Functions Of Insurance

Overzicht

Ask most people what insurance does and they will say it pays out when something goes wrong. True, but that is only the surface. Underneath sits a quiet machine that turns thousands of small, uncertain premiums into a fund large enough to rebuild a burnt shop, and then puts the waiting money to work building roads, factories and homes. Insurance both protects the individual and grows the whole economy, and the syllabus asks you to see both halves at once.

This lesson separates what insurance is built to do, its primary functions, from the wider benefits it happens to deliver, its secondary functions. You will see how the common pool works, why a single premium can stand in for a huge loss, how insurers become one of the largest investors in the country, and how the trade earns foreign exchange that counts among a nation's invisible earnings. By the end you will be able to place any function in the right family and back it with a Nigerian example.

Doelstellingen

  1. State the primary function of insurance and explain how risk pooling achieves it
  2. Describe the secondary functions of insurance, including capital formation and loss prevention
  3. Explain how insurance supports international trade and the invisible earnings of a country
  4. Distinguish the primary from the secondary functions using practical examples

Lesnotitie

A young tailor in Kaduna insures his workshop, pays a premium of a few thousand naira, and thinks of it as money gone. Months later a fire guts the row of shops beside his, and their uninsured owners are ruined, while he reopens within weeks on the insurer's cheque. The premium was not money gone. It bought him a share of a common pool into which many traders pay and out of which the unlucky few are paid. Understanding the functions of insurance means understanding both what that pool does for the tailor and what the same pooled money does for Nigeria as a whole.

Lesevaluatie

Gefeliciteerd met het voltooien van de les op Functions Of Insurance. Nu je de sleutelconcepten en ideeën, het is tijd om uw kennis op de proef te stellen. Deze sectie biedt een verscheidenheid aan oefeningen vragen die bedoeld zijn om uw begrip te vergroten en u te helpen uw begrip van de stof te peilen.

Je zult een mix van vraagtypen tegenkomen, waaronder meerkeuzevragen, korte antwoordvragen en essayvragen. Elke vraag is zorgvuldig samengesteld om verschillende aspecten van je kennis en kritisch denkvermogen te beoordelen.

Gebruik dit evaluatiegedeelte als een kans om je begrip van het onderwerp te versterken en om gebieden te identificeren waar je mogelijk extra studie nodig hebt. Laat je niet ontmoedigen door eventuele uitdagingen die je tegenkomt; beschouw ze in plaats daarvan als kansen voor groei en verbetering.

  1. Which of the following is a PRIMARY function of insurance? A. Loss prevention B. Capital formation C. Risk transfer D. Provision of credit Answer: C
  2. The pooling of losses in insurance depends chiefly on the: A. Law of diminishing returns B. Law of large numbers C. Principle of subrogation D. Law of demand and supply Answer: B
  3. A mutual pool of 400 traders expects total annual fire losses of 4,800,000 naira, to be shared equally. What pure premium must each trader pay? A. 4,800 naira B. 12,000 naira C. 1,200 naira D. 48,000 naira Answer: B
  4. Which of the following is a SECONDARY function of insurance? A. Risk transfer B. Charging an equitable premium C. Creation of a common pool D. Loss prevention Answer: D
  5. Insurance adds to a country's invisible earnings mainly by: A. Paying claims to local policyholders B. Accepting risks from foreign clients and earning premiums abroad C. Collecting value added tax for the government D. Selling shares on the stock exchange Answer: B

Aanbevolen Boeken

Principles of Risk Management and Insurance
Principles of Risk Management and Insurance
Ondertitel: Thirteenth edition
Uitgever: Pearson
Jaar: 2016
ISBN: 978-0-13-408257-8
Beschrijving: The standard introduction to risk and insurance, covering risk management, insurer operations and the main lines of life, health, property and liability cover.
Fundamentals of Risk and Insurance
Fundamentals of Risk and Insurance
Ondertitel: Tenth edition
Uitgever: Wiley
Jaar: 2008
ISBN: 978-0-470-08753-4
Beschrijving: A clear account of the nature of risk and the economics of insurance, written for beginning students across life, health, property and liability insurance.
Fundamentals of Insurance
Fundamentals of Insurance
Ondertitel: Second edition
Uitgever: Himalaya Publishing House
Jaar: 2017
ISBN: 978-93-5097-079-9
Beschrijving: An accessible treatment of insurance in four parts: the basics of risk, insurance management, life insurance and non-life insurance.