What Is Insurance

 As we know, one of the ways of risk prevention is risk insurance for the insurance company. This method is considered the most important risk management method. Therefore, many people think that risk management is the same as insurance. Even if the actual circumstances are not like that.

Insurance means an insurance transaction involving two parties, the insured and the insurer. If the insurer guarantees to the insured person that he will be compensated for the damage that he may suffer as a result of an event that would not necessarily occur or that could not be determined when or when it occurred. Since the insured has an obligation to pay some money to the insurer, the amount is a proportional part of the sum insured, commonly called the "premium".

Viewed from several angles, insurance has different goals and distribution techniques, including:

A. From an economic point of view:

Target:

Reducing the uncertainty of the results of operations carried out by a person or company in order to fulfill needs or achieve goals.

Technique:

By transferring the risk to the other party and the other party pooling a significant amount of risk, the size of the possibility of loss can be estimated more accurately.

B. In terms of law then:

Target:

Transferring the risks faced by an object or business activity to another party.

Technique:

The risk is then transferred to the insurer through premium payments to the insured in the contract of insurance performance (insurance contract).

C. In the case of trade, then:

Target:

Share the risks they face with all policy participants.

Technique:

Transferred risk from individuals / companies to financial institutions engaged in risk management (insurance companies), which will share the risk with all insurance participants that they manage.

D. From a social point of view:

Target:

Losses are borne jointly by all participants in the insurance program.

Technique:

All members of the group (members of the group) of the insurance program contribute (in the form of premiums) to cover losses suffered by any of its members.

E. As for mathematics, then:

Target:

The prediction of the size of the risk possibility and the result of the forecast serves to distribute the risk to all participants (group of participants) of the insurance program.

Technique:

It calculates the probability based on the theory of probability ("Probability Theory") performed by both the actuary and the underwriter.