Insurance terminology and definitions

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Insurance terminology and definitions for everyday use

Insurance

The impartial transfer of the possibility of a loss, from the insured to the insurer in exchange for payment. It is a form of risk management mainly used to protect against the risk of uncertain loss and to indemnify the insured.

Risk management

It is the recognition, evaluation, and prioritization of risks to apply resources to minimize and monitor the likelihood and/or effect of unfortunate events. Risks can come from uncertainty in financial markets, possible project failures, accidents, natural causes and disasters as well as unpredictable events.

The strategies to manage uncertainties with negative consequences typically include transferring the risk to another party, as in the case of purchasing insurance.

Indemnification

It is to restore or to be reinstated to the position that one was in prior to the happening of a specified event or peril.

Three types of insurance contracts that seek to indemnify an insured:

  • a “reimbursement” policy
  • a “pay on behalf” policy
  • an “indemnification” policy.

 

The Policy

The insurance policy is a contract between the insurer and the insured (policyholder). The policy determines the claims which the insurer is required to pay.

The insurance policy is a contract whereby the insurer will pay the insured if certain stipulated events transpire. Subject to the “fortuity principle”, the event must be uncertain, either the moment of the event (e.g. death of the insured) or whether the event will happen at all (e.g. flood or fire).

Insurance contracts operate by the principle of utmost good faith (uberrima fides) which requires both parties to deal in good faith. The insured has a definite duty to reveal every fact related to the risk to be covered.

Items of an insurance policy

  • Declarations – all details of the insured, the insuring company, what risks or property is covered, the amount of insurance, what deductibles apply, the policy period and premium amount.
  • Definitions – explanations of important terms used in the policy.
  • Insuring agreement – details of insured risks and the contractual agreement between insurer and insured. A summary of the major promises of the insurance company.
  • Exclusions – losses arising from specific events which are not covered by the policy.
  • Conditions – provisions and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.
  • Endorsements – modifications to the policy.
  • Policy riders – The terms of policy amendments.

 

Ref.: http://en.wikipedia.org/wiki/Insurance

 

Global Insurance market trends

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Global Insurance Trends

In answer to issues faced by the banking industry, the insurance industry’s approach to risk-control is becoming more meticulous and regimented.

According to Global Insurance Leader Shaun Crawford the “size of the prize” has never been larger, and insurers prepared for the challenges ahead will come out on top’.

The industry is slowed down as international regulators are not working together to synchronize risk-based capital ruling. The market continues to be frustrated by lengthy delays with Solvency II and similar challenges.

Accounting principles are another significant barrier. There is much apprehension regarding systemically important insurer (GSII) status and the Financial Stability Board’s (FSB)designation. 

 International opportunities

Several opportunities are obvious for the long term which are worthy of attention in a highly competitive market. Issues to consider are the increase in wealth being transferred from generation to generation and a greater acknowledgment that state and private pension schemes are too expensive.

Significant opportunities are resultant from these issues, but most distribution models are not competent to meet customer expectations. Consumers want the availability of a mixture of digital and personal communications with their insurers, as well as clarity of costs and services. 

Global trends 

  • ·         Noteworthy changes occurred in Bancassurance during the past year.
  • ·         A large financial institution and a Dutch multinational financial services company sold many of their international companies.
  • ·         A large Spanish bank has embarked on some joint venture deals globally.
  • ·         Indian and Chinese joint ventures produced mixed results as foreign investors struggle with cultural differences and to cope with local regulations.
  • ·         A huge drop in the purchase of savings and investment products happened in the UK, according to the Retail Distribution Review (RDR).
  • ·         Advisers are battling to cope with a non-commission sales model.
  • ·         Global regulators are studying distribution carefully as they are seeking market remedies. 

Improved systems and processes

In the competitive property market, providers are focusing progressively on reducing combined ratios with expense base cuts.

New claims processes and policy systems are being developed, with greater off shoring and shared-service structures.

Specialty risks are receiving attention and require visibility of any abnormal profits or risks.

 

 

Is Cancer Insurance a new trend in Insurance?

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Cancer Insurance

Cancer insurance is an optional supplemental health insurance to assist in managing the risks of cancer. As a relatively new trend, it is meant to ease the costs of cancer treatment and therefore financial support to the policy holder. Support that is based on the terms of a policy. Premiums will depend on the risk related to covering the disease. Cancer Insurance emerged only around 50 years ago to meet demand coming from cancer sufferers.

Cancer insurance is not intended to replace standard health insurance coverage but to supplement such insurance by giving cover for a disease that often results in high medical costs. In recent years, new areas of cover developed such as uterine cancer and breast cancerin males. There are many types of plans that cover various forms of cancer.

 

Benefits of Coverage

Cancer insurance policies typically offer wellness benefits to help those suffering from cancer or at risk, to change to healthier lifestyles. These benefits can offer financial support for programs such as tobacco cessation, gym memberships, and dietary changes.

The insured may get access to information regarding healthy lifestyles and to wellness tests for early detection of disease. These tests include mammograms, Pap smear tests, colonoscopies and others.

The benefits are often designed to diminish the effects of cancer or encourage the prevention of it. Benefits differ amongst companies. Many benefits relate to medical expenses, which may include cancer treatment. Other benefits relate to non-medical costs such as transportation, food, home and child care and certain bills.

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Does your Health insurance offer Cancer Cover?

Coverage Concerns

Because of the risks of serious health issues such as cancer, Health Insurance companies often exclude coverage. Standard health insurance policies do not offer coverage for cancer. Therefore supplemental insurance policies, designed to cover cancer, will be useful. Eligibility to qualify for cancer insurance, vary from insurer to insurer and could sometimes pose a problem.

Some myths regarding cancer insurance are:

  • If I get sick, my policy will be canceled; which is untrue. As long as you pay the premium there is no reason to cancel your policy.
  • I have to use special health care facilities. This only applies to your health insurance, never to supplemental coverage
  • If I’ve had cancer before, I can’t get this plan, which is also far from the truth. If you’ve been cancer free for at least 5 to 10 years, you can apply for approval.

 

Ref.:  http://www.cancerinsuranceinfo.com/

         http:// en.wikipedia.org/wiki/Cancer_insurance

 

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Why insurance is vital

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Does your financial plan include insurance?

Does your financial plan include Insurance?

A financial plan should include various crucial items like estate planning, mortgages, credit cards and loans. One important item should be insurance. Insurance is what happens ‘if something bad happens’. People without it will only see the benefit of insurance when that bad thing happens.

Benefits of insurance are manifold! It gives you peace of mind that your loved ones will be taken care of when (not if) you die. Indemnity to cover your loans will prevent your loved ones from inheriting your debt. How sad would that be? Not for you, since you will have departed, but for their memory of you. A loan that they cannot cover could result in your assets being seized to repay it. Could you do that to them?

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Do you have adequate Life Insurance?

What kind of insurance will cover my debt?

Insurance that pays when you die. Determine the amount and repayment period of your outstanding expenses and get insurance to match it. Your own death is an expense that will appear somewhere in your life, normally at the end of it.

You most certainly have to create insurance to cover the mortgage on your house or the loan on your car. This way, if you were to pass away while there is still an amount owing, it will automatically be paid off. By matching the term of the loan and the term of the policy, you will only have to pay premiums for the term of the loan.

So, if your car loan has three years on the term and you matched that with a policy, should you pass away in the second year, the policy would pay your beneficiary the full amount of the loan. Only two thirds is needed to pay the outstanding balance.

Many kinds of loans, including mortgage loans, car loans, overdrafts and personal loans can be secured in this way. Even debt on hire purchases of whatever you bought.

Surely you care enough for the ones you’ll leave behind to get insurance!

 

 

Finding the best Car Insurance Company

The Car Insurance Industry – Who is the best?

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Do you want this kind of service?

Selecting the best company for car insurance sounds rather impossible, right? You can’t rely on an agent to help you, as he is either representing several companies or one company exclusively. Or can you? He has direct ties with your community after all and is easily accessible.

Many companies don’t use agents to market their products but use the internet or telephone instead. Perhaps you can ask your neighbor, but the best for him is not necessarily best for you. Your choice of company will be determined by time and past experience. 

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This is the kind of service you deserve!

Consider these Car Insurance factors

1.    Insurance Agents – For the person who wants personal contact and advice, the Insurance agent is of great value. Insurance agents have been the most successful way of distributing car insurance products. 

2.    Direct Distributor – These companies serve you via mail, the internet and call centers. They give instant car insurance quotes and hassle free purchases. They claim to have lower rates as the middle man is eliminated. 

When you have decided how you want to be served, you can begin the search for your most suitable Car Insurance Company. Find online rating guides to help you.

 

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How statistics determine your insurance premiums

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Statistics determine your insurance premiums

Statistics reveal risk and insurance premiums to be charged 

How well you know your Insurance agent has no effect on the terms of the policy you purchase from him as it used to be in days gone by.

In the days before computers, auto insurance was personal and a policy was individual. Your agent could call in some favors from his colleague in head office to obtain better insurance premiums for you. It was a given that male drivers under 25 paid high premiums and young females were considered as lower risk and charged less.   

Nowadays, insurance companies have large databases containing accident and claims records. By calculations, these records will reveal the type of person likely to be a safe driver and the one likely to be an accident risk.

Generally called ‘Black Box’ technology, it provides the understanding of the background and conduct of people, they think should pay higher insurance premiums. For example, people with less responsibility are actually of higher risk than those with higher liability.  Statistics have shown that the bearers of bad credit scores are more likely to be involved in accidents.

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Know how your insurance premiums are determined

How are auto insurance premiums determined? 

It is a toss of the dice between staying competitive by comparison and making the best profit for shareholders. Now that they have ‘Black Box’ technology, auto insurance companies are scrutinizing every driver. Credit score, career, past record, even the city you live in have an influence on your rates.

Selecting low limits of liability has proven you to be higher risk than those who select higher limits. That means you could lower your auto insurance premiums if you raise your liability limits. 

In some cases the new ‘Black Box’ technology reduced rates by up to 20% compared to companies that aren’t using it. Unfortunately, credit scores play a part in ALL auto insurance rating. A bad credit score results in higher insurance premiums. You won’t have the advantage of ‘discounts’ or ‘loyal customer’ credits any more. You will be rated right down to your shoe size, counted amongst drivers like you, and charged consequently.

 

Trends and problems in Health Insurance

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Do YOU have adequate health insurance?

Omitting Health Insurance – a trend and pressing problem worldwide

While many people, retired or working, have health cover through employer-sponsored plans, many workers and their families are uninsured because their employer doesn’t offer a health insurance plan and they cannot afford health insurance. Then there are millions of people without employment and obviously no way of obtaining health insurance other than state care, if it is available in their home country.

In some countries there are Health Insurance programs which help fill in the gaps for children from low income families and some of the parents, but the reach of these programs is limited. As a result, the millions without health insurance face undesirable health consequences because of delayed health care.

 

Snowball effect of no Health Insurance

Extending coverage to the uninsured should be an international priority. The number of people without health insurance is a worldwide calamity today.

Health insurance premiums have become too expensive for even middle class families to afford. In turn the uninsured are incapable to cover medical costs which sometimes result in the financial wreck of a family, and in turn results in the ongoing loss of income to the medical society. In turn the cost of medical expenses is driven higher. In the end it comes back to the insurance companies which then must drive the premiums of health insurance higher to help cover the rising cost of health care. The loss of income to the medical community creates a trend of medical professionals leaving their home country to countries where they will be remunerated according to their skills and knowledge. A sad loss to their countries of birth, both of skills and taxes.

 

Consequences of no Health Insurance

Conditions that would have been caught before it became severe are only found in a progressed state, because the person didn’t seek treatment due to not having insurance coverage.

If a person becomes capable to afford Health Insurance later on in life, it is more than likely he has developed pre-existing conditions that private insurance companies will exclude from coverage anyway.  An application could even be declined for this reason. Applicants who didn’t have coverage for a certain length of time, are also penalized by the loading of their premiums.

Until a solution is found the only thing that the seeker of health insurance can do, is to compare all of the options to find the lesser of all of the evils. Often the choice is the biggest evil of going without coverage.

 

What is happening in Insurance