Insurance: Difference between revisions

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{{~~short~~ description|~~Equitable transfer of the risk of a~~ loss~~, from one entity to another, in exchange for payment~~}}

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'''Insurance''' is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of [[risk management]], primarily used to protect against the risk of a contingent or uncertain loss.

'''Insurance''' is a means of protection from financial loss in which, in exchange for a [[fee]], a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of [[risk management]], primarily used to protect against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an '''insurer''', '''insurance company''', '''insurance carrier''', or [[underwriter]]. A person or entity who buys insurance is known as a '''policyholder''', while a person or entity covered under the policy is called an '''insured'''. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms. Furthermore, it usually involves something in which the insured has an [[insurable interest]] established by ownership, possession, or pre-existing relationship.

An entity which provides insurance is known as an '''insurer''', '''insurance company''', '''insurance carrier''', or [[underwriter]]. A person or entity who buys insurance is known as a '''policyholder''', while a person or entity covered under the policy is called an '''insured'''. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must always be reducible to financial terms. Furthermore, it usually involves something in which the insured has an [[insurable interest]] established by ownership, possession, or pre-existing relationship.

The insured receives a [[contract]], called the [[insurance policy]], which details the conditions and circumstances under which the insurer will compensate the insured, or their designated beneficiary or assignee. The amount of money charged by the insurer to the policyholder for the coverage set forth in the insurance policy is called the '''premium'''. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. A mandatory [[out-of-pocket expense]] required by an insurance policy before an insurer will pay a claim is called a [[deductible]] (or if required by a [[health insurance]] policy, a [[copayment]]). The insurer may mitigate its own risk by taking out [[reinsurance]], whereby another insurance company agrees to carry some of the risks, especially if the primary insurer deems the risk too large for it to carry.

The insured receives a [[contract]], called the [[insurance policy]], which details the conditions and circumstances under which the insurer will compensate the insured, or their designated beneficiary or assignee. The amount of money charged by the insurer to the policyholder for the coverage set forth in the insurance policy is called the '''premium'''. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. A mandatory [[out-of-pocket expense]] required by an insurance policy before an insurer will pay a claim is called a [[deductible]] or excess (or if required by a [[health insurance]] policy, a [[copayment]]). The insurer may mitigate its own risk by taking out [[reinsurance]], whereby another insurance company agrees to carry some of the risks, especially if the primary insurer deems the risk too large for it to carry.

==History==

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The law of general average is the fundamental [[principle]] that underlies all insurance.<ref name="Prudential pp. 5–6" /> In 1816, an archeological excavation in [[Minya, Egypt]] produced a [[Nerva–Antonine dynasty]]-era [[Clay tablet|tablet]] from the ruins of the [[Antinous#Deification and the cult of Antinous|Temple of Antinous]] in [[Antinoöpolis]], [[Roman Egypt|Aegyptus]]. The tablet [[Articles of association|prescribed the rules]] and [[Benefit society|membership dues]] of a [[burial society]] [[Collegium (ancient Rome)|collegium]] established in [[Lanuvium]], [[Roman Italy|Italia]] in approximately 133 AD during the reign of [[Hadrian]] (117–138) of the [[Roman Empire]].<ref name="Prudential pp. 5–6" /> In 1851 AD, future [[Supreme Court of the United States|U.S. Supreme Court]] [[Associate Justice of the Supreme Court of the United States|Associate Justice]] [[Joseph P. Bradley]] (1870–1892 AD), once employed as an [[actuary]] for the [[Mutual Benefit Life Insurance Company]], submitted an article to the ''[[Institute of Actuaries|Journal of the Institute of Actuaries]]''. His article detailed an historical account of a [[Severan dynasty]]-era [[life table]] compiled by the [[Roman law|Roman jurist]] [[Ulpian]] in approximately 220 AD that was also included in the ''Digesta''.<ref>{{cite book|year=1915|title=The Documentary History of Insurance, 1000 BC–1875 AD|publisher=[[Prudential Financial|Prudential Press]]|place=[[Newark, New Jersey|Newark, NJ]]|pages=[https://archive.org/details/cu31924030231736/page/n9/mode/2up 6–7]|url=https://archive.org/details/cu31924030231736/mode/2up|access-date=15 June 2021}}</ref>

Concepts of insurance ~~has~~ been also found in 3rd century BC Hindu scriptures such as [[Dharmasastra]], [[Arthashastra]] and [[Manusmriti]].<ref>{{cite book|title=The Life Insurance Industry in India: Current State and Efficiency|page=2|author=Tapas Kumar Parida, Debashis Acharya|publisher=Springer|year=2016|isbn=9789811022333}}</ref> The ancient Greeks had marine loans. Money was advanced on a ship or cargo, to be repaid with large interest if the voyage prospers. However, the money would not be repaid at all if the ship were lost, thus making the rate of interest high enough to pay for not only for the use of the capital but also for the risk of losing it (fully described by [[Demosthenes]]). Loans of this character have ever since been common in maritime lands under the name of [[bottomry]] and respondentia bonds.<ref name=EB1911>{{cite EB1911 |wstitle=Insurance |volume=14 |pages=657–658 |first1=Charlton |last1=Lewis |first2=Thomas |last2=Ingram}}</ref>

Concepts of insurance have been also found in 3rd century BC Hindu scriptures such as [[Dharmasastra]], [[Arthashastra]] and [[Manusmriti]].<ref>{{cite book|title=The Life Insurance Industry in India: Current State and Efficiency|page=2|author=Tapas Kumar Parida, Debashis Acharya|publisher=Springer|year=2016|isbn=9789811022333}}</ref> The ancient Greeks had marine loans. Money was advanced on a ship or cargo, to be repaid with large interest if the voyage prospers. However, the money would not be repaid at all if the ship were lost, thus making the rate of interest high enough to pay for not only for the use of the capital but also for the risk of losing it (fully described by [[Demosthenes]]). Loans of this character have ever since been common in maritime lands under the name of [[bottomry]] and respondentia bonds.<ref name=EB1911>{{cite EB1911 |wstitle=Insurance |volume=14 |pages=657–658 |first1=Charlton |last1=Lewis |first2=Thomas |last2=Ingram}}</ref>

The direct insurance of sea-risks for a premium paid independently of loans began in [[Belgium]] about 1300 AD.<ref name=EB1911/>

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in [[Genoa]] in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347. In the next century, maritime insurance developed widely, and premiums were varied with risks.<ref>J. Franklin, ''The Science of Conjecture: Evidence and Probability Before Pascal'' (Baltimore: Johns Hopkins University Press, 2001), 274-277.</ref> These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in [[marine insurance]].

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in [[Genoa]] in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347. In the next century, maritime insurance developed widely, and premiums were varied with risks.<ref>J. Franklin, ''The Science of Conjecture: Evidence and Probability Before Pascal'' (Baltimore: Johns Hopkins University Press, 2001), 274-277.</ref> These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance.

The earliest known policy of life insurance was made in the [[Royal Exchange, London]], on 18 June 1583, for £383, 6s. 8d. for twelve months on the life of William Gibbons.<ref name=EB1911/>

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[[Property insurance]] as we know it today can be traced to the [[Great Fire of London]], which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir [[Christopher Wren]]'s inclusion of a site for "the Insurance Office" in his new plan for London in 1667."<ref>Dickson (1960): 4</ref> A number of attempted fire insurance schemes came to nothing, but in 1681, [[Economics|economist]] [[Nicholas Barbon]] and eleven associates established the first fire insurance company, the "Insurance Office for Houses", at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by his Insurance Office.<ref>Dickson (1960): 7</ref>

At the same time, the first insurance schemes for the [[underwriting]] of [[business venture]]s became available. By the end of the seventeenth century, London's growth as a centre for trade was increasing due to the demand for [[marine insurance]]. In the late 1680s, [[Edward Lloyd (publisher)|Edward Lloyd]] opened [[Lloyd's Coffee House|a coffee house]], which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, including those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market [[Lloyd's of London]] and several related shipping and insurance businesses.<ref>{{cite ODNB|url=http://press.oxforddnb.com/index/16/101016829 |title=Lloyd, Edward (''c''.1648–1713) |first=Sarah |last=Palmer |date=October 2007 |volume=1 |doi=10.1093/ref:odnb/16829 |access-date=16 February 2011 |url-status = dead|archive-url=https://web.archive.org/web/20110715030319/http://press.oxforddnb.com/index/16/101016829/ |archive-date=15 July 2011 }}</ref>

At the same time, the first insurance schemes for the [[underwriting]] of [[business venture]]s became available. By the end of the seventeenth century, London's growth as a centre for trade was increasing due to the demand for marine insurance. In the late 1680s, [[Edward Lloyd (publisher)|Edward Lloyd]] opened [[Lloyd's Coffee House|a coffee house]], which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, including those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market [[Lloyd's of London]] and several related shipping and insurance businesses.<ref>{{cite ODNB|url=http://press.oxforddnb.com/index/16/101016829 |title=Lloyd, Edward (''c''.1648–1713) |first=Sarah |last=Palmer |date=October 2007 |volume=1 |doi=10.1093/ref:odnb/16829 |access-date=16 February 2011 |url-status = dead|archive-url=https://web.archive.org/web/20110715030319/http://press.oxforddnb.com/index/16/101016829/ |archive-date=15 July 2011 }}</ref>

[[File:National-insurance-act-1911.jpg|thumb|upright=0.9|Leaflet promoting the [[National Insurance Act 1911]]]]

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[[Life insurance]] policies were taken out in the early 18th century. The first company to offer life insurance was the [[Amicable Society for a Perpetual Assurance Office]], founded in London in 1706 by [[William Talbot (bishop)|William Talbot]] and [[Allen baronets|Sir Thomas Allen]].<ref Name="Anzovin121">Anzovin, Steven, ''Famous First Facts'' 2000, item # 2422, H. W. Wilson Company, {{ISBN|0-8242-0958-3}} p. 121 ''The first life insurance company known of record was founded in 1706 by the Bishop of Oxford and the financier Thomas Allen in London, England. The company, called the Amicable Society for a Perpetual Assurance Office, collected annual premiums from policyholders and paid the nominees of deceased members from a common fund.''</ref><ref>Amicable Society, ''The charters, acts of Parliament, and by-laws of the corporation of the Amicable Society for a perpetual assurance office'', Gilbert and Rivington, 1854, p. 4</ref> Upon the same principle, [[Edward Rowe Mores]] established the [[The Equitable Life Assurance Society|Society for Equitable Assurances on Lives and Survivorship]] in 1762.

It was the world's first [[mutual insurer]] and it pioneered age based premiums based on [[mortality rate]] laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based."<ref name=eq>{{Cite web|url=http://www.equitable.co.uk/about-us/history-and-facts/|title=Today and History:The History of Equitable Life|date=26 June 2009|access-date=16 August 2009}}</ref>

It was the world's first [[mutual insurer]] and it pioneered age-based premiums based on [[mortality rate]] laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based."<ref name=eq>{{Cite web|url=http://www.equitable.co.uk/about-us/history-and-facts/|title=Today and History:The History of Equitable Life|date=26 June 2009|access-date=16 August 2009}}</ref>

In the late 19th century "accident insurance" began to become available.<ref>{{cite web|title=Encarta: Health Insurance |url=http://ca.encarta.msn.com/encyclopedia_761576408_8/Health_Insurance.html#s49 |archive-url=https://web.archive.org/web/20090717201207/http://ca.encarta.msn.com/encyclopedia_761576408_8/Health_Insurance.html |archive-date=17 July 2009 |url-status = dead}}</ref> The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in [[England]] to insure against the rising number of fatalities on the nascent [[railway]] system.

The first international insurance rule was the [[General_average#York Antwerp Rules|York Antwerp Rules]] (YAR) for the distribution of costs between ship and cargo in the event of general average. In 1873 the "Association for the Reform and Codification of the Law of Nations", the forerunner of the [[International Law Association]] (ILA), was founded in [[Brussels]]. It published the first YAR in 1890, before switching to the present title of the "International Law Association" in 1895.<ref>{{Citation|author= F. L. Wiswall|url= https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf| title=A Brief History |publisher= [[International Maritime Organization|Comite Maritime International]]|series= |date=2019 |archive-url= https://web.archive.org/web/20190814090124/https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf|archive-date= 14 August 2019}}</ref><ref>{{Citation|author= Dr. Ruth Frendo|url= ~~http~~://www.ila-hq.org/images/ILA/docs/international_law_association_article_-_dr_ruth_frendo.pdf | title=Archivist and Records Manager at the Institute of Advanced Legal Studies |publisher= ILA|series= |date=}}</ref>

The first international insurance rule was the [[General_average#York Antwerp Rules|York Antwerp Rules]] (YAR) for the distribution of costs between ship and cargo in the event of general average. In 1873 the "Association for the Reform and Codification of the Law of Nations", the forerunner of the [[International Law Association]] (ILA), was founded in [[Brussels]]. It published the first YAR in 1890, before switching to the present title of the "International Law Association" in 1895.<ref>{{Citation|author= F. L. Wiswall|url= https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf| title=A Brief History |publisher= [[International Maritime Organization|Comite Maritime International]]|series= |date=2019 |archive-url= https://web.archive.org/web/20190814090124/https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf|archive-date= 14 August 2019}}</ref><ref>{{Citation|author= Dr. Ruth Frendo|url= https://www.ila-hq.org/images/ILA/docs/international_law_association_article_-_dr_ruth_frendo.pdf | title=Archivist and Records Manager at the Institute of Advanced Legal Studies |publisher= ILA|series= |date=}}</ref>

By the late 19th century governments began to initiate national insurance programs against sickness and old age. [[History of Germany|Germany]] built on a tradition of welfare programs in [[Prussia]] and [[Saxony]] that began as early as in the 1840s. In the 1880s Chancellor [[Otto von Bismarck]] introduced old age pensions, accident insurance and medical care that formed the basis for Germany's [[welfare state]].<ref name="EPH">E. P. Hennock, ''The Origin of the Welfare State in England and Germany, 1850–1914: Social Policies Compared'' (2007)</ref><ref>Hermann Beck, ''Origins of the Authoritarian Welfare State in Prussia, 1815-1870'' (1995)</ref> In Britain more extensive legislation was introduced by the [[Liberal Party (UK)|Liberal]] government in the [[National Insurance Act 1911]]. This gave the British working classes the first contributory system of insurance against illness and unemployment.<ref>[~~http~~://www.nationalarchives.gov.uk/cabinetpapers/themes/national-health-insurance.htm The Cabinet Papers 1915-1982: National Health Insurance Act 1911.] The National Archives, 2013. Retrieved 30 June 2013.</ref> This system was greatly expanded after the [[Second World War]] under the influence of the [[Beveridge Report]], to form the first modern [[welfare state]].<ref name="EPH"/><ref>Bentley B. Gilbert, ''British social policy, 1914-1939'' (1970)</ref>

By the late 19th century governments began to initiate national insurance programs against sickness and old age. [[History of Germany|Germany]] built on a tradition of welfare programs in [[Prussia]] and [[Saxony]] that began as early as in the 1840s. In the 1880s Chancellor [[Otto von Bismarck]] introduced old age pensions, accident insurance and medical care that formed the basis for Germany's [[welfare state]].<ref name="EPH">E. P. Hennock, ''The Origin of the Welfare State in England and Germany, 1850–1914: Social Policies Compared'' (2007)</ref><ref>Hermann Beck, ''Origins of the Authoritarian Welfare State in Prussia, 1815-1870'' (1995)</ref> In Britain more extensive legislation was introduced by the [[Liberal Party (UK)|Liberal]] government in the [[National Insurance Act 1911]]. This gave the British working classes the first contributory system of insurance against illness and unemployment.<ref>[https://www.nationalarchives.gov.uk/cabinetpapers/themes/national-health-insurance.htm The Cabinet Papers 1915-1982: National Health Insurance Act 1911.] The National Archives, 2013. Retrieved 30 June 2013.</ref> This system was greatly expanded after the [[Second World War]] under the influence of the [[Beveridge Report]], to form the first modern [[welfare state]].<ref name="EPH"/><ref>Bentley B. Gilbert, ''British social policy, 1914-1939'' (1970)</ref>

In 2008, the International Network of Insurance Associations (INIA), then an informal network, became active and it has been succeeded by the [[Global Federation of Insurance Associations]] (GFIA), which was formally founded in 2012 ~~to aim~~ to increase insurance industry effectiveness in providing input to international regulatory bodies and to contribute more effectively to the international dialogue on issues of common interest. It consists of ~~its~~ 40 member associations and 1 observer association in 67 countries, which companies account for around 89% of total insurance premiums worldwide.<ref>[https://www.gfiainsurance.org/about-us "About us"], the Global Federation of Insurance Associations.</ref>

In 2008, the International Network of Insurance Associations (INIA), then an informal network, became active and it has been succeeded by the [[Global Federation of Insurance Associations]] (GFIA), which was formally founded in 2012 to increase insurance industry effectiveness in providing input to international regulatory bodies and to contribute more effectively to the international dialogue on issues of common interest. It consists of 40 member associations and 1 observer association in 67 countries, which companies account for around 89% of total insurance premiums worldwide.<ref>[https://www.gfiainsurance.org/about-us "About us"], the Global Federation of Insurance Associations.</ref>

==Principles==

Insurance involves ~~[[pooling (resource management)|~~pooling]] funds from ''many'' insured entities ~~(known as exposures)~~ to pay for the losses that ~~only~~ some ~~insureds~~ may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an [[insurable risk]], the risk insured against must meet certain characteristics. Insurance as a [[financial intermediary]] is a commercial enterprise and a major part of the financial services industry, but individual entities can also [[self-insurance|self-insure]] through saving money for possible future losses.<ref>Gollier C. (2003). [https://www.jstor.org/stable/41953424?seq=1#page_scan_tab_contents To Insure or Not to Insure?: An Insurance Puzzle]. ''The Geneva Papers on Risk and Insurance Theory''.</ref>

Insurance involves pooling funds from many insured entities to pay for the losses that some may incur, a process known as [[risk pool]]. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an [[insurable risk]], the risk insured against must meet certain characteristics. Insurance as a [[financial intermediary]] is a commercial enterprise and a major part of the financial services industry, but individual entities can also [[self-insurance|self-insure]] through saving money for possible future losses.<ref>Gollier C. (2003). [https://www.jstor.org/stable/41953424?seq=1#page_scan_tab_contents To Insure or Not to Insure?: An Insurance Puzzle]. ''The Geneva Papers on Risk and Insurance Theory''.</ref>

===Insurability===

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Risk which can be insured by private companies typically share seven common characteristics:<ref>This discussion is adapted from Mehr and Camack's "Principles of Insurance", 6th edition, 1976, pp 34 – 37.</ref>

# A large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies cover individual members of large classes, allowing insurers to benefit from the [[law of large numbers]] in which predicted losses are similar to the actual losses. Exceptions include [[Lloyd's of London]], which is famous for insuring the life or health of actors, sports figures, and other famous individuals. However, all exposures will have distinct differences, which may lead to different premium rates.

# '''A large number of similar exposure units''': Since insurance operates through pooling resources, the majority of insurance policies cover individual members of large classes, allowing insurers to benefit from the [[law of large numbers]] in which predicted losses are similar to the actual losses. Exceptions include [[Lloyd's of London]], which is famous for insuring the life or health of actors, sports figures, and other famous individuals. However, all exposures will have distinct differences, which may lead to different premium rates.

# Definite loss: This type of loss takes place at a known time and place from a known cause. The classic example involves the death of an insured person on a life insurance policy. [[Fire]], [[Traffic collision|automobile accidents]], and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. [[Occupational disease]], for instance, may involve prolonged exposure to injurious conditions where no specific time, place, or cause is identifiable. Ideally, the time, place, and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.

# '''Definite loss''': This type of loss takes place at a known time and place from a known cause. The classic example involves the death of an insured person on a life insurance policy. [[Fire]], [[Traffic collision|automobile accidents]], and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. [[Occupational disease]], for instance, may involve prolonged exposure to injurious conditions where no specific time, place, or cause is identifiable. Ideally, the time, place, and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.

# Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure because it results from an event for which there is only the opportunity for cost. Events that contain speculative elements such as ordinary business risks or even purchasing a lottery ticket are generally not considered insurable.

# '''Accidental loss''': The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure because it results from an event for which there is only the opportunity for cost. Events that contain speculative elements such as ordinary business risks or even purchasing a lottery ticket are generally not considered insurable.

# Large loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses, these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.

# '''Large loss''': The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses, these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.

# Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, then it is not likely that insurance will be purchased, even if on offer. Furthermore, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. Suppose there is no such chance of loss. In that case, the transaction may have the form of insurance, but not the substance (see the U.S. [[Financial Accounting Standards Board]] pronouncement number 113: "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts").

# '''Affordable premium''': If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, then it is not likely that insurance will be purchased, even if on offer. Furthermore, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. Suppose there is no such chance of loss. In that case, the transaction may have the form of insurance, but not the substance (see the U.S. [[Financial Accounting Standards Board]] pronouncement number 113: "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts").

# Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.

# '''Calculable loss''': There are two elements that must be at least estimable, if not formally calculable: the probability of loss and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.

# Limited risk of catastrophically large losses: Insurable losses are ideally [[independence (probability theory)|independent]] and non-catastrophic, meaning that the losses do not happen all at once and that individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. [[Capital (economics) |Capital]] constrains insurers' ability to sell [[earthquake insurance]] as well as wind insurance in [[Tropical cyclone|hurricane]] zones. In the United States, the federal government insures [[flood insurance|flood risk]] in specifically identified areas. In commercial fire insurance, it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers or are insured by a single insurer which syndicates the risk into the [[reinsurance]] market.

===Legal===

When a company insures an individual entity, there are basic legal requirements and regulations. Several commonly cited legal principles of insurance include:<ref>Irish Brokers Association. [https://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 Insurance Principles] {{webarchive|url=https://web.archive.org/web/20090411184958/http://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 |date=11 April 2009 }}.</ref>

When a company insures an individual entity, there are basic legal requirements and regulations. Several commonly cited legal principles of insurance include the following:<ref>Irish Brokers Association. [https://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 Insurance Principles] {{webarchive|url=https://web.archive.org/web/20090411184958/http://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 |date=11 April 2009 }}.</ref>

# [[Indemnity]] – the insurance company indemnifies or compensates the insured in the case of certain losses only up to the insured's interest.

# Benefit insurance – as it is stated in the study books of The Chartered Insurance Institute, the insurance company does not have the right of recovery from the party who caused the injury and must compensate the ~~Insured~~ regardless of the fact that Insured had already sued the negligent party for the damages (for example, personal accident insurance)

# Benefit insurance – as it is stated in the study books of The Chartered Insurance Institute, the insurance company does not have the right of recovery from the party who caused the injury and must compensate the insured regardless of the fact that Insured had already sued the negligent party for the damages (for example, personal accident insurance)

# [[Insurable interest]] – the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved. The concept requires that the insured have a "stake" in the loss or damage to the life or property insured. What that "stake" is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons. The requirement of an insurable interest is what distinguishes insurance from [[gambling]].

# [[Good faith (law)|Utmost good faith]] – ([[Uberrima fides]]) the insured and the insurer are bound by a [[good faith (law)|good faith]] bond of honesty and fairness. Material facts must be disclosed.

# [[Good faith (law)|Utmost good faith]] ([[Uberrima fides]]) – the insured and the insurer are bound by a [[good faith (law)|good faith]] bond of honesty and fairness. Material facts must be disclosed.

# Contribution – insurers, which have similar obligations to the insured, contribute in the indemnification, according to some method.

# Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for the insured's loss. The ~~Insurers~~ can waive their subrogation rights by using the special clauses.

# Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for the insured's loss. The insurers can waive their subrogation rights by using the special clauses.

# Causa proxima, or [[proximate cause]] – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be [[exclusion clause|excluded]]

# Causa proxima, or [[proximate cause]] – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be [[exclusion clause|excluded]].

# Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss to a minimum, as if the asset ~~was~~ not insured.

# Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss to a minimum, as if the asset were not insured.

===Indemnification===

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To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, [[life insurance]] is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally three types of insurance contracts that seek to indemnify an insured:

# A "reimbursement" policy

# A "pay on behalf" or "on behalf of policy"<ref name="KulpHall">C. Kulp & J. Hall, Casualty Insurance, Fourth Edition, 1968, page 35</ref>

# A "pay on behalf" or "on behalf of" policy"<ref name="KulpHall">C. Kulp & J. Hall, Casualty Insurance, Fourth Edition, 1968, page 35</ref>

# An "indemnification" policy

From an insured's standpoint, the result is usually the same: the insurer pays the loss and claims expenses.

If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and then be "reimbursed" by the insurance carrier for the loss and out of pocket costs including, with the permission of the insurer, claim expenses.<ref name="KulpHall" />{{NoteTag|However, the bankruptcy of the insured with a "reimbursement" policy does not relieve the insurer. Certain types of insurance, e.g., workers' compensation and personal automobile liability, are subject to statutory requirements that injured parties have direct access to coverage.}}

If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and then be "reimbursed" by the insurance carrier for the loss and out-of-pocket costs including, with the permission of the insurer, claim expenses.<ref name="KulpHall" />{{NoteTag|However, the bankruptcy of the insured with a "reimbursement" policy does not relieve the insurer. Certain types of insurance, e.g., workers' compensation and personal automobile liability, are subject to statutory requirements that injured parties have direct access to coverage.}}

Under a "pay on behalf" policy, the insurance carrier would defend and pay a claim on behalf of the insured who would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language, which enables the insurance carrier to manage and control the claim.

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* [[War exclusion clause]], excluding damage from acts of war or terrorism.<ref>{{cite news |last1=Menapace |first1=Michael |title=Losses From Malware May Not Be Covered Due To Your Policy's Hostile Acts Exclusion |url=https://www.natlawreview.com/article/property-insurance-cyber-insurance-coverage-and-war-losses-malware-may-not-be-0 |access-date=25 April 2019 |work=The National Law Review |date=10 March 2019}}</ref><ref>{{cite news |last1=Stock |first1=Rob |title=Insurers waive terrorism exclusions for Christchurch shooting victims |url=https://www.stuff.co.nz/national/christchurch-shooting/111397687/insurers-waive-terrorism-exclusions-for-christchurch-shooting-victims |access-date=25 April 2019 |work=Stuff |date=19 March 2019}}</ref>

Insurers may prohibit certain activities ~~which~~ are considered dangerous and therefore excluded from coverage. One system for classifying activities according to whether they are authorised by insurers refers to ~~"green light" approved activities and events, "yellow light" activities and events which require insurer consultation and/or waivers~~ of ~~liability, and "red light"~~ activities and events ~~which are prohibited and outside the scope of insurance cover.~~<ref>California State PTA (2019), [http://downloads.capta.org/Leaders/Insurance/CAPTA_Insurance_Guide_2019_FINAL.pdf Insurance Guide], revised April 2019, accessed 19 December 2020</ref>

Insurers may prohibit certain activities that are considered dangerous and therefore excluded from coverage. One system for classifying activities according to whether they are authorised by insurers refers to three types of activities and events:<ref>California State PTA (2019), [http://downloads.capta.org/Leaders/Insurance/CAPTA_Insurance_Guide_2019_FINAL.pdf Insurance Guide], revised April 2019, accessed 19 December 2020</ref>

* green light – approved

* yellow light – require insurer consultation and/or waivers of liability

* red light – prohibited and outside the scope of insurance cover

==Social effects==

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===Insurance premium===

~~Insurers~~' business model aims to collect more in insurance premiums than is paid out in losses, and to also offer a competitive price which consumers will accept. Insurance premiums can be simplified as:<ref name="i874">{{cite web | last=Community | first=the Actuarial | title=Chapter 10 Premium Foundations | website=Loss Data Analytics Second Edition | date=1 July 2019 | url=https://openacttexts.github.io/LDAVer2/ChapPremiumFoundations.html | access-date=8 June 2025}}</ref>

The insurers' business model aims to collect more in insurance premiums than is paid out in losses, and to also offer a competitive price which consumers will accept. Insurance premiums can be simplified as:<ref name="i874">{{cite web | last=Community | first=the Actuarial | title=Chapter 10 Premium Foundations | website=Loss Data Analytics Second Edition | date=1 July 2019 | url=https://openacttexts.github.io/LDAVer2/ChapPremiumFoundations.html | access-date=8 June 2025}}</ref>

:insurance premium = [[expected value]] of claims + underwriting expenses + [[operating expense]] + [[Profit (accounting)|profit]] - [[return on investment]].

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Insurers make money in two ways:

* Through [[underwriting]], the process by which insurers select the risks to insure and decide how much in insurance premiums to charge for accepting those risks, and taking the brunt of the risk should it come to ~~fruition~~.

* Through [[underwriting]], the process by which insurers select the risks to insure and decide how much in insurance premiums to charge for accepting those risks, and taking the brunt of the risk should it come to pass.

* By [[investment|investing]] the insurance premiums they collect from insured parties

A company with a combined ratio over 100% may nevertheless remain profitable due to investment earnings.

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In the [[United States]], the underwriting loss of [[property insurance|property]] and [[casualty insurance]] companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance-industry insiders, most notably [[Maurice R. Greenberg|Hank Greenberg]], do not believe that it is possible to sustain a profit from float forever without an underwriting profit as well, but this opinion is not universally held. Reliance on float for profit has led some industry experts to call insurance companies "investment companies that raise the money for their investments by selling insurance".<ref>{{Cite journal|last1= Weir|first1= Audrey A.|last2= Hampton|first2= John H.|date= March 1995|title= Essentials of Risk Management and Insurance|journal= The Journal of Risk and Insurance|volume= 62|issue= 1|pages= 157|doi= 10.2307/253703|issn= 0022-4367|jstor= 253703}}</ref>

Naturally, the float method is difficult to carry out in an [[Depression (economics)|economically depressed]] period~~. [[Bear market]]s do cause~~ insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance-premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the [[insurance cycle|underwriting, or insurance, cycle]].<ref>

Naturally, the float method is difficult to carry out in an [[Depression (economics)|economically depressed]] period generally causing insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance-premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the [[insurance cycle|underwriting or insurance cycle]].<ref>

Fitzpatrick, Sean, [https://ssrn.com/abstract=690316 ''Fear is the Key: A Behavioral Guide to Underwriting Cycles,''] 10 Conn. Ins. L.J. 255 (2004).

</ref>

When the insurance is required to pay for uninsured people the premia increase.<ref name="d051">{{cite journal | last1=Sun | first1=Stephen Teng | last2=Yannelis | first2=Constantine | title=QUANTIFYING THE PREMIUM EXTERNALITY OF THE UNINSURED: Quantifying the Premium Externality of the Uninsured | journal=Journal of the European Economic Association | volume=14 | issue=2 | date=2016 | doi=10.1111/jeea.12148 | pages=405–437 | url=https://academic.oup.com/jeea/article-lookup/doi/10.1111/jeea.12148 | access-date=2026-03-25| url-access=subscription }}</ref>

===Claims===

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Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, [[vehicle insurance]] would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an [[traffic collision|accident]]). A [[home insurance]] policy in the United States typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.

[[Business]] insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the [[business owner's policy]] (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Business insurance information. What does a businessowners policy cover? | url = ~~http~~://www.iii.org/individuals/business/basics/bop/ | access-date = 9 May 2007 }}</ref>

[[Business]] insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the [[business owner's policy]] (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Business insurance information. What does a businessowners policy cover? | url = https://www.iii.org/individuals/business/basics/bop/ | access-date = 9 May 2007 }}</ref>

===Vehicle insurance===

[[File:Car crash 1.jpg|thumb|right|A wrecked vehicle in [[Copenhagen]]]]

Vehicle insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a [[traffic collision]].

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===Health insurance===

[[File:Great western hospital.JPG|right|thumb|Great Western Hospital, [[Swindon]]]]

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===Casualty insurance===

Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as [[Vehicle insurance|auto]], [[Workers' compensation|workers compensation]], and some [[Liability insurance|liability insurances]].

Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified into, such as [[Vehicle insurance|auto]], [[Workers' compensation|workers compensation]], and some [[Liability insurance|liability insurances]].

* Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the [[criminal act]]s of third parties. For example, a company can obtain crime insurance to cover losses arising from [[theft]] or [[embezzlement]].

* [[Terrorism insurance]] provides protection against any loss or damage caused by [[terrorism|terrorist]] activities. In the United States in the wake of [[september 11 attacks|9/11]], the [[Terrorism Risk Insurance Act]] 2002 (TRIA) set up a federal program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).

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===Life insurance===

[[File:Amicable Society for a Perpetual Assurance Office, Serjeants' Inn, Fleet Street, London, 1801.jpg|thumb|upright=0.8|[[Amicable Society for a Perpetual Assurance Office]], Serjeants' Inn, Fleet Street, [[London]], 1801]]

Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an [[Annuity (financial contracts)|annuity]]. In most states, a person cannot purchase a policy on another person without their knowledge.

Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an [[Annuity (financial contracts)|annuity]]. In most US states, a person cannot purchase a policy on another person without their knowledge.

Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and [[pension]]s that pay a benefit for life are sometimes regarded as insurance against the possibility that a [[retirement|retiree]] will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.

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===Burial insurance===

Burial insurance is an old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a [[funeral]]. The [[Ancient Greece|Greeks]] and [[Ancient Rome|Romans]] introduced burial insurance c. 600 CE when they organized [[~~guild~~]]s called [[Benevolent society|benevolent societies]], which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the [[Middle Ages]] served a similar purpose, as did friendly societies during Victorian times.

Burial insurance is an old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a [[funeral]]. The [[Ancient Greece|Greeks]] and [[Ancient Rome|Romans]] introduced burial insurance c. 600 CE when they organized [[collegia|''collegia'']] (guilds) called [[Benevolent society|benevolent societies]], which cared for the surviving families and paid funeral expenses of members upon death. [[Guilds in the Middle Ages]] served a similar purpose, as did [[Friendly society|friendly societies]] during Victorian times.

===Property===

[[File:Tornado Damage, Illinois 2.JPG|right|thumb|This [[tornado]] damage to an [[Illinois]] home would be considered an "[[Act of God]]" for insurance purposes.]]

Property insurance provides protection against risks to property, such as [[fire]], [[theft]] or [[weather]] damage. This may include specialized forms of insurance such as fire insurance, [[flood insurance]], [[earthquake insurance]], [[home insurance]], inland marine insurance or [[boiler insurance]].

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* [[Aviation insurance]] protects [[aircraft]] hulls and spares, and associated liability risks, such as passenger and third-party liability. [[Airport]]s may also appear under this subcategory, including air traffic control and refuelling operations for international airports through to smaller domestic exposures.

* [[Boiler insurance]] (also known as boiler and machinery insurance, or equipment breakdown insurance) insures against accidental physical damage to boilers, equipment or machinery.

* [[Builder's risk insurance]] insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.<ref>{{cite web|title=Builder's Risk Insurance: Specialized Coverage for Construction Projects|url=~~http~~://adjustersinternational.com/publications/adjusting-today/builders-risk-insurance/1/|website=Adjusting Today|publisher=Adjusters International|access-date=16 October 2009}}</ref>

* [[Builder's risk insurance]] insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.<ref>{{cite web|title=Builder's Risk Insurance: Specialized Coverage for Construction Projects|url=https://adjustersinternational.com/publications/adjusting-today/builders-risk-insurance/1/|website=Adjusting Today|publisher=Adjusters International|access-date=16 October 2009}}</ref>

* [[Crop insurance]] may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, pests<ref name="Ali-et-al-2020">{{cite journal|last1=Ali|first1=Williams|last2=Abdulai|first2=Awudu|author-link2=Awudu Abdulai|last3=Mishra|first3=Ashok K.|date=2020-10-06|title=Recent Advances in the Analyses of Demand for Agricultural Insurance in Developing and Emerging Countries|journal=[[Annual Review of Resource Economics]]|publisher=[[Annual Reviews (publisher)|Annual Reviews]]|volume=12|issue=1|pages=411–430|doi=10.1146/annurev-resource-110119-025306|issn=1941-1340|s2cid=225173762|doi-access=free}}</ref> (including especially insects), or disease<ref>{{US patent application|20060287896}} "Method for providing crop insurance for a crop associated with a defined attribute"</ref><ref name="Ali-et-al-2020" />—some of these being termed [[named peril]]s.<ref name="Ali-et-al-2020" /> [[Index-based insurance]] uses models of how climate extremes affect crop production to define certain climate triggers that if surpassed have high probabilities of causing substantial crop loss. When harvest losses occur associated with exceeding the climate trigger threshold, the index-insured farmer is entitled to a compensation payment.<ref>{{Cite journal|last1=Born|first1=Lorna|last2=Spillane|first2=Charles|last3=Murray|first3=Una|date=20 December 2018|title=Integrating gender into index-based agricultural insurance: a focus on South Africa|journal=Development in Practice|volume=29|issue=4|pages=409–423|doi=10.1080/09614524.2018.1556608|issn=0961-4524|hdl=10568/102499|s2cid=158288729|hdl-access=free}}</ref>

* [[Crop insurance]] may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, pests<ref name="Ali-et-al-2020">{{cite journal|last1=Ali|first1=Williams|last2=Abdulai|first2=Awudu|author-link2=Awudu Abdulai|last3=Mishra|first3=Ashok K.|date=2020-10-06|title=Recent Advances in the Analyses of Demand for Agricultural Insurance in Developing and Emerging Countries|journal=[[Annual Review of Resource Economics]]|publisher=[[Annual Reviews (publisher)|Annual Reviews]]|volume=12|issue=1|pages=411–430|doi=10.1146/annurev-resource-110119-025306|issn=1941-1340|s2cid=225173762|doi-access=free |bibcode=2020ARRE...12..411A }}</ref> (including especially insects), or disease<ref>{{US patent application|20060287896}} "Method for providing crop insurance for a crop associated with a defined attribute"</ref><ref name="Ali-et-al-2020" />—some of these being termed [[named peril]]s.<ref name="Ali-et-al-2020" /> [[Index-based insurance]] uses models of how climate extremes affect crop production to define certain climate triggers that if surpassed have high probabilities of causing substantial crop loss. When harvest losses occur associated with exceeding the climate trigger threshold, the index-insured farmer is entitled to a compensation payment.<ref>{{Cite journal|last1=Born|first1=Lorna|author2-link=Charles Spillane|last2=Spillane|first2=Charles|last3=Murray|first3=Una|date=20 December 2018|title=Integrating gender into index-based agricultural insurance: a focus on South Africa|journal=Development in Practice|volume=29|issue=4|pages=409–423|doi=10.1080/09614524.2018.1556608|issn=0961-4524|hdl=10568/102499|s2cid=158288729|hdl-access=free}}</ref>

* [[Earthquake insurance]] is a form of property insurance that pays the policyholder in the event of an [[earthquake]] that causes damage to the property. Most ordinary home insurance policies do not cover earthquake damage. Earthquake insurance policies generally feature a high [[deductible]]. Rates depend on location and hence the likelihood of an earthquake, as well as the [[Earthquake engineering|construction of the home]].

* [[Fidelity bond]] is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

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[[File:FEMA - 14947 - Photograph by Jocelyn Augustino taken on 08-30-2005 in Louisiana.jpg|thumb|right|[[Hurricane Katrina]] caused over $80 billion of storm and flood damage.]]

* [[Flood insurance]] protects against property loss due to flooding. Many U.S. insurers do not provide flood insurance in some parts of the country. In response to this, the federal government created the [[National Flood Insurance Program]] which serves as the insurer of last resort.

* [[Home insurance]], also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = What is homeowners insurance? | url = ~~http~~://www.iii.org/individuals/homei/hbasics/whatis/ | access-date = 11 November 2008 }}</ref>

* [[Home insurance]], also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = What is homeowners insurance? | url = https://www.iii.org/individuals/homei/hbasics/whatis/ | access-date = 11 November 2008 }}</ref>

* [[Landlords' insurance|Landlord insurance]] covers residential or commercial property that is rented to tenants. It also covers the landlord's liability for the occupants at the property. Most homeowners' insurance, meanwhile, cover only owner-occupied homes and not liability or damages related to tenants.<ref>{{Cite web|url=https://www.forbes.com/sites/forbesrealestatecouncil/2019/09/10/insurance-for-landlords-protecting-your-investment/|title=Insurance For Landlords: Protecting Your Investment|last=Miller|first=Nathan|website=Forbes|language=en|access-date=2019-10-27}}</ref>

* [[Marine insurance]] and marine cargo insurance cover the loss or damage of vessels at sea or on [[Inland waterways of the United States|inland waterways]], and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.

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* Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder's home uninhabitable. Periodic payments are made directly to the insured until the home is rebuilt or a specified time period has elapsed.

* [[Surety bond]] insurance is a three-party insurance guaranteeing the performance of the principal.

~~[[File:WTC smoking on 9-11.jpeg|thumb|right|The demand for [[terrorism insurance]] surged after the [[September 11 attacks]] of 2001.]]~~

* Volcano insurance is a specialized insurance protecting against damage arising specifically from [[Volcano|volcanic eruptions]].

* Windstorm insurance is an insurance covering the damage that can be caused by wind events such as [[Tropical cyclone|hurricanes]].

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===Liability===

Liability insurance is a broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured.

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* [[Prize indemnity insurance]] protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a [[basketball]] game, or a [[hole in one|hole-in-one]] at a [[golf]] tournament.

* [[Professional liability insurance]], also called [[professional indemnity insurance]] (PI), protects insured professionals such as architectural corporations and medical practitioners against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called [[medical malpractice]] insurance.

Often a commercial insured's liability insurance program consists of several layers. The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insurer to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary insurance or self-insured retention, the insured may have one or more layers of [[excess insurance]] to provide coverage additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies (policies that contain their own terms, conditions, and exclusions), "follow form" excess insurance (policies that follow the terms of the underlying policy except as specifically provided), and [[Umbrella insurance|"umbrella" insurance policies]] (excess insurance that in some circumstances could provide coverage that is broader than the underlying insurance).<ref>{{Cite journal |title =Excess Liability Insurance: Law and Litigation |last1 = Seaman|first1 = S. M.|date = Spring 1997|journal = Tort & Insurance Law Journal |volume=32 |issue=3 |pages=653–714|last2 = Kittredge|first2 = C. |jstor=25763179 }}</ref>

Often a commercial insured's liability insurance program consists of several layers. The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insurer to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary insurance or self-insured retention, the insured may have one or more layers of [[excess insurance]] to provide coverage with additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies (policies that contain their own terms, conditions, and exclusions), "follow form" excess insurance (policies that follow the terms of the underlying policy except as specifically provided), and [[Umbrella insurance|"umbrella" insurance policies]] (excess insurance that in some circumstances could provide coverage that is broader than the underlying insurance).<ref>{{Cite journal |title =Excess Liability Insurance: Law and Litigation |last1 = Seaman|first1 = S. M.|date = Spring 1997|journal = Tort & Insurance Law Journal |volume=32 |issue=3 |pages=653–714|last2 = Kittredge|first2 = C. |jstor=25763179 }}</ref>

===Credit===

Credit insurance repays some or all of a [[loan]] when the borrower is insolvent.

* [[Mortgage insurance]] insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name "credit insurance" more often is used to refer to policies that cover other kinds of debt.

* [[Mortgage insurance]] insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name "credit insurance" is more often used to refer to policies that cover other kinds of debt.

* Many credit cards offer payment protection plans which are a form of credit insurance.

* [[Trade credit insurance]] is business insurance over the accounts receivable of the insured. The policy pays the policy holder for covered accounts receivable if the debtor defaults on payment.

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===Other types===

* [[All-risk insurance]] is an insurance that covers a wide range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy.<ref>[http://www.business.gov/manage/business-insurance/insurance-types.html Types of Business Insurance | SBA.gov] {{Webarchive|url=https://web.archive.org/web/20100629042726/http://www.business.gov/manage/business-insurance/insurance-types.html |date=29 June 2010 }}. Business.gov. Retrieved on 18 July 2013.</ref> In [[car insurance]], all-risk policy includes ~~also~~ the damages caused by the own driver.

* [[All-risk insurance]] is an insurance that covers a wide range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy.<ref>[http://www.business.gov/manage/business-insurance/insurance-types.html Types of Business Insurance | SBA.gov] {{Webarchive|url=https://web.archive.org/web/20100629042726/http://www.business.gov/manage/business-insurance/insurance-types.html |date=29 June 2010 }}. Business.gov. Retrieved on 18 July 2013.</ref> In [[car insurance]], an all-risk policy also includes the damages caused by the own driver.

[[File:2006GoodwoodBreedersCup.jpg|thumb|right|High-value horses may be insured under a [[Thoroughbred|bloodstock]] policy.]]

* [[Bloodstock insurance]] covers individual [[horse]]s or a number of horses under common ownership. Coverage is typically for mortality as a result of accident, illness or disease but may extend to include infertility, in-transit loss, veterinary fees, and prospective foal.

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* [[Defense Base Act]] (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the United States and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, foreign nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.

* [[Expatriate insurance]] provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.

*Hired-in ~~Plant Insurance~~ covers liability where, under a contract of hire, the customer is liable to pay for the cost of [[Plant Hire|hired-in]] equipment and for any rental charges due to a plant hire firm, such as construction plant and machinery.<ref>Breathe Insurance Brokers Ltd., [~~http~~://www.breatheinsurance.co.uk/business-insurance/plant-hire-insurance/ Plant Hire Insurance], accessed 1 November 2020</ref>

*Hired-in plant insurance covers liability where, under a contract of hire, the customer is liable to pay for the cost of [[Plant Hire|hired-in]] equipment and for any rental charges due to a plant hire firm, such as construction plant and machinery.<ref>Breathe Insurance Brokers Ltd., [https://www.breatheinsurance.co.uk/business-insurance/plant-hire-insurance/ Plant Hire Insurance]{{Dead link|date=May 2026 |bot=InternetArchiveBot }}, accessed 1 November 2020</ref>

* [[Legal expenses insurance]] covers policyholders for the potential costs of legal action against an institution or an individual. When something happens which triggers the need for legal action, it is known as "the event". There are two main types of legal expenses insurance: [[Legal expenses insurance#Before the event insurance|before the event insurance]] and [[Legal expenses insurance#After the event insurance|after the event insurance]].

* Livestock insurance is a ~~specialist~~ policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.

* Livestock insurance is a specialized policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.

* Media liability insurance is designed to cover professionals that engage in film and television production and print, against risks such as [[defamation]].

* Nuclear incident insurance covers damages resulting from an [[nuclear and radiation accidents|incident involving radioactive materials]] and is generally arranged at the national level. (See the [[nuclear exclusion clause]] and, for the United States, the [[Price–Anderson Nuclear Industries Indemnity Act]].)

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* [[Travel insurance]] is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, and personal liabilities.

* [[Tuition insurance]] insures students against involuntary withdrawal from cost-intensive educational institutions

* [[Interest rate insurance]] protects the holder from adverse changes in interest rates, for instance for those with a variable rate loan or mortgage

* [[Interest rate insurance]] protects the holder from adverse changes in interest rates, for instance, for those with a variable rate loan or mortgage

* Divorce insurance is a form of contractual liability insurance that pays the insured a cash benefit if their marriage ends in divorce.

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* Fraternal insurance is provided on a cooperative basis by [[Benefit society|fraternal benefit societies]] or other social organizations.<ref>Margaret E. Lynch, Editor, "Health Insurance Terminology", Health Insurance Association of America, 1992, {{ISBN|1-879143-13-5}}</ref>

* [[No-fault insurance]] is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.

* Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten ~~Protected Self~~-~~Insurance Program~~ reduces and stabilizes the cost of insurance and provides valuable risk management information.

* Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten protected self-insurance program reduces and stabilizes the cost of insurance and provides valuable risk management information.

* Retrospectively rated insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.

* Formal [[self-insurance]] (active risk retention) is the deliberate decision to pay for otherwise insurable losses out of one's own money.<ref>{{cite book |last1=Lencsis |first1=Peter M. |title=Workers compensation : a reference and guide |date=1998 |publisher=Quorum Books |location=Westport, Connecticut |isbn=9781567201741 |pages=75–76 |url=https://archive.org/details/workerscompensat00lenc/page/75/mode/2up |access-date=30 December 2020}}</ref> This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self-insurance is usually used to pay for high-frequency, low-severity losses.<ref name="Teale2013">{{Cite book|last=Teale|first=John|title=Insurance and Risk Management|publisher=CCH/Wolters Kluwer|year=2013|isbn=978-1-922042-88-0|location=Sydney, Australia|pages=40|quote=Risk retention occurs when an individual or business firm retains all or part of a given risk. Risk retention is generally appropriate when the frequency of loss is low and its severity is low. Risk retention can also be appropriate for high-frequency, low-severity risks where potential losses are of low value. Risk retention can be either active or passive. Active risk retention refers to the situation where an individual recognises the risk and deliberately elects to retain all or part of that risk. This may be achieved by a firm or individual electing to carry the first $500 of any loss as a policy excess (or deductible). An excess (or deductible) is a provision in the policy whereby a specified amount is deducted from the loss payment otherwise payable to the insured. Alternatively, the risk manager may decide to self-insure the entire risk thereby saving what they would have paid as an insurance premium. Active risk retention is used because a policy excess will eliminate small policy claims and the administrative expense of adjusting these claims resulting in reduced premiums. It is also used where insurance is either unavailable or too expensive.}}</ref> Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.<ref name="Teale2013"/>

* [[Reinsurance]] is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. [[Financial reinsurance]] is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk.

* [[Social insurance]] ~~can be many things to many people in many countries. But a summary of its essence is that it~~ is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), ~~plus retirement savings, that requires~~ participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ~~ensures~~ that everyone can become a claimant when ~~or if they need to~~. ~~Along the way, this inevitably becomes related to other concepts~~ such ~~as the justice system and the~~ [[~~welfare state~~]]~~. This is a large, complicated topic that engenders tremendous debate, which can be further studied~~ in the ~~following articles (and others):~~

* [[Social insurance]] is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others, often consolidated as part of a [[social security]] program), requiring participation by all citizens or residents. By forcing everyone in a society to become a policyholder and pay premiums, it provides a [[social safety net]], ensuring that everyone can become a claimant when necessary. Examples of such programs are [[National Insurance]] in the United Kingdom or [[Social Security (United States)|Social Security]] in the United States.

**[[National Insurance]]

** [[Social safety net]]

** [[Social security]]

** [[Social Security ~~debate~~ (United States)]]

** [[Social Security (United States~~)]]~~

** [[Social welfare provision]]

* [[Stop-loss insurance]] provides protection against catastrophic or unpredictable losses. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.

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In the [[United Kingdom]], [[The Crown]] (which, for practical purposes, meant the [[civil service]]) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies and rented back, this arrangement is now less common.

In the United States, the most prevalent form of [[self-insurance]] is governmental risk management pools. They are self-funded cooperatives, operating as carriers of coverage for the majority of governmental entities today, such as county governments, municipalities, and school districts. Rather than these entities independently self-~~insure~~ and ~~risk~~ bankruptcy from a large judgment or catastrophic loss, such governmental entities form a [[risk pool]]. Such pools begin their operations by capitalization through member deposits or bond issuance. Coverage (such as general liability, auto liability, professional liability, workers compensation, and property) is offered by the pool to its members, similar to coverage offered by insurance companies. However, self-insured pools offer members lower rates (due to not needing insurance brokers), increased benefits (such as loss prevention services) and subject matter expertise. Of approximately 91,000 distinct governmental entities operating in the United States, 75,000 are members of self-insured pools in various lines of coverage, forming approximately 500 pools. Although a relatively small corner of the insurance market, the annual contributions (self-insured premiums) to such pools have been estimated up to 17 billion dollars annually.<ref>Marcos Antonio Mendoza, "Reinsurance as Governance: Governmental Risk Management Pools as a Case Study in the Governance Role Played by Reinsurance Institutions", 21 Conn. Ins. L.J. 53, 55-60 (2014) https://ssrn.com/abstract=2573253</ref>

In the United States, the most prevalent form of [[self-insurance]] is governmental risk management pools. They are self-funded cooperatives, operating as carriers of coverage for the majority of governmental entities today, such as county governments, municipalities, and school districts. Rather than these entities independently self-insuring and risking bankruptcy from a large judgment or catastrophic loss, such governmental entities form a [[risk pool]]. Such pools begin their operations by capitalization through member deposits or bond issuance. Coverage (such as general liability, auto liability, professional liability, workers compensation, and property) is offered by the pool to its members, similar to coverage offered by insurance companies. However, self-insured pools offer members lower rates (due to not needing insurance brokers), increased benefits (such as loss prevention services) and subject matter expertise. Of approximately 91,000 distinct governmental entities operating in the United States, 75,000 are members of self-insured pools in various lines of coverage, forming approximately 500 pools. Although a relatively small corner of the insurance market, the annual contributions (self-insured premiums) to such pools have been estimated at up to 17 billion dollars annually.<ref>Marcos Antonio Mendoza, "Reinsurance as Governance: Governmental Risk Management Pools as a Case Study in the Governance Role Played by Reinsurance Institutions", 21 Conn. Ins. L.J. 53, 55-60 (2014) https://ssrn.com/abstract=2573253</ref>

==Insurance companies==

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===Mutual versus proprietary===

Insurance companies are commonly classified as either [[Mutual insurance|mutual]] or proprietary companies.<ref>{{cite book|title=IF1 – Insurance, Legal & Regulatory|year=2011|publisher=Chartered Insurance Institute|isbn=978-0-85713-094-5|author=David Ransom|page=2/5}}</ref> Mutual companies are owned by the policyholders, while shareholders (who may or may not own policies) own proprietary insurance companies.

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===Regulatory differences===

In the United States, insurance is regulated by the states under the [[McCarran–Ferguson Act]], with "periodic proposals for federal intervention", and a nonprofit coalition of state insurance agencies called the [[National Association of Insurance Commissioners]] works to harmonize the country's different laws and regulations.<ref>Randall S. (1998). [http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf "Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners"]. {{webarchive|url=https://web.archive.org/web/20110511230141/http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf |date=11 May 2011}}. ''Florida State University Law Review''.</ref> The National Conference of Insurance Legislators (NCOIL) also works to harmonize the different state laws.<ref>J Schacht, B Foudree. (2007). [http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf "A Study on State Authority: Making a Case for Proper Insurance Oversight"]. {{webarchive|url=https://web.archive.org/web/20110510081324/http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf |date=10 May 2011 }}. ''NCOIL''</ref> [[1988 California Proposition 103]] is claimed to reduce home insurance rates,<ref name="i896">{{cite web | ~~last~~=Kamisher | ~~first~~=Eliyahu | last2=Reyes | first2=Max | last3=Carson | first3=Biz | title=It's not just State Farm. Allstate no longer sells new home insurance policies in California | website=Los Angeles Times | date=2 June 2023 | url=https://www.latimes.com/business/story/2023-06-02/allstate-state-farm-stop-selling-new-home-insurance-in-california | access-date=11 January 2025}}</ref> while it is blamed by some for reduced availability of [[home insurance]] in wildfire-distressed neighborhoods.<ref name="r793">{{cite web | last=Darmiento | first=Laurence | title=State takes final step to fix California's troubled home insurance market | website=Los Angeles Times | date=30 December 2024 | url=https://www.latimes.com/business/story/2024-12-30/california-home-insurance-sustainable-insurance-strategy-lara-reinsurance-state-farm-wildfires | access-date=11 January 2025}}</ref>

In the United States, insurance is regulated by the states under the [[McCarran–Ferguson Act]], with "periodic proposals for federal intervention", and a nonprofit coalition of state insurance agencies called the [[National Association of Insurance Commissioners]] works to harmonize the country's different laws and regulations.<ref>Randall S. (1998). [http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf "Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners"]. {{webarchive|url=https://web.archive.org/web/20110511230141/http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf |date=11 May 2011}}. ''Florida State University Law Review''.</ref> The National Conference of Insurance Legislators (NCOIL) also works to harmonize the different state laws.<ref>J Schacht, B Foudree. (2007). [http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf "A Study on State Authority: Making a Case for Proper Insurance Oversight"]. {{webarchive|url=https://web.archive.org/web/20110510081324/http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf |date=10 May 2011 }}. ''NCOIL''</ref> [[1988 California Proposition 103]] is claimed to reduce home insurance rates,<ref name="i896">{{cite web | last1=Kamisher | first1=Eliyahu | last2=Reyes | first2=Max | last3=Carson | first3=Biz | title=It's not just State Farm. Allstate no longer sells new home insurance policies in California | website=Los Angeles Times | date=2 June 2023 | url=https://www.latimes.com/business/story/2023-06-02/allstate-state-farm-stop-selling-new-home-insurance-in-california | access-date=11 January 2025}}</ref> while it is blamed by some for reduced availability of [[home insurance]] in wildfire-distressed neighborhoods.<ref name="r793">{{cite web | last=Darmiento | first=Laurence | title=State takes final step to fix California's troubled home insurance market | website=Los Angeles Times | date=30 December 2024 | url=https://www.latimes.com/business/story/2024-12-30/california-home-insurance-sustainable-insurance-strategy-lara-reinsurance-state-farm-wildfires | access-date=11 January 2025}}</ref>

In the [[European Union]], the Third Non-Life Directive and the Third Life Directive, both passed in 1992 and effective 1994, created a single insurance market in Europe and allowed insurance companies to offer insurance anywhere in the EU (subject to permission from authority in the head office) and allowed insurance consumers to purchase insurance from any insurer in the EU.<ref>C. J. Campbell, L. Goldberg, A. Rai. (2003). [http://people.hofstra.edu/Anoop_Rai/research/JORI70-1Campbell.pdf "The Impact of the European Union Insurance Directives on Insurance Company Stocks"] {{Webarchive|url=https://web.archive.org/web/20171123162358/https://people.hofstra.edu/Anoop_Rai/research/JORI70-1Campbell.pdf |date=23 November 2017 }}. ''The Journal of Risk and Insurance''.</ref> As far as [[insurance in the United Kingdom]], the [[Financial Services Authority]] took over insurance regulation from the General Insurance Standards Council in 2005;<ref>Haurant S. (2005). [https://www.theguardian.com/business/2005/jan/14/money.watchdogs "FSA takes on insurance regulation"]. ''The Guardian''.</ref> laws passed include the Insurance Companies Act 1973 and another in 1982,<ref>Adams J. (2012). [http://www.fsa.gov.uk/static/pubs/speeches/julian-adams-barbon-lecture-2012.pdf "The impact of changing regulation on the insurance industry"] {{Webarchive|url=https://web.archive.org/web/20181005100455/http://www.fsa.gov.uk/static/pubs/speeches/julian-adams-barbon-lecture-2012.pdf |date=5 October 2018 }}. [[Financial Services Authority]].</ref> and reforms to [[warranty]] and other aspects under discussion {{as of|2012|lc=y}}.<ref>[https://web.archive.org/web/20130114010523/http://www.lloyds.com/the-market/communications/regulatory-communications-homepage/regulatory-communications/regulatory-news-articles/2012/08/reforming-uk-insurance-contract-law "Reforming UK insurance contract law"]. Lloyd's. 30 August 2012. Archived from the [http://www.lloyds.com/the-market/communications/regulatory-communications-homepage/regulatory-communications/regulatory-news-articles/2012/08/reforming-uk-insurance-contract-law original] on 14 January 2013.</ref>

The [[insurance industry in China]] was nationalized in 1949 and thereafter offered by only a single state-owned company, the [[People's Insurance Company of China]], which was eventually suspended as demand declined in a communist environment. In 1978, market reforms led to an increase in the market and by 1995 a comprehensive Insurance Law of the People's Republic of China<ref>[~~http~~://www.lehmanlaw.com/resource-centre/laws-and-regulations/insurance/insurance-law-of-the-peoples-republic-of-china-1995.html "Insurance Law of the People's Republic of China – 1995"]. Lehman, Lee & Xu.</ref> was passed, followed in 1998 by the formation of [[China Insurance Regulatory Commission]] (CIRC), which has broad regulatory authority over the insurance market of China.<ref>Thomas JE. (2002). [http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf "The role and powers of the Chinese insurance regulatory commission in the administration of insurance law in China"]. {{Webarchive|url=https://web.archive.org/web/20110511192041/http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf |date=11 May 2011 }}. ''Geneva Papers on Risk and Insurance''.</ref>

The [[insurance industry in China]] was nationalized in 1949 and thereafter offered by only a single state-owned company, the [[People's Insurance Company of China]], which was eventually suspended as demand declined in a communist environment. In 1978, market reforms led to an increase in the market and by 1995 a comprehensive Insurance Law of the People's Republic of China<ref>[https://www.lehmanlaw.com/resource-centre/laws-and-regulations/insurance/insurance-law-of-the-peoples-republic-of-china-1995.html "Insurance Law of the People's Republic of China – 1995"]. Lehman, Lee & Xu.</ref> was passed, followed in 1998 by the formation of [[China Insurance Regulatory Commission]] (CIRC), which has broad regulatory authority over the insurance market of China.<ref>Thomas JE. (2002). [http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf "The role and powers of the Chinese insurance regulatory commission in the administration of insurance law in China"]. {{Webarchive|url=https://web.archive.org/web/20110511192041/http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf |date=11 May 2011 }}. ''Geneva Papers on Risk and Insurance''.</ref>

In India IRDA is insurance regulatory authority. As per the section 4 of IRDA Act 1999, Insurance Regulatory and Development Authority (IRDA), which was constituted by an act of parliament. National Insurance Academy, Pune is apex insurance capacity builder institute promoted with support from Ministry of Finance and by LIC, Life & General Insurance companies.

In 2017, within the framework of the joint project of the [[Central Bank of Russia|Bank of Russia]] and [[Yandex]], a special [[check mark]] (a green circle with a tick and 'Реестр ЦБ РФ' (Unified state register of insurance entities) text box) appeared in the search for Yandex system, informing the consumer that the company's financial services are offered on the marked website, which has the status of an insurance company, a broker or a mutual insurance association.<ref>{{Cite web|url=~~http~~://www.cbr.ru/eng/press/event/?id=1568|title=Insurers' websites receive first marks {{!}} Банк России|website=www.cbr.ru|access-date=21 May 2018}}</ref>

In 2017, within the framework of the joint project of the [[Central Bank of Russia|Bank of Russia]] and [[Yandex]], a special [[check mark]] (a green circle with a tick and 'Реестр ЦБ РФ' (Unified state register of insurance entities) text box) appeared in the search for Yandex system, informing the consumer that the company's financial services are offered on the marked website, which has the status of an insurance company, a broker or a mutual insurance association.<ref>{{Cite web|url=https://www.cbr.ru/eng/press/event/?id=1568|title=Insurers' websites receive first marks {{!}} Банк России|website=www.cbr.ru|access-date=21 May 2018}}</ref>

==Insurance practices and controversies==

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In July 2007, the US [[Federal Trade Commission]] (FTC) released a report presenting the results of a study concerning credit-based [[insurance score]]s in automobile insurance. The study found that these scores are effective predictors of risk. It also showed that African-Americans and Hispanics are substantially overrepresented in the lowest credit scores, and substantially underrepresented in the highest, while Caucasians and Asians are more evenly spread across the scores. The credit scores were also found to predict risk within each of the ethnic groups, leading the FTC to conclude that the scoring models are not solely proxies for redlining. The FTC indicated little data was available to evaluate benefit of insurance scores to consumers.<ref name="FTC Study">[http://ftc.gov/opa/2007/07/facta.shtm Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance], Federal Trade Commission (July 2007)</ref> The report was disputed by representatives of the [[Consumer Federation of America]], the National Fair Housing Alliance, the [[National Consumer Law Center]], and the Center for Economic Justice, for relying on data provided by the insurance industry.<ref>[http://www.consumeraffairs.com/news04/2007/07/insurance_credit.html Consumers Dispute FTC Report on Insurance Credit Scoring] www.consumeraffairs.com (July 2007)</ref>

All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Issues Update: Regulation Modernization | url = ~~http~~://www.iii.org/media/hottopics/insurance/ratereg/ | access-date = 11 November 2008 }}</ref>

All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Issues Update: Regulation Modernization | url = https://www.iii.org/media/hottopics/insurance/ratereg/ | access-date = 11 November 2008 }}</ref>

In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, [[credit score]]s, [[gender]], [[profession|occupation]], [[marital status]], and [[education]] level. However, the use of such factors is often considered to be unfair or unlawfully [[discrimination|discriminatory]], and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.

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* [https://web.archive.org/web/20230128221829/https://www.ncsl.org/research/health/congressional-research-service-reports-on-health Congressional Research Service (CRS) Reports regarding the US Insurance industry]

* [https://www.ferma.eu/ Federation of European Risk Management Associations]

* [~~http~~://www.ibc.ca/ Insurance Bureau of Canada]

* [https://www.ibc.ca/ Insurance Bureau of Canada]

* [https://www.iii.org/ Insurance Information Institute]

* [~~http~~://www.naic.org/ National Association of Insurance Commissioners]

* [https://www.naic.org/ National Association of Insurance Commissioners]

* [https://web.archive.org/web/20060525173303/http://www.bl.uk/collections/business/insurind.html The British Library] – finding information on the insurance industry (UK focus)

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[[Category:Insurance| ]]

[[Category:Financial services]]

[[Category:~~Services~~ sector ~~of the economy~~]]

[[Category:Tertiary sector]]

[[Category:Articles containing video clips]]

@@ Line 1: / Line 1: @@
-{{short description|Equitable transfer of the risk of a loss, from one entity to another, in exchange for payment}}
+{{Short description|Protection from financial loss}}
 {{Redirect-distinguish|Insure|Ensure}}
 {{other uses}}
@@ Line 6: / Line 6: @@
 {{Financial market participants}}
-'''Insurance''' is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of [[risk management]], primarily used to protect against the risk of a contingent or uncertain loss.
+'''Insurance''' is a means of protection from financial loss in which, in exchange for a [[fee]], a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of [[risk management]], primarily used to protect against the risk of a contingent or uncertain loss.
-An entity which provides insurance is known as an '''insurer''', '''insurance company''', '''insurance carrier''', or [[underwriter]]. A person or entity who buys insurance is known as a '''policyholder''', while a person or entity covered under the policy is called an '''insured'''. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms. Furthermore, it usually involves something in which the insured has an [[insurable interest]] established by ownership, possession, or pre-existing relationship.
+An entity which provides insurance is known as an '''insurer''', '''insurance company''', '''insurance carrier''', or [[underwriter]]. A person or entity who buys insurance is known as a '''policyholder''', while a person or entity covered under the policy is called an '''insured'''. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must always be reducible to financial terms. Furthermore, it usually involves something in which the insured has an [[insurable interest]] established by ownership, possession, or pre-existing relationship.
-The insured receives a [[contract]], called the [[insurance policy]], which details the conditions and circumstances under which the insurer will compensate the insured, or their designated beneficiary or assignee. The amount of money charged by the insurer to the policyholder for the coverage set forth in the insurance policy is called the '''premium'''. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. A mandatory [[out-of-pocket expense]] required by an insurance policy before an insurer will pay a claim is called a [[deductible]] (or if required by a [[health insurance]] policy, a [[copayment]]). The insurer may mitigate its own risk by taking out [[reinsurance]], whereby another insurance company agrees to carry some of the risks, especially if the primary insurer deems the risk too large for it to carry.
+The insured receives a [[contract]], called the [[insurance policy]], which details the conditions and circumstances under which the insurer will compensate the insured, or their designated beneficiary or assignee. The amount of money charged by the insurer to the policyholder for the coverage set forth in the insurance policy is called the '''premium'''. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. A mandatory [[out-of-pocket expense]] required by an insurance policy before an insurer will pay a claim is called a [[deductible]] or excess (or if required by a [[health insurance]] policy, a [[copayment]]). The insurer may mitigate its own risk by taking out [[reinsurance]], whereby another insurance company agrees to carry some of the risks, especially if the primary insurer deems the risk too large for it to carry.
 ==History==
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 The law of general average is the fundamental [[principle]] that underlies all insurance.<ref name="Prudential pp. 5–6" /> In 1816, an archeological excavation in [[Minya, Egypt]] produced a [[Nerva–Antonine dynasty]]-era [[Clay tablet|tablet]] from the ruins of the [[Antinous#Deification and the cult of Antinous|Temple of Antinous]] in [[Antinoöpolis]], [[Roman Egypt|Aegyptus]]. The tablet [[Articles of association|prescribed the rules]] and [[Benefit society|membership dues]] of a [[burial society]] [[Collegium (ancient Rome)|collegium]] established in [[Lanuvium]], [[Roman Italy|Italia]] in approximately 133 AD during the reign of [[Hadrian]] (117–138) of the [[Roman Empire]].<ref name="Prudential pp. 5–6" /> In 1851 AD, future [[Supreme Court of the United States|U.S. Supreme Court]] [[Associate Justice of the Supreme Court of the United States|Associate Justice]] [[Joseph P. Bradley]] (1870–1892 AD), once employed as an [[actuary]] for the [[Mutual Benefit Life Insurance Company]], submitted an article to the ''[[Institute of Actuaries|Journal of the Institute of Actuaries]]''. His article detailed an historical account of a [[Severan dynasty]]-era [[life table]] compiled by the [[Roman law|Roman jurist]] [[Ulpian]] in approximately 220 AD that was also included in the ''Digesta''.<ref>{{cite book|year=1915|title=The Documentary History of Insurance, 1000 BC–1875 AD|publisher=[[Prudential Financial|Prudential Press]]|place=[[Newark, New Jersey|Newark, NJ]]|pages=[https://archive.org/details/cu31924030231736/page/n9/mode/2up 6–7]|url=https://archive.org/details/cu31924030231736/mode/2up|access-date=15 June 2021}}</ref>
-Concepts of insurance has been also found in 3rd century BC Hindu scriptures such as [[Dharmasastra]], [[Arthashastra]] and [[Manusmriti]].<ref>{{cite book|title=The Life Insurance Industry in India: Current State and Efficiency|page=2|author=Tapas Kumar Parida, Debashis Acharya|publisher=Springer|year=2016|isbn=9789811022333}}</ref> The ancient Greeks had marine loans. Money was advanced on a ship or cargo, to be repaid with large interest if the voyage prospers. However, the money would not be repaid at all if the ship were lost, thus making the rate of interest high enough to pay for not only for the use of the capital but also for the risk of losing it (fully described by [[Demosthenes]]). Loans of this character have ever since been common in maritime lands under the name of [[bottomry]] and respondentia bonds.<ref name=EB1911>{{cite EB1911 |wstitle=Insurance |volume=14 |pages=657–658 |first1=Charlton |last1=Lewis |first2=Thomas |last2=Ingram}}</ref>
+Concepts of insurance have been also found in 3rd century BC Hindu scriptures such as [[Dharmasastra]], [[Arthashastra]] and [[Manusmriti]].<ref>{{cite book|title=The Life Insurance Industry in India: Current State and Efficiency|page=2|author=Tapas Kumar Parida, Debashis Acharya|publisher=Springer|year=2016|isbn=9789811022333}}</ref> The ancient Greeks had marine loans. Money was advanced on a ship or cargo, to be repaid with large interest if the voyage prospers. However, the money would not be repaid at all if the ship were lost, thus making the rate of interest high enough to pay for not only for the use of the capital but also for the risk of losing it (fully described by [[Demosthenes]]). Loans of this character have ever since been common in maritime lands under the name of [[bottomry]] and respondentia bonds.<ref name=EB1911>{{cite EB1911 |wstitle=Insurance |volume=14 |pages=657–658 |first1=Charlton |last1=Lewis |first2=Thomas |last2=Ingram}}</ref>
 The direct insurance of sea-risks for a premium paid independently of loans began in [[Belgium]] about 1300 AD.<ref name=EB1911/>
-Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in [[Genoa]] in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347. In the next century, maritime insurance developed widely, and premiums were varied with risks.<ref>J. Franklin, ''The Science of Conjecture: Evidence and Probability Before Pascal'' (Baltimore: Johns Hopkins University Press, 2001), 274-277.</ref> These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in [[marine insurance]].
+Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in [[Genoa]] in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347. In the next century, maritime insurance developed widely, and premiums were varied with risks.<ref>J. Franklin, ''The Science of Conjecture: Evidence and Probability Before Pascal'' (Baltimore: Johns Hopkins University Press, 2001), 274-277.</ref> These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance.
 The earliest known policy of life insurance was made in the [[Royal Exchange, London]], on 18 June 1583, for £383, 6s. 8d. for twelve months on the life of William Gibbons.<ref name=EB1911/>
@@ Line 38: / Line 38: @@
 [[Property insurance]] as we know it today can be traced to the [[Great Fire of London]], which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir [[Christopher Wren]]'s inclusion of a site for "the Insurance Office" in his new plan for London in 1667."<ref>Dickson (1960): 4</ref> A number of attempted fire insurance schemes came to nothing, but in 1681, [[Economics|economist]] [[Nicholas Barbon]] and eleven associates established the first fire insurance company, the "Insurance Office for Houses", at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by his Insurance Office.<ref>Dickson (1960): 7</ref>
-At the same time, the first insurance schemes for the [[underwriting]] of [[business venture]]s became available. By the end of the seventeenth century, London's growth as a centre for trade was increasing due to the demand for [[marine insurance]]. In the late 1680s, [[Edward Lloyd (publisher)|Edward Lloyd]] opened [[Lloyd's Coffee House|a coffee house]], which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, including those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market [[Lloyd's of London]] and several related shipping and insurance businesses.<ref>{{cite ODNB|url=http://press.oxforddnb.com/index/16/101016829 |title=Lloyd, Edward (''c''.1648–1713) |first=Sarah |last=Palmer |date=October 2007 |volume=1 |doi=10.1093/ref:odnb/16829 |access-date=16 February 2011 |url-status = dead|archive-url=https://web.archive.org/web/20110715030319/http://press.oxforddnb.com/index/16/101016829/ |archive-date=15 July 2011 }}</ref>
+At the same time, the first insurance schemes for the [[underwriting]] of [[business venture]]s became available. By the end of the seventeenth century, London's growth as a centre for trade was increasing due to the demand for marine insurance. In the late 1680s, [[Edward Lloyd (publisher)|Edward Lloyd]] opened [[Lloyd's Coffee House|a coffee house]], which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, including those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market [[Lloyd's of London]] and several related shipping and insurance businesses.<ref>{{cite ODNB|url=http://press.oxforddnb.com/index/16/101016829 |title=Lloyd, Edward (''c''.1648–1713) |first=Sarah |last=Palmer |date=October 2007 |volume=1 |doi=10.1093/ref:odnb/16829 |access-date=16 February 2011 |url-status = dead|archive-url=https://web.archive.org/web/20110715030319/http://press.oxforddnb.com/index/16/101016829/ |archive-date=15 July 2011 }}</ref>
 [[File:National-insurance-act-1911.jpg|thumb|upright=0.9|Leaflet promoting the [[National Insurance Act 1911]]]]
@@ Line 44: / Line 44: @@
 [[Life insurance]] policies were taken out in the early 18th century. The first company to offer life insurance was the [[Amicable Society for a Perpetual Assurance Office]], founded in London in 1706 by [[William Talbot (bishop)|William Talbot]] and [[Allen baronets|Sir Thomas Allen]].<ref Name="Anzovin121">Anzovin, Steven, ''Famous First Facts'' 2000, item # 2422, H. W. Wilson Company, {{ISBN|0-8242-0958-3}} p. 121 ''The first life insurance company known of record was founded in 1706 by the Bishop of Oxford and the financier Thomas Allen in London, England. The company, called the Amicable Society for a Perpetual Assurance Office, collected annual premiums from policyholders and paid the nominees of deceased members from a common fund.''</ref><ref>Amicable Society, ''The charters, acts of Parliament, and by-laws of the corporation of the Amicable Society for a perpetual assurance office'', Gilbert and Rivington, 1854, p. 4</ref> Upon the same principle, [[Edward Rowe Mores]] established the [[The Equitable Life Assurance Society|Society for Equitable Assurances on Lives and Survivorship]] in 1762.
-It was the world's first [[mutual insurer]] and it pioneered age based premiums based on [[mortality rate]] laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based."<ref name=eq>{{Cite web|url=http://www.equitable.co.uk/about-us/history-and-facts/|title=Today and History:The History of Equitable Life|date=26 June 2009|access-date=16 August 2009}}</ref>
+It was the world's first [[mutual insurer]] and it pioneered age-based premiums based on [[mortality rate]] laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based."<ref name=eq>{{Cite web|url=http://www.equitable.co.uk/about-us/history-and-facts/|title=Today and History:The History of Equitable Life|date=26 June 2009|access-date=16 August 2009}}</ref>
 In the late 19th century "accident insurance" began to become available.<ref>{{cite web|title=Encarta: Health Insurance |url=http://ca.encarta.msn.com/encyclopedia_761576408_8/Health_Insurance.html#s49 |archive-url=https://web.archive.org/web/20090717201207/http://ca.encarta.msn.com/encyclopedia_761576408_8/Health_Insurance.html |archive-date=17 July 2009 |url-status = dead}}</ref> The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in [[England]] to insure against the rising number of fatalities on the nascent [[railway]] system.
-The first international insurance rule was the [[General_average#York Antwerp Rules|York Antwerp Rules]] (YAR) for the distribution of costs between ship and cargo in the event of general average. In 1873 the "Association for the Reform and Codification of the Law of Nations", the forerunner of the [[International Law Association]] (ILA), was founded in [[Brussels]]. It published the first YAR in 1890, before switching to the present title of the "International Law Association" in 1895.<ref>{{Citation|author= F. L. Wiswall|url= https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf| title=A Brief History |publisher= [[International Maritime Organization|Comite Maritime International]]|series= |date=2019 |archive-url= https://web.archive.org/web/20190814090124/https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf|archive-date= 14 August 2019}}</ref><ref>{{Citation|author= Dr. Ruth Frendo|url= http://www.ila-hq.org/images/ILA/docs/international_law_association_article_-_dr_ruth_frendo.pdf | title=Archivist and Records Manager at the Institute of Advanced Legal Studies |publisher= ILA|series= |date=}}</ref>
+The first international insurance rule was the [[General_average#York Antwerp Rules|York Antwerp Rules]] (YAR) for the distribution of costs between ship and cargo in the event of general average. In 1873 the "Association for the Reform and Codification of the Law of Nations", the forerunner of the [[International Law Association]] (ILA), was founded in [[Brussels]]. It published the first YAR in 1890, before switching to the present title of the "International Law Association" in 1895.<ref>{{Citation|author= F. L. Wiswall|url= https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf| title=A Brief History |publisher= [[International Maritime Organization|Comite Maritime International]]|series= |date=2019 |archive-url= https://web.archive.org/web/20190814090124/https://comitemaritime.org/wp-content/uploads/2018/06/a-brief-history-wiswall.pdf|archive-date= 14 August 2019}}</ref><ref>{{Citation|author= Dr. Ruth Frendo|url= https://www.ila-hq.org/images/ILA/docs/international_law_association_article_-_dr_ruth_frendo.pdf | title=Archivist and Records Manager at the Institute of Advanced Legal Studies |publisher= ILA|series= |date=}}</ref>
-By the late 19th century governments began to initiate national insurance programs against sickness and old age. [[History of Germany|Germany]] built on a tradition of welfare programs in [[Prussia]] and [[Saxony]] that began as early as in the 1840s. In the 1880s Chancellor [[Otto von Bismarck]] introduced old age pensions, accident insurance and medical care that formed the basis for Germany's [[welfare state]].<ref name="EPH">E. P. Hennock, ''The Origin of the Welfare State in England and Germany, 1850–1914: Social Policies Compared'' (2007)</ref><ref>Hermann Beck, ''Origins of the Authoritarian Welfare State in Prussia, 1815-1870'' (1995)</ref> In Britain more extensive legislation was introduced by the [[Liberal Party (UK)|Liberal]] government in the [[National Insurance Act 1911]]. This gave the British working classes the first contributory system of insurance against illness and unemployment.<ref>[http://www.nationalarchives.gov.uk/cabinetpapers/themes/national-health-insurance.htm The Cabinet Papers 1915-1982: National Health Insurance Act 1911.] The National Archives, 2013. Retrieved 30 June 2013.</ref> This system was greatly expanded after the [[Second World War]] under the influence of the [[Beveridge Report]], to form the first modern [[welfare state]].<ref name="EPH"/><ref>Bentley B. Gilbert, ''British social policy, 1914-1939'' (1970)</ref>
+By the late 19th century governments began to initiate national insurance programs against sickness and old age. [[History of Germany|Germany]] built on a tradition of welfare programs in [[Prussia]] and [[Saxony]] that began as early as in the 1840s. In the 1880s Chancellor [[Otto von Bismarck]] introduced old age pensions, accident insurance and medical care that formed the basis for Germany's [[welfare state]].<ref name="EPH">E. P. Hennock, ''The Origin of the Welfare State in England and Germany, 1850–1914: Social Policies Compared'' (2007)</ref><ref>Hermann Beck, ''Origins of the Authoritarian Welfare State in Prussia, 1815-1870'' (1995)</ref> In Britain more extensive legislation was introduced by the [[Liberal Party (UK)|Liberal]] government in the [[National Insurance Act 1911]]. This gave the British working classes the first contributory system of insurance against illness and unemployment.<ref>[https://www.nationalarchives.gov.uk/cabinetpapers/themes/national-health-insurance.htm The Cabinet Papers 1915-1982: National Health Insurance Act 1911.] The National Archives, 2013. Retrieved 30 June 2013.</ref> This system was greatly expanded after the [[Second World War]] under the influence of the [[Beveridge Report]], to form the first modern [[welfare state]].<ref name="EPH"/><ref>Bentley B. Gilbert, ''British social policy, 1914-1939'' (1970)</ref>
-In 2008, the International Network of Insurance Associations (INIA), then an informal network, became active and it has been succeeded by the [[Global Federation of Insurance Associations]] (GFIA), which was formally founded in 2012 to aim to increase insurance industry effectiveness in providing input to international regulatory bodies and to contribute more effectively to the international dialogue on issues of common interest. It consists of its 40 member associations and 1 observer association in 67 countries, which companies account for around 89% of total insurance premiums worldwide.<ref>[https://www.gfiainsurance.org/about-us "About us"], the Global Federation of Insurance Associations.</ref>
+In 2008, the International Network of Insurance Associations (INIA), then an informal network, became active and it has been succeeded by the [[Global Federation of Insurance Associations]] (GFIA), which was formally founded in 2012 to increase insurance industry effectiveness in providing input to international regulatory bodies and to contribute more effectively to the international dialogue on issues of common interest. It consists of 40 member associations and 1 observer association in 67 countries, which companies account for around 89% of total insurance premiums worldwide.<ref>[https://www.gfiainsurance.org/about-us "About us"], the Global Federation of Insurance Associations.</ref>
 ==Principles==
-Insurance involves [[pooling (resource management)|pooling]] funds from ''many'' insured entities (known as exposures) to pay for the losses that only some insureds may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an [[insurable risk]], the risk insured against must meet certain characteristics. Insurance as a [[financial intermediary]] is a commercial enterprise and a major part of the financial services industry, but individual entities can also [[self-insurance|self-insure]] through saving money for possible future losses.<ref>Gollier C. (2003). [https://www.jstor.org/stable/41953424?seq=1#page_scan_tab_contents To Insure or Not to Insure?: An Insurance Puzzle]. ''The Geneva Papers on Risk and Insurance Theory''.</ref>
+Insurance involves pooling funds from many insured entities to pay for the losses that some may incur, a process known as [[risk pool]]. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an [[insurable risk]], the risk insured against must meet certain characteristics. Insurance as a [[financial intermediary]] is a commercial enterprise and a major part of the financial services industry, but individual entities can also [[self-insurance|self-insure]] through saving money for possible future losses.<ref>Gollier C. (2003). [https://www.jstor.org/stable/41953424?seq=1#page_scan_tab_contents To Insure or Not to Insure?: An Insurance Puzzle]. ''The Geneva Papers on Risk and Insurance Theory''.</ref>
 ===Insurability===
@@ Line 62: / Line 62: @@
 Risk which can be insured by private companies typically share seven common characteristics:<ref>This discussion is adapted from Mehr and Camack's "Principles of Insurance", 6th edition, 1976, pp 34 – 37.</ref>
-# A large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies cover individual members of large classes, allowing insurers to benefit from the [[law of large numbers]] in which predicted losses are similar to the actual losses. Exceptions include [[Lloyd's of London]], which is famous for insuring the life or health of actors, sports figures, and other famous individuals. However, all exposures will have distinct differences, which may lead to different premium rates.
+# '''A large number of similar exposure units''': Since insurance operates through pooling resources, the majority of insurance policies cover individual members of large classes, allowing insurers to benefit from the [[law of large numbers]] in which predicted losses are similar to the actual losses. Exceptions include [[Lloyd's of London]], which is famous for insuring the life or health of actors, sports figures, and other famous individuals. However, all exposures will have distinct differences, which may lead to different premium rates.
-# Definite loss: This type of loss takes place at a known time and place from a known cause. The classic example involves the death of an insured person on a life insurance policy. [[Fire]], [[Traffic collision|automobile accidents]], and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. [[Occupational disease]], for instance, may involve prolonged exposure to injurious conditions where no specific time, place, or cause is identifiable. Ideally, the time, place, and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
+# '''Definite loss''': This type of loss takes place at a known time and place from a known cause. The classic example involves the death of an insured person on a life insurance policy. [[Fire]], [[Traffic collision|automobile accidents]], and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. [[Occupational disease]], for instance, may involve prolonged exposure to injurious conditions where no specific time, place, or cause is identifiable. Ideally, the time, place, and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
-# Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure because it results from an event for which there is only the opportunity for cost. Events that contain speculative elements such as ordinary business risks or even purchasing a lottery ticket are generally not considered insurable.
+# '''Accidental loss''': The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure because it results from an event for which there is only the opportunity for cost. Events that contain speculative elements such as ordinary business risks or even purchasing a lottery ticket are generally not considered insurable.
-# Large loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses, these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.
+# '''Large loss''': The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses, these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.
-# Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, then it is not likely that insurance will be purchased, even if on offer. Furthermore, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. Suppose there is no such chance of loss. In that case, the transaction may have the form of insurance, but not the substance (see the U.S. [[Financial Accounting Standards Board]] pronouncement number 113: "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts").
+# '''Affordable premium''': If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, then it is not likely that insurance will be purchased, even if on offer. Furthermore, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. Suppose there is no such chance of loss. In that case, the transaction may have the form of insurance, but not the substance (see the U.S. [[Financial Accounting Standards Board]] pronouncement number 113: "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts").
-# Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
+# '''Calculable loss''': There are two elements that must be at least estimable, if not formally calculable: the probability of loss and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
 # Limited risk of catastrophically large losses: Insurable losses are ideally [[independence (probability theory)|independent]] and non-catastrophic, meaning that the losses do not happen all at once and that individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. [[Capital (economics) |Capital]] constrains insurers' ability to sell [[earthquake insurance]] as well as wind insurance in [[Tropical cyclone|hurricane]] zones. In the United States, the federal government insures [[flood insurance|flood risk]] in specifically identified areas. In commercial fire insurance, it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers or are insured by a single insurer which syndicates the risk into the [[reinsurance]] market.
 ===Legal===
-When a company insures an individual entity, there are basic legal requirements and regulations. Several commonly cited legal principles of insurance include:<ref>Irish Brokers Association. [https://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 Insurance Principles] {{webarchive|url=https://web.archive.org/web/20090411184958/http://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 |date=11 April 2009 }}.</ref>
+When a company insures an individual entity, there are basic legal requirements and regulations. Several commonly cited legal principles of insurance include the following:<ref>Irish Brokers Association. [https://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 Insurance Principles] {{webarchive|url=https://web.archive.org/web/20090411184958/http://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167 |date=11 April 2009 }}.</ref>
 # [[Indemnity]] – the insurance company indemnifies or compensates the insured in the case of certain losses only up to the insured's interest.
-# Benefit insurance – as it is stated in the study books of The Chartered Insurance Institute, the insurance company does not have the right of recovery from the party who caused the injury and must compensate the Insured regardless of the fact that Insured had already sued the negligent party for the damages (for example, personal accident insurance)
+# Benefit insurance – as it is stated in the study books of The Chartered Insurance Institute, the insurance company does not have the right of recovery from the party who caused the injury and must compensate the insured regardless of the fact that Insured had already sued the negligent party for the damages (for example, personal accident insurance)
 # [[Insurable interest]] – the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved. The concept requires that the insured have a "stake" in the loss or damage to the life or property insured. What that "stake" is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons. The requirement of an insurable interest is what distinguishes insurance from [[gambling]].
-# [[Good faith (law)|Utmost good faith]] – ([[Uberrima fides]]) the insured and the insurer are bound by a [[good faith (law)|good faith]] bond of honesty and fairness. Material facts must be disclosed.
+# [[Good faith (law)|Utmost good faith]] ([[Uberrima fides]]) – the insured and the insurer are bound by a [[good faith (law)|good faith]] bond of honesty and fairness. Material facts must be disclosed.
 # Contribution – insurers, which have similar obligations to the insured, contribute in the indemnification, according to some method.
-# Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for the insured's loss. The Insurers can waive their subrogation rights by using the special clauses.
+# Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for the insured's loss. The insurers can waive their subrogation rights by using the special clauses.
-# Causa proxima, or [[proximate cause]] – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be [[exclusion clause|excluded]]
+# Causa proxima, or [[proximate cause]] – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be [[exclusion clause|excluded]].
-# Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss to a minimum, as if the asset was not insured.
+# Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss to a minimum, as if the asset were not insured.
 ===Indemnification===
@@ Line 86: / Line 86: @@
 To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, [[life insurance]] is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally three types of insurance contracts that seek to indemnify an insured:
 # A "reimbursement" policy
-# A "pay on behalf" or "on behalf of policy"<ref name="KulpHall">C. Kulp & J. Hall, Casualty Insurance, Fourth Edition, 1968, page 35</ref>
+# A "pay on behalf" or "on behalf of" policy"<ref name="KulpHall">C. Kulp & J. Hall, Casualty Insurance, Fourth Edition, 1968, page 35</ref>
 # An "indemnification" policy
 From an insured's standpoint, the result is usually the same: the insurer pays the loss and claims expenses.
-If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and then be "reimbursed" by the insurance carrier for the loss and out of pocket costs including, with the permission of the insurer, claim expenses.<ref name="KulpHall" />{{NoteTag|However, the bankruptcy of the insured with a "reimbursement" policy does not relieve the insurer.  Certain types of insurance, e.g., workers' compensation and personal automobile liability, are subject to statutory requirements that injured parties have direct access to coverage.}}
+If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and then be "reimbursed" by the insurance carrier for the loss and out-of-pocket costs including, with the permission of the insurer, claim expenses.<ref name="KulpHall" />{{NoteTag|However, the bankruptcy of the insured with a "reimbursement" policy does not relieve the insurer.  Certain types of insurance, e.g., workers' compensation and personal automobile liability, are subject to statutory requirements that injured parties have direct access to coverage.}}
 Under a "pay on behalf" policy, the insurance carrier would defend and pay a claim on behalf of the insured who would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language, which enables the insurance carrier to manage and control the claim.
@@ Line 106: / Line 106: @@
 * [[War exclusion clause]], excluding damage from acts of war or terrorism.<ref>{{cite news |last1=Menapace |first1=Michael |title=Losses From Malware May Not Be Covered Due To Your Policy's Hostile Acts Exclusion |url=https://www.natlawreview.com/article/property-insurance-cyber-insurance-coverage-and-war-losses-malware-may-not-be-0 |access-date=25 April 2019 |work=The National Law Review |date=10 March 2019}}</ref><ref>{{cite news |last1=Stock |first1=Rob |title=Insurers waive terrorism exclusions for Christchurch shooting victims |url=https://www.stuff.co.nz/national/christchurch-shooting/111397687/insurers-waive-terrorism-exclusions-for-christchurch-shooting-victims |access-date=25 April 2019 |work=Stuff |date=19 March 2019}}</ref>
-Insurers may prohibit certain activities which are considered dangerous and therefore excluded from coverage. One system for classifying activities according to whether they are authorised by insurers refers to "green light" approved activities and events, "yellow light" activities and events which require insurer consultation and/or waivers of liability, and "red light" activities and events which are prohibited and outside the scope of insurance cover.<ref>California State PTA (2019), [http://downloads.capta.org/Leaders/Insurance/CAPTA_Insurance_Guide_2019_FINAL.pdf Insurance Guide], revised April 2019, accessed 19 December 2020</ref>
+Insurers may prohibit certain activities that are considered dangerous and therefore excluded from coverage. One system for classifying activities according to whether they are authorised by insurers refers to three types of activities and events:<ref>California State PTA (2019), [http://downloads.capta.org/Leaders/Insurance/CAPTA_Insurance_Guide_2019_FINAL.pdf Insurance Guide], revised April 2019, accessed 19 December 2020</ref>
+* green light – approved
+* yellow light – require insurer consultation and/or waivers of liability
+* red light – prohibited and outside the scope of insurance cover
 ==Social effects==
@@ Line 126: / Line 130: @@
 ===Insurance premium===
-Insurers' business model aims to collect more in insurance premiums than is paid out in losses, and to also offer a competitive price which consumers will accept. Insurance premiums can be simplified as:<ref name="i874">{{cite web | last=Community | first=the Actuarial | title=Chapter 10 Premium Foundations | website=Loss Data Analytics   Second Edition | date=1 July 2019 | url=https://openacttexts.github.io/LDAVer2/ChapPremiumFoundations.html | access-date=8 June 2025}}</ref>
+The insurers' business model aims to collect more in insurance premiums than is paid out in losses, and to also offer a competitive price which consumers will accept. Insurance premiums can be simplified as:<ref name="i874">{{cite web | last=Community | first=the Actuarial | title=Chapter 10 Premium Foundations | website=Loss Data Analytics Second Edition | date=1 July 2019 | url=https://openacttexts.github.io/LDAVer2/ChapPremiumFoundations.html | access-date=8 June 2025}}</ref>
 :insurance premium = [[expected value]] of claims + underwriting expenses + [[operating expense]] + [[Profit (accounting)|profit]] - [[return on investment]].
@@ Line 134: / Line 138: @@
 Insurers make money in two ways:
-* Through [[underwriting]], the process by which insurers select the risks to insure and decide how much in insurance premiums to charge for accepting those risks, and taking the brunt of the risk should it come to fruition.
+* Through [[underwriting]], the process by which insurers select the risks to insure and decide how much in insurance premiums to charge for accepting those risks, and taking the brunt of the risk should it come to pass.
 * By [[investment|investing]] the insurance premiums they collect from insured parties
 A company with a combined ratio over 100% may nevertheless remain profitable due to investment earnings.
@@ Line 141: / Line 145: @@
 In the [[United States]], the underwriting loss of [[property insurance|property]] and [[casualty insurance]] companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance-industry insiders, most notably [[Maurice R. Greenberg|Hank Greenberg]], do not believe that it is possible to sustain a profit from float forever without an underwriting profit as well, but this opinion is not universally held. Reliance on float for profit has led some industry experts to call insurance companies "investment companies that raise the money for their investments by selling insurance".<ref>{{Cite journal|last1= Weir|first1= Audrey A.|last2= Hampton|first2= John H.|date= March 1995|title= Essentials of Risk Management and Insurance|journal= The Journal of Risk and Insurance|volume= 62|issue= 1|pages= 157|doi= 10.2307/253703|issn= 0022-4367|jstor= 253703}}</ref>
-Naturally, the float method is difficult to carry out in an [[Depression (economics)|economically depressed]] period. [[Bear market]]s do cause insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance-premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the [[insurance cycle|underwriting, or insurance, cycle]].<ref>
+Naturally, the float method is difficult to carry out in an [[Depression (economics)|economically depressed]] period generally causing insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance-premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the [[insurance cycle|underwriting or insurance cycle]].<ref>
 Fitzpatrick, Sean, [https://ssrn.com/abstract=690316 ''Fear is the Key: A Behavioral Guide to Underwriting Cycles,''] 10 Conn. Ins. L.J. 255 (2004).
 </ref>
+When the insurance is required to pay for uninsured people the premia increase.<ref name="d051">{{cite journal | last1=Sun | first1=Stephen Teng | last2=Yannelis | first2=Constantine | title=QUANTIFYING THE PREMIUM EXTERNALITY OF THE UNINSURED: Quantifying the Premium Externality of the Uninsured | journal=Journal of the European Economic Association | volume=14 | issue=2 | date=2016 | doi=10.1111/jeea.12148 | pages=405–437 | url=https://academic.oup.com/jeea/article-lookup/doi/10.1111/jeea.12148 | access-date=2026-03-25| url-access=subscription }}</ref>
 ===Claims===
@@ Line 182: / Line 188: @@
 Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, [[vehicle insurance]] would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an [[traffic collision|accident]]). A [[home insurance]] policy in the United States typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.
-[[Business]] insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the [[business owner's policy]] (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Business insurance information. What does a businessowners policy cover? | url = http://www.iii.org/individuals/business/basics/bop/ | access-date = 9 May 2007 }}</ref>
+[[Business]] insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the [[business owner's policy]] (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Business insurance information. What does a businessowners policy cover? | url = https://www.iii.org/individuals/business/basics/bop/ | access-date = 9 May 2007 }}</ref>
 ===Vehicle insurance===
 {{Main|Vehicle insurance}}
 [[File:Car crash 1.jpg|thumb|right|A wrecked vehicle in [[Copenhagen]]]]
 Vehicle insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a [[traffic collision]].
@@ Line 201: / Line 208: @@
 ===Health insurance===
 {{Main|Health insurance|Dental insurance}}
 [[File:Great western hospital.JPG|right|thumb|Great Western Hospital, [[Swindon]]]]
@@ Line 215: / Line 223: @@
 ===Casualty insurance===
 {{Main|Casualty insurance}}
-Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as [[Vehicle insurance|auto]], [[Workers' compensation|workers compensation]], and some [[Liability insurance|liability insurances]].
+Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified into, such as [[Vehicle insurance|auto]], [[Workers' compensation|workers compensation]], and some [[Liability insurance|liability insurances]].
 * Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the [[criminal act]]s of third parties. For example, a company can obtain crime insurance to cover losses arising from [[theft]] or [[embezzlement]].
 * [[Terrorism insurance]] provides protection against any loss or damage caused by [[terrorism|terrorist]] activities. In the United States in the wake of [[september 11 attacks|9/11]], the [[Terrorism Risk Insurance Act]] 2002 (TRIA) set up a federal program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).
@@ Line 223: / Line 232: @@
 ===Life insurance===
 {{Main|Life insurance}}
 [[File:Amicable Society for a Perpetual Assurance Office, Serjeants' Inn, Fleet Street, London, 1801.jpg|thumb|upright=0.8|[[Amicable Society for a Perpetual Assurance Office]], Serjeants' Inn, Fleet Street, [[London]], 1801]]
-Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an [[Annuity (financial contracts)|annuity]]. In most states, a person cannot purchase a policy on another person without their knowledge.
+Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an [[Annuity (financial contracts)|annuity]]. In most US states, a person cannot purchase a policy on another person without their knowledge.
 Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and [[pension]]s that pay a benefit for life are sometimes regarded as insurance against the possibility that a [[retirement|retiree]] will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
@@ Line 235: / Line 245: @@
 ===Burial insurance===
-Burial insurance is an old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a [[funeral]]. The [[Ancient Greece|Greeks]] and [[Ancient Rome|Romans]] introduced burial insurance c.&nbsp;600 CE when they organized [[guild]]s called [[Benevolent society|benevolent societies]], which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the [[Middle Ages]] served a similar purpose, as did friendly societies during Victorian times.
+Burial insurance is an old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a [[funeral]]. The [[Ancient Greece|Greeks]] and [[Ancient Rome|Romans]] introduced burial insurance c.&nbsp;600 CE when they organized [[collegia|''collegia'']] (guilds) called [[Benevolent society|benevolent societies]], which cared for the surviving families and paid funeral expenses of members upon death. [[Guilds in the Middle Ages]] served a similar purpose, as did [[Friendly society|friendly societies]] during Victorian times.
 ===Property===
 {{Main|Property insurance}}
 [[File:Tornado Damage, Illinois 2.JPG|right|thumb|This [[tornado]] damage to an [[Illinois]] home would be considered an "[[Act of God]]" for insurance purposes.]]
 Property insurance provides protection against risks to property, such as [[fire]], [[theft]] or [[weather]] damage. This may include specialized forms of insurance such as fire insurance, [[flood insurance]], [[earthquake insurance]], [[home insurance]], inland marine insurance or [[boiler insurance]].
@@ Line 246: / Line 257: @@
 * [[Aviation insurance]] protects [[aircraft]] hulls and spares, and associated liability risks, such as passenger and third-party liability. [[Airport]]s may also appear under this subcategory, including air traffic control and refuelling operations for international airports through to smaller domestic exposures.
 * [[Boiler insurance]] (also known as boiler and machinery insurance, or equipment breakdown insurance) insures against accidental physical damage to boilers, equipment or machinery.
-* [[Builder's risk insurance]] insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.<ref>{{cite web|title=Builder's Risk Insurance: Specialized Coverage for Construction Projects|url=http://adjustersinternational.com/publications/adjusting-today/builders-risk-insurance/1/|website=Adjusting Today|publisher=Adjusters International|access-date=16 October 2009}}</ref>
+* [[Builder's risk insurance]] insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.<ref>{{cite web|title=Builder's Risk Insurance: Specialized Coverage for Construction Projects|url=https://adjustersinternational.com/publications/adjusting-today/builders-risk-insurance/1/|website=Adjusting Today|publisher=Adjusters International|access-date=16 October 2009}}</ref>
-* [[Crop insurance]] may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, pests<ref name="Ali-et-al-2020">{{cite journal|last1=Ali|first1=Williams|last2=Abdulai|first2=Awudu|author-link2=Awudu Abdulai|last3=Mishra|first3=Ashok K.|date=2020-10-06|title=Recent Advances in the Analyses of Demand for Agricultural Insurance in Developing and Emerging Countries|journal=[[Annual Review of Resource Economics]]|publisher=[[Annual Reviews (publisher)|Annual Reviews]]|volume=12|issue=1|pages=411–430|doi=10.1146/annurev-resource-110119-025306|issn=1941-1340|s2cid=225173762|doi-access=free}}</ref> (including especially insects), or disease<ref>{{US patent application|20060287896}} "Method for providing crop insurance for a crop associated with a defined attribute"</ref><ref name="Ali-et-al-2020" />—some of these being termed [[named peril]]s.<ref name="Ali-et-al-2020" /> [[Index-based insurance]] uses models of how climate extremes affect crop production to define certain climate triggers that if surpassed have high probabilities of causing substantial crop loss. When harvest losses occur associated with exceeding the climate trigger threshold, the index-insured farmer is entitled to a compensation payment.<ref>{{Cite journal|last1=Born|first1=Lorna|last2=Spillane|first2=Charles|last3=Murray|first3=Una|date=20 December 2018|title=Integrating gender into index-based agricultural insurance: a focus on South Africa|journal=Development in Practice|volume=29|issue=4|pages=409–423|doi=10.1080/09614524.2018.1556608|issn=0961-4524|hdl=10568/102499|s2cid=158288729|hdl-access=free}}</ref>
+* [[Crop insurance]] may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, pests<ref name="Ali-et-al-2020">{{cite journal|last1=Ali|first1=Williams|last2=Abdulai|first2=Awudu|author-link2=Awudu Abdulai|last3=Mishra|first3=Ashok K.|date=2020-10-06|title=Recent Advances in the Analyses of Demand for Agricultural Insurance in Developing and Emerging Countries|journal=[[Annual Review of Resource Economics]]|publisher=[[Annual Reviews (publisher)|Annual Reviews]]|volume=12|issue=1|pages=411–430|doi=10.1146/annurev-resource-110119-025306|issn=1941-1340|s2cid=225173762|doi-access=free |bibcode=2020ARRE...12..411A }}</ref> (including especially insects), or disease<ref>{{US patent application|20060287896}} "Method for providing crop insurance for a crop associated with a defined attribute"</ref><ref name="Ali-et-al-2020" />—some of these being termed [[named peril]]s.<ref name="Ali-et-al-2020" /> [[Index-based insurance]] uses models of how climate extremes affect crop production to define certain climate triggers that if surpassed have high probabilities of causing substantial crop loss. When harvest losses occur associated with exceeding the climate trigger threshold, the index-insured farmer is entitled to a compensation payment.<ref>{{Cite journal|last1=Born|first1=Lorna|author2-link=Charles Spillane|last2=Spillane|first2=Charles|last3=Murray|first3=Una|date=20 December 2018|title=Integrating gender into index-based agricultural insurance: a focus on South Africa|journal=Development in Practice|volume=29|issue=4|pages=409–423|doi=10.1080/09614524.2018.1556608|issn=0961-4524|hdl=10568/102499|s2cid=158288729|hdl-access=free}}</ref>
 * [[Earthquake insurance]] is a form of property insurance that pays the policyholder in the event of an [[earthquake]] that causes damage to the property. Most ordinary home insurance policies do not cover earthquake damage. Earthquake insurance policies generally feature a high [[deductible]]. Rates depend on location and hence the likelihood of an earthquake, as well as the [[Earthquake engineering|construction of the home]].
 * [[Fidelity bond]] is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
@@ Line 253: / Line 264: @@
 [[File:FEMA - 14947 - Photograph by Jocelyn Augustino taken on 08-30-2005 in Louisiana.jpg|thumb|right|[[Hurricane Katrina]] caused over $80 billion of storm and flood damage.]]
 * [[Flood insurance]] protects against property loss due to flooding. Many U.S. insurers do not provide flood insurance in some parts of the country. In response to this, the federal government created the [[National Flood Insurance Program]] which serves as the insurer of last resort.
-* [[Home insurance]], also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = What is homeowners insurance? | url = http://www.iii.org/individuals/homei/hbasics/whatis/ | access-date = 11 November 2008 }}</ref>
+* [[Home insurance]], also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = What is homeowners insurance? | url = https://www.iii.org/individuals/homei/hbasics/whatis/ | access-date = 11 November 2008 }}</ref>
 * [[Landlords' insurance|Landlord insurance]] covers residential or commercial property that is rented to tenants. It also covers the landlord's liability for the occupants at the property. Most homeowners' insurance, meanwhile, cover only owner-occupied homes and not liability or damages related to tenants.<ref>{{Cite web|url=https://www.forbes.com/sites/forbesrealestatecouncil/2019/09/10/insurance-for-landlords-protecting-your-investment/|title=Insurance For Landlords: Protecting Your Investment|last=Miller|first=Nathan|website=Forbes|language=en|access-date=2019-10-27}}</ref>
 * [[Marine insurance]] and marine cargo insurance cover the loss or damage of vessels at sea or on [[Inland waterways of the United States|inland waterways]], and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.
@@ Line 259: / Line 270: @@
 * Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder's home uninhabitable. Periodic payments are made directly to the insured until the home is rebuilt or a specified time period has elapsed.
 * [[Surety bond]] insurance is a three-party insurance guaranteeing the performance of the principal.
-[[File:WTC smoking on 9-11.jpeg|thumb|right|The demand for [[terrorism insurance]] surged after the [[September 11 attacks]] of 2001.]]
 * Volcano insurance is a specialized insurance protecting against damage arising specifically from [[Volcano|volcanic eruptions]].
 * Windstorm insurance is an insurance covering the damage that can be caused by wind events such as [[Tropical cyclone|hurricanes]].
@@ Line 265: / Line 275: @@
 ===Liability===
 {{Main|Liability insurance}}
 Liability insurance is a broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured.
@@ Line 274: / Line 285: @@
 * [[Prize indemnity insurance]] protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a [[basketball]] game, or a [[hole in one|hole-in-one]] at a [[golf]] tournament.
 * [[Professional liability insurance]], also called [[professional indemnity insurance]] (PI), protects insured professionals such as architectural corporations and medical practitioners against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called [[medical malpractice]] insurance.
-Often a commercial insured's liability insurance program consists of several layers. The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insurer to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary insurance or self-insured retention, the insured may have one or more layers of [[excess insurance]] to provide coverage additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies (policies that contain their own terms, conditions, and exclusions), "follow form" excess insurance (policies that follow the terms of the underlying policy except as specifically provided), and [[Umbrella insurance|"umbrella" insurance policies]] (excess insurance that in some circumstances could provide coverage that is broader than the underlying insurance).<ref>{{Cite journal |title =Excess Liability Insurance: Law and Litigation |last1 = Seaman|first1 = S. M.|date = Spring 1997|journal = Tort & Insurance Law Journal |volume=32 |issue=3 |pages=653–714|last2 = Kittredge|first2 = C. |jstor=25763179 }}</ref>
+Often a commercial insured's liability insurance program consists of several layers. The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insurer to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary insurance or self-insured retention, the insured may have one or more layers of [[excess insurance]] to provide coverage with additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies (policies that contain their own terms, conditions, and exclusions), "follow form" excess insurance (policies that follow the terms of the underlying policy except as specifically provided), and [[Umbrella insurance|"umbrella" insurance policies]] (excess insurance that in some circumstances could provide coverage that is broader than the underlying insurance).<ref>{{Cite journal |title =Excess Liability Insurance: Law and Litigation |last1 = Seaman|first1 = S. M.|date = Spring 1997|journal = Tort & Insurance Law Journal |volume=32 |issue=3 |pages=653–714|last2 = Kittredge|first2 = C. |jstor=25763179 }}</ref>
 ===Credit===
 {{Main|Payment protection insurance}}
 Credit insurance repays some or all of a [[loan]] when the borrower is insolvent.
-* [[Mortgage insurance]] insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name "credit insurance" more often is used to refer to policies that cover other kinds of debt.
+* [[Mortgage insurance]] insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name "credit insurance" is more often used to refer to policies that cover other kinds of debt.
 * Many credit cards offer payment protection plans which are a form of credit insurance.
 * [[Trade credit insurance]] is business insurance over the accounts receivable of the insured. The policy pays the policy holder for covered accounts receivable if the debtor defaults on payment.
@@ Line 288: / Line 300: @@
 ===Other types===
-* [[All-risk insurance]] is an insurance that covers a wide range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy.<ref>[http://www.business.gov/manage/business-insurance/insurance-types.html Types of Business Insurance | SBA.gov] {{Webarchive|url=https://web.archive.org/web/20100629042726/http://www.business.gov/manage/business-insurance/insurance-types.html |date=29 June 2010 }}. Business.gov. Retrieved on 18 July 2013.</ref> In [[car insurance]], all-risk policy includes also the damages caused by the own driver.
+* [[All-risk insurance]] is an insurance that covers a wide range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy.<ref>[http://www.business.gov/manage/business-insurance/insurance-types.html Types of Business Insurance | SBA.gov] {{Webarchive|url=https://web.archive.org/web/20100629042726/http://www.business.gov/manage/business-insurance/insurance-types.html |date=29 June 2010 }}. Business.gov. Retrieved on 18 July 2013.</ref> In [[car insurance]], an all-risk policy also includes the damages caused by the own driver.
 [[File:2006GoodwoodBreedersCup.jpg|thumb|right|High-value horses may be insured under a [[Thoroughbred|bloodstock]] policy.]]
 * [[Bloodstock insurance]] covers individual [[horse]]s or a number of horses under common ownership. Coverage is typically for mortality as a result of accident, illness or disease but may extend to include infertility, in-transit loss, veterinary fees, and prospective foal.
@@ Line 294: / Line 306: @@
 * [[Defense Base Act]] (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the United States and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, foreign nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
 * [[Expatriate insurance]] provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
-*Hired-in Plant Insurance covers liability where, under a contract of hire, the customer is liable to pay for the cost of [[Plant Hire|hired-in]] equipment and for any rental charges due to a plant hire firm, such as construction plant and machinery.<ref>Breathe Insurance Brokers Ltd., [http://www.breatheinsurance.co.uk/business-insurance/plant-hire-insurance/ Plant Hire Insurance], accessed 1 November 2020</ref>
+*Hired-in plant insurance covers liability where, under a contract of hire, the customer is liable to pay for the cost of [[Plant Hire|hired-in]] equipment and for any rental charges due to a plant hire firm, such as construction plant and machinery.<ref>Breathe Insurance Brokers Ltd., [https://www.breatheinsurance.co.uk/business-insurance/plant-hire-insurance/ Plant Hire Insurance]{{Dead link|date=May 2026 |bot=InternetArchiveBot }}, accessed 1 November 2020</ref>
 * [[Legal expenses insurance]] covers policyholders for the potential costs of legal action against an institution or an individual. When something happens which triggers the need for legal action, it is known as "the event". There are two main types of legal expenses insurance: [[Legal expenses insurance#Before the event insurance|before the event insurance]] and [[Legal expenses insurance#After the event insurance|after the event insurance]].
-* Livestock insurance is a specialist policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.
+* Livestock insurance is a specialized policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.
 * Media liability insurance is designed to cover professionals that engage in film and television production and print, against risks such as [[defamation]].
 * Nuclear incident insurance covers damages resulting from an [[nuclear and radiation accidents|incident involving radioactive materials]] and is generally arranged at the national level. (See the [[nuclear exclusion clause]] and, for the United States, the [[Price–Anderson Nuclear Industries Indemnity Act]].)
@@ Line 307: / Line 319: @@
 * [[Travel insurance]] is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, and personal liabilities.
 * [[Tuition insurance]] insures students against involuntary withdrawal from cost-intensive educational institutions
-* [[Interest rate insurance]] protects the holder from adverse changes in interest rates, for instance for those with a variable rate loan or mortgage
+* [[Interest rate insurance]] protects the holder from adverse changes in interest rates, for instance, for those with a variable rate loan or mortgage
 * Divorce insurance is a form of contractual liability insurance that pays the insured a cash benefit if their marriage ends in divorce.
@@ Line 313: / Line 325: @@
 * Fraternal insurance is provided on a cooperative basis by [[Benefit society|fraternal benefit societies]] or other social organizations.<ref>Margaret E. Lynch, Editor, "Health Insurance Terminology", Health Insurance Association of America, 1992, {{ISBN|1-879143-13-5}}</ref>
 * [[No-fault insurance]] is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.
-* Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.
+* Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten protected self-insurance program reduces and stabilizes the cost of insurance and provides valuable risk management information.
 * Retrospectively rated insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.
 * Formal [[self-insurance]] (active risk retention) is the deliberate decision to pay for otherwise insurable losses out of one's own money.<ref>{{cite book |last1=Lencsis |first1=Peter M. |title=Workers compensation : a reference and guide |date=1998 |publisher=Quorum Books |location=Westport, Connecticut |isbn=9781567201741 |pages=75–76 |url=https://archive.org/details/workerscompensat00lenc/page/75/mode/2up |access-date=30 December 2020}}</ref> This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self-insurance is usually used to pay for high-frequency, low-severity losses.<ref name="Teale2013">{{Cite book|last=Teale|first=John|title=Insurance and Risk Management|publisher=CCH/Wolters Kluwer|year=2013|isbn=978-1-922042-88-0|location=Sydney, Australia|pages=40|quote=Risk retention occurs when an individual or business firm retains all or part of a given risk. Risk retention is generally appropriate when the frequency of loss is low and its severity is low. Risk retention can also be appropriate for high-frequency, low-severity risks where potential losses are of low value. Risk retention can be either active or passive. Active risk retention refers to the situation where an individual recognises the risk and deliberately elects to retain all or part of that risk. This may be achieved by a firm or individual electing to carry the first $500 of any loss as a policy excess (or deductible). An excess (or deductible) is a provision in the policy whereby a specified amount is deducted from the loss payment otherwise payable to the insured. Alternatively, the risk manager may decide to self-insure the entire risk thereby saving what they would have paid as an insurance premium. Active risk retention is used because a policy excess will eliminate small policy claims and the administrative expense of adjusting these claims resulting in reduced premiums. It is also used where insurance is either unavailable or too expensive.}}</ref> Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.<ref name="Teale2013"/>
 * [[Reinsurance]] is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. [[Financial reinsurance]] is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk.
-* [[Social insurance]] can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that requires participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if they need to. Along the way, this inevitably becomes related to other concepts such as the justice system and the [[welfare state]]. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others):
+* [[Social insurance]] is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others, often consolidated as part of a [[social security]] program), requiring participation by all citizens or residents. By forcing everyone in a society to become a policyholder and pay premiums, it provides a [[social safety net]], ensuring that everyone can become a claimant when necessary. Examples of such programs are [[National Insurance]] in the United Kingdom or [[Social Security (United States)|Social Security]] in the United States.
-**[[National Insurance]]
-** [[Social safety net]]
-** [[Social security]]
-** [[Social Security debate (United States)]]
-** [[Social Security (United States)]]
-** [[Social welfare provision]]
 * [[Stop-loss insurance]] provides protection against catastrophic or unpredictable losses. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.
@@ Line 331: / Line 337: @@
 In the [[United Kingdom]], [[The Crown]] (which, for practical purposes, meant the [[civil service]]) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies and rented back, this arrangement is now less common.
-In the United States, the most prevalent form of [[self-insurance]] is governmental risk management pools. They are self-funded cooperatives, operating as carriers of coverage for the majority of governmental entities today, such as county governments, municipalities, and school districts. Rather than these entities independently self-insure and risk bankruptcy from a large judgment or catastrophic loss, such governmental entities form a [[risk pool]]. Such pools begin their operations by capitalization through member deposits or bond issuance. Coverage (such as general liability, auto liability, professional liability, workers compensation, and property) is offered by the pool to its members, similar to coverage offered by insurance companies. However, self-insured pools offer members lower rates (due to not needing insurance brokers), increased benefits (such as loss prevention services) and subject matter expertise. Of approximately 91,000 distinct governmental entities operating in the United States, 75,000 are members of self-insured pools in various lines of coverage, forming approximately 500 pools. Although a relatively small corner of the insurance market, the annual contributions (self-insured premiums) to such pools have been estimated up to 17 billion dollars annually.<ref>Marcos Antonio Mendoza, "Reinsurance as Governance: Governmental Risk Management Pools as a Case Study in the Governance Role Played by Reinsurance Institutions", 21 Conn. Ins. L.J. 53, 55-60 (2014) https://ssrn.com/abstract=2573253</ref>
+In the United States, the most prevalent form of [[self-insurance]] is governmental risk management pools. They are self-funded cooperatives, operating as carriers of coverage for the majority of governmental entities today, such as county governments, municipalities, and school districts. Rather than these entities independently self-insuring and risking bankruptcy from a large judgment or catastrophic loss, such governmental entities form a [[risk pool]]. Such pools begin their operations by capitalization through member deposits or bond issuance. Coverage (such as general liability, auto liability, professional liability, workers compensation, and property) is offered by the pool to its members, similar to coverage offered by insurance companies. However, self-insured pools offer members lower rates (due to not needing insurance brokers), increased benefits (such as loss prevention services) and subject matter expertise. Of approximately 91,000 distinct governmental entities operating in the United States, 75,000 are members of self-insured pools in various lines of coverage, forming approximately 500 pools. Although a relatively small corner of the insurance market, the annual contributions (self-insured premiums) to such pools have been estimated at up to 17 billion dollars annually.<ref>Marcos Antonio Mendoza, "Reinsurance as Governance: Governmental Risk Management Pools as a Case Study in the Governance Role Played by Reinsurance Institutions", 21 Conn. Ins. L.J. 53, 55-60 (2014) https://ssrn.com/abstract=2573253</ref>
 ==Insurance companies==
@@ Line 350: / Line 356: @@
 ===Mutual versus proprietary===
 {{Main|Mutual insurance}}
 Insurance companies are commonly classified as either [[Mutual insurance|mutual]] or proprietary companies.<ref>{{cite book|title=IF1 – Insurance, Legal & Regulatory|year=2011|publisher=Chartered Insurance Institute|isbn=978-0-85713-094-5|author=David Ransom|page=2/5}}</ref> Mutual companies are owned by the policyholders, while shareholders (who may or may not own policies) own proprietary insurance companies.
@@ Line 396: / Line 403: @@
 ===Regulatory differences===
 {{Main|Insurance law}}
-In the United States, insurance is regulated by the states under the [[McCarran–Ferguson Act]], with "periodic proposals for federal intervention", and a nonprofit coalition of state insurance agencies called the [[National Association of Insurance Commissioners]] works to harmonize the country's different laws and regulations.<ref>Randall S. (1998). [http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf "Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners"]. {{webarchive|url=https://web.archive.org/web/20110511230141/http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf |date=11 May 2011}}. ''Florida State University Law Review''.</ref> The National Conference of Insurance Legislators (NCOIL) also works to harmonize the different state laws.<ref>J Schacht, B Foudree. (2007). [http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf "A Study on State Authority: Making a Case for Proper Insurance Oversight"]. {{webarchive|url=https://web.archive.org/web/20110510081324/http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf |date=10 May 2011 }}. ''NCOIL''</ref> [[1988 California Proposition 103]] is claimed to reduce home insurance rates,<ref name="i896">{{cite web | last=Kamisher | first=Eliyahu | last2=Reyes | first2=Max | last3=Carson | first3=Biz | title=It's not just State Farm. Allstate no longer sells new home insurance policies in California | website=Los Angeles Times | date=2 June 2023 | url=https://www.latimes.com/business/story/2023-06-02/allstate-state-farm-stop-selling-new-home-insurance-in-california | access-date=11 January 2025}}</ref> while it is blamed by some for reduced availability of [[home insurance]] in wildfire-distressed neighborhoods.<ref name="r793">{{cite web | last=Darmiento | first=Laurence | title=State takes final step to fix California's troubled home insurance market | website=Los Angeles Times | date=30 December 2024 | url=https://www.latimes.com/business/story/2024-12-30/california-home-insurance-sustainable-insurance-strategy-lara-reinsurance-state-farm-wildfires | access-date=11 January 2025}}</ref>
+In the United States, insurance is regulated by the states under the [[McCarran–Ferguson Act]], with "periodic proposals for federal intervention", and a nonprofit coalition of state insurance agencies called the [[National Association of Insurance Commissioners]] works to harmonize the country's different laws and regulations.<ref>Randall S. (1998). [http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf "Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners"]. {{webarchive|url=https://web.archive.org/web/20110511230141/http://www.law.fsu.edu/Journals/lawreview/downloads/263/rand.pdf |date=11 May 2011}}. ''Florida State University Law Review''.</ref> The National Conference of Insurance Legislators (NCOIL) also works to harmonize the different state laws.<ref>J Schacht, B Foudree. (2007). [http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf "A Study on State Authority: Making a Case for Proper Insurance Oversight"]. {{webarchive|url=https://web.archive.org/web/20110510081324/http://www.ncoil.org/policy/Docs/2007/ILFStudy.pdf |date=10 May 2011 }}. ''NCOIL''</ref> [[1988 California Proposition 103]] is claimed to reduce home insurance rates,<ref name="i896">{{cite web | last1=Kamisher | first1=Eliyahu | last2=Reyes | first2=Max | last3=Carson | first3=Biz | title=It's not just State Farm. Allstate no longer sells new home insurance policies in California | website=Los Angeles Times | date=2 June 2023 | url=https://www.latimes.com/business/story/2023-06-02/allstate-state-farm-stop-selling-new-home-insurance-in-california | access-date=11 January 2025}}</ref> while it is blamed by some for reduced availability of [[home insurance]] in wildfire-distressed neighborhoods.<ref name="r793">{{cite web | last=Darmiento | first=Laurence | title=State takes final step to fix California's troubled home insurance market | website=Los Angeles Times | date=30 December 2024 | url=https://www.latimes.com/business/story/2024-12-30/california-home-insurance-sustainable-insurance-strategy-lara-reinsurance-state-farm-wildfires | access-date=11 January 2025}}</ref>
 In the [[European Union]], the Third Non-Life Directive and the Third Life Directive, both passed in 1992 and effective 1994, created a single insurance market in Europe and allowed insurance companies to offer insurance anywhere in the EU (subject to permission from authority in the head office) and allowed insurance consumers to purchase insurance from any insurer in the EU.<ref>C. J. Campbell, L. Goldberg, A. Rai. (2003). [http://people.hofstra.edu/Anoop_Rai/research/JORI70-1Campbell.pdf "The Impact of the European Union Insurance Directives on Insurance Company Stocks"] {{Webarchive|url=https://web.archive.org/web/20171123162358/https://people.hofstra.edu/Anoop_Rai/research/JORI70-1Campbell.pdf |date=23 November 2017 }}. ''The Journal of Risk and Insurance''.</ref> As far as [[insurance in the United Kingdom]], the [[Financial Services Authority]] took over insurance regulation from the General Insurance Standards Council in 2005;<ref>Haurant S. (2005). [https://www.theguardian.com/business/2005/jan/14/money.watchdogs "FSA takes on insurance regulation"]. ''The Guardian''.</ref> laws passed include the Insurance Companies Act 1973 and another in 1982,<ref>Adams J. (2012). [http://www.fsa.gov.uk/static/pubs/speeches/julian-adams-barbon-lecture-2012.pdf "The impact of changing regulation on the insurance industry"] {{Webarchive|url=https://web.archive.org/web/20181005100455/http://www.fsa.gov.uk/static/pubs/speeches/julian-adams-barbon-lecture-2012.pdf |date=5 October 2018 }}. [[Financial Services Authority]].</ref> and reforms to [[warranty]] and other aspects under discussion {{as of|2012|lc=y}}.<ref>[https://web.archive.org/web/20130114010523/http://www.lloyds.com/the-market/communications/regulatory-communications-homepage/regulatory-communications/regulatory-news-articles/2012/08/reforming-uk-insurance-contract-law "Reforming UK insurance contract law"]. Lloyd's. 30 August 2012. Archived from the [http://www.lloyds.com/the-market/communications/regulatory-communications-homepage/regulatory-communications/regulatory-news-articles/2012/08/reforming-uk-insurance-contract-law original] on 14 January 2013.</ref>
-The [[insurance industry in China]] was nationalized in 1949 and thereafter offered by only a single state-owned company, the [[People's Insurance Company of China]], which was eventually suspended as demand declined in a communist environment. In 1978, market reforms led to an increase in the market and by 1995 a comprehensive Insurance Law of the People's Republic of China<ref>[http://www.lehmanlaw.com/resource-centre/laws-and-regulations/insurance/insurance-law-of-the-peoples-republic-of-china-1995.html "Insurance Law of the People's Republic of China – 1995"]. Lehman, Lee & Xu.</ref> was passed, followed in 1998 by the formation of [[China Insurance Regulatory Commission]] (CIRC), which has broad regulatory authority over the insurance market of China.<ref>Thomas JE. (2002). [http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf "The role and powers of the Chinese insurance regulatory commission in the administration of insurance law in China"]. {{Webarchive|url=https://web.archive.org/web/20110511192041/http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf |date=11 May 2011 }}. ''Geneva Papers on Risk and Insurance''.</ref>
+The [[insurance industry in China]] was nationalized in 1949 and thereafter offered by only a single state-owned company, the [[People's Insurance Company of China]], which was eventually suspended as demand declined in a communist environment. In 1978, market reforms led to an increase in the market and by 1995 a comprehensive Insurance Law of the People's Republic of China<ref>[https://www.lehmanlaw.com/resource-centre/laws-and-regulations/insurance/insurance-law-of-the-peoples-republic-of-china-1995.html "Insurance Law of the People's Republic of China – 1995"]. Lehman, Lee & Xu.</ref> was passed, followed in 1998 by the formation of [[China Insurance Regulatory Commission]] (CIRC), which has broad regulatory authority over the insurance market of China.<ref>Thomas JE. (2002). [http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf "The role and powers of the Chinese insurance regulatory commission in the administration of insurance law in China"]. {{Webarchive|url=https://web.archive.org/web/20110511192041/http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2002_GP27(3)_Thomas.pdf |date=11 May 2011 }}. ''Geneva Papers on Risk and Insurance''.</ref>
 In India IRDA is insurance regulatory authority. As per the section 4 of IRDA Act 1999, Insurance Regulatory and Development Authority (IRDA), which was constituted by an act of parliament. National Insurance Academy, Pune is apex insurance capacity builder institute promoted with support from Ministry of Finance and by LIC, Life & General Insurance companies.
-In 2017, within the framework of the joint project of the [[Central Bank of Russia|Bank of Russia]] and [[Yandex]], a special [[check mark]] (a green circle with a tick and 'Реестр ЦБ РФ' (Unified state register of insurance entities) text box) appeared in the search for Yandex system, informing the consumer that the company's financial services are offered on the marked website, which has the status of an insurance company, a broker or a mutual insurance association.<ref>{{Cite web|url=http://www.cbr.ru/eng/press/event/?id=1568|title=Insurers' websites receive first marks {{!}} Банк России|website=www.cbr.ru|access-date=21 May 2018}}</ref>
+In 2017, within the framework of the joint project of the [[Central Bank of Russia|Bank of Russia]] and [[Yandex]], a special [[check mark]] (a green circle with a tick and 'Реестр ЦБ РФ' (Unified state register of insurance entities) text box) appeared in the search for Yandex system, informing the consumer that the company's financial services are offered on the marked website, which has the status of an insurance company, a broker or a mutual insurance association.<ref>{{Cite web|url=https://www.cbr.ru/eng/press/event/?id=1568|title=Insurers' websites receive first marks {{!}} Банк России|website=www.cbr.ru|access-date=21 May 2018}}</ref>
 ==Insurance practices and controversies==
@@ Line 439: / Line 447: @@
 In July 2007, the US [[Federal Trade Commission]] (FTC) released a report presenting the results of a study concerning credit-based [[insurance score]]s in automobile insurance. The study found that these scores are effective predictors of risk. It also showed that African-Americans and Hispanics are substantially overrepresented in the lowest credit scores, and substantially underrepresented in the highest, while Caucasians and Asians are more evenly spread across the scores. The credit scores were also found to predict risk within each of the ethnic groups, leading the FTC to conclude that the scoring models are not solely proxies for redlining. The FTC indicated little data was available to evaluate benefit of insurance scores to consumers.<ref name="FTC Study">[http://ftc.gov/opa/2007/07/facta.shtm Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance], Federal Trade Commission (July 2007)</ref> The report was disputed by representatives of the [[Consumer Federation of America]], the National Fair Housing Alliance, the [[National Consumer Law Center]], and the Center for Economic Justice, for relying on data provided by the insurance industry.<ref>[http://www.consumeraffairs.com/news04/2007/07/insurance_credit.html Consumers Dispute FTC Report on Insurance Credit Scoring] www.consumeraffairs.com (July 2007)</ref>
-All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Issues Update: Regulation Modernization | url = http://www.iii.org/media/hottopics/insurance/ratereg/ | access-date = 11 November 2008 }}</ref>
+All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Issues Update: Regulation Modernization | url = https://www.iii.org/media/hottopics/insurance/ratereg/ | access-date = 11 November 2008 }}</ref>
 In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, [[credit score]]s, [[gender]], [[profession|occupation]], [[marital status]], and [[education]] level. However, the use of such factors is often considered to be unfair or unlawfully [[discrimination|discriminatory]], and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.
@@ Line 555: / Line 563: @@
 * [https://web.archive.org/web/20230128221829/https://www.ncsl.org/research/health/congressional-research-service-reports-on-health Congressional Research Service (CRS) Reports regarding the US Insurance industry]
 * [https://www.ferma.eu/ Federation of European Risk Management Associations]
-* [http://www.ibc.ca/ Insurance Bureau of Canada]
+* [https://www.ibc.ca/ Insurance Bureau of Canada]
 * [https://www.iii.org/ Insurance Information Institute]
-* [http://www.naic.org/ National Association of Insurance Commissioners]
+* [https://www.naic.org/ National Association of Insurance Commissioners]
 * [https://web.archive.org/web/20060525173303/http://www.bl.uk/collections/business/insurind.html The British Library] – finding information on the insurance industry (UK focus)
@@ Line 569: / Line 577: @@
 [[Category:Insurance| ]]
 [[Category:Financial services]]
-[[Category:Services sector of the economy]]
+[[Category:Tertiary sector]]
 [[Category:Articles containing video clips]]

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