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Insurance

Insurance. This presentation is based on ARGE Commerce ( 2003): Insurance, Manz Verlag Schulbuch, Wien Mag. Maria Peer. Economic Importance. Businesses and individuals face risks – fire , lawsuits , natural disasters , theft , illness , business interruption , accidents , death

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Insurance

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  1. Insurance This presentation isbased on ARGE Commerce (2003): Insurance, Manz Verlag Schulbuch, Wien Mag. Maria Peer

  2. EconomicImportance • Businessesandindividualsfacerisks– fire, lawsuits, naturaldisasters, theft, illness, businessinterruption, accidents, death • Controlthefinancialaspectsofthefuture • Contractualagreement– onepartyagreestocompensatetheotherpartyforlosses • Insurerchargestheinsured a price – theinsurance premium • Transformation ofrisksintocosts

  3. The poolingofrisk • Insurance based on theideathat a certainrisk • Occursonlyrarely in a lifetimeof a singleperson – • amountsto a higherfrequence, ifyouregard 10,000 people • The insuredpaypremiuminto a commonpool – themoneycollectedisusedto • Pay compensation • Cover administrative costs • Buildupreservesforunforeseeablerisks • Earn a profitfortheinsurancecompany

  4. Insurable – uninsurablerisks

  5. The insurance premium • Whatthepolicy holder hastopaytotheinsurerfortaking on theinsurancecoverageof a risk. Premium consistsof • Risk premium • Administration costs • Organisation costs • Safe premium (lifeinsurance) • Additionalfees

  6. Howarepremiumsfixed? • Howlikelyisitthat a certaindamageoccurs (e.g. a broken leg in a skiingaccident) • Probabilityoflosscanbeestimatedusingrecords • The highertherisk, thehighertheamountofthepremium • Nocoverageofrisksarisingas a resultof war, tradinglossesoractsofGod

  7. Re-insuranceand Co-insurance • Re-insurance:sharingriskswhicharetoo large foroneinsurer – taking out insurancewithotherinsurancecompanies • Co-insurance: sharingrisks, a fewinsurersparticipate in theissueofonepolicytogether • thepolicy holder isinformedaboutthedivisionoftherisk • directinsurersare registered in thepolicywiththeirsharesoftherisk • Theygetpartofthepremium • The leadinginsurancecompanytakesoverthemanagement

  8. Insurance contractparties • Insurer: partywhotakes on theinsurancecoverageof a riskagainstpaymentof a premium • Policy holder: partywhowishestheinsurancecompanytotake on theinsurancecoverage – fulfilsthedutytopaythe premium • Insured: policy holder orcontractistaken in favourof a thirdperson • Beneficiary: with a lifeoraccidentinsurance, policy holder canappointoneormorepersonswhoshouldgetthecompensation • Claimant: thepersontowhomthepolicy holder must paythecompensation. The policy holder claimscoveragefromtheinsurer

  9. The policy • Documentabouttheinsurancecontract – pieceofevidencethat an insurancecontracthasbeentaken out + contentofthecontract • Basically an insurancepolicyshows:

  10. Questions • Who cangiveyouinformationabouttaking out insurance? • Whatis an insurancepolicyandwhatisshown on it? • Howarepremiumscalculated? • Discusshowre-insuranceworksandwhatroleitplays in thesolvencyoftheinsuranceindustry? • Can all risksbeinsured? • Explainthebasicconceptofinsurance.

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