Definition of concept of Insurance
Individuals and businesses face risk,which is uncertainly concerning the occurrence of loss. Risk takes many form including the risk of premature death or poor health, the risk of damage to property, the risk of legal liability, and the risk of individual outliving their accumulated assets. Certain risks can simply be avoided. Other risks, however, must be effectively managed. Methods of dealing with these risk include retention, loss control and risk transfer.
The foundation for insurance business if Law of large numbers. This principal states that a risk that is not predictable for one person can be forecast accurately for a sufficiently large group of people with similar characteristics. No insurance company can accurately forecast when any person will die, but its actuarial estimates of the total number of policyholders who will die in any given year are usually quite accurate.
Insurance companies are financial intermediaries because: they collect and invest large amount of premiums; they provide means for accumulating saving and channelize these funds to various sectors; they even provide loans to the policyholders, they are non-banking financial institutions, because they are not directly involved in banking activities like deposits or other financial services. Insurance company are also the part of financial intermediaries, hence the study of their functions are playing significant role in the financial market. They are considered as the contractual saving institution due to their nature. Apart form handling risks of different markets, they are also the time bound financial contractor. They execute various financial functions that influence financial market of any country, Therefore, the regulatory authority always regulates their fund.
The insurance industry has enjoyed that most enviable records of long term growth of any of the financial institutions, Insurance is a key instruments in the industrial development, social development and moreover for economic growth!!!!!
Individuals and businesses face risk,which is uncertainly concerning the occurrence of loss. Risk takes many form including the risk of premature death or poor health, the risk of damage to property, the risk of legal liability, and the risk of individual outliving their accumulated assets. Certain risks can simply be avoided. Other risks, however, must be effectively managed. Methods of dealing with these risk include retention, loss control and risk transfer.
The foundation for insurance business if Law of large numbers. This principal states that a risk that is not predictable for one person can be forecast accurately for a sufficiently large group of people with similar characteristics. No insurance company can accurately forecast when any person will die, but its actuarial estimates of the total number of policyholders who will die in any given year are usually quite accurate.
Insurance companies are financial intermediaries because: they collect and invest large amount of premiums; they provide means for accumulating saving and channelize these funds to various sectors; they even provide loans to the policyholders, they are non-banking financial institutions, because they are not directly involved in banking activities like deposits or other financial services. Insurance company are also the part of financial intermediaries, hence the study of their functions are playing significant role in the financial market. They are considered as the contractual saving institution due to their nature. Apart form handling risks of different markets, they are also the time bound financial contractor. They execute various financial functions that influence financial market of any country, Therefore, the regulatory authority always regulates their fund.
The insurance industry has enjoyed that most enviable records of long term growth of any of the financial institutions, Insurance is a key instruments in the industrial development, social development and moreover for economic growth!!!!!
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