card guide
What is Insurance?

It’s only just begun

Let’s say you are a young person with very little money and no job. You’re driving down the road in your new car that is anything but “new” because you just picked it up from a bloke who sold it to you for three hundred quid. The engine’s rattling like a bag full of spanners and the smell of petrol inside the car is causing you a little concern. But that doesn’t matter, because you have a car, your first car.

You drive no further than half a mile when suddenly, bang! Some idiot’s driven into you. Nobody’s hurt, but standing on the pavement next to his dented Volvo is an arrogant middle aged man who is now asking you for your insurance details. That’s when you think, “Ah, insurance. Now, what is that exactly?”

And that’s when you realise that insurance was introduced to prevent you having to pay out large sums of money when accidents happen.

History of Insurance

Centuries ago those clever fellows, the Babylonians, practiced a form of insurance as they traded wares as far back as 2,000BC. Next in line were the Greeks and Romans who had what were known as “Benevolent Societies”. These would pay for the funeral expenses and care for families of the departed, like a form of life assurance. The Ancient Greeks, too, as they went to sea to trade, would take out a form of insurance against shipwreck both on their vessels and its contents.

A game of chance

It was all very unscientific from what we can gather and rather like a game of dice: somebody pays a sum considerably less than the value of the ship and its cargo to a wealthy man who will then pay for repairs or a new ship if your vessel is lost at sea. As long as the man of wealth was getting sufficient money in, (more than he was paying out), he was a happy merchant!

Fundamentally, that’s how the insurance business operates to day. It doesn’t matter what type of insurance it is, there are a whole bunch of people paying small sums to a company that will pay for the repairs or replacement of the insured item. That company, the insurer, will always be trying to minimise its payments going out and maximise the income it is taking in.

Insurance, particularly on things like house contents and buildings cover is today a very accurate practice – no longer a matter of chance. Insurers have built up masses of data from records over decades that indicate the likelihood of accidents or loss occurring. This takes away the luck element completely.

Insurance is Big Business

These days you can insure yourself against almost any type of unpredictable risk. Some of the major types of insurance are:

The latter being a relatively recent introduction to the insurance Broker’s plate of offerings.

Lloyds of London - Insurance Underwriters

Lloyds of London was traditionally the centre of the insurance business. There you will find representatives from hoards of companies or private individuals that underwrite the insurance business.

Insurers soon learned that although they were in the business of taking risk they wanted to minimise the impact of a claim if they had to pay out monies to somebody, especially if the claim was vast. So to minimise the impact the insurance industry developed a system of spreading the insurance amongst several companies or individuals. That is a system still in operation today and is known as re-insurance; effectively this is insuring the insurers.

Underwriters

Whether the risk is obvious, such as a youth behind the wheel of an un-roadworthy vehicle or is less obvious, such as public liability insurance for a Punch and Judy operator, all risks will be assessed at some stage by an Underwriter. It is the Underwriter’s job to dictate how much the customer will pay in their insurance premiums. It is they who make insurance premiums on young drivers so expensive that the insurance often costs more than the car.


Posted on: [ November 03, 2017 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon