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What is Insurance? 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 or uncertain loss. Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party. An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship. How Insurance Works There is a multitude of different types of insurance policies available, and virtually any individual or business can find an insurance company willing to insure them—for a price. The most common types of personal insurance policies are auto, health, homeowners, and life. Most individuals in the United States have at least one of these types of insurance, and car insurance is required by law. Businesses require special types of insurance policies that insure against specific types of risks faced by a particular business. For example, a fast-food restaurant needs a policy that covers damage or injury that occurs as a result of cooking with a deep fryer. An auto dealer is not subject to this type of risk but does require coverage for damage or injury that could occur during test drives. Types of Insurance Any risk that can be quantified can potentially be insured. The following includes major ypes of insurance; Life Insurance or Personal Insurance. Property Insurance. Marine Insurance. Fire Insurance. Liability Insurance. Guarantee Insurance. Social Insurance. Benefits of Insurance 1. Provide safety and security: Insurance provide financial support and reduce uncertainties in business and human life. It provides safety and security against particular event. There is always a fear of sudden loss. Insurance provides a cover against any sudden loss. For example, in case of life insurance financial assistance is provided to the family of the insured on his death. In case of other insurance security is provided against the loss due to fire, marine, accidents etc. 2. Generates financial resources: Insurance generate funds by collecting premium. These funds are invested in government securities and stock. These funds are gainfully employed in industrial development of a country for generating more funds and utilised for the economic development of the country. Employment opportunities are increased by big investments leading to capital formation. 3. Life insurance encourages savings: Insurance does not only protect against risks and uncertainties, but also provides an investment channel too. Life insurance enables systematic savings due to payment of regular premium. Life insurance provides a mode of investment. It develops a habit of saving money by paying premium. The insured get the lump sum amount at the maturity of the contract. Thus life insurance encourages savings. 4. Promotes economic growth: Insurance generates significant impact on the economy by mobilizing domestic savings. Insurance turn accumulated capital into productive investments. Insurance enables to mitigate loss, financial stability and promotes trade and commerce activities those results into economic growth and development. Thus, insurance plays a crucial role in sustainable growth of an economy. 5. Medical support: A medical insurance considered essential in managing risk in health. Anyone can be a victim of critical illness unexpectedly. And rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for different type of health risks. The insured gets a medical support in case of medical insurance policy. 6. Spreading of risk: Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of insurance is to spread risk among a large number of people. A large number of persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out of funds of the insurer. 7. Source of collecting funds: Large funds are collected by the way of premium. These funds are utilised in the industrial development of a country, which accelerates the economic growth. Employment opportunities are increased by such big investments. Thus, insurance has become an important source of capital formation. Career Opportunities in Insurance Actuary Actuaries assess risk so they can set premiums. They usually specialize in one type of insurance. For instance, property insurance actuaries will analyze data about natural disasters to determine how much the insurance company would have to pay out in benefits should an earthquake occur. This helps the company set appropriate premiums so it can remain profitable even if disaster strikes. Claims Adjuster When an insured person needs to make a claim — perhaps due to a car accident, home theft or earthquake damage — the insurance company must assess the damage and compensate the insured person. To do this, an adjuster conducts interviews, inspects the scene and gathers other information to get a clear sense of what happened. This information is reported to a claims examiner (see below). The adjuster then makes a specific offer to the claimant for how much the company will pay. If this amount is rejected, the adjuster works with company lawyers to back up the company’s position. However, some adjusters are hired directly by claimants; their goal is to get larger offers than those offered by insurance companies. Claims Examiner Examiners work closely with claims adjusters. They review submitted claims to determine whether they should be paid or denied. Their main job, then, is to decide whether claims are reasonable; they leave the precise compensation to claims adjusters. Insurance Claims and Policy Processing Clerk Clerks do administrative work, processing policies that are bought by customers as well as claims that are made. They make sure that records are up to date so that their colleagues — adjusters, sales agents, underwriters and others — are working with accurate information. Insurance Investigator If the examiner believes a claim to be suspicious, she or he refers the case to an investigator, whose role is to protect the company from suspected insurance fraud. An investigator may, for instance, do initial research to find out if a house fire was the result of arson, which would constitute fraud and void the claim. Insurance Sales Agent As the name implies, insurance sales agents sell insurance policies of all types to customers. They work in three general areas: property and casualty insurance; life insurance; and health insurance. Their goal is to help customers purchase a plan that suits their needs, whether it is a business who needs to insure against product liability or an individual who needs to cover a car against theft. Agents help customers consider premium costs, deductibles and other financial considerations. Agents can either work for one insurance company or they can work for brokerages, in which case they show individual clients options from multiple companies and pair them with the best one for them. Insurance Underwriter Whereas actuaries look at risks broadly, underwriters apply these risks to specific cases, assessing the likelihood that the insurance company will profit by selling insurance to a person or business. For instance, they judge whether to provide insurance to a homeowner who lives in an area prone to fires or whether to provide auto insurance to a driver with a history of accidents. Underwriters must balance risk and reward. If they do not issue insurance, the company loses out on income from premiums. If they do, the insurance company may lose money if a claim is made.

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