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Insurance Institutions

Insurance Institutions I. Introduction A. Type of Insurance 1. Social Insurance 2. Private Insurance American System Life Insurance Property/Casualty Insurance European System B. Risk 1. Outcome Pure Risk The outcome can only be a loss or no loss with no possibility for gain.

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Insurance Institutions

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  1. Insurance Institutions

  2. I. Introduction A. Type of Insurance 1. Social Insurance 2. Private Insurance • American System • Life Insurance • Property/Casualty Insurance • European System

  3. B. Risk 1. Outcome • Pure Risk The outcome can only be a loss or no loss with no possibility for gain. • Speculative Risk Uncertainty about an event could result in either a gain or a loss.

  4. 2. Insurability • Statistical Concepts • Law of Large Numbers • Measurable Objective Risk Objective risk is the deviation of actual losses from expected losses and can be measured statistically.

  5. Commercial Insurability • Homogeneous exposure units There is a large number of homogeneous exposure units so that losses can be predicted on the law of large numbers. • Accidental and unintentional occurrence The law of large numbers is based on randomness.

  6. Identifiable circumstances of loss The time, location, cause, and amount should be identifiable. • Calculable probability of loss The is required for the purpose of calculating premium.

  7. Non-catastrophic loss A large portion of the exposure units should not experience a loss at the same time. • Affordable premium This is to ensure a sizable market.

  8. II. Life Insurance Companies A. Industry Structure 1. Insurers • By Organizational Form • Stock Life Insurance Companies • Mutual Life Insurance Companies • Fraternal Life Insurance Companies • Government Agencies • Mutual Savings Banks

  9. By Reserve Requirement • Legal Reserve Companies • Assessment Insurance Companies • By Reinsurance • Primary Companies (Ceding Companies) • Reinsurance Companies

  10. 2. Distribution Network • Branch Offices • General Agencies • Direct Mail

  11. B. Financial Operations 1. Life Insurance Policies • By Purpose • Risk

  12. Term Insurance • Duration 1-year, 3-year, 5-year, 10-year • Face Amount Constant term, decreasing term, increasing term • Expiration Protection Renewable term, convertible term

  13. Risk/Investment • Endowment Life • Whole Life (Straight Life) • Variable Life • Universal Life • Variable Universal Life (Universal Life II) • Single Premium Life

  14. By Market Segment • Individual Life (Ordinary Life) • Business Life • Group Life • Credit Life • Industrial Life (Home Service Life)

  15. By Dividend Received • Participating Contract (rec. dividends) • Non-Participating Contract (no dividend)

  16. 2. Annuity 3. Health Insurance 4. Investments • Corporate Bonds • Mortgages • Government Securities

  17. C. Regulations • National Association of Insurance Commissioners (NAIC) • Insurance Regulatory Information System

  18. III. Property/Casualty Insurance Companies A. Industry Structure 1. Insurers • By Ownership • Stock Companies • Mutual Companies • Reciprocals (Interinsurance Exchanges) • Domestic Lloyd

  19. By Corporate Control • Independent Companies • Captive Companies

  20. By Premium Assessment • Assessment Companies • Non-Assessment Companies

  21. By Reinsurance • Primary Companies (Ceding Companies) • Reinsurance Companies

  22. 2. Distribution Network • Branch Offices • General Agencies • Direct Mail

  23. B. Financial Operations 1. Property/Liability Policies • By Parties Covered • First Person Insurance • Third Party Liability Insurance

  24. By Pattern of Loss Payments • Short-Tailed Insurance Lines • Long-Tailed Insurance Lines

  25. By Risk Category • Property Insurance • Named Peril Policies A named peril policy cover perils that are specifically named, such as lightning, flood, theft, etc.

  26. All-Risk Policies (Open Perils) An all risk policy protect the insured against loss from all perils except those specifically excluded.

  27. Liability Insurance • Marine Insurance • Ocean Marine Insurance • Inland Marine Insurance • Multiline Policies A multiline policy contain both property and liability insurance coverages. Examples include homeowner’s policies and personal auto policies.

  28. Surety Insurance • Fidelity Insurance

  29. 2. Health Insurance 3. Investments • Corporate stocks • Revenue bonds • Corporate bonds • U. S. government securities C. Regulations

  30. IV. Trends A. Bancassurance • Cross-Sectoral Investing (i.e., crossing industry lines) • Interpenetration of Markets (i.e., merges and acquisitions) • Cooperative Arrangement (i.e., cooperating between independent banks and insurance companies)

  31. B. Cross-Border Activities • Mergers and Acquisitions • Branching

  32. V. Social Insurance A. Institutions • Social Security Administration, Department of Health and Human Services • Bureau of Employment Security, Department of Labor • Bureau of Employees’ Compensation, Department of Labor

  33. B. Financial Operations • Old-Age, Survivor, Disability, and Health Insurance (OASDHI) • Unemployment Insurance • Worker’s Compensation

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