Sectors of Insurance Industry
The insurance industry classifies the different products it offers by sector. A universally agreed-upon classification of sectors does not exist, so a non-exhaustive but inclusive and simplified classification of three broad sectors will be used in this exploration. The four sectors of insurance coverage are
- Life & Health Insurance Industry
- General Insurance Industry
- Specialty Insurance Industry
- Reinsurance Industry
Life & Health Insurance Industry:
Life and health insurance covers life and annuities, and health and disability. In general, life insurance provides a death benefit, health insurance provides coverage for sickness and injury, disability insurance provides for the financial needs of individuals who can't work due to sickness or injury, and annuities provide income. Term life policies provide protection over a specific period of time and don't accrue equity. Whole life policies provide long-term financial protection. They typically build equity that pays cash benefits and therefore usually have higher premiums than term life policies.
Health insurance policies can be divided into fee-for-service, managed care and long-term care. The three types of policies cover a wide range of medical, surgical, and hospital expenses. Many policies also cover prescription drugs and offer some dental coverage.
Often referred to as disability income insurance, this insures a beneficiary's earned income against the risk that disability will make working, and earning, impossible. It includes paid sick leave, short-term disability benefits, and long-term disability benefits.
Annuities, another type of life insurance product, provide income. An annuity pays periodic – usually monthly – income benefits for a specific period of time or over the course of the annuitant's (annuity holder's) lifetime. Annuity income benefits can also be transferred to a beneficiary upon the annuitant's death.
General Insurance Industry:
Insurance other than ‘Life & Health Insurance’ falls under the category of General Insurance. General Insurance comprises of insurance of property against fire, burglary etc., personal insurance such as accident and liability insurance which covers legal liabilities. Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and inundation, earthquake, accidents and so on. Most general insurance covers are annual contracts. However, there are few products that are long-term. Property and casualty insurance providers perform an essential function in today's economy. By covering losses from disasters, accidents, and lawsuits, property and casualty insurers protect policyholders from property damage and liability, providing the means for victims to resume their lives and businesses, and continue contributing to the economy.
Specialty Insurance Industry:
Specialty insurance focuses more closely on helping policyholders preserve their financial interests, and provides coverage for any risk the insurer is willing to take. Specialty policy types include surety bonds to ensure the trustworthiness of contractors. The insurer providing the surety bond vouches for the trustworthiness of contractors by putting its money on the line. If a client's contractor fails to perform or causes a loss to the client, the insurer is obligated to have the work completed or pay for the loss up to the bond "penalty. It also included financial guarantee insurance to assure lenders of the creditworthiness of borrowers by guaranteeing the principal and interest payments on obligations of bonds. Mortgage insurance is also available that assists financiers from protracted default.
Reinsurance protects insurers from catastrophic losses; reinsurance is the insurance for insurance companies. Reinsurance policies provide benefits that enable insurers to recover capital quickly, limit losses, and stabilize cash flow after a disaster strikes. As such, risk is shared by both the insurer and the reinsurer, decreasing the likelihood of insurer bankruptcy in the face of catastrophe.