Often many people hear about insurance and only partially understand the definition and purpose of the insurance. It should be understood that the insurance really is and people can do with a more objective assessment. And, they were able to determine which is best for themselves.
Insurance is an agreement between two or more parties, with which the insurer committed themselves to the insured to receive the insurance premiums, to provide reimbursement to the insured for loss, damage or loss of expected benefits, or legal liability to third parties which may be suffered insured, arising from an uncertain events, or to provide a payment based on the death or life of an insured person. In a sense, the insurance has four basic principles, namely :
1 Indemnity
In this principle, the insurer is willing to pay no more than the actual value to be borne by the insured. This principle is made on the grounds. First, the purpose of the insurance contract is to restore the same economic position when the loss has not yet occurred. Second, the insured did not benefit from the loss. Third, reduce moral hazard by eliminating the profit incentive.
2 Insurable Interest
This principle says that the insured must be in a position to suffer financially when a loss occurs. This principle was made to avoid speculation, reducing moral hazard, and so as not to bear more of the financial needs of the insured (supports the principle of indemnity).
3 Utmost Good Faith
Utmost good faith means honesty very highly regarded in the insurance contract.
4. Subrogation
Subrogation means that the insurer is only obligated to pay in accordance with that stated in the policy.
5. Contribution (contribution)
If an insured object to some insurance parusahaan it will apply the principle of contribution of each of the insurance company.
6 Proximate Cause (proximal causes)
The main cause of the principle of active and efficient cause of a loss in an event. If the interests of the insured suffered natural disasters or accidents, then first of all we will look for the causes of the active and efficient that drives an unbroken chain of events that in the end there is a disaster or accident.
The purpose of this insurance is:
- Provide a guarantee of protection from the risk of losses suffered by one party.
- Improve efficiency concerning, because it does not need to specifically maintain security and surveillance to provide protection that takes a lot of energy, time and cost.
- Equitable cost, which is enough to pay a certain amount and do not need to replace / pay for their own losses incurred and the amount is not necessarily uncertain.
- The basis for the bank to extend credit because the bank requires a guarantee of protection of the collateral provided by the borrower money.
- For savings, because the amount paid to the insurer will be returned in larger quantities -> specifically for life insurance.
- Loss of Earning Power Closes a person or business entity at the time it may not work (work)
Potential Problems In Insurance
The purpose of the community in terms of buying insurance is for protection while getting insured risk. The insurance company should be able to avoid those who buy insurance for the purpose of speculation or pertaruhanan. Therefore, the insurance company must apply the basic principles of insurance.
Other potential problems faced by the insurance company is adverse selection behavior and moral hazard from customers and / or prospective customers. Usually most want to buy health insurance are those who suffer from chronic pain than those who were healthy or sick less.
In other words, those who most want to buy insurance are those who know the risks and risk. They could potentially do harm option, behaves as if healthy with good medical records show. Therefore, the insurance company should be able to have a way to be able to resolve the issue. Among others, provide a physical examination requirement with a hospital that has been designated (although this does not solve the problem completely because it potentially raises the moral hazard problem caused by the appointment).
In addition, health insurance companies can reduce the presence of adverse selection by selling insurance on a group whose members have similar characteristics.
