Men have long sought a way to insure their property so as not to lose everything in the event of a problem. And if it has experienced significant changes since its creation in 1700 BC, in Babylonian society, the role of insurance has not really changed. Insurance always aims to protect, despite the different forms of contracts that exist today.
- Definition Of Insurance.
- Classification Of Different Insurances.
- What Are The Roles Of Insurance?
What is insurance?
Simply put, insurance is a mechanism that allows a person (natural or legal) to protect themselves from the financial and economic consequences engendered by the occurrence of a risk. By the insurance contract, the insurer undertakes to provide a service for the benefit of the insured when a risk arises. The insured undertakes to pay a premium or a contribution.
In France, there are 3 types of organizations offering insurance services. They are governed by separate legislation:
Insurance companies which are governed by the Insurance Code;
Mutuals which fall under the Mutuality Code;
Provident institutions which fall under the Social Security Code.
However, it should be noted that the insurance world is not limited to only insurers, many other players work there: general insurance agents, insurance experts, brokers, etc.
Insurance can be classified by taking into account several criteria of distinction. The most common classification is based on the obligations of the insurer at the time of execution of the contract. Thus, there are:
Non-life insurance in which the insurer must compensate the victim for the effects of a disaster and offer compensation proportional to the cost of the damage. Within these insurances, a distinction must be made between property insurance (compensation for damage which may be suffered by the property of a third party and covering damage suffered by the insured’s property) and liability insurance (compensation damage to others);
Personal insurance in which the insurer pays a sum, the amount of which is contractually established at the time of the occurrence of a risk affecting the life of the insured or the policyholder. These insurances can also be divided into 2 subcategories: life insurance (death insurance, life insurance, mixed insurance) and non-life insurance (health insurance, personal injury insurance).
The advantage of the distinction between damage and personal insurance is that damage insurance is based on an indemnity principle while personal insurance is based on a flat-rate principle (enrichment).
The roles of Insurance:
In addition to protecting people, insurance plays a relatively important role in the economy because it makes trade relations more reliable, reassures investors in the national economy and encourages investment.
The role of insurance is also social, given that the sums paid to the insured as well as to the beneficiaries allow the latter to maintain their income, safeguard their assets, reduce social protection services, keep their jobs and to energize the economic fabric.