Insurance Institutions

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Insurance Institutions
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I. Introduction

• A. Type of Insurance
• 1. Social Insurance
• 2. Private Insurance
• American System
• Life Insurance
• Property/Casualty Insurance
• European System

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• B. Risk
• 1. Outcome
• Pure Risk
• The outcome can only be a loss or no loss with
  no possibility for gain.
• Speculative Risk
• Uncertainty about an event could result in
  either a gain or a loss.

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• 2. Insurability
• Statistical Concepts
• Law of Large Numbers
• Measurable Objective Risk
• Objective risk is the deviation of actual losses
  from expected losses and can be measured
  statistically.

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• Commercial Insurability
• Homogeneous exposure units
• There is a large number of homogeneous exposure
  units so that losses can be predicted on the law
  of large numbers.
• Accidental and unintentional occurrence
• The law of large numbers is based on randomness.

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• Identifiable circumstances of loss
• The time, location, cause, and amount should be
  identifiable.
• Calculable probability of loss
• The is required for the purpose of calculating
  premium.

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• Non-catastrophic loss
• A large portion of the exposure units should not
  experience a loss at the same time.
• Affordable premium
• This is to ensure a sizable market.

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II. Life Insurance Companies

• A. Industry Structure
• 1. Insurers
• By Organizational Form
• Stock Life Insurance Companies
• Mutual Life Insurance Companies
• Fraternal Life Insurance Companies
• Government Agencies
• Mutual Savings Banks

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• By Reserve Requirement
• Legal Reserve Companies
• Assessment Insurance Companies
• By Reinsurance
• Primary Companies (Ceding Companies)
• Reinsurance Companies

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• 2. Distribution Network
• Branch Offices
• General Agencies
• Direct Mail

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• B. Financial Operations
• 1. Life Insurance Policies
• By Purpose
• Risk

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• Term Insurance
• Duration
• 1-year, 3-year, 5-year, 10-year
• Face Amount
• Constant term, decreasing term, increasing term
• Expiration Protection
• Renewable term, convertible term

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• Risk/Investment
• Endowment Life
• Whole Life (Straight Life)
• Variable Life
• Universal Life
• Variable Universal Life (Universal Life II)
• Single Premium Life

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• By Market Segment
• Individual Life (Ordinary Life)
• Business Life
• Group Life
• Credit Life
• Industrial Life (Home Service Life)

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• By Dividend Received
• Participating Contract (rec. dividends)
• Non-Participating Contract (no dividend)

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• 2. Annuity
• 3. Health Insurance
• 4. Investments
• Corporate Bonds
• Mortgages
• Government Securities

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• C. Regulations
• National Association of Insurance Commissioners
  (NAIC)
• Insurance Regulatory Information System

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III. Property/Casualty Insurance Companies

• A. Industry Structure
• 1. Insurers
• By Ownership
• Stock Companies
• Mutual Companies
• Reciprocals (Interinsurance Exchanges)
• Domestic Lloyd

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• By Corporate Control
• Independent Companies
• Captive Companies

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• By Premium Assessment
• Assessment Companies
• Non-Assessment Companies

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• By Reinsurance
• Primary Companies (Ceding Companies)
• Reinsurance Companies

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• 2. Distribution Network
• Branch Offices
• General Agencies
• Direct Mail

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• B. Financial Operations
• 1. Property/Liability Policies
• By Parties Covered
• First Person Insurance
• Third Party Liability Insurance

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• By Pattern of Loss Payments
• Short-Tailed Insurance Lines
• Long-Tailed Insurance Lines

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• By Risk Category
• Property Insurance
• Named Peril Policies
• A named peril policy cover perils that are
  specifically named, such as lightning, flood,
  theft, etc.

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• All-Risk Policies (Open Perils)
• An all risk policy protect the insured against
  loss from all perils except those specifically
  excluded.

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• Liability Insurance
• Marine Insurance
• Ocean Marine Insurance
• Inland Marine Insurance
• Multiline Policies
• A multiline policy contain both property and
  liability insurance coverages. Examples include
  homeowners policies and personal auto policies.

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• Surety Insurance
• Fidelity Insurance

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• 2. Health Insurance
• 3. Investments
• Corporate stocks
• Revenue bonds
• Corporate bonds
• U. S. government securities
• C. Regulations

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IV. Trends

• A. Bancassurance
• Cross-Sectoral Investing (i.e., crossing industry
  lines)
• Interpenetration of Markets (i.e., merges and
  acquisitions)
• Cooperative Arrangement (i.e., cooperating
  between independent banks and insurance companies)

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• B. Cross-Border Activities
• Mergers and Acquisitions
• Branching

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V. Social Insurance

• A. Institutions
• Social Security Administration, Department of
  Health and Human Services
• Bureau of Employment Security, Department of
  Labor
• Bureau of Employees Compensation,
• Department of Labor

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• B. Financial Operations
• Old-Age, Survivor, Disability, and Health
  Insurance (OASDHI)
• Unemployment Insurance
• Workers Compensation