Accidents such as fires, floods, traffic accidents, etc, frequently occur; that totally or partially affect people both in their physical integrity and their assets. Nobody ever and in no place is not exposed to different risks. The zero risk, natural aspiration of the human being is impossible.
Insurance itself constitutes a system of economic-financial relationships that, due to its content and the place it occupies in the reproduction process, constitutes an important component of finance; guaranteeing the unity of the process of social reproduction in its totality and in each of its parts, constituting in a specific way the distribution of social reserves from national income.
In insurance, the allocation of human resources is decisive, while the support of risk capital is complementary and non-existent. This activity is closely related to the development of the economy of the area in question. In such a way that the social-economic and political framework will inevitably be the determining factor for it. However, two objectively equal situations can be differentiated through the subjective factor, elements of the latter being, among others, intellectual capacity, determination, motivation, responsibility, initiative, creativity, etc.
Improving "awareness of the need for insurance" in a country has as much to do with improving public confidence in the safety of insured companies.
In terms of insurance for example, we have that the world premium is made up of approximately 35% from the US, 34% from Europe, 26% from Asia and the remaining 5% divided between Oceania, Africa and Latin America. The latter does not as a whole reach 1.5% of the world premium production. For this reason, we see the importance of this issue in terms of the need to increase the number of insured in quality and quantity and its link with the clear and precise information that the client has with the insurance activity.
The objective of this study is to describe in a simple way the importance of insurance worldwide and its direct relationship with risks. Also the objective of this work is to describe some characteristics of risks in the world, as well as some events and people's attitudes towards them.
Let's see first what is understood by risk:
Risk:
The risk, is not but a probability, it is the possibility that by chance or event that produces a patrimonial nonsense occurs. People are permanently in a risk situation, understood as one in which, without being necessarily doomed to misfortune, they are exposed to it.
Sometimes the risk can be confused with the loss when in reality the latter is nothing more than the realization of the risk.
The risks can be considered:
- Uncertain or possible:
To talk about insurance risk, there must be the possibility that a harmful event occurs or that a patrimonial need occurs.
Uncertainty, an essential element in insurance, can have different degrees, any of which must be given for the insurability of a risk: they are the yes, the when and the how.
Examples:
To insure a car against the risk of collisions, it is necessary to know if at some point it will circulate (if it is on display and only leaves the agency after it has been sold, the seller does not run the risk of having to bear an impairment on its assets derived from a crash). The insurer, for its part, will not insure the car owned by the seller against the risk of collision because this would be impossible.
In life insurance, death is a risk because, in addition to its occurrence on it, there is a relative uncertainty by not knowing when it will occur.
In agricultural insurance it is important to always know how a crop has been lost so that the insurer is obliged to pay compensation. In the contract, the risks assumed by the insurer, related to the occurrence of natural phenomena, are perfectly defined. Therefore, if there is a loss fundamentally due to the insured's lack of attention, the conditions of uncertainties inherent to the risk are no longer present, since the probability of loss of the crop in question becomes possible and certain.
- Fortuitous:
Anything that is independent of the will of the person threatened by the event foreseen as possible is considered fortuitous. This element is of vital importance for the insurer. For example, although it is known that the western region of the island is susceptible to being affected by tropical cyclones, what is unknown is which tobacco producers it will affect and to what extent.
The observation carried out by the insurance company to determine in relation to a certain period of time and a certain insurance object, the frequency with which it will be affected by a certain risk (statistical probability) is what will allow it to determine the premium that it will charge for the coverage of a fortuitous risk. In addition, when fortuitous events are observed in large numbers, they show a regular repetition and are subject to the Law of Large Numbers, instruments that insurers also use to determine their premiums.
- Concrete:
An insurer has to analyze the risk it is going to assume from both quantitative and qualitative points of view. You must know the nature, situation and characteristics of the risk, accept or carry out a prior risk analysis.
For example, the force that the winds that affect the banana must have for that risk to be considered insurable in relation to that production and correspondingly to be able to determine the premium to be charged.
- Lawful:
For a contract to be able to protect against a risk, it must be lawful, it cannot go against the moral, political or legal rules of the country in question, or to the detriment of third parties. This principle is valid in all countries and failure to comply would immediately render the contract void.
With economic content:
The occurrence of a loss must produce an economic need that is satisfied with the corresponding compensation. We also call this insurable interest.
The risk implies the threat that if the event occurs, it will cause a financial need.
"Hit Parade" of the Dangers
Experts have ranked the risks that frighten people the most and those that are most likely to occur and should be feared.
Two divisions of the world's risks:
In most cases, the media are responsible for overestimating some dangers in front of others, as is the case with the so common fear of air accidents, since there is no safer means of transport than the plane. And it is that while dying en masse is susceptible to being on the front page, the lethal drip caused by the road does not deserve space in the media and that is why death on the road has less impact.
This also occurs in domestic accidents, such as a fire, or a gas leak, which take many victims each year. The fear of the public multiplies proportionally due to the spectacularity. There is a concept of so-called “high signal” or “memorable” accidents that people remember more than possibly more serious ones.
People have been shown to be roughly three times more tolerant of risks that are voluntarily undertaken than those that are beyond their control. That is why the fatal tobacco is rarely considered as a threat to our security, while nuclear energy is the black beast of our times. However, according to some estimates, living next to a power station carries the same risk as driving a car for 5 kilometers.
The answer must be sought in the perception that people have of the dangers that loom over their lives, something that is closely related to the influence of the media.
The Science of Risksologists
It touches me, it does not touch me….
Mathematicians, statisticians, insurance company experts, meteorologists, stock exchange experts, all share the same occupation: analyzing the past and against events so that the surprises of the future do not catch us off guard.
In January 1995, Hurricane Andrew hit the Florida coast. Among the victims of the catastrophe it was necessary to mourn the disappearance of nine insurance companies, ruined by the sum of money they had to pay their clients. The data is disturbing and indicates that despite the progress in meteorology, the scrupulous precaution of insurance companies and the long history of hurricanes and similar phenomena (tornadoes, rains, torrentials, cold waves, etc.) in the southern US disaster could not be foreseen.
To anticipate the dangers of the future we only have the experience of the past, but events do not always develop according to their previous trajectory.
Despite everything, we must not fall into the fatalism of thinking that everything in life is chance and uncertainty. The more data we have on the development of an event, the more accurate will be the calculation of probabilities with which man tries to express in numbers the risks and fortunes that lie in wait for him.
In the United States, concern about environmental and health hazards has turned risk quantification into a science in which hundreds of millions of dollars are invested. It draws on various knowledge: biology, chemistry, physics, medicine, geology, epidemiology and statistics.
Risk specialists act like this: locate a possible threat, such as a toxic substance emitted by a chemical company, obtain the greatest amount of data and estimate the probability of harm in the population. Its opinion may cause the State to limit or prohibit the activity of the company in question.
The main criticism that risk specialists receive is the exaggeration of their estimates and the alarm they cause.
Apart from big events, Insurance Companies are usually also wise risk calculators. For this, there are so-called actuarial sciences that are concerned with expressing in data the possibility of almost any mishap. The companies agree to cover eventual risks and that they have an empirical basis. The actuaries have all the necessary data.
Nature unleashed is capable of disrupting any calculation. José Luis Urquijo, author of the book: “Risk and decisions” believes that there is a way to deal with such unforeseen circumstances: “The best thing is to diversify investments, a method that is curiously more used by small investors than, for example, by large banks. which give themselves great hits when betting on few businesses.
Environmental pollution or fatal accidents?
One of the obvious solutions to mitigate environmental pollution is to make lighter cars that require less fuel. But according to some studies, the occupant of a small car is 17 times less likely to survive a frontal collision. Sometimes the elimination of some dangers accentuates others.
Nobody-ever- and in no place stops putting their life and their heritage at risk. Cities, wherever they are, represent a constant risk due to their complex social, political and economic structure, but we must not be afraid: Life is a risk worth facing.
Most frequent accidents by age:
From 1 to 5 years: suffocation, fire and burns
From 15 to 25: car accident
From 30 to 40: intoxication
From 80 to 90: falls.
Risk behaviors
Both natural and legal persons can adopt different behaviors in the face of risk:
1- Indifference:
No forecast is taken and even without specific determination. The harmful consequences that the occurrence of the risk may cause are supported with the own patrimony.
2- Prevention:
A series of material measures are adopted to prevent the occurrence of an accident and to ensure that if it occurs the consequences of the damage are minimal. As an example we have the seat belt in cars: the installation of fire extinguishers in those places where a fire can take place, the existence of alarms, the means of security in general.
3- Forecast:
It is the concern to prevent a harmful event from occurring and is fundamentally characterized by the formation of an economic fund that allows to face the consequences of a loss.
The risk can be assumed or transferred to a third party. If it is assumed we are talking about savings or self-insurance.
By saving it is possible to form future capitals that allow, if necessary, to resort to them and reduce the effects of a loss.
Self-insurance allows natural or legal persons to face the economic consequences of their own risks with their own assets. Of course, this form of provision affects funds constituted according to certain technical financial principles.
This system is used mainly by large companies with financial resources that allow them to build an economic fund in the event of having to use it to alleviate the consequences of a claim.
Although this form of forecasting can solve certain economic needs, it has against it the fact that there is no dispersion of risk or community of interests, which means that large sums have to be saved so that the total satisfaction of needs is really achieved. economic in case of claims.
Insurance is the most perfect formula for being technically effective to cover risks since these are transferred to a third party called an insurer that has an organization and technique that allows it to guarantee the most adequate compensation for those.
Insurance is undoubtedly a very important instrument for spreading risks. So why not insure against all the risks of life? Lloyd's, the great London company, is said to boast of being able to cover all risks except those of virginity and religious beliefs.
The last condition is that the insurance is not contaminated with moral hazard. It is the situation in which the insured person can influence the probability of the insured event occurring.
In reality, there are moral risks in almost all insurance: the person who has fully insured his car is likely to drive with less care than if he had not fully insured it. However, in some cases the moral hazard is so great that it is not possible to ensure an event. The classic example is that of Lloyd's of London who refused to sell a Sicilian father insurance against his daughter's honor. What principle could explain this behavior?
Insurance is an economic-financial activity dedicated to providing services in the event of a claim suffered by the insured, which eliminates the need to attend or develop a particular activity in search of an end in the person receiving the service.
The insurance activity has a marked financial and economic accent not only because it is based on premium collections and compensation payments but also and mainly because it performs the important financial and social task of achieving a redistribution of the capital contributed by a high number of equity units Among those that are affected by losses (claims) that occur in any of them.
Insurance is economically advantageous while meteorology describes risks, insurance helps to improve and distribute them.
The role of the insurance company is to spread the risks, abounding many different risks (millions of homes or lives or cars, thousands of factories or hotels). Note that what is essential and subject to chance in the case of the individual is highly predictable and uniform in the case of the masses. An example of these is that a 50-year-old man in good health lives 30 more years is a matter of luck. But the famous law of large numbers guarantees that 100,000 women in their 50s and in good health will only be alive at the end of that period of time.
The life insurance company can easily set a premium with which you will never lose money. Therefore the insurance process makes it possible to reduce large individual risks by distributing them among a much larger population.
One of the aspects to take into account in the insurance is its corporate purpose, understood this word as objective, reason for being purpose intention being this compensation for the economic damage experienced by assets as a result of a loss. In general, there is a marked tendency to confuse the object of insurance in general with the object (thing) on which each contract itself falls.
Insurance Functions
Safety factor: A service common to all types of insurance is that it guarantees protection against possible major losses in exchange for small but fixed payments. In other words, it allows transforming the risk of having an incalculable loss of assets in the event of an accident, for a planable period expense.
Increases efficiency and development: The natural result of eliminating risk and uncertainty, redounds to the benefit of business efficiency and development.
Equally distribute losses: One of the main functions of insurance is the equitable distribution among a majority of the economic losses suffered by a minority. In other words, the losses of the unfortunate few are shared among the many larger policyholders who have not suffered a loss. The function of the insurer is equivalent to that of an administrator of the funds of the insured.
It serves as the basis for credit: The granting of credit is a very important aspect of modern business and is achieved in part implicitly, through all forms of insurance. In the case, for example of a mortgage, there was no mortgagee willing to lend money if he has not bought that the value of the property is properly insured against fire.
Facilitates savings: Facilitates savings and compared to any other system is the only one that guarantees the formation of capital.
The community benefits from insurance: Insurers receive sums of money from which they are deposited to deal with claims and invest them in the capital market.
The insurance market is one of the main sources of capital investment for commerce and industry, which indirectly benefits the community.
The insurance function of economic development: The development of the standard of living and economic activities creates the need for their insurance. To such an extent, insurance is one of the most weighted expressions of macroeconomic developments that premium collection is commonly used in various countries as an economic indicator of overall value.
Information, image and public awareness
Insurance will grow in parallel with the development of countries, but for this it will have to overcome a series of sociological barriers, among which its complex image and the lack of knowledge that the lack of an insurance culture entails.
The insurance image is formed primarily by the ideas, feelings and concepts that it evokes in the public spirit. The professions need the sympathy and trust of the public and especially of their clientele. In the insurance profession, more than in others, that trust is indispensable. Without it, the insured would not sign the contract. You also need that confidence so that, after signing, you feel satisfied that you have done so and consequently speak well of the insurers.
The public has very poor knowledge of insurance companies and their activity. It ignores almost everything in terms of its organization and operation. Often contradictory ideas are formed based on personal or partial considerations or impressions sometimes poorly disseminated. Although false and inaccurate, these ideas are important since they are what give an image to insurance companies and insurers and this image conditions the relationships that individuals have with companies.
The legal apparatus on which insurance companies are based scares the public. When he goes to them seeking security and freedom of spirit, the language in which they speak, the explanations they give him, the documents they give him generally do not reveal that the problems are much more complex than he imagined.
A good training and information policy is vital for insurance companies, since they do not have tangible merchandise to sell. Its success depends on the quality of the service it offers, which in turn greatly depends on the human factor. The program must be built around human relationships and the starting point must be the group that represents the entity in this relationship; in other words, its agents and its staff.
We put the agents first, because for many years they have been the only instrument of relationship with the insured who has had the insurance; on the other hand, their distancing from the central offices makes motivational actions more necessary to encourage them in their hard work.
To make the public aware of the usefulness and advantages of insurance we must first make it known through adequate information, clarifying in a simple way the characteristics of its activity and then respond seriously and briefly to the needs of the client, thus achieving a good Image to the entity as the public is often aware of the need for insurance, but may have a negative image of insurers.
With an internal training and information program, the following objectives will be achieved:
Promote loyalty towards the Entity, showing the agents-employees that they are part of a large company, which has an importance in the field of Insurance, giving them a sense of belonging and association with the company of which they can be proud.
Improve the cooperation of employees and agents with management
Give employees and agents a sense of teamwork. Explaining some things about others contributes to building the collective spirit of a "great family"
Inform employees and agents of the regulations, insurance modalities, business methods, new policies and plans of the Entity.
Increase the prestige of the entity among your organization.
Inspire individual initiatives and wishes for progress
Combat, when necessary, adverse publicity or harmful rumors.
To the External Public
The public must be adequately informed of the aspects, objectives and subjective of the Insurance. He must also know the social utility of insurance, based on solidarity and know himself as the main protagonist of the insurance.
The main objectives to be achieved are:
Improve the public image of the sector
Train the public in dealing with insurance entities and banish classic taboos.
Try to introduce Insurance, in all the study plans of the different levels and help educators to have the necessary knowledge.
Recruit qualified people to work on the curricula at different levels and help educators to have the necessary knowledge.
Foster relationships between insurers, so that greater knowledge and understanding leads to greater collaboration and integration between entities.
Establish continuous communication channels between employers, employees and agents so that a better knowledge can lead to greater collaboration.
Promote relationships and contacts with international markets.
Advertising is a medium whose fundamental action is to prepare or develop sales by informing potential customers of a product or service, detailing its characteristics and especially the advantages that its acquisition and use can provide the customer.
But advertising can also inform about a company or a sector as in the case of insurance. The eminently informative nature of advertising is evident in the case of a new product. However, it is often forgotten that this character maintains its full validity even for products that have been on the market for a long time.
Advertising is not improvised; just as no company that respects itself would ever improvise its own product line or its own distribution system. On the contrary, advertising also requires prior programming that takes into account the broadest commercial programming of the company.
Final Considerations
Insurance is the ideal alternative to financial risk.
To the intrinsic safety factor in insurance, we must add others that will make it essential in modern society. Among them, the one that is key to the economic development of companies and nations stands out.
Regardless of the economic barriers, the insurance industry stumbles in its development with others derived from the sectoral image and the ignorance that the public and the entities' own personnel have about insurance.
To overcome these barriers, objectives and strategies must be established to first raise awareness among the internal public of the companies and then the external public, based on training and information. To achieve these objectives, an action program must be developed in which the following are used:
1- Internal actions, both formative and informative.
2- Gradually introduce insurance in the teaching of young people.
3- Make a significant advertising effort
The best advertisement for insurance continues to be prompt and fair payment of claims.
Consulted Bibliography
- Insurance as an economic category of Socialism. Authors' Collective "Muy Interesante" Mexican Magazine Modules number 1 and 2 of the distance training system of the Cuban School of Insurance. Conference: Develop insurance to ensure development. Manuel Maestro, president of INESE
Internet sites:
- www.ahorre.com/seguros,www.arpem.com/seguros
