Insurance is a protection cover against any contingencies that happen in the life of an individual. Technically, it is a contract between the policy holder and the insurance company wherein the event of any occurrence of loss which is stated likewise in the policy, the insurance company is liable to pay an amount of money to the insurer. For example in case of motor insurance, the insurance company is liable to pay a specific sum of money if an accident occurs or anybody is injured during the course of any accident.
The money that an insurance company pays to the insurer is usually the money collected from the insurer by way of ‘Premium’. These are monthly or quarterly payments which are arrived at by a process called ‘underwriting’. Underwriting is a very important function as far as the processing of an insurance policy goes. Though this process, the exact premium that has to be charged from an insurer is decided keeping in mind several factors like age of the insurer, his health usually gauged by a medical check-up in case of health related insurance, the risk factors that one could be prone to etc. If the insurance company finds that the risk factors associated are too high or the age of the insurer is not as per the guidelines of a specific policy, the insurance company can reject to sell the policy to the insurer.
It is imperative on the part of the policy holder or the person who intends to buy a certain policy, to be well versed with the intricacies of any policy before purchasing the same. Also, if a certain insurance company rejects to sell a certain policy, there could be some other company which may sell it with a higher premium or any other clause attached to it. Therefore, information is a key to buying / selling in the insurance sector.
Also, in the case of insurance policies especially accident related ones, there is a specified amount which the insurer has to pay in the case of an accident and the remaining part will be paid by the insurance company. This specified amount which is called ‘deductible’ is pre-decided and agreed upon by both the parties and upon this, the insurance company now decided what premium has to be charged form the insurer. If the person in question decides on a higher deductible, the premium charged will be lower.
In the case of a motor insurance or a health insurance policy for example, usually 10 to 20% of the charges incurred by the insurer has to be paid by the insurer himself and the rest by the insurance company. This also depends on the coverage limit which is the maximum amount that an insurance company will pay for any mishap as form of employer liability insurance. This is regardless of the actual cost incurred by the policy holder and generally is so specified in the policy.
The processing of the ‘Claim’ involves the formal request made by the policy holder to the insurance company in the event of a mishap. This involves the submission of various related documents etc by the policy holder and the subsequent scrunitinization by the insurance company in order to process the claim. For instance, in the case of a health related insurance, a synopsis of the services received by the insurer or the person in whose name the policy has been bought, will be prepared by the doctor or the health care provider and the same will be submitted for evaluation of a ‘claim’. The timely settlement of a claim is an important function of any insurance company and on this depends the popularity of a certain company too.
As insurance for companies is a broad subject, more information can be found here on wikipedia