Insurance companies (insurers) are business entities that protect the interests of insured persons by compensating them for material damage upon occurrence of an insured event. The activities of insurers are regulated by special laws and are monitored by regulators. In Russia, the Central Bank acts as such a regulator.
Insurance principles
In any country, the insurance organization is based on certain principles that allow us to successfully carry out our activities. They are:
- in possession of insurance reserves;
- in fulfilling insurance obligations;
- in the prevalence of insurance reserves over insurance liabilities.
In order to fulfill these points, the insurer is required to weigh the risks of the occurrence of certain insurance cases.
In most insurance situations, statistics are on the side of the insurer. In some cases, the state intervenes in arranging insurance. It is on compliance with the above principles that the insurance business in most countries of the world is built.
How is the insurance business organized?
The legislation provides that the subject of direct activity of an insurance organization may be insurance or reinsurance. The list of types of insurance services is listed in the license issued by the state. If the policyholder does not fulfill his duties or performs them improperly, the license can be revoked, this organization loses the right to provide insurance services, which, however, does not deprive it of its obligation to fulfill the insurance obligations taken earlier.
Many insurers working in the same economic field form the insurance market that provides protection to individuals, state and private commercial enterprises, and financial organizations.
Types of Insurance Organizations
In our country, insurance organizations may be privately or publicly owned. The undisputed 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 financial resources of individuals or financial organizations.
The unique form of work of many private insurance companies is Lloyd's Syndicate. This is an association of private insurance organizations of insurers for the general conduct of the insurance and reinsurance business. The form of the syndicate turned out to be so convenient that it still operates today, insuring against small household appliances to large sea vessels.
Voluntary and compulsory insurance
Currently, the entire insurance market can be divided into:
- insurance services provided on a voluntary basis;
- insurance regulated by law.
You can also highlight the third paragraph on the organization of insurance, which is called "reinsurance", or the division of insurance liability between two or more organizations. This form of liability protection involves the distribution of possible financial payments between several insurers. Insurance of insurance companies allows, distributing payments, to fulfill their obligations without much damage to their financial condition.
If for commercial insurance compliance with the principles already guarantees a certain profit, then the organization of social insurance is tightly controlled by the state. Let's try to deal with those types of insurance that are mandatory from the point of view of the law.
Compulsory insurance
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 who 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 in favor of injured third parties;
- everyone has the right to medical care - this norm is supported 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 - the Pension Fund is responsible for this.
The activities 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;
- the amount of insurance liability, which includes the minimum compulsory insurance payment and the statutory maximum insurance payment;
- obligations and rights of policyholders and insured persons.
Compulsory insurance and insurers
The law provides a list of organizations that are entitled to carry out insurance activities as part of compulsory insurance. Some insurance organizations are created on a state basis (Pension Fund, Social Insurance Fund). Some insurers are given the right to carry out activities in the field of compulsory insurance (CTP, for example).
Controlling the most important area of protecting the rights of its citizens, the state performs two functions:
- minimizes down payments, making compulsory insurance affordable for most citizens of their country;
- guarantees maximum coverage of insurance entities, making the organization of social insurance cost-effective and financially self-sufficient.
Consider how insurers work in the field of compulsory insurance. Classic examples of this are the Pension Fund and the Social Insurance Fund.
Organization of insurance in state funds
The organization of pension insurance in our country is based on a symbiosis of two main systems:
- joint, which went to us as the legacy of the Soviet Union;
- personal, which is an innovation of the last fifteen years.
Under the joint system, every citizen paid pension contributions to the general budget of the Pension Fund. Subsequently, money was paid out of it, depending on the length of service, various ratios and other things. Despite its simplicity, the solidarity system led to the fact that people who worked for five years, and for a quarter of a century began to receive virtually the same pension.
In addition to such leveling, another significant shortcoming of the joint system was revealed: the critical deficit of the Pension Fund. To align the pension budget, the state decided to introduce a personalized accounting of pension savings. Each citizen, depending on his income, pays a certain percentage to his personal retirement account, as a bank deposit and upon reaching retirement age receives his own pension.
Health insurance
The organization of compulsory health insurance is based on a joint system for receiving contributions. Each citizen deducts from his income a certain percentage of the money to the social insurance fund. Of these funds, he is paid "sick leave" as compensation for wages due to illness. The FSS also deals with maternity and childcare payments. The same fund compensates for expenses due to disability arising as a result of an accident when conducting professional activities. If citizens want to receive large compensation payments - for example, to reimburse the cost of treatment, for a surgical operation - voluntary medical insurance is at their service.
Liability Insurance
Liability insurance is another type of protection for affected persons. Its peculiarity lies in the fact that the policyholder and policyholder enter into an insurance contract. Payments for this type of insurance are received by a third, injured person. A classic example of liability insurance is the insurance policy.
OSAGO deals with liability insurance for damage caused to third parties as a result of a car accident.
Organization of liability insurance lies in the field of activity of those insurers who are entitled to it. Minimum down payment ratios and maximum payouts are regulated by law. The state also has the right to determine how the damage will be compensated - in cash or in kind, and to control the activities of policyholders.