ECONOMIC INSURANCES

Macro economic aspects

From the macroeconomic point of view, the insurances institution provides two major contributions: Investment stimulus. According to Kenneth Arrow, the displacement of the risk of insurance is very beneficial from a social point of view as it induces the undertaking of new economic activities and it can be affirmed that in the absence of insurance activity, the volume of investment It would be lower and ultimately decrease the income and welfare of the population.

It helps to avoid inequalities.
The insurances avoids the extreme impoverishment that has its cause in deaths or accidents, contributing to greater economic equity.

Insurances contract

The insurances contract is one for which the insurer is obliged, by charging a premium and in the event that the event occurs whose risk is subject to coverage to compensate, within the agreed limits, the damage caused to the insured or to satisfy a capital, an income or other agreed benefits.

The contracting party or policyholder, who may or may not agree with the insured, on the other hand, is obliged to make the payment of that premium, in exchange for the coverage granted by the insurer, which prevents him from facing a greater economic damage, in case the incident occurs.

Insurances company

Insurances companies are financial intermediaries from an economic and financial point of view. This sector differs from other economic sectors in that, to start its activity, it needs a relatively small fixed capital, since it does not need to make large investments in assets to carry out its activity and its working capital is anticipated by its own customers on behalf of the product which has to start manufacturing at that time (security). Therefore, theoretically, their technical financing needs are very small. On the other hand, the product they sell, security, is guaranteed to all customers, although delivery is only made to a part of the clientele. Time also plays in favor of the insurer, since the corresponding cost (accident rate) is distributed by postponing and resulting, in the meantime, to a savings pool formed by the so-called technical provisions; Therefore, from a financial point of view, the policyholder of an insurances policy is a lender who provides a credit to the insurer to manufacture the product (security), thus making the insurer a mere investor of the funds not consumed.

Insurances companies are financial intermediaries from an economic and financial point of view

This sector differs from other economic sectors in that, to start its activity, it needs a relatively small fixed capital, since it does not need to make large investments in assets to carry out its activity and its working capital is anticipated by its own customers on behalf of the product which has to start manufacturing at that time (security). Therefore, theoretically, their technical financing needs are very small. On the other hand, the product they sell, security, is guaranteed to all customers, although delivery is only made to a part of the clientele. Time also plays in favor of the insurer, since the corresponding cost (accident rate) is distributed by postponing and resulting, in the meantime, to a savings pool formed by the so-called technical provisions; Therefore, from a financial point of view, the policyholder of an insurance policy is a lender who provides a credit to the insurer to manufacture the product (security), thus making the insurer a mere investor of the funds not consumed

The insurances activity, by its very nature, turns into a long-term investment what, in general, the insurance contractor did not even consider saving. However, it is a saving that from the financial point of view is very stable and long term.

In the European Union, as in most countries of the world, private insurers are subject to control and supervision by administrative authorities, and in order to operate they need to obtain a special authorization, since insurance is a contract in which the insured pays the premium in advance, while the insurer will indemnify him after the incident and therefore it is in the public interest that by then the insurer has the financial capacity to do so. All this is done under administrative law provisions dictated by the authorities. In Spain, this control of private insurers is carried out by the Ministry of Finance and Competitiveness through the General Directorate of Insurance and Pension Funds (DGSFP), 8 while in the European Union the supervision is carried out by the European Insurance Authority and Retirement Pensions -EIOPA- (European Insurance and Occupational Pensions Authority)

  • Elements of an insurances operation
  • the risk
  • the insured object
  • the insured interest
  • the sum insured
  • the insurance premium
  • the sinister
  • the compensation

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