Monday, September 15, 2008

Health Insurance Domain in a Nutshell

Insurance industry in statistics

More than 70% of the population had private health insurance in US.
950 companies are competing in health insurance
3000 companies provide property insurance in US.
1500 Life insurance companies
Current assets of Life and health insurance industry is $2.5 Trillions. These assets are invested in real estate, govt securities, coroprate bonds etc.,
2.2 Million people in US are working in Insurance industy out of that 900K work in Life and health insurance industry
Employees in insurance industy are earning $122.7 Millions as wages/slaries. $12.1 Millions earned by self employees.
To start an insurance company in US minimum capital is $100 K to $1000K

What is Insurance Industry.....

Four Approaches of dealing with risk
1. Own the risk
2. Dont do that task at all - not possible in some cases (dont ride , because there is threat of accident)
3. Reduce the risk by taking some preventive actions (burglur alarm.)
4. Transfer some or whole part of Risk - INSURANCE

Insurer: Generally the company who pays in the event of loss
Coverage: Contractual agreement that insurer will pay insured in case of pre agreed incidents.
Insured: The person whol transfers the risk to insurer with small premiums paid periodically.
Claim: Demand by insurer for payment of benefit
Benefit: Amount paid by insurer to insured as a compensation to risk
Premiums: Insured pays insurer periodically for coverage of risk.

1. Uncertainity of loss: No self damages and deliberate cause
2. Measurability of loss: Loss should be able to be measured in currency value
3. Large Number of Insureds:
4. significant size of potential Loss:
5. Equitable sharing.
6. Speculative risk (share market), Pure risk (fire accident)

Category of insurance
1. Individual (person insures himself and his family)
2. Group (company insurers for employee)

Types of Insurance
1. Whole life insurance Or permanent insurance
2. Term life insurance (covers for a specific period)
3. Credit Life insurance (pay the remaining debts of the insurer in case of his discontinuity due to unfortunate incident)
4. Annuity Contracts (paying the beneficiary dependents for a specific period.)

B) HEALTH INSURANCE: Medical, dental, surgical coverage
1. Direct: Loss of actual damage
2. Indirect: loss due to no rent, loss of profits, temporary shifting of house.
liable for an accident and has to pay the damage by insurer is covered by insurance company.

Types of Insurance Organizations:

Stock Insurance Comapnies: Stock holders are the owners of the company.
Mutual Insurance Companies: Policy holders are the owners of the company.

Demutualization: Shifting from Mutual company to Stock company.
Large capital source
Ability to acquire other companies
Tax reduction in US
Attracting top level employees: can offer stocks to top executives.


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