With the evolution of commodity-money relations, people are increasingly in need of protecting their interests and property from possible unforeseen circumstances, whether it be natural disasters or the commonplace failure of the other party to fulfill certain obligations. The economic essence of insurance is determined in order to protect entities from possible losses, and in the event of an accident to compensate them for losses.
The insurance market is the most important component of the financial market where the insurance service is sold and bought.
In order to fully understand the essence of insurance, it is necessary to familiarize yourself with its main subjects:
- insurer - a legal entity that has received a license to engage in insurance activities. Such companies cannot carry out commodity-intermediary, production and banking transactions;
- the policyholder is a legal or competent natural person who, by virtue of the laws of the Russian Federation, has the right to act as a party to the insurance contract, and insurance payments may be assigned in favor of a third party. After the conclusion of the contract, policyholders are issued a policy that certifies their right to this service;
- insurance agent - physical. or legal a person who represents the interests of the insurer, speaking on his behalf. For this, firms receive a fee in the form of commissions;
- insurance broker - an individual or legal entity that acts as an intermediary in insurance relations, but at the same time on its own behalf. He examines the market conditions, competitive conditions and develops the best insurance program for his client.
The economic essence of insurance is also expressed in certain features by which this area of activity differs from others:
- There is a risk of an insured event resulting in damage, and then it is compensated.
- The need for individuals and legal entities to cover future damage is satisfied only by this service, which also reflects the essence of insurance.
- Damage is distributed over time.
- All funds collected (mobilized to the insurance fund ) (insurance premiums) are returned in the form of insurance payments.
Among other things, the economic nature of insurance is revealed through specific functions. It is customary to allocate risk, preventive, savings and control functions.
The risk function contributes to the redistribution of cash at cost between insurance participants, this is due to the occurrence of an insured event. It is a large number of risks that led to the development of many insurance industries and sub-sectors.
Preventive is due to the fact that part of the money received from contributions is sent to prevent insurance risk, reduce it or eliminate it.
The savings function is based on protecting citizens who have reached a particular social status and income from possible unforeseen insurance risks.
Finally, the control function involves strict monitoring of how the target funds of insurance funds are spent.
Thus, we examined what the essence and functions of insurance are. It remains to illuminate another important issue.
Insurance funds - the key concept of insurance - this is all cash generated through insurance premiums that are under the operational management of the insurer. These include the concepts of a state reserve fund (state centralized insurance fund); insurer's fund; reserve fund of entrepreneurial structures formed in the process of self-insurance.
So, we figured out what the economic essence of insurance is and examined the distinguishing features. They also described the main actors - policyholders, insurers, brokers and agents. We can conclude that the essence and functions of insurance are directly related: the functions stem from the very essence of insurance, its purpose.