The insurance industry
offer protection against financial losses resulting from a variety
of perils. By purchasing insurance policies, individuals and businesses
can receive reimbursement for losses due to car accidents, theft
of property, and fire and storm damage medical expenses; and loss
of income due to disability or death.
The insurance industry consists mainly of insurance carriers (or insurers ) and insurance agencies and brokerages. In general, insurance carriers are large companies that provide insurance and assume the risks covered by the policy. Insurance agencies and brokerages sell insurance policies for the carriers. While some of these establishments are directly affiliated with a particular insurer and sell only that carrier’s policies, many are independent and are thus free to market the policies of a variety of insurance carriers. In addition to supporting these two primary components, the insurance industry includes establishments that provide other insurance-related services, such as claims adjustment or third-party administration of insurance and pension funds. Insurance carriers assume the risk associated with
annuities and insurance policies and assign premiums to be paid
for the policies. In the policy, the carrier states the length and
conditions of the agreement, exactly which losses it will provide
compensation for, and how much will be awarded. The premium charged
for the policy is based primarily on the amount to be awarded in
case of loss, as well as the likelihood that the insurance carrier
will actually have to pay. In order to be able to compensate policyholders
for their losses, insurance companies invest the money they receive
in premiums, building up a portfolio of financial assets and income-producing
real estate which can then be used to pay off any future claims
that may be brought. There are two basic types of insurance carriers:
direct and reinsurance. Direct carriers are responsible for the
initial underwriting of insurance policies and annuities, while
reinsurance carriers assume all or part of the risk associated with
the existing insurance policies originally underwritten by other
insurance carriers. |
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