Insurance

Definition of the service

Covered risks

The only condition with the assurability of a thing is the risk (or risk). Consequently, on the principle, it is possible to subscribe an insurance for any event relating to the property of a Personal property, to that of a Real estate value, with the life, health, etc.
The Types of contracts of most common insurances are the contracts of insurance life and the contracts of insurance damage. One distinguishes the contracts from insurance of people and those of insurance of goods.

The contract of insurance

The contract of insurance is the keystone of the production of this service. It establishes the conditions under which the service will be rendered. In France, it is treated by Article 1101 of the Civil code and fixed:

the premium which the policy-holder commits himself pouring (L113-2 and L113-3 of the Code of the insurances)
the service that the insurer will return
the conditions which oblige the insurer to return the service.

History

As of Antiquity

First methods of transfer of risks are announced at the Babylonian S, as of the III developed system is included in the Code of Hammourabi. If a merchant carries out a loan to accomplish a transport, it pays an additional sum with the praetor. The loan does not have to be refunded if the goods are made fly.

Thousand years later, the inhabitants of Rhodos invent the mutualisation. The merchants whose goods arrive at destination refund those whose goods were destroyed at the time of a storm.

The Greeks and the Romans introduce the insurance health and the insurance life. The Guilds of the Middle Ages fulfill a similar role, while taking part at the expenses of funeral of their members deceased.

The insurance becomes more and more complex in Europe after the rebirth.

Modern bases since the 17th century

At the end of the 17th century, the increasing importance of London as a center of trade draws the request for marine insurances. Edward Lloyd opens a tavern which becomes a reference mark for the sailors and the shippers, and thereafter an information source on the maritime world. It becomes a meeting place for the people seeking to ensure their boats, and those proposing a cover. Today still, Lloyd' S of London remains the high place of the marine insurance.

With the modern direction, the insurance goes back to the large fire of London of 1666, which destroyed 13200 buildings. Following this fire, Nicholas Barbon opens an office to ensure the buildings.

In the United States, the first company is created in 1732. Benjamin Franklin is the first, through the Philadelphia Contributionship for the Insurance off Houses from Loss by Fire , to invent the prevention, while refusing to ensure the houses for which the fire hazard is too strong.

Organization of the economic sector

Economic model

The contract of insurance is a contract of transfer of risks:

the policy-holder yields a risk, by random definition, with the insurance company. When the contract envisages a frankness, the policy-holder preserves part of the risk.
the insurance company accepts the risk in exchange of the premium.

The mechanism of the insurance does not modify the probability of supervening of the risk, nor its consequences. It is satisfied to transfer the risk from a Economic agent, the policy-holder, with one or more others.

The policy-holder is then protected against from the events which it cannot only support. He can then carry out risky activities. The insurance helps indirectly with the creation of richnesses.

The insurance company carries out, thanks to the subscription of many similar risks, a mutualisation of the risks between the policy-holders. This statistical control of the risk makes it possible the insurer to decrease the total volatility of its risks. The Loi of the great numbers makes it possible the insurer to roughly know the amount of the future disasters.

Curiously, the activities of games of chance (lotteries, etc) are similar to the insurance: one needs a risk for it. In both cases, one pays a small sum, and if a rare event occurs, one receives a large sum. The difference is that the insurance covers the " risks; négatifs" , of loss, and the lottery contrary to the positive, speculative risks.

It is important in both cases which the event is rather rare, and which, concerning the insurance, the fact of being assured does not modify the behaviors vis-a-vis the risks (moral Aléa), if not the insurer does not balance any more his accounts.

Certain cases like burglings, flights of vehicles or motorbike accidents are a little particular, insofar as the question is not there any more to know if an event will occur, but simply when it does it.

How do the insurers live?

To live, an insurance company must be able to pay the whole of the disasters which its policy-holders will undergo. This entire amount being by unknown definition, the insurance companies begin with “mutualiser” the risks. This mechanism aims at reducing the variability of the losses. The amount of the probable losses (increased of a safety margin, and overheads of the company) is paid by the policy-holders (premium).

The money thus collected not being transferred immediately with the policy-holder, it can be placed, which brings a comfortable source of revenue additional. This amount is particularly important in the branches with long unfolding (for example of civil responsibility), where the disaster, when it occurs, is compensated only for long years after the perception of the premium. In the branches with short unfolding, this source of revenue is less important.

The insurer is consequently able to face a situation of usual sinistrality. However, one includes/understands easily who if a risk is carried out simultaneously for a great number of assured (bad weather, natural Catastrophe, etc), the money which the insurer must pour can come to strongly reduce its prospects for profits, to see exceeding its financial capacities. It is the case if it must free assets blocked to regulate the victims of a storm. The insurer will be able to increase the amount of the premiums to come in order to reconstitute the capital devoted to the compensations.

In order to face the exceptional disasters, the insurers can reinsure (with of course frankness from their share) their own risks near specialized companies; it is the Réassurance.

In the middle of the Years 1970, a motorist assured the MAIF involuntarily caused the telescoping of two trains, blocking during several weeks the traffic between Nancy and Paris (which had to be diverted with high expenses by Troyes or Sedan).

the ceiling of reinsurance of the MAIF was reached, and the increase in the annual contributions (one speaks about contributions at the mutual insurance companies, and premiums in the insurance companies) was hardly perceptible by the policy-holders because of this same reinsurance.

It is significant to note that Lloyd' S, insurer of the Titanic, honoured its engagements and that this important outlay did not threaten its existence.

Principal insurance companies

Trades specific to the insurance

One can distinguish various specific professions to this activity

the General Agent of Insurance is the representative or agent of an insurance company which places its contracts near the customers. For this reason it engages the responsibility for the company taking into consideration article 1382 to 1384 of the Civil code (common right of the responsibility). He exerts a liberal profession. According to AGEA, trade union, there are 13.576 general agents in France.

Upstream of the insurance the General Agents of Insurances analyze the risks of their customers, then advise the latter on the insurance appropriatenesses, place the risks near their insurance companies, follow the management of the contracts from day to day, and assist their customers in the event of disaster of the opening until the compensation; They also are still called “insurers councils”, elected by their customers to represent them vis-a-vis the companies. This is why they are responsible for their results near their customers. The General Agents of Insurances have a particular status of intermediary with their company mandante, they are liberal and heads of undertakings, statute which governs their relations with the insurance companies. It should be noted that most of the time a General Agent of Insurance practices also broking near other companies and according to a given percentage.

the insurance broker has the statute of tradesman and represents the customer with respect to the companies with which he works. It is given the responsability by policy-holders to find the contracts best adapted to them and/or at the best cost near the insurance companies (a policy-holder has thus the choice to pass directly by an agent or indirectly by the means of a broker).

There are approximately 2.800 brokers in France. They are tradesmen registered with the trade register. The regulation obliges them with soucrire a financial guarantee to cover the funds which are entrusted to them. They must also be obligatorily assured of professional civil responsibility.

the Comparator of premiums of insurance thanks to the development of Internet, brought a new approach in the marketing of contracts of insurance. The Net surfer can put in competition in some clicks various insurance companies on the mutual insurance company health, the auto insurance, the insurance dwelling, the insurance borrower, credit etc…. These Internet sites often managed by insurance brokers also have of offers and proposals for insurances negotiated near the companies.
the Actuaire studies the statistical risks to establish general tariffings (premiums of insurance).

the financial functions (Management credit-passive, operators of market, Treasurer, Management auditor) take an increasingly large importance considering the importance of the capital (technical reserves) of which management should be optimized.

the expert in disasters establishes the reality of the damage and the responsibilities, quantifies their value and determines the amounts of compensation to pour. Certain companies have their own experts, one calls them inspector. They can in certain cases regulate financially the disaster on the spot by making a check.
On sale remotely, the responsible for commercial action pilot design of the mailing.

the project managers, upstream of the commercial actions, lead the development of equipment or systems aiming reducing the costs or at developing the wallet (electronic management of the documents, evolution of the telephone platform and the channel Internet, computer software, creation and management of databases).

the lawyers have in load the follow-up of the dispute, ensure the legal day before (evolution of the regulation, jurisprudence), and update the contractual documents (general terms, particular conditions).

the employee of insurance ensures the contact of the customers and the business transactions ( Front office ). It occupies the station of then to advise customers . If the employee of insurance is in load only administrative treatment ( back office ), it occupies a station of manager-writer . The employee of insurance is often general-purpose and carries out these various types of operation. Some are specialized in writers of contracts , others are sinister writers only in charge of the settlement of the claims.

Finance

The insurance in finance leaves room to the concept of Couverture of risk by adapted financial instruments which the Financial market offers.

Interdependent insurance

Several people join and contribute, while bringing each one an amount of money, solidarity funds, which a Coopérative will manage. (association). This bottom will help cotisant it which undergoes one of the disasters that they will have mentioned, if none of these disasters will be produced, bottom will be returned to the cotisants. The part of the contributions which did not need to be used to cover the disasters of the cotisants during the year is not kept by the co-operative: Either is returned to the cotisants, or is kept and counted like funds of contributions already versed for one New Year's Day. If the funds is not sufficient to cover the related spending with the damage, it will be with the cotisants either to bring new contributions to cover the surplus, or to accept that the co-operative does not cover all the expenses for the cotisants.

Form contract of insurance

Subscription of the contract

At the time of the subscription of the contract, the insurer and the policy-holder agree:

of an event or a list of events, included in the insurance policy (of medieval Italian policia : list), and guaranteed by the insurer
of a premium paid by the policy-holder with the insurer.

Before the subscription, the applicant of insurance, ensured future, fills out a questionnaire aiming at informing the insurance company on his risk. Starting from this document, the insurer can carry out the Calcul of the premium of insurance. This calculation Statistique primarily takes account of the probability of realization of the risk and the cost of the disasters.

In France, the contract of insurance is a contract in good faith. The policy-holder is supposed to inform in an exact way and supplements the insurer in answer to his questions. The false claims made by the policy-holder can lead to the nullity of the contract.

Occurence of a assured event

At the time of the realization of one of the events listed with the contract, the insurer assists the assure. This assistance is generally financial and then takes the form of a compensation. But it can take other forms, for example a legal assistance or a repatriation for a sick person abroad.

For example, a Armateur ensures a boat and receives a sum, function of the amount subscribes and the outdatedness, if the ship is damaged or destroyed. A Assurance-vie will guarantee the payment of a pension if the policy-holder reaches a certain age whereas the life insurance takes effect in the contrary case, etc a motorist implied in an accident will be able to profit from the support of its insurance company d' in front of the courts and possibly of a sum to regulate the damage for which it is responsible…

End of the contract

The policy-holder and the insurer can denounce the contract in each term. The contracts of insurance are in general with renewal by tacit agreement. In France, the code of the insurances also envisages a possible cancellation for the insurer after each disaster. In the event of disappearance of the risk ensured, for example in the event of death for a contract of insurance on a person, the contract takes naturally fine. The contracts of insurance life, the contracts of group and the other collective operations are expressly excluded from the device of renewal of the contracts of insurance.

The insurance policy

The insurance policy is the contractual document which governs the relations between the insurance company and the policy-holder. This contract fixes in particular:

the list of the guaranteed events, with possible exclusions.
guarantee, i.e. assistance brought to ensured in the event of disaster.
obligations of the assured one:

possible preventive measures in order to decrease the risk
times of declaration to the insurer in the event of disaster
the amount and terms of payment of the premium
possibilities of cancellation of the policy

obligations of the insurance company:

terms of payment for the compensation

The insurance policies are composed of general terms, commune to all the policy-holders of the same company for a risk or a whole of risk given, and conditions particular, specific to the policy-holder.

Regulation (French case)

The insurance is a very regulated profession. It is a question of preserving the interests of the policy-holders. The companies must answer many constraints, in particular as regards solvency margin. An independent authority, the ACAM, is charged to control the insurance companies. The companies practitioner of the operations of insurance are subjected, according to their legal status, with the provisions of:

Code of the insurances for the insurance companies
Code of reciprocity for the mutual insurance companies
Code of the social security for the institutions of Precaution and retirement

A law of December 15th, 2005 obliges from now on the insurers to warn the people designated with the contract of Assurance-vie, when they are informed of the death of the subscriber.

European directive

The directive Solvabilité II will redefine the solvency margins of the reinsurance and insurance companies at horizon 2010/2.

See too

Internal bonds

GAREAT
National school of Standard insurances
Sinistralité
of contracts of insurances

External bonds

French federation of the insurance companies - FFSA */Site of the National school of insurances

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