Concept and organization of insurance
Insurance companies (insurers) are the subjects of commercial activity that protect the interests of insured persons, compensating them for material damage in the event of an insured event. The activities of insurers are regulated by special laws and are controlled by regulators. In Russia, such a regulator is the Central Bank.
Principles of insurance
In any country, the insurance organization is based on certain principles that allow it to successfully carry out its activities. They are:
- In possession of insurance reserves;
- In the performance of insurance obligations;
- In the prevalence of insurance reserves over insurance liabilities.
In order to fulfill these points, the insurer is obliged to weigh the risks of occurrence of those or other insured events.
In most insurance situations on the side of the insurer is the statistics. In some cases, the state interferes with the organization of insurance. It is on the observance of the principles described above that the insurance business is built in most countries of the world.
How is the insurance business organized?
Legislation provides that the subject of the direct activity of an insurance organization may be insurance or reinsurance. The list of types of insurance services is listed in the license, which is issued by the state. If the policyholder does not fulfill his duties or performs them improperly, the license may be withdrawn, the organization loses the right to provide insurance services, which, however, does not deprive it of the obligation to fulfill the insurance obligations taken earlier.
A lot of insurers working in one economic field form an insurance market that provides protection to individuals, state and private commercial enterprises, financial organizations.
Types of insurance organizations
In our country, insurance companies can be privately owned or state-owned. Unquestionable leaders of the insurance market are the Pension Fund and the Social Insurance Fund, which accumulate all the mandatory contributions of working citizens. Private insurance companies are formed at the expense of private individuals or financial organizations.
A unique form of work of many private insurance companies is the Lloyd syndicate. This is an association of private insurance organizations of insurers for the general conduct of business on insurance and reinsurance. The form of the syndicate turned out to be so convenient that it still operates, insuring against small household appliances and large ships.
Voluntary and compulsory insurance
Currently, the entire insurance market can be conditionally divided into:
- Insurance services provided on a voluntary basis;
- Insurance regulated by law.
It is possible to allocate also the third point on the organization of insurance which carries the name "reinsurance", or division of the insurance responsibility between two and more organizations. This form of protection of liability implies the distribution of a possible financial payment between several insurers. Insurance of insurance organizations allows, by distributing payments, to fulfill their obligations without much damage to their financial condition.
If for commercial insurance the observance of the principles already guarantees a certain profit, then the social insurance organization is tightly controlled by the state. Let's try to deal with those types of insurance, which are mandatory from the point of view of the law.
The state makes certain forms of insurance mandatory, based on the protection of people or business entities that are related to the interests of the state. The organization of compulsory insurance by default provides for the interests of citizens, which are declared in the constitution of the country. In practice, it looks like this:
- Every citizen has the right to decent work - this is what occupational accident insurance does;
- Everyone has the right to enjoy freedom of movement - in support of this - compulsory motor third party liability insurance policies that insure against injured third parties;
- Everyone has the right to medical care - this rule is backed by compulsory insurance in the Social Insurance Fund, which guarantees insurance payments in case of illness;
- Citizens have the right to a decent old age - for this is the responsibility of the Pension Fund.
The activity of insurers in the implementation of compulsory insurance is based on certain laws and regulations, which provide:
- Objects for which this type of insurance is mandatory;
- Volumes of insurance liability, which include the minimum mandatory payment for insurance and the maximum amount of insurance payment established by law;
- Duties and rights of policyholders and insured persons.
Compulsory insurance and insurers
The law provides for a list of organizations that have the right to conduct insurance activities in the framework of compulsory insurance. Some insurance organizations are established on a state basis (the Pension Fund, the Social Insurance Fund). Some insurers are given the right to carry out activities in the field of compulsory insurance (OSAGO, for example).
Controlling the most important area of protection of the rights of its citizens, the state performs two functions:
- Minimizes down payments, making compulsory insurance affordable for most citizens of their country;
- Guarantees the maximum coverage of insurance subjects, making the organization of social insurance profitable and financially self-sufficient.
Consider how insurers work in the field of compulsory insurance. Classical examples for this can serve as the Pension Fund and the FSS.
Organization of insurance in state funds
The organization of pension insurance in our country is based on a symbiosis of two main systems:
- Solidarity, which we inherited as a legacy of the Soviet Union;
- Personal, which is an innovation of the last fifteen years.
In the solidarity system, each citizen paid pension contributions to the total budget of the Pension Fund. Subsequently, money was paid out of it, depending on the length of service, various coefficients, and so on. Despite its simplicity, the solidarity system led to the fact that people who had worked for five years and a quarter of a century began to receive virtually the same pension.
In addition to such an equalization, one more significant drawback of the solidarity system was revealed: the critical deficit of the Pension Fund. To equalize the pension budget, the state decided to introduce a personal account of pension savings. Each citizen, depending on his income, deducts a certain percentage on his personal retirement account, as a bank deposit and when he reaches retirement age he gets his own pension.
The organization of compulsory health insurance is based on a joint contribution system. Each citizen deducts from his income a certain percentage of money in the social insurance fund. Of these funds, he is paid "sick" as compensation for wages due to illness. FSS also deals with payments of "maternity" and payments for the care of young children. The same fund compensates for expenses due to incapacity for work resulting from an accident in the conduct of professional activities. If citizens want to receive large compensation payments - for example, to reimburse the costs of treatment, for a surgical operation, - voluntary medical insurance is available to them.
Liability insurance is another type of protection for injured persons. Its peculiarity lies in the fact that the policyholder will conclude the insurance contract with the policyholder and the policy holder. Payments for this type of insurance are received by the third, injured person. A classic example of liability insurance is the MTPL policy.
OSAGO deals with liability insurance for damage caused to third parties as a result of a car accident.
The organization of liability insurance lies in the sphere of activity of those insurers that have the right to do so. The minimum coefficients of initial contributions and the maximum amount of payment are regulated by law. The state also has the right to determine exactly how damage will be compensated - in cash or in kind, and to monitor the activities of policyholders.