Insurance today refers to the relationship to protect the interests of legal entities and individuals with respect to property in cases of insured events. The economic nature and functions of insurance are due to the fact that this is a type of activity that is directly related to the distribution of the risk of damage among policyholders and insurers.
Insurers are specialized organizations that provide the accumulation of insurance premiums and payments in the event of certain damage to property interests. Policyholders are, respectively, persons who insure their property interests.
Like any other activity, insurance plays a role in the economy, it has its own insurance functions and is based on certain principles.
Its role is that it ensures the continuity and continuity of social reproduction. This is manifested in the results of activities, which in turn are expressed in:
- ensuring economic and social stability due to timely and full compensation of losses;
- the participation of the free funds of the insurance company fund in the investment activities of various insurance organizations ;
- performance indicators of insurance operations.
Insurance is distinguished by specific features that characterize it as a category of economy. These principles include the following:
- redistribution of material damage over time;
- the presence of insurance risk (see insurance functions - risk function);
- reimbursement of insurance payments in the form of insurance payments;
- meeting the needs of citizens to cover possible material damage.
The economic nature of insurance activity corresponds to the functions of insurance, which express its public purpose. Among the main functions are risk, preventive, savings and control.
The main function that insurance performs is rightfully considered risky, since this activity is impossible without risk. It is he who determines the existence and further development of insurance. Thus, it is within the limits of the risk function that there is a redistribution of value among all insurance participants as a result of accidental insured events. It is important that it is the variety of risks that determines the development of insurance as a whole, the emergence of its new industries and subspecies.
The insurance functions are also represented by a warning function, which is implemented by financing at the expense of a certain amount of the insurance fund funds local measures to reduce or eliminate the degree of insurance risks, and, as a result, losses from these risks. In insurance, such measures are called preventive.
The next function is savings. It implies saving money through survival insurance. This type of activity is associated with the need of people to insure their social status and level of income.
And, finally, the control function is to ensure the timely formation and use of money from the insurance fund, which, in turn, is based on the legislation governing insurance activities in general. This function is carried out through control over the legality of specific insurance operations by insurance companies.
In addition to the above, there are other functions that depend on each specific type of insurance activity. For example, the functions of social insurance.