Spread of Risk
- "The losses of few are shared among the many"
- A large pot into which all insureds place their premiums
- This pot provides for
... [Show More] payment for the losses of those who have claims
Basis of Credit System
Consumer access to insurance frees up credit
Eliminates Worry - Encourages Entrepreneurship
- Allows people to engage in many ventures w/o having to set money aside (for future losses)
- Premium (defined expenditure)
- Covers large but uncertain losses - making you _________.
Loss Prevention and Loss Reduction
- Nation-wide campaign to fight Insurance Fraud
- Industry works hard to prevent and reduce severity
Source of Employment and Investment Capital
- Insurers are major employers and investors
- Insurers employ or contract services from more than 100,000 people, including: independent brokers, adjusters, and actuaries.
- Car repair, construction, medicine, law, and accounting derive income from the settlement of insurance claims.
- Claims total billions annually.
Definition of Insurance
- "The undertaking by one person to indemnify another person against loss or liability for loss in respect of certain risk or peril to which the object of insurance may be exposed ... or to pay a sum of money or other thing of value upon the happening of a certain event."
Insurance ...
- Provides a means of shifting ones financial responsibility for a loss to another party.
Payment will be made only in the ...
- Event of the happening of a certain risk or peril.
Risk
- "The chance of financial loss to which the object of insurance may be exposed."
Insurance is purchased to ..
- Cover the chances of financial loss
Risk has also come to mean the ...
- "The object of insurance."
Peril
- "The cause of loss"
- i.e. fire, wind, or hail
Amount of Payment is restricted to the amount required to indemnify the insured
- purpose is to indemnify or compensate the victim of loss
Principle of Indemnity
- Ensures that people receive the actual amount of their loss, no more, no less.
- More than loss would enable people to profit
- To pay them less would result in incomplete indemnity
Insurance covers losses to which the object of insurance may be exposed
- Pay for losses which are both accidental and future.
- Not deliberate or already occurred.
The indemnity provided can be in the form of ...
- a sum of money
- a thing of value
- the Insurance company always has the right to settle a claim on the basis of repair as opposed to payment
Property and Casualty Insurance in Canada
- Automobile insurance
- Property insurance
- Liability insurance
Automobile Insurance
- Largest single class of property and casualty insurance with premiums exceeding those for all other classes combined.
Property Insurance
- Habitational and business properties represent the second largest source of premiums to insurers.
Liability Insurance
- Provides protection when insureds are financially responsible for injury or damage they cause to others.
- Third major source of income to insurers
Organizations of Insurance
- Private insurance companies
- Government insurers
Private Insurers
(a) Stock Companies
(b) Mutual Companies
Stock Companies
- Most insurance written today = stock
- Operates through private funds or through public sale of stock
- Ownership is with the company's shareholders
- Their main purpose? "to derive a profit from their investment." [Show Less]