Sectors of Insurance Industry
The insurance industry classifies the different products it offers by sector. The insurance sector is made up of companies that offer risk management in the form of insurance contracts. There are four main insurance sectors: Life & Health Insurance Industry, General Insurance Industry, Specialty Insurance Industry & Reinsurance Industry. This article describes the current insurance industry sectors and their associated activities, products, and services.
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 the 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 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 a 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 Industry:
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 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.
Related Links
You May Also Like
-
The Business Model of Insurance Industry
The insurance industry business model can be further categorized into two types of main activities, service domain, and support domain. Service domain activities make up the company's value chain and the support domain provides the infrastructure and support to sustain the value chain. Support activities may include corporate services, finance, human resources, or information systems, and technology.
-
The insurance industry classifies the different products it offers by sector. The insurance sector is made up of companies that offer risk management in the form of insurance contracts. There are four main insurance sectors: Life & Health Insurance Industry, General Insurance Industry, Specialty Insurance Industry & Reinsurance Industry. This article describes the current insurance industry sectors and their associated activities, products, and services.
-
This article helps the student to understand the legal principles and provisions of the insurance law. Starting with the fundamentals from which law is derived, this article helps the student to understand the salient aspects of any insurance contract, the rights and obligations of parties to the contract, and the legal environment within which insurance practice is carried out. Explore the seven most important principles of insurance.
-
A primary insurer purchases reinsurance to limit its exposure, usually to one specific type of risk, thereby diversifying its book of risk. Businesses in this industry focus on assuming all or part of the risk associated with existing insurance policies originally underwritten by direct insurance carriers. In other words, the primary activity of this industry is insuring insurance companies. Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers.
-
An article to explain key terms used in the Insurance Industry and Insurance Business. Also, learn about various operational and performance metrics used in the insurance domain. Learn the definition and meaning of insurance industry terms like insured, insurer, claim, reinsurance, policy, and policy premium, etc.
-
What is General Insurance Industry?
General Insurance industry providers perform an essential function in today's economy. General insurance is typically defined as any insurance that is not determined to be life insurance. Depending on the type of occupation, risk exposure, and the money involved, the insurance could be different for each industry or business. In underwriting insurance policies, general insurers earn premiums that they further invest.
-
The insurance industry comprises companies and people who develop insurance policies and sell, administrate, and regulate them. Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. The insurance Industry manages the risk to people and businesses from the dangers of their current circumstances. Insurance policies are a safeguard against the uncertainties of life.
-
Insurance policies are a safeguard against the uncertainties of life. Insurance policy helps in not only mitigating risks but also provides a financial cushion against adverse financial burdens suffered. From a macro perspective Insurance industry turns capital accumulates as premiums into productive investments thereby promoting trade and commerce activities which result in the sustainable economic growth of the economy.
-
What is Finance? Meaning, Definition & Features of Finance
Finance is the science around the management of money. Finance encompasses banking, credit, investments, assets, and liabilities. The finance function encompasses a variety of functions, activities, and processes. Finance also consists of financial systems. Acquisition, allocation, utilization, and channelizing the funds to maximize the shareholder's wealth. Finance includes public, personal, and corporate finance.
-
Insurance is categorized based on risk, type, and hazards. Logically, any risk that can be quantified can potentially be insured. Understand the importance of insurance and the different types of insurances like Life Insurance or Personal Insurance, Property Insurance, Marine Insurance, Fire Insurance, Liability Insurance, Guarantee Insurance.
