Insurance Company- An Overview
Insurance is a form of risk management primarily used to hedge against the risk of continents, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance. The insured or policyholder is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance. Since insurance operates through pooling resources, the majority of insurance policies are providing for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to be actual losses. The loss takes place at a known time in a known place and from a known cause. The classic example is death of an insurance person on a life insurance policy. Fire, automobile accidents and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable.
The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter coasts may be times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer. Claims and loss handing is the materialized utility of insurance.
It is the actual product paid for claims may be filed by insured’s directly with the insurer or through brokers or agents. The insurer may require that the claim be filed on its own proprietary from or may accept claim on a standard industry form. Insurance company claims departments employ a large number of claim adjusters supported by a staff of records management and data entry clerks. Incoming claims are classified based on severity and are assigned to adjusters whose settlement authority varies with their knowledge and experience. The adjuster undertakes an investigation of each claim, usually in close cooperation with the insured, determines if overage is available under the terms of the insurance contract, and if so reasonable monetary value of the claim and authorizes payments. In managing the climes handing function insurance seek to balance the elements of customer satisfaction, administrative handling expenses and claims overpayment leakage.
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