The Basic Principle of Insurance
Insurance companies also get a return on investment. It is obtained from investing premiums received until they have to pay the claim. This money is called “float”. Insurers can benefit or loss from price changes in the float and also interest rate or dividend on the float. In the United States, loss of property and death are recorded by insurance companies was U.S. $ 142.3 billion in five years ended in 2003. However, total profits in the same period was U.S. $ 68.4 billion, as a result of the float.
In the insurance world there are 6 basic principles that must be met, namely:
- Insurable interest right to insure, arising from a financial relationship, between the insured with the insured and legally recognized.
- Utmost good faith An action to disclose accurately and completely, all facts material (material fact) about something that will be insured both solicited and unsolicited. The meaning is: the insurer must honestly explain clearly everything about the scope of terms and conditions of insurance and the insured must also provide clear and accurate description of the objects or interests of the insured.
- Proximate cause A cause of active, efficient cause a train of events that lead to a result without the intervention of which started and working actively from a new and independent sources.
- Indemnity A mechanism by which the insurer to provide financial compensation to put the insured in a financial position that he had immediately before the loss (Commercial code article 252, 253 and confirmed in article 278).
- Subrogation The transfer of demand from the insured to the insurer after a claim is paid.
- Contribution Rights of insurer to another insurer invite equally bear, but do not have the same obligations to the insured to participate provide indemnity.