All You Need To Know About The Insurance Industry In Commerce
THE INSURANCE INDUSTRY – When someone wishes to insure against a risk he takes out an insurance policy which gives details of the insurance taken out. Before a policy is granted a proposal form is completed by the person wanting insurance. It asks the questions that the insurer to know in order to assess the degree of risk involved. Ofte needs a policy cannot be drawn up immediately and here a cover note may be issued giving temporary cover until the policy is drafted.
A certiticate gives evidence that an insurance policy exists. The premium is the amount of money paid for the insurance.
Many insurance policies are not arranged directly between the insurer and the insured, but by intermediaries. Agents work directly for a company on a full-time or part-time basis. Brokers are full-time specialists in arranging insurance. They do not wor directly for a company but rather sell insurance for several companies for which they receive a commission from the companes involved.
Policies may be granted by the insurance companies or by the underwriters at Lloyd’s of London. Lloyd’s is a market where individuals, called underwriters, offer insurance. It is a unique institution with a worldwide reputation for integrity and accepting unusual risks. An individual wishing to be insured would not approach the insurers directly, but instead would go through one of the 261 Lloyd’s brokerage houses whose job is to find someone to insure his client at the most reasonable price. Where the Insurance is for a large amount, e.g. for a ship, it is unlikely that a single underwriter would accept the whole risk so the broker will have to find other willing underwriters.
Much of the work of Lloyd’s involves reinsurance, that is insuring other insurers against risks that they have accepted. This practice spreads the burden of the risk still more widely so that no individual insurer stands to lose so large a sum of money on a single accident.