What Exactly Is Insurance?| In this article you will know all about Insurance, Nature of Insurance, Benefit of Insurance, How to apply for Insurance, It is important to note that at the end of this article, you will come across additional relevant information that will help you grow stronger.
As we all know, insuring a risk to an insurance company is one method of risk prevention. This method is regarded as the most important in dealing with risk. As a result, many people confuse risk management with insurance. Despite the fact that this is not the case.
Insurance refers to the insurance transaction between two parties, the insured and the insurer. Where the insurer guarantees the insured person that he will be reimbursed for a loss incurred as a result of an event that would not necessarily occur or could not be determined when or if it occurred. As the insured is required to pay a portion of the sum insured to the insurer, this is referred to as the “premium.”
When viewed from various perspectives, insurance has a variety of goals and splitting techniques, including:
1) From an economic perspective, then:
The goal:
reducing the uncertainty of the outcomes of operations carried out by a person or company to meet needs or achieve goals
Technique:
By transferring the risk to the other party and the other party combining a significant amount of risk, the magnitude of the possibility of loss can be estimated more precisely.
2. In terms of Law, then:
The goal:
transferring the risks that an object or business activity faces to another party
Technique:
The risk is transferred to the insurer through premium payments made by the insured to the insurer in the indemnity contract (insurance policy).
3) In terms of Trade, then:
The goal:
Distribute the risks to all insurance program participants.
Technique:
Risk is transferred from individuals or businesses to financial institutions engaged in risk management (insurance companies), which will share the risk with all participants in the insurance it manages.
4). From a societal standpoint, then:
The goal:
Carry losses on behalf of all insurance program participants.
Technique:
All members of the insurance program’s group (group members) contribute (in the form of premiums) to compensate for losses suffered by one or more of its members.
5) In terms of Mathematics, then:
The goal:
Predict the magnitude of the risk, and the outcome of the forecast is used to divide the risk among all participants (group of participants) in the insurance program.
Technique:
Calculates the probability using probability theory (“Probability Theory”), which is performed by both the actuary and the underwriter.
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