What is Conventional Insurance? - Insurance Pedia (IP)

What is Conventional Insurance?

INSURANCE-PEDIA.COM | The definition of insurance can be given in various viewpoints, as Darmawi (2000: 2) suggests, in the economic view, insurance is a method to reduce risk by moving and combine the uncertainty of financial loss. Based on the economic concept, insurance deals with removal and combining risk.

From a legal point of view, insurance is a contract (agreement) of risk coverage between the insured and the insurer. Insurers promise to pay the losses caused by the risk accountable to the insured.

While the insured pay a premium periodically to the insurer. Thus, the insured exchange for large losses that may occur with a certain payment is relatively small.

In the business view, insurance is a company that primarily receives / sells services, transfers risks from other parties, and benefits by sharing of risk among a large number of customers. From a social point of view, insurance is defined as a social organization that receives transfers risk and collect funds from its members to pay the losses that may occur to each member.

From the view of mathematics, insurance is a mathematical application in calculating the cost and benefits of risk coverage. Probability laws and statistical techniques are used to achieve predictable results.

From several notions of insurance, it can be concluded that insurance is one financial institution that has an important role for risk protection activities for the community.