Insurance Industry is the main branch of the money market that decides the various developments in the Insurance Sector. A vital and fundamental understanding of insurance and what it can do to businesses and individuals is important to make future decisions
“Knowledge is the new currency for financial success” says Entrepreneur and Thought Leader Hirav Shah.
Financial freedom is a mental, emotional and educational process, says Robert Kiyosaki.
While financial freedom is a relative term, business analyst, strategist, corporate consultant and astro strategist Hirav Shah opines that taking care of your finances can be made easy if one knows what their financial future is likely to be. It helps in diverting funds, taking major decisions in business, investing at the right time for best results and withdrawing assets when the time is not right – these are just a few issues that Hirav Shah deals with in depth with his clients.
In the same vein, insurance is a huge industry in itself and helps businesses and individuals safeguard their money and future prospects.
Now, let’s understand the overview and FAQs in the insurance industry…
The insurance industry has different players operating at different levels. Life insurance companies focus on legacy planning, replacing human capital value, while health insurance covers medical costs. Property, casualty or accident insurance is aimed at replacing the value of homes, cars or valuables.
Insurance companies can be either traditional stock companies with outside investors or mutual companies where policyholders are the owners.
Types of insurance companies…
It has to be remembered that not all insurance companies cater to the same products or to the same customer base. The large chunk of insurance companies is accident and health insurers; property and casualty insurers and financial guarantors. The most common types of personal insurance policies are auto, health, homeowners and life.
For example in the United States, just about everyone has at least one kind of insurance, whereas car insurance is required by law.
- On the other hand, businesses require special insurance policies that insure them against specific types of risks faced by a particular business. Just to quote an example, a fast-food restaurant needs a policy that covers damage or injury that occurs as a result of cooking with a deep fryer.
- There are insurance policies for very specific needs such as kidnap and ransom, medical malpractice, professional liability insurance.
- Some companies engage in reinsurance to reduce risk. Reinsurance is part of insurance companies’ efforts to keep themselves solvent and to avoid default due to payments. Regulators mandate it for companies of a certain size and type. Let’s take the example of a company that may write too much insurance thinking that there is no risk of hurricanes in a geographic area. But when the inconceivable happens, reinsurance will help in taking off some risks off the table. Otherwise, insurance companies would go out of business whenever a natural disaster hits.
What is an Insurance float?
One of the interesting aspects of insurance companies is that they are essentially allowed to use their customers’ money to invest for themselves. This makes them similar to banks, but investing happens to an even greater extent. This is referred to as float.
Do insurance agents act as full-time advisors?
Of late, insurance companies are in direct competition with other financial asset providers. In fact, the insurance agents are branded as full-service financial advisors offering both protection products as well as investments, financial planning and retirement planning. Most insurance companies now have their own broker dealer either in-house or in partnership.
The global insurance (providers, brokers and re-insurers) market is expected to decline from $5939.5 billion in 2019 to $5807.3 billion in 2020 at a compound annual growth rate (CAGR of 2.3%.
What is the worth of the Insurance Industry in India?
The Indian life insurance market grew by 13.2% in 2017 to reach a value of $92.1 bn. It is expected to account for 35% of India’s total savings by 2020. India accounts for 6.8% of the Asia Pacific life insurance market value.
“Right knowledge and information helps make right decisions” concludes Business Strategist, Financial Advisor and Business Astrologer Hirav Shah.