The basics of insurance are simple: one company offers a guarantee future payment for a contracted event. The company offering the guarantee charges a premium for insuring against the event’s occurence – in doing so, the insurance company is protecting the client against certain circumstances, say physical capital loss due to a natural disaster. The insurance company assumes all financial responsibility associated with the client’s losses.
Where the business gets complicated is in the calculations of premiums. This involves the use of complex stochastic probabilty models meant to simulate the likelihood of a given event’s occurrence. Not all events are created equal, from an insurance perspective – for some types of insurance a company can accurately predict the probability of occurence (say, automobile insurance, which has such a large sample to study that companies can make accurate predictions and judgments about demographic groups). For events that are harder to predict (say, the future value a Mortgage-Backed Security (MBS) ) insurance companies take on greater risk when they issue policies.
Insurance Industry Sub-Sectors
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Property Casualty Insurance
Casualty insurance deals with policies that are written to hedge against the risk of unforeseen accidents. Some examples are insurance policies for auto accidents or losses incurred at sea (Marine Insurance). In general, casualty insurance hedges against risks associated with liability and crime.
Companies within the Casualty and Property Insurance Sub-Sector
Accident Health Insurance
Health insurance deals with policies that are written to hedge against the risk of unexpected or unexpectedly high health costs. Interestingly, the insurer of health insurance policy can either be from the private sector or the public sector, subsidized by taxes.
Whats Moving the Insurance Sector
Retiring Baby Boomer Generation/Convergence of Insurance Sector and Financial Industry
As the first of the baby boomers are set to retire within the next few years, financial and insurance firms remain pitted in a battle to provide them with financial funds to fuel their retirement. The traditional methods of retirement finance such as social security, 401ks, and corporate pension plans are becoming increasingly riskier as government legislature struggles to find a solution to social security deficits and companies find it harder and harder to meet the promises of current pension plans. Since the lines between financial institutions and insurance institutions has been blurred with the repeal of the 1999 repeal of the Glass-Steagall Act, which restricted the ability of insurance companies to provide financial services, aging baby boomers have become an increasingly attractive market to insurance companies.
To compete with the corporate pensions plans provided by the company, insurance companies are offering annuities to retirees. Annuities come in many, often complex, forms and packages. However, the underlying concept remains the same: purchase of the annuity is made with an upfront lump sum, with the promise of a steady periodic income as long as the contract requires.
Since they’re wrikong on a solution already, my guess is that they will not want to bother using SPAAR’s data in the interim since it would be for so limited a time.I’m always chomping at the bit for the latest and greatest info so I’ll post it as soon as it’s available! Reply /a