Structure of insurance.

Insurance company

A company that offers insurance policies to the public, either by selling directly to an individual or through another source such as an employee's benefit plan. An insurance company is usually comprised of multiple insurance agents. An insurance company can specialize in one type of insurance, such as life insurance, health insurance, or auto insurance, or offer multiple types of insurance. Insurance companies exist to pool individual risk. This pooling of risk allows a group of people to share the burden of paying the costs of a particular event, which reduces the likelihood of any one event financially devastating an individual. Due to the number of different risks a person will face during his lifetime, insurance companies have evolved over the years to provide insurance products that cover almost all of them. To reduce the financial impact caused by a particular event, an insurance company will offer to financially reimburse a person if the event occurs. In exchange for this reimbursement, the insurance company collects premiums from the insured person. The price of the premium is determined based upon the likelihood of the event happening, the financial cost of the event and the number of people whose risk can be pooled. Life

Insurance companies provide life insurance to individuals to help pay for burial costs, to pay off debts or to replace lost income for the surviving spouse or family. Using a large pool of applicants, an insurance company can easily determine average mortality. For the members who live past the average mortality age, they effectively fund the payouts for the members who die prematurely. Because no one knows if they will die prematurely, life insurance helps mitigate a family's risk.

Health Health insurance helps pool the risk of illness. Because some people will require treatments that cost hundreds of thousands of dollars, and some people can go through life without catching a cold, the costs of health care for any one person is smoothed out. Because no one knows how much care they will need or what their health will be, pooling the risk with other people makes sense. Additionally, younger and healthier people help fund the higher medical costs incurred by the older members of the insurance pool. Car Unlike life and health insurance, car insurance has the potential to never be utilized. Car insurance is provided by insurance companies to share the risk of getting into an accident. Using actuarial tables, insurance companies can determine the probability of a member getting into an accident and how much the typical accident will cost them. This analysis is applied to the entire member pool, and then the total cost is divided among everyone. Income With the decline in pensions, insurance companies have stepped up to provide a solution that eliminates the chance of a person running out of money during retirement. Annuities are provided to people who want a guaranteed stream of income, and they work based on the odds of how long you will live and the kind of returns they can generate from the money you paid them in exchange for the guaranteed income stream. Annuity payments are typically higher than what an individual could replicate for himself because the insurance company has the benefit of having a pool of members, some of which will die early, which provides additional capital for those who live longer than the average mortality rate

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Pros and corns of using one life insurance company

No limits have been set regulating the number of life insurance policies that an individual can have at one time, nor are there any requirements as to how many different companies an insured person can buy life insurance from. There are many pros and cons to using one insurance company. Insolvency Insolvency is when an insurance company becomes obsolete and does not have the funds to pay claims for death benefits. One pro for having more than one insurance company is that if one of the insurance companies were to become insolvent, the insured person would have other forms of life insurance protection in place. Steady Growth toward Security Many individuals with low financial resources must purchase life insurance as they can afford it. Another pro in favor of multiple life insurance companies and policies is that in such a case the insured person has the ability to grow towards their security as their financial strength grows. The insured individual can continue to purchase life insurance policies from various companies as they can afford to add the coverage to their portfolio along the way. Discounts for Large Death Benefits Some insurance companies offer discounts for large death benefits. Basically, in a situation where the insurance company offers a discount for a large death benefit policy the insured individual has an opportunity to save money by purchasing only one plan and by keeping their life insurance with that one company. An individual with several smaller death benefit policies at various life insurance companies can potentially miss out on such a discount. Confusion With there being so many different types of life insurance available, having multiple plans at many insurance companies can cause confusion. Trying to keep the plans details straight and trying to remember what plan has certain provision, such as which policy is the permanent plan and which policy is the term plan can cause confusion and can cause an insured person to mix up provisions with each company on different policies. Contract or Administrative Fees Additionally, another con to having more than one life insurance policy with more than one life insurance Company is that an insured person may pay additional fees. Many life insurance policies have contract fees or administrative fees for each policy. If an insured individual has several policies with multiple companies they may be paying more than their share of contract or administrative fees. Cons:

You are not allowed to choose separate investment accounts, i.e., money market, stock or bond funds; the insurance company controls how and where your premium dollars are invested. Whole Life Insurance offers no premium flexibility or face amount flexibility; the plan you buy today remains fixed for life. It is therefore important to plan carefully, because Whole Life Insurance is not very good at adapting to insurance and/or retirement plans that change significantly.

Insurance proficianalas.

Insurance proficianals are people who act as the bridge between the insurance company and the insured. They can categorize into two different types business insurance agents and brokers.

Agents.
An agent is a person who acts as the interface bridging the insurer and the insured. . As a broad statement of law, an agents liability to their customers is administrative. That is, agents are only responsible for the timely and accurate processing of forms, premiums, and paperwork. Agents have no duty to conduct a thorough examination of insured business or to make sure he has appropriate coverage. Rather, it is insureds obligation to make sure he has purchased needed coverage. The insurance agent does not do any analysis of the type of business that insured own. He is not the right person to give suggestions on the coverage that insured need for his business. Insured should ensure coverage of all possible risks involved in his business. After doing a thorough analysis of all possible risks, insured discusses the coverage options available with business insurance agent and purchase the insurance plan that would suit the unique needs of his business.

Captive agents

Independent agents

1. Sell insurance policies on behalf of a particular insurance company. They are confined to a specific company. 2. Work for an insurer in particular. 3. May not have a good understanding of the policies available with other insurers.

Work independently and no pressure on independent agents to sell a particular policy

Work for multiple insurers. Have a deep understanding of the pros and cons of almost all the policies available with different companies.

Advantages of agents. W it h a c a ptiv e ins ura nc e a ge nt, y ou only ge t the guida nc e of on e c om pa ny tha t se lls one bra nd of ins ura nc e . W ith an in de pe n de nt ins ura nc e a ge nt, y ou m ight ge t m ore c hoic e s . Th is is be ca us e an inde pe nde nt ins ura nc e a ge nt re pre s e nts m u lt iple bra nds , and ca n c om pa re c ov e ra ge and pric e s to find t h e be s t pos s ible va lue for y our indiv idua l c irc um s ta nc es . In de pe n de nt a ge nts are u s ua lly v e s te d m e m be rs of y our c om m u nity who a re c om m itte d to doing bus ines s fa c e -to- fa ce a n d be ing y our a dv oc a te in tim e s of ne e d. Th e y a ls o: W ork for y ou whe n y ou ha v e a c la im . Are not be holde n to a ny one c om pa ny . This m e a ns y ou don t h a v e to c ha nge a ge nc ie s as y our ins ura nc e and se rv ic e n e e ds c ha nge . Are y our c ons ulta nts , work ing with y ou a s y ou de te rm ine y ou r ne e ds . Are va lue - hunte rs who look afte r y our poc k e tbook in findin g t h e be s t c om bina tion of pric e , c ov e ra ge , a nd se rv ic e .

Offe r one -s top shopping for a full ra nge of produc ts , in c luding hom e , re nte rs , auto , bus ine ss , life , he a lth, and re t ire m e nt pla ns . C a n pe riodic a lly re v ie w y our c ov e ra ge to k ee p up with y ou r c h a nging ins ura nc e ne e ds . Are c om m itte d to c us t om e r sa tis fa c tion- it's the ke y to the ir liv e liho od Tre a t y ou lik e a pe rs on, not a num be r. Are lic e ns e d profe s s iona ls with s trong c us tom e r a nd c om m unity tie s .

( In form a tion s upplie d by the Inde pe nde nt Ins ura nc e Age nt s & Brok e rs of Ame ric a )

Disadvantages of agents. Agents are bound to represent a specific company, and are therefore more limited in the number of products they can offer. They can only recommend and only have access to their own companys products, which may or may not be the right fit for your specific insurance requirements

Insurance Broker According to the Sri Lanka insurance brokers association, a broker is a Persons who, acting with complete freedom as to their choice of undertaking, bring together, with a view to the insurance or reinsurance of risks, persons seeking insurance or reinsurance and insurance and reinsurance undertakings, carry out work preparatory to the conclusion of contracts of insurance or reinsurance and, where appropriate, assist in the administration and performance of such contracts, in particular in the event of a claim. He is a person who would be able to bridge the gap on the uncovered risks of business. Insurance brokers can be best described as a kind of superindependent agent. Brokers are required to have a brokers license which typically means the broker will have more education or experience than an agent. Brokers also have a higher duty, in most states, to their clients. Brokers have the duty to analyze a business and secure correct and adequate coverage for the business. This is a higher duty than the pure administrative duty of the agent. However, this expertise comes at a price.

Due to the expertise that he has with respect to the insurance policies, he is likely to charge more on the services he offers. An insurance broker is more knowledgeable than an independent insurance agent. He has a very good knowledge on all the insurance plans available in the market. He understands the unique needs of insured business and would be in a position to give valuable suggestions regarding the choice of the most suitable business insurance policy. Advantages of Using an Insurance Broker. When buying insurance, you can choose to buy from an insurance agent who represents a specific insurance company, or you can choose to purchase your insurance through an independent insurance broker. Often, an independent broker can prove to be the better choice, and its easy to find the cheapest insurance premiums from a broker in your area online. 1. An insurance broker works for you not the insurance company. Your insurance broker is not tied to a specific company or a specific companys products. They can search a number of companies and their offerings to find the best deal for you. A broker can take a thorough look at your personal needs and recommend the best coverage for you based on your situation. Brokers can get you the best deal available from their portfolio of offerings. 2. Brokers are experienced and professional. Brokers deal with a wide range of products and services and are qualified to recommend the policies that best suit your needs from a broader portfolio of options than a direct insurance agent. They typically have experience with clients dealing with losses and can guide you through the often confusing and stressful claims process, answering any questions that you may have. Brokers usually work for smaller companies representing big insurance companies and can often offer faster and more personalized support. In addition, every insurance broker must be bonded, meaning that you are protected in the event of any dishonest conduct. 3. Brokers are licensed through the Registered Insurance Brokers of Ontario (RIBO). RIBO was established in 1981 and is a self regulated organization that authorizes the licensing of brokers for all general insurance in Ontario. Brokers are required to meet RIBO requirements in ethical conduct, professional competence and insurance related financial obligations. RIBO provides brokers with the opportunity for life-long learning and a chance to continually improve their knowledge and skill. Brokers are required to earn additional education credits each year to ensure that they stay up to date on the latest developments in the insurance industry and offer comprehensive advice and knowledge.

4. Your privacy is protected. Brokers are required by their Code of Ethics to maintain your privacy and keep all client discussions and information completely confidential. 5. Brokers give full disclosure on commission rates and their effect on your insurance premiums. Brokers are required to disclose their commission rate and the effect this has on your insurance premiums. Broker compensation is included in your premium payments and your broker will provide you with a statement at the point of sale that tells you how much of your premium goes toward the brokers commission. This allows you to make an informed choice when buying insurance. 6. They know the insurance market: Not only is an insurance broker an expert in knowing what to shop for and where to shop, they can negotiate on your behalf. They know the insurance market and when you're getting value for your money. 7. You don't have to worry about insurance,: because everything is taken care of for you. You can tailor your plans based on expert advice and a clear explanation of the insurance options from your insurance broker. Disadvantages of Using Insurance Brokers 1. Brokers often represent only a small number of companies (some even represent only one company!) which means they are not comparing many quotes for insured. 2. Brokers are biased as they are paid by the insurance company when you take out a policy, some insurance companies pay more than others, so unfortunately theres a good chance theyll push insured towards one that pays them more.

3. Brokers usually just send out insureds renewal notice every year, they dont check to make sure insured still have the best price. When we search for a quote online the power is in our hands, we can obtain multiple quotes and compare them, we can play around with deductibles and other adjustable items to see the effect on our premium. We can then repeat the process when our policy is due for renewal to ensure us still have the best price for what we need.

Similarity.
1. Same

structure policies, settle claims, and usually work on a commission basis.

2. In most states, both the agent and the insurance broker must be licensed, after having passed an insurance exam. 3. An agent or an insurance broker may also attend seminars and conferences to keep up to date on the latest insurance trends and legislation. 4. Since all types of insurance are in high demand, a necessity in many cases, good agents and brokers are also in high demand. 5. Each meets with potential clients and advises them on the most appropriate coverage. 6. When claims are made, they have to settle the claim equitably for both the client and the agency. 7. Agents and brokers can be salaried employees of an agency. 8. Insurance agents and brokers have administrative tasks to do, such as keeping records of sales. Lucky and successful agents will have a staff to handle these matters.