The concept and organization of insurance

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Insurance companies (insurers) are commercial entities that protect the interests of insured persons, compensating them for material damage in the event of an insured event. The activities of insurers are regulated by special laws and controlled by regulators. In Russia, the Central Bank acts as such a regulator.

Insurance principles

In any country, the organization of insurance is based on certain principles that allow you to successfully carry out your activities. They are:

• in the possession of insurance reserves;
• in the fulfillment of insurance obligations;
• in the prevalence of insurance reserves over insurance liabilities.

In order to fulfill these points, the insurer is obliged to weigh the risks of certain insured events.

In most insurance situations, the statistics are on the side of the insurer. In some cases, the state intervenes in the organization of insurance. It is on the observance of the above principles that the insurance business is built in most countries of the world.

How the insurance business is organized

The legislation provides that the subject of direct activityinsurance organization may be insurance or reinsurance. The list of types of insurance services is listed in the license issued by the state. If the policyholder does not fulfill its obligations or performs them improperly, the license may be revoked, this organization loses the right to provide insurance services, which, however, does not deprive it of the obligation to fulfill the insurance obligations assumed earlier.

Many insurers operating in the same economic field form an insurance market that provides protection to individuals, public and private commercial enterprises, financial institutions.

Types of insurance companies

In our country, insurance organizations can be privately or publicly owned. The undisputed leaders of the insurance market are the Pension Fund and the Social Insurance Fund, which accumulate all the mandatory contributions of working citizens. Private insurance companies are formed at the expense of private individuals or financial institutions.

A unique form of operation for many private insurance companies is the Lloyd's syndicate. This is an association of private insurance organizations of insurers for the common conduct of insurance and reinsurance business. The form of the syndicate turned out to be so convenient that it still operates today, insuring from small household appliances to large ships.

Voluntary and compulsory insurance

Currently, the entire insurance services market can be conditionally divided into:

• insurance services provided onvoluntary;
• regulated insurance.

One can single out the third item on the organization of insurance, which is called "reinsurance", or the division of insurance liability between two or more organizations. This form of liability protection involves the distribution of a possible financial benefit among several insurers. Insurance of insurance organizations allows, by distributing payments, to fulfill their obligations without much damage to their financial condition.

If for commercial insurance compliance with the principles already guarantees a certain profit, then the organization of social insurance is tightly controlled by the state. Let's try to figure out the types of insurance that are legally required.

Compulsory insurance

The government makes some forms of insurance mandatory based on the protection of people or business entities that are related to the interests of the state. The organization of compulsory insurance by default provides for the interests of citizens, which are declared in the country's constitution. In practice, it looks like this:

• every citizen has the right to decent work - that's what accident insurance does;
• everyone has the right to enjoy freedom of movement - in confirmation of this - mandatory compulsory OSAGO insurance policies that insure in favor of affected third parties;
• eachhas the right to medical care - this norm is supported by compulsory insurance from the Social Insurance Fund, which guarantees insurance payments in case of illness;
• citizens have the right to a decent old age - the Pension Fund is responsible for this.

The activity of insurers in the implementation of compulsory insurance is based on certain laws and regulations, which provide:

• objects for which this type of insurance is mandatory;
• volumes of insurance liability, which include the minimum mandatory payment for insurance and the maximum amount of insurance payment established by law;
• duties and rights of policyholders and insured persons.

Compulsory insurance and insurers

The law provides for a list of organizations that have the right to conduct insurance activities within the framework of compulsory insurance. Some insurance organizations are created on a state basis (Pension Fund, Social Insurance Fund). Some insurers are granted the right to carry out activities in the field of compulsory insurance (OSAGO, for example).

Controlling the most important area of protecting the rights of its citizens, the state performs two functions:

• minimizes down payments, making compulsory insurance affordable for most citizens of their country;
• guarantees maximum subject coverageinsurance, making the social insurance organization profitable and financially self-sufficient.

Let's consider how insurers work in the field of compulsory insurance. The Pension Fund and the FSS are classic examples of this.

Organization of insurance in state funds

The organization of pension insurance in our country is based on a symbiosis of two main systems:

• solidarity, which we got as a legacy of the Soviet Union;
• personal, which is an innovation of the last fifteen years.

Under the solidarity system, each citizen paid pension contributions to the general budget of the Pension Fund. Subsequently, money was paid out of it, depending on the length of service, various coefficients and other things. Despite its simplicity, the solidarity system has led to the fact that people who have worked for five years and a quarter of a century have actually received the same pension.

Besides this leveling, another significant shortcoming of the solidarity system was revealed: the critical deficit of the Pension Fund. In order to equalize the pension budget, the state decided to introduce personalized accounting for pension savings. Each citizen, depending on their income, pays a certain percentage to their personal pension account, as to a bank deposit, and upon reaching retirement age receives their own pension.

He alth insurance

Organization of compulsory he alth insurancebased on a solidarity system of contributions. Each citizen deducts a certain percentage of money from his income to the social insurance fund. From these funds, “sick leave” is paid to him as compensation for wages due to illness. The FSS also deals with payments of "maternity" and payments for the care of young children. The same fund compensates for expenses due to incapacity for work resulting from an accident in the course of professional activities. If citizens want to receive large compensation payments - for example, to reimburse the costs of treatment, for a surgical operation - voluntary medical insurance is at their service.

Liability insurance

Liability insurance is another form of protection for injured persons. Its peculiarity lies in the fact that the insurance contract will be concluded by the insured and the policy holder. Payments for this type of insurance are received by a third, injured person. A classic example of liability insurance is the OSAGO policy.

OSAGO deals with liability insurance for damage caused to third parties as a result of a car accident.

The organization of liability insurance lies within the scope of activities of those insurers who are en titled to it. The minimum coefficients of initial contributions and the maximum amount of payment are regulated by law. The state also has the right to determine how exactly it will be compensateddamage - in cash or in kind, and control the activities of policyholders.