INSURANCE

Safety is joy born from the idea of something

past or future, whose cause of doubt has been
removed.
-Baruch Spinoza-

Razloveanu Ana Maria

Group 1516, Series D, FABBV

CONTENT

1. What is insurance?
2. Why do we need insurance?
3. Forms of protection
4. Getting specific insurance
5. Classification of insurance
6. The importance of insurance in the economy
7. Conclusions
8. Bibliography

INSURANCE

1. What is insurance?
Insurance is defined as the financial transaction arising from an insurance
contract or an obligation under the law, whereby the insurer undertakes in
exchange for a periodic amounts received to indemnify the insured for losses that
it might suffer as a result of events beyond his control.

2. Why do we need insurance?

The production is a prerequisite for the existence of human society. To live
and grow, one has to produce and create goods, using tools and such acts of
nature. In this way it creates between man and nature interdependent
relationships, the man not being able to live outside of nature, even if acting on
it, but inside it that man is subject to the natural environment, but also try and
adapt these conditions to their needs . Phenomena or natural events can lead to
property damage, of life or damage to property or injury to human health. These
hazards can cause damage, so one has to know the effects of these hazards in
order to tackle.
Nature produces calamities, including: floods, fires, earthquakes, hurricanes,
drought etc. These disasters cause huge material distugeri, and deaths or
diseases of humans, animals and plants (crops).
Human development through science and know each other led to work easier and
increase production, but also by unwise or abuse neglizenta man can also cause
damage.
From mere exposure above shows that some hazards are independent of human
will have an objective character, so call them and natural hazards, but there
are dangers of human behavior and they have subjective.
Knowledge of these hazards allow people to take preventive measures, ie to
ensure or take precautionary measures to avoid or limit distugerile caused by
these hazards. In international insurance practice they are generally called:
disasters / calamities and disasters / technical disasters or accidents.
Damage caused by the two types of disasters, according to their size, are
grouped in: small, medium and large. It damages the distinction between debt
and damages covered by special or insurance.
An important place is occupied between accidents or work accidents at work.
These types of accidents occurring at work or during professional activity and
cause: death, disability or illness of man. Another important place is occupied
injury accidents between road, rail, sea and the air. So the dangers they are
exposed to people, animals and property are varied.
A statistic shows a trend of increasing natural catastofelor, and of the technical
man. But people did not stay passive in front of resigning disasters, on the
contrary sought to defend themselves, to dodge, to predict, prevent and mitigate

loss of life and property. So while came the need for some form of protection
which have resulted in insurance.

3. Form of protection
To eliminate these risks, the man has several options: avoid or prevent the
risk, limit the damage, producing reserves to cover possible damage and risk
passing on to another person.
Avoiding or risk prevention measures are to be taken not to cause any risk, these
measures anticipatory. Risk prevention can be done through action by active or
passive. Actions reduce the possibility of occurrence of active and passive limits
the extent of destruction.
Limitation of Damages means taking measures to reduce the effects of damage
immediately after production catastofei, but before taking ending calamity.
These first two categories to eliminate risk: risk avoidance and limit damage are
not strictly defined, they can act together.
Producing reserves to cover possible damages involves the establishment of a
reserve fund, to be used for this purpose.
Shift risk to another person can be achieved when a person or company agrees to
pay a certain sum of money to another person, usually specialized, which
undertakes to bear that risk damage to the flat.
Choosing one of optunile against risk presented above depends on
circumstances, and the economic power of the individual or entity concerned.
Usually, the last option is taken when the other measures can not be taken.
Ignorance production time calamity or disaster, required that man should have at
all times to provide a fund to cover damages.

4. Specifics insurance
Insurance concepts are:

the insurer;
the insured;
insurance beneficiary;
ensuring contractor;
risk insured;
assessment of insurance;
the sum insured;

rule of insurance;
premiums;
Period of insurance;
loss or damage;
indemnity insurance;
insurance contract.

The insurer is a legal person, the insurance company, which in turn

assumes liability insurance premium to cover certain damages.

The insured is the person or entity who provide goods or lives against
certain disasters, the insurance premium in exchange for which the insurer
pays.

Insurance beneficiary is the person entitled to cash compensation or the

sum insured, without this necessarily be a party to the insurance contract.
Sometimes it is expressly designated by the insured, sometimes made
during performance of the contract by written statement.

Contractor to ensure the person can conclude an insurance contract

without necessarily assured.

Insured risk product that phenomenon through its effects oblige the
insurer to pay the insured or the insured sum compensation.

Not all phenomena that cause damage are insured risk, but only those who
meet certain conditions, cumulative:

the phenomenon to be possible, but not sure that phenomenon and often
occurs;
phenomenon to have a random character;
phenomenon can be recorded in the statistics;
phenomenon is not dependent on the will of the insured or insurance
beneficiary.

Evaluation of insurance is the way it sets the value of goods to be

included in the insurance contract. Overvaluation or undervaluation may
have negative consequences for the insurer or the insured. This notion is
used only to insurance companies, insurance people can not undergone
the evaluation.

The sum insured is the amount of insurance the insurer liable in the
event for which the insurance fenomenuliui. The sum insured is the
maximum limit of liability of the insurer and is one of the elements on
which the premium is calculated.

Norma insurance is set by law and only mandatory property insurance,

the sum insured per unit is secured object. Ex: the housing is square
meters of built area, agricultural crops per hectare. The insured amount
obtained by multiplying the number of units standard insurance insured
object.

The premium is the amount of money previously established that the

insured pays the insurer, because it can be insurance fund to pay
insurance indemnity or the sum insured when the insured risk. Of earned
premiums, the insurer is paying the compensation fund and the insured
amounts, and other funds that cover their legal expenses insurance fund
management.

The insurance premium is determined as follows: multiply the sum assured

with premium rate tariff set for 100 or 1,000 monetary units sum insured.

First tariff quota consists of the gross or net premium base rate and the
addition or supplement to the basic rate. Net first is to pay compensation
fund formation and sums insured. Addition is to cover the administration of
the insurance fund, a reserve fund and a small profit.

Length of time the insurance is valid for the relationship between

insurer and insured, as they were established in the insurance contract, it
is a specific element voluntary insurance. This duration varies from
voluntary insurance of goods from voluntary insurance of persons:

the real time can be 1 year or less 3 or 6 months;

to ensure the life time can be 5, 10 or 15 years.

Establish voluntary life insurance is very important for determining the

amount of insurance premium that pays the policyholder and the insurer's
liability is only within this period.

Injury or damage is the loss (in monetary terms) intervened in a good

secured as a result of the occurrence of the phenomenon against which the
insurance. The damage can be totally or partially, if the property was
destroyed in whole or only part of it.

Indemnity insurance is the amount of money that the insurer owes the
insured to cover damages caused by the insured risk. In the amount of
insurance compensation can be equal to or less than the damage,
according to the principle of liability of the insurer to cover the damage.

Practice distinguish three main property insurance to cover damage:

The principle of proportionate liability;

a first venture;
The principle of limited liability.

The principle of proportionate liability insurance indemnity is determined in

the same proportion to the value of the property insured. Compensation is
equal to the damage only when the sum insured is equal to the value of
the property insured. This principle is used in animal insurance, crops,
international transport of goods, etc..

The first principle of risk compensation is equal to the loss, without

exceeding the size of the sum insured. It is used in property insurance,
which total damage occurring harder, eg building and construction
insurance.

Volume compensation at two different principles only when the sum

insured is less than the value of the property, and damage was partial.

Both principles the damage that exceeds the sum insured is fully borne by
the insured.

A first risk is great for sure than the principle of proportionate liability,
because damages are compensated to a greater extent, but the premium
is higher.

The principle of limited liability compensation is granted only if the

damage caused by the insured risk exceeds a certain predetermined limit.
Part of the value of the damage which is the responsibility of the insured is
called the franchise and is stipulated in the insurance contract.

Franchise is of two kinds:

franchise reached or simple: the insurer covers the entire loss up to the
amount insured, if the damage is greater than the deductible;

deductible deductible is subtracted from the damage, no matter how

great the damage, that the insurer only pays for part of the loss that
exceeds the deductible.

No compensation is payable for damage which falls within the

franchise. The deductible compensation for damage is lower, and
premium rate tariff is lower. Franchise cause him to have provided
more care to prevent damage to that part of you will incur damage
effects alone.

5. Classification of insurance

Insurance of goods, persons and liability can be categorized by several

criteria:

field or branch referred;

assurance of achieving legal form;
the risks included in insurance;
territorial in scope;
how relationships are established between the insurer and the insured.

a. Insurance by industry or branch are:

Insurance of goods;
personal insurance;
liability insurance.

Property insurance: the object material values that belong to different

natural or legal persons who may suffer damage.

Personal insurance: individual the object itself.

Liability insurance: the insurer undertakes to pay compensation for

damage caused by the insured to third parties. These accidents in personal
injury or destruction of property and legal liability insured. This provides
protection of property insured for third party injured by the insured will not
come to him for compensation, but the insurer who has assumed
responsibility.

By objects of insurance are:

life insurance;
Ensure the vehicle;
marine and transport
insurance;
Aviation Insurance;
Fire and other damage to
property;

liability insurance;
credit insurance and
guarantees;
Provide financial losses and
risks insured;
agricultural insurance.

b. Achievement by legal insurance, insurance of goods,

people and civil liability are:

compulsory or by law;
Provide voluntary or contractual.

Compulsory Insurance: defending national wealth, economic and social

interests. Ensuring appears required by law without the consent of the will
of those who own these goods, the relationship between insurer and
insured, their rights and obligations are established by law.

Compulsory insurance covers all of the same type, so it's total insurance.
Being totally prevent risk selection, and therefore compulsory insurance
premiums are lower than those of voluntary uality.

The sum insured is determined by the law in the form of rules to ensure
the units of goods insured means that compulsory insurance is normal.
Insurance rules can be absolute and relative. The rules are based on the
absolute assurance of the same type that the lower for not giving the
insured possibility that such property to compensation greater than the
value of the property. Thus there is a need to complete one compulsory
optional to cover the difference between the actual value of the property
and insurance dee norm.

Compulsory insurance is without limit, as there is good acting always

assured. If a good compulsorily insured was replaced with another, for
various reasons, still remains valid insurance, so the responsibility and
obligations of the two parties are not limited by time.

Automatically responds to health insurance insurer, since the insured take

possession and payment of compensation is not subject to the prior
payment of the insurance premium for the premium payment term is set
by law. If premiums due are not paid on time, the insurer may require the
payment of delay and even to withhold from compensation, the first
outstanding.

Optional insurance: appear in the contract of insurance between the

insurer and the insured. Conclusion optional insurance will depend on the
insured which are the only ones who can decide about contracting
insurance.

End optional insurance for risks not included in compulsory or even

completing compulsory insurance in order to receive compensation or a
higher sum insured.

Specific features of voluntary insurance:

are founded only upon agreement of the parties, the contract of

insurance;

it is not total, are only part of the existing assets in the possession of
persons;

the sum insured is determined by the rules, but the proposed insured
and the maximum limit of the actual value of the property on completion
of insurance;

amounts of personal insurance optional insurance are established by

regulation;

are mobile, because it provides stability conditions of the insurance by

the insured's material interests and capabilities;

allow completion of compulsory insurance;

is valid only for a certain period of time, clearly established in the

insurance contract, the insurer's liability insurance expiry of this period
ends whether or not the insured risk occurred;

enter into force only after the fulfillment of all conditions set forth in the
insurance contract;

late payment of insurance premiums may result in termination of

contract;

If damage before insurance premium payment or after the deadline for

paying the premium, the insurer does not pay compensation.
c.

Insurance risks covered by the insurance are classified

as:

Insurance against fire, lightning, explosion, etc.., Are for building,

construction, machinery and equipment, vehicles, furniture and so on;

insurance against hail, storms, floods and so on, usually for crops;

Insurance for animal diseases and injuries;

insurance against accidents and other risks specific to public transport

and walking whilst at domestic and international transport;

insurance against events that occur in people's lives: death, illness,

accidents and so on, which can lead to temporary or permanent loss of
working capacity are personal insurance;

insurance against civil liability in cases of damage caused to third parties

by conducting various activities.

d. Insurance after the territorial scope are:

Ensure internal

The external.

Domestic insurance usually have the following characteristics:

contracting parties reside in the same country;

goods, people and civil liability is within the same country;

insured risks occur within the same country;

insurance premiums and sums insured damages in local currency.

Foreign insurance characteristic that affects the assets, people and civil
liability leaving the territory that ends the insurance contract. Contracting
Party or insurance beneficiary resides in another country or in the
insurance or the insured risk is in another country. Usually this type of
insurance payments are made in foreign currency and therefore are also
known as foreign exchange insurance. Foreign insurance are determined
primarily by economic relations between states.

e. Insurance by the way relations are established between

the insurer and the insured:
direct insurance;
indirect insurance or reinsurance.

Direct insurance: insurance have relationships are established directly

between the insurer and the insured under the insurance contract or the
law.

Indirect insurance (reinsurance) have ratios that are established each

time between two insurance companies, one of which is reinsured
(transferor) and the other reinsurer.

Reinsurance is based on the reinsurance contract, which gives reinsurer

reinsured part of that and responsibilities assumed by the insurance
contract and part of the premiums collected. Reinsurer liable to cover
damages suffered by property included in the insurance contract, the limits
specified in the reinsurance contract.

Reinsurance contract provisions deriving from the insurance contract,

without there being any legal relationship between insurers and insured.
Reinsurance is insurance direct insurer, being a report only between legal
entities that are institutions or insurance companies.

6. Importance of insurance in economics

Increasing the gross domestic product (GDP) favorably affect the insurance
development, reflected in the amount of premiums earned in a year.
Between the two indicators are way relation, so branch to ensure impacts
on the national economy.

Life insurance is a branch of creating added value. In insurance

branch falls insurance companies, agents, curtierii insurance auxiliary
services to insurers, insureds councils, oraganizatiile expertise and
independent retirement homes.

The gross production of the insurance industry does not include total
insurance premiums, but only a certain part, that remuneration activity.

The elements that make up insurance premiums and contributions to

retirement homes:

Remuneration considered activities of service;

hedging;

the amount saved by the insured, in case of life insurance.

Intermediate consumption of insurance companies: rent, furniture,

stationery, transport, telecommunications, subsistence, maintenance,
small repairs. Gross value added and intermediate consumption from gross
production obtain.

Most developing countries made a big gross in insurance compared to

developing countries, where the gross value is very small, this explains the
poor development of the insurance sector as a natural consequence of the
economic downturn and the low standard of living in certain countries.

Shrinking population and consumer spending decreased ability of

companies to finance the cost of production and circulation, restricted to a
minimum of protection through insurance.

From year to year the gross added value in insurance increases or

decreases, depending on the economic situation and disasters. In general,
the gross value added in insurance has a faster rate than GDP. With few
exceptions, mostly because of the amount of compensation paid or
reserved, the gross value added in the same sense evoueaza insurance
GDP increases or decreases from one year to another.

Life insurance is a branch creating jobs. Insurance are important for

the country's economy and provides many jobs, being noticed a growing
trend in the number of employees in insurance companies.

Life insurance is a branch participating in the offer of loan capital

in the financial market. Insurance companies are required to reserve
premium.

Premium reserves of life insurance have some characteristics:

they gradually, after collecting premiums from policyholders;

payments which are due at time reservations are removed, over many
years;

These reserves are at the insurance company and can be used as its own
resources.

Insurance premium reserves reserves damages are available to the

insurance company, because disasters can occur anytime. There are cases
when payment of damages can not be immediate, but after certain period
of expertise and even if the insured amounts due is not paid immediately,
they should be reserved.

Making the reserves of raw damage is done by placing their money in

stocks, bonds, treasury bills, term deposits from banks to lend, purchase of
real estate, etc..

Financial resources from the insurance companies do not increase the

money supply in circulation, only a redistribution, thus strengthening
monetary equilibrium and we avoid monetary emission aoperirea deficit.
But in some circumstances placement monetary in nature: the acoradte
loans on life insurance policies from. Although increases the money supply,
is a small and controlled growth.

Insurance companies can negatively or positively influence the balance of

payments of the country, when they make reinsurance. If these
reinsurance exceeding the national currency flows occur, all such amounts
are reflected in the country's balance of payments influenatnd a positive or
negative.

Life insurance is a reduction factor of economic uncertainty and a means

resuming paused. When you insure a person is aware of a risk, trying to
put the negative consequences shelter. The risk does not disappear, but
move his effects to secure the insurer. So the future for sure gained some
confidence, stabilize financial risk premium becomes a production cost or
expense in the family budget.

Insurance does not reduce the number of risks, but people are better
prepared to cope. Existence insurance enables repair of buildings,
machinery, replacement of certain goods in a while you executatrea
purchase of materials and repairs and not lack of financial resources.

7. Conclusions


Insurance is an essential element of the mechanism of the
market economy, contributing to the economic development of the
country and the expansion of foreign economic relations.

Everyone needs protection, whether we think of the natural or

legal persons. During a lifetime accumulates a number of goods, values,
acquired it in sorrow, that can disappear in an instant after a fire, an
earthquake, a theft or any other reason. Resulting financial loss can not be
compensated in any other way than through insurance. At the same time,
physical integrity, health, ability to work can also be affected, leading to
the impossibility of an activity, so lack of income. As legal, insurance
needs are similar to those of individuals, the insurance of goods, loss of
profits, credits, but they manifest as a result of a legal liability that the
person has towards its employees.

In developed countries, insurance is a part of education, traditions

and even of life, while in Romania, at present, we are far from able
to speak of an education for the entire population in this area.

Awareness and expression of the need for protection of any man, as

the decision to buy insurance, that individual initiative and
voluntary, are largely determined by objective factors - economic,
financial, social, familial, educational - and subjective factors experiences previous knowledge of the advantages and security
protection.

Meanwhile, all these benefits do not depend only on individual

private insurers, but also the existence of a healthy insurance
market, the strict regulations that do not allow the functioning of
unprofessional companies whose failures affect customer confidence
and overall market performance.

Note that in this century insurance directly dependent on the

economic life of the production of movable and immovable property,
international trade flows of goods, values and people, have been a
visible trend growth, which positively influenced and evolution of
reinsurance.

The insurance and reinsurance plays an important role in the

development of international trade and financial services and holds a key
position in the industrial and commercial life of the world.

8. Bibliography:


o C. Bennet - Dictionary of Insurance Publishing:
Trei, Bucharest, 2000

o Dumitru G. Badea Insurance & Reinsurance

Publishing: Economic, Bucharest, 2000

o www.asigurari.com

o www.wikipedia.ro