History of General Insurance Coverage?
History of General Insurance – So, what exactly is general insurance anyways?
If you are a business owner or soon to be a business owner, then understanding
this business coverage is a strategically sound move.
However, to do this answer justice, let’s go back to the basics.
Insurance is, by definition, a financial agreement and arrangement that
transfers the costs of unexpected loss.
This transfer involves taking a potential loss from an insurance pool.
What is An Insurance Pool?
This insurance pool is a combination of all potential loss,
and the cost factor to transfer any exposed predicted losses.
The process of insurance transfer involves a system.
This system is used to redistribute loss among the members of that pool.
(Swimming Pool vs Insurance Pool Analogy)
So, imagine a backyard for a second. In that backyard, several swimming pools exist.
Now, there is a swimming party with many expected attendees.
These attendees are transferred to 1 of these isolated pools.
No other pools are being occupied, however. If something should go wrong
in the pool with all the attendees, help would be redistributed. This redistribution would
be within members of that isolated pool only. Yes, these are two completely
different topics, one that is an actual swimming pool and the other,
an insurance metaphor for a holding group of like members labeled, pool of insurance.
However, for illustration purposes, it shows how risk pools of insurance:
- and distribute.
General History Coverage – Channels?
There are different channels or streams of general insurance, but since we are
only looking at the basics and history of it, we will stop here. –
The next discussion is the actual coverage of insurance.
So what is Insurance Coverage?
What is Transfer of Risk?
Now, that you understand that insurance transfers loss exposure to
an insurance pool and then redistributes that loss amount.
This redistribution goes to the same pool members, yes, swimming pool example again.
Very important notation. You get the basic idea behind this concept.
Now, throughout history, there has been an unexpected economic loss.
This is inevitable of course. There can be many reasons for the shift in the economy,
or many factors all acting as trigger points. No matter if the
trigger points are political, or not, the result is a shift in the economy.
This shift can be devastating for a population of course. It can affect people on a large scale.
General Insurance Coverage:
You can think back to the days of The Great Depression as an example.
To some of the more recent cases of economic distress. For example,
the subprime lending fiasco in the housing market
in the first decade of the new millennium.
Operational System of Prediction – Effective?
Not all operating systems can predict the outcome of the loss.
However, a combined loss can be predicted.
This prediction is performed through the operation of an insurance system.
This is through the practice of predictability of loss.
This is the basic protocol for the operation of this system. Now, if you are wondering
how can insurance be initiated in advance?
Let’s use an example for illustration
purposes to shed more light on this subject. So, for example, purposes, let ’s say
you are a truck driver needing commercial truck insurance.
You are looking to compare rates and buy online, if possible.
Sounds reasonable, this process of buying online commercial insurance is a
very attractive proposition to many.
The convenience, the fast turnaround and most importantly,
the lowered cost of the insurance premium.
The reason for this low-cost insurance premium can
be managed through the reduction of overhead. This is done through the
elimination of retail stores, as an example.
Having an online commercial brokerage not
only serves as a convenient platform for shoppers to research and buy coverage,
but it also has helped in reducing multiple retail locations.
Win-Win: Business Scenario?
This is a win-win solution for both insured and insurance professional.
The reduction of retail locations, means less overhead.
This is one example, but it shows how the
online insurance marketplace can save you money.
That is the bottom line, right?
Exchange of Insurance Coverage –
(for Small Fee)
The exchange for commercial coverage through
an insurance company is marginal compared
to the actual cost of possible lost, or is it? It might not sound like an appealing
phrase, because for the most part, most people believe they are
overpaying for insurance. No matter if that insurance is for their commercial
property or a commercial auto policy.
The same sentiment is very common. You do not have to do tons of research to
find this common thread. Just ask yourself for example, “are you paying too much for insurance?”.
Most people would agree they are. Therefore, the most common keyword, for the most part,
is “cheap insurance quotes” online. Do yourself a favor, and
conduct your own research online. Check out different insurance product lines,
and see if you see certain key phrases, like “the cheapest, most affordable” and so forth.
You get the drift on this search suggestion.
Language Alteration – Industry Communication?
Insurance Communication – Yes, you can alter the adjective, cheap and substitute
for another common term, but the meaning is the same.
People are searching for lower insurance premiums. You may not
think the insurance premium on your commercial policy is cheap at all.
But, if you were to break down all the coverage you are getting, you would be surprised.
That is because, for a fraction of the cost, you are getting in
some cases, millions of dollars in coverage protection.
Risk Absorption for Your Business
This is a big deal. Now, you ask yourself, “how can insurance companies absorb all
these risks for a fraction of the cost?”. Great question! The reason
insurance companies can allow for this transaction in advance is that
losses are predicted accurately. This is because the system
allows for a group of loss to be assessed accurately. This is an important
function of this system. The redistribution other cost incurred from loss can
be financed and redistributed in advance, for just this purpose.
This is how the cost can be maintained at a fraction of the premium.