair or unlawfully discriminatory , and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.
An insurance underwriter's job is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes a greater likelihood of loss should theoretically be charged a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent. Older people are thus treated differently from younger people i. The rationale for the differential treatment goes to the heart of the risk a life insurer takes: Old people are likely to die sooner than young people, so the risk of loss the insured's death is greater in any given period of time and therefore the risk premium must be higher to cover the greater risk.
New assurance products can now be protected from copying with a business method patent in the United States. A recent example of a new insurance product that is patented is Usage Based auto insurance. Early versions were independently invented and patented by a major US auto insurance company, Progressive Auto Insurance U.
Many independent inventors are in favor of patenting new insurance products since it gives them protection from big companies when they bring their new insurance products to market. Many insurance executives are opposed to patenting insurance products because it creates a new risk for them.
There are currently about new patent applications on insurance inventions filed per year in the United States. The rate at which patents have been issued has steadily risen from 15 in to 44 in The first insurance patent to be granted was  including another example of an application posted was US "risk assessment company". It was posted on March 6, This patent application describes a method for increasing the ease of changing insurance companies. Insurance on demand also IoD is an insurance service that provides clients with insurance protection when they need, i.
Certain insurance products and practices have been described as rent-seeking by critics. Under United States tax law , for example, most owners of variable annuities and variable life insurance can invest their premium payments in the stock market and defer or eliminate paying any taxes on their investments until withdrawals are made. Sometimes this tax deferral is the only reason people use these products. Muslim scholars have varying opinions about life insurance.
Some argue that gharar is not present due to the actuarial science behind the underwriting. Some Christians believe insurance represents a lack of faith   and there is a long history of resistance to commercial insurance in Anabaptist communities Mennonites , Amish , Hutterites , Brethren in Christ but many participate in community-based self-insurance programs that spread risk within their communities.
From Wikipedia, the free encyclopedia. For other uses, see Insurance disambiguation. Main article: History of insurance. Main article: Insurability. Main article: Indemnity. Play media. Main article: Vehicle insurance. Main article: Gap insurance. Main articles: Health insurance and Dental insurance. Main article: Casualty insurance.
Main article: Life insurance. Main article: Property insurance. Main article: Liability insurance. Main article: Payment protection insurance. This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Main article: Mutual insurance.
Main article: Captive insurance. Main article: Insurance law. This article needs to be updated. Please update this article to reflect recent events or newly available information. January Further information: Insurance patent. Oxford Dictionary of National Biography. Archived from the original on 15 July Retrieved 16 February The company, called the Amicable Society for a Perpetual Assurance Office, collected annual premiums from policyholders and paid the nominees of deceased members from a common fund.
Retrieved Archived from the original on The National Archives, Luengo, David A.
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His recent research has focused on the transformations of the religious field in the Chinese world; on the globalization of Daoism; and on volunteering, faith-based social engagement and civil society. Her research interests include culture, economic practices, healthcare, globalization, new social movements, and Chinese societies. He received his doctoral degree from the University of Nevada, Las Vegas. His book, Making Activists in Global China, compares two diaspora Chinese social movements to understand how religion, globalization, and social movement activism intersect.
He is currently the Richard A. Petersburg State University. His research focuses on immigration, social integration, and civil society. His publications also include numerous works in the sociology of religion and on citizenship. Her research interests are cultural sociology, civil society, urban space, and Hong Kong culture and politics.
Her research interests focus on culture and civil society, especially the relationship between economy and civil sphere. She has investigated the role of culture within informatization discourse. Her most recent research concerns an ethnography of public places, in which she examines how strangers use a variety of cultural structures in order to construct an interaction order. He received his Ph. His primary teaching interests include political sociology, contemporary theories of democracy, social and health policy, and historical sociology.
He has organized many events of civic deliberations sponsored by governments, and is writing a book on the practice of deliberative democracy in Taiwan.