Function and Objectives of Insurance - Insurance Pedia (IP)

Function and Objectives of Insurance

INSURANCE-PEDIA.COM | Besides as a form of risk control (financially), insurance also has various benefits that are classified into several functions as follows:

1. Main Function (Primary)

a) Risk Redirection
As a means or mechanism for the possible loss / loss of the insured as the “Original Risk Bearer” to one or more insurers (a risk transfer mechanism). So that uncertainty in the form of the possibility of a loss as a result of an unexpected event, will turn into certain insurance protection (certainty) to change the loss to claim compensation or premium payment terms.

b) Fund-raisers
As collectors of funds from the community (policyholders) to be paid to those who are unfortunate, the funds collected in the form of premiums or insurance costs paid by the insured to the insurer, managed in such a way that the funds are berkemang, which will later be used for pay the losses that may be suffered by one of the insured.

c) Balanced Premium
To arrange in such a way that the premium payments made by each insured are balanced and reasonable compared to the risk transferred to the insured (equitable premium). And the size of the premium to be paid the insured is calculated based on a rate of premium multiplied by the sum insured.

2. Additional Functions (Secondary)

a) Covert Export (invisible export) as a disguised sale of commodities or unreal goods(intangible product) abroad.

b) Stimulation of Economic Growth (economic stimulus) Is to stimulate business growth, prevent loss, control losses, have social benefits and as a savings.

c) Means of saving investment funds and invisible earnings
d) Means of Prevention & Control of Losses

Insurance Objectives

1) Provide assurance of protection from the risks of losses suffered by one party.

2) Improving efficiency, because it does not need to specifically provide security and supervision to provide protection that takes a lot of energy, time and cost.

3) Equity of cost, which is enough only by spending a certain amount and do not need to replace / pay for own losses incurred the amount of indeterminate and uncertain.

4) The basis for the bank to provide credit because the bank requires a guarantee of protection of collateral provided by the borrower money.

5) As a savings, because the amount paid to the insurer will be returned in greater amounts. This is especially true for life insurance.

6) Closing the Loss of Earning Power of a person or business entity when he or she can not function (works).