Insurance is the business of spreading risk, allowing people to pay a small amount of money for the peace of mind that if something went wrong – flood, fire or accident for example, they would be financially compensated. It doesn’t matter whether it is auto insurance (car insurance), home insurance, health insurance, truck insurance, boat insurance, life insurance, dental insurance, medical insurance or house insurance, they are all doing the same thing.
It is an industry at the heart of the global economy and everyday life. Without it, the world would look very different.
Would the satellites that allow our mobile phones to operate and our favourite TV shows to be broadcast ever be launched if their loss wasn’t insured? Would international trade have developed so far if container ships weren’t covered against hurricanes and storms? Would Hollywood blockbusters ever get made if there was no-one there to insure the producers in case a star got injured, or filming was delayed?
How insurance companies operate
Insurance companies use the ‘law of large numbers’ to collect premiums from the many and return it to those that need it following an accident or loss.
Insurance companies assess the probability of an event occurring and then create appropriate prices called premiums, to charge customers for insuring against particular types of risk. The premiums need to be both competitive in the market and high enough to cover any payouts or ‘claims’. Insurance firms then invest the premium money to enhance profits.
To deliver this service insurers require a workforce with a diverse mix of skills, which in turn lead to a wide range of professional careers.
Here at “Insurance Advice Online” we will explain the who, what, where & why of insurance, so you never have to feel confused or disenfranchised.