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Life is full of unexpected risks or unexpected, that's why we need to understand about insurance. Some
natural events that occurred in recent years and take a lot of
casualties, both fatalities and property, such as reminding us of the
need for insurance. For
every member of society, including the business, the risk for
experiencing disadvantage (misfortune) like this always (Kamaluddin:
2003). In order to overcome the losses, human develop mechanisms which we now know as insurance.
The main function of insurance is a mechanism to transfer risk (risk transfer mechanism), which transfer risk from one party (the insured) to another party (the insurer). Risk aversion is by no means eliminates the possibility of misfortune, but the insurer to provide financial security (financial security) and tranquility (peace of mind) to the insured. In return, the insured pays the premium in a very small number when compared to the potential losses that may be suffered (Morton: 1999).
Basically, an insurance policy is a contract that is a valid agreement between the insurer (in this case the insurance company) with the insured, where the insurer was willing to bear some losses that may arise in the future in return for payment (premium) of a particular insured.
According to Law No.. 2 of 1992, which referred to the insurance or coverage is an agreement between two or more parties, by which the parties committed themselves to the insured, by accepting the insurance premiums to provide reimbursement to the insured for loss, damage or loss of expected benefits, or legal liability to third parties that may be suffered by the insured, arising from an uncertain events, or to provide a payment based on the death or life of an insured person.
In order for a potential loss (which may happen) can be insured (insurable) then it must have the following characteristics: 1) the loss of uncertainty, 2) losses should be limited, 3) had significant losses, 4) loss ratio can be predictable and 5) loss is not catastrophic (disaster) for the insurer.
The question arises, death is a sure thing, why be insured? Even though it is something that contains certainty, but when exactly when someone's death is beyond the control of that person. So that when the moment of death that actually contain uncertainty is what causes it insurable.
There are two forms of agreement in determining the amount of the payment at maturity of insurance, namely: contract value (valued contract) and the indemnity contract (contract of indemnity). Value of the contract is an agreement in which the amount of payment has been determined in advance. For example, the value of the sum assured (UP) in life insurance. Indemnity contract is an agreement based on the number santunannya amount of actual financial loss. For example, the cost of hospital care.
In the case of insurance companies trying to suppress the possibility of a fatal loss / large, then it can transfer the risk to another insurance company. It is called reinsurance companies that accept named reinsurers.
In addition to the five characteristics above, before it can be insured, the insurance company should consider the insurable interest and anti-selection. Insurable interest relating to the relationship between the insured and the recipient of compensation / benefits - in terms of loss potential. Example, the insurance company will not sell fire insurance policy to parties other than the owner of the building is insured. Insurable interest in this example is the ownership of an eye something that is insured. Similarly, family relationships, financial linkages are unwarranted, is also a form of insurable interest. The definition of anti-selection (counter selection) refers to the existence of a greater tendency to take insurance because it has a level of risk above average. Example, people who have a record of poor health or risk dangerous jobs tend to want to buy insurance. To reduce anti-selection effect, the insurance company should be able to identify and classify potential risks or losses. The process of identification and classification of the level of risk is called underwriting or risk selection. But that does not mean anti-selection led to the filing of insurance was denied, because the risk of loss to the insured than average premiums can be sub-standard (special premium) due to sub-standard risk (specific risk) unless the possibility of loss is much higher, perhaps the insurance application was rejected.
History of Insurance
Insurance originated from the people of Babylon 4000-3000 BC, known as Hammurabi agreement. Later in 1668 AD at the Coffee House Lloyd's of London London stands as the forerunner of conventional insurance. Sources of insurance law is a positive law, natural law and existing examples as culture.
Insurance brings economic as well as social mission with the premiums paid to the insurance company to guarantee the transfer of risk, namely the transfer (transfer) the risk of the insured to the insurer. Insurance as a risk transfer mechanism whereby an individual or a business move some uncertainty in exchange for premium payments. The definition of risk here is uncertainty whether or not a loss occurs (the uncertainty of loss).
Insurance in Indonesia started in the Dutch colonial period, associated with the success of the country's companies in the plantation sector and trade in Indonesia. To meet the needs assurance of continuity of business, certainly needed the insurance. Development of insurance industry in Indonesia had a vacuum during the Japanese colonial period.
Insurance needs can be filled by the Life Insurance
1) Personal Needs, including: provision of final living expenses such as costs associated with death, the cost of debt or bill payments in the form of loans that must be repaid; family allowance, costs of education, and pensions. In addition, life insurance policy that has a cash value can be used as a savings or investment.
2) Business Requirements, such as: insurance on key persons (insurance for the important people in the company); insurance on business owners (insurance for business owners); employee benefit (employee benefits) for example, a collection of life and health insurance.
source: Morton, G. (1999). Principles of Life and Health Insurance. LOMA.
The main function of insurance is a mechanism to transfer risk (risk transfer mechanism), which transfer risk from one party (the insured) to another party (the insurer). Risk aversion is by no means eliminates the possibility of misfortune, but the insurer to provide financial security (financial security) and tranquility (peace of mind) to the insured. In return, the insured pays the premium in a very small number when compared to the potential losses that may be suffered (Morton: 1999).
Basically, an insurance policy is a contract that is a valid agreement between the insurer (in this case the insurance company) with the insured, where the insurer was willing to bear some losses that may arise in the future in return for payment (premium) of a particular insured.
According to Law No.. 2 of 1992, which referred to the insurance or coverage is an agreement between two or more parties, by which the parties committed themselves to the insured, by accepting the insurance premiums to provide reimbursement to the insured for loss, damage or loss of expected benefits, or legal liability to third parties that may be suffered by the insured, arising from an uncertain events, or to provide a payment based on the death or life of an insured person.
In order for a potential loss (which may happen) can be insured (insurable) then it must have the following characteristics: 1) the loss of uncertainty, 2) losses should be limited, 3) had significant losses, 4) loss ratio can be predictable and 5) loss is not catastrophic (disaster) for the insurer.
The question arises, death is a sure thing, why be insured? Even though it is something that contains certainty, but when exactly when someone's death is beyond the control of that person. So that when the moment of death that actually contain uncertainty is what causes it insurable.
There are two forms of agreement in determining the amount of the payment at maturity of insurance, namely: contract value (valued contract) and the indemnity contract (contract of indemnity). Value of the contract is an agreement in which the amount of payment has been determined in advance. For example, the value of the sum assured (UP) in life insurance. Indemnity contract is an agreement based on the number santunannya amount of actual financial loss. For example, the cost of hospital care.
In the case of insurance companies trying to suppress the possibility of a fatal loss / large, then it can transfer the risk to another insurance company. It is called reinsurance companies that accept named reinsurers.
In addition to the five characteristics above, before it can be insured, the insurance company should consider the insurable interest and anti-selection. Insurable interest relating to the relationship between the insured and the recipient of compensation / benefits - in terms of loss potential. Example, the insurance company will not sell fire insurance policy to parties other than the owner of the building is insured. Insurable interest in this example is the ownership of an eye something that is insured. Similarly, family relationships, financial linkages are unwarranted, is also a form of insurable interest. The definition of anti-selection (counter selection) refers to the existence of a greater tendency to take insurance because it has a level of risk above average. Example, people who have a record of poor health or risk dangerous jobs tend to want to buy insurance. To reduce anti-selection effect, the insurance company should be able to identify and classify potential risks or losses. The process of identification and classification of the level of risk is called underwriting or risk selection. But that does not mean anti-selection led to the filing of insurance was denied, because the risk of loss to the insured than average premiums can be sub-standard (special premium) due to sub-standard risk (specific risk) unless the possibility of loss is much higher, perhaps the insurance application was rejected.
History of Insurance
Insurance originated from the people of Babylon 4000-3000 BC, known as Hammurabi agreement. Later in 1668 AD at the Coffee House Lloyd's of London London stands as the forerunner of conventional insurance. Sources of insurance law is a positive law, natural law and existing examples as culture.
Insurance brings economic as well as social mission with the premiums paid to the insurance company to guarantee the transfer of risk, namely the transfer (transfer) the risk of the insured to the insurer. Insurance as a risk transfer mechanism whereby an individual or a business move some uncertainty in exchange for premium payments. The definition of risk here is uncertainty whether or not a loss occurs (the uncertainty of loss).
Insurance in Indonesia started in the Dutch colonial period, associated with the success of the country's companies in the plantation sector and trade in Indonesia. To meet the needs assurance of continuity of business, certainly needed the insurance. Development of insurance industry in Indonesia had a vacuum during the Japanese colonial period.
Insurance needs can be filled by the Life Insurance
1) Personal Needs, including: provision of final living expenses such as costs associated with death, the cost of debt or bill payments in the form of loans that must be repaid; family allowance, costs of education, and pensions. In addition, life insurance policy that has a cash value can be used as a savings or investment.
2) Business Requirements, such as: insurance on key persons (insurance for the important people in the company); insurance on business owners (insurance for business owners); employee benefit (employee benefits) for example, a collection of life and health insurance.
source: Morton, G. (1999). Principles of Life and Health Insurance. LOMA.
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