Life is full of unexpected risks or unexpected, that's why we need to understand about insurance. Some natural events that occurred in recent years, and take a lot of casualties, both fatalities and property, such as reminding us of the need for insurance. For each member of the society including the business community, the risk of suffering deprivation (misfortune) like this always (Kamaluddin: 2003). In order to overcome the losses, people develop a mechanism which we now know as insurance.
The primary function of insurance is a mechanism to transfer risk (risk transfer mechanism), which transfer risk from one party (the insured) to another party (the insurer). The transfer of risk is by no means eliminates the possibility of misfortune, but the insurer to provide financial security (financial security) and tranquility (peace of mind) to the insured. In return, the insured pays the premium in a very small number when compared to the potential losses that may be suffered (Morton: 1999).
In essence, an insurance policy is a contract that is a valid agreement between the insurer (in this case the insurance company) with the insured, where the insurer is willing to bear some losses that may arise in the future in return for payment (premium) certain of the insured.
According to Law. 2 of 1992, which is the insurance or coverage is an agreement between two or more parties, with which the insurer was bound by the insured, by accepting the insurance premiums to provide reimbursement to the insured for loss, damage or loss of expected benefits, or legal liability to third parties that may be suffered by the insured, arising from an uncertain events, or to provide a payment based on the death or life of an insured person.
In order for a potential loss (which may be) to be insured (insurable) then it must have the characteristics of: 1) the loss of uncertainty, 2) loss should be limited, 3) have significant losses, 4) the ratio of losses can be predictable and 5) the loss is not catastrophic (catastrophe) for the insurer.
The question arises; death is uncertain, why be insured? Although it is something that contains a certainty, but when exactly when someone's death is beyond the control of that person. So when the moment of death that really is what causes uncertainty insurable.
There is two forms of agreement in determining the payment amount at maturity of insurance, namely: contract value (valued contract) and indemnity contract (contract of indemnity). The contract value is an agreement in which the amount of payment has been determined in advance. For example, the sum assured (UP) on life insurance. Indemnity contract is an agreement santunannya amount based on the amount of actual financial loss. For example, the cost of hospital care.
In the case of insurance companies trying to suppress the possibility of a fatal loss / large, then it can transfer the risk to another insurance company. It is called reinsurance, reinsurance companies that accept named reinsurers.
In addition to the five characteristics above, before it can be insured, the insurance company should consider insurable interest and anti-selection. Insurable interest related to the relationship between the insured and the recipient of compensation / benefits - in terms of loss potential. For example, the insurance company will not sell fire insurance policy to a person other than the owner of the building is insured.Insurable interest This is an example of ownership within thd something insured. Similarly, family relationships, financial linkages are reasonable, also a form of insurable interest. The definition of anti-selection (counter selection) refers to the existence of a greater tendency to take insurance because it has a level of risk above average. For example, people who have a record of poor health or risk dangerous jobs tend to want to buy insurance. To reduce anti-selection effect, the insurance company must be able to identify and classify potential risks or losses. The process of identification and classification of the level of risk is called underwriting or risk selection. But that does not mean anti-selection led to the filing of insurance is rejected, because the risk of loss to the insured than average can be charged a premium sub standard (Special premium) due to sub-standard risk (Specific risk) unless the possibility of loss is much higher, it may request denied insurance.
History of Insurance
Insurance originated from the people of Babylon 4000-3000 BC, known as Hammurabi agreement. Then in 1668 AD at the Coffee House Lloyd's of London London stands as the forerunner of conventional insurance.Sources of insurance law is positive law, natural law and existing examples as culture.
Insurance brings economic as well as social mission with the premiums paid to the insurance company to guarantee the transfer of risk, namely the transfer (transfer) the risk of the insured to the insurer. Insurance as a risk transfer mechanism whereby individuals or business move some uncertainty in exchange for premium payments. The definition of risk here is uncertainty occurs whether or not a loss (the uncertainty ofloss).
Insurance in Indonesia started in the Dutch colonial period, associated with the success of the country in the plantation sector and trade in Indonesia. To meet the needs guarantees of continuity of business, of course, required of insurance. Developments in the insurance industry Indonesia had a vacuum during the Japanese colonial period.
Collateral requirement can be filled by the Life Insurance
1) Personal Needs, including: the provision of living expenses such as final costs associated with death, the cost of debt or bill payments in the form of loans that must be repaid; family allowance, costs of education, and pensions. In addition, the life insurance policy that has a cash value can be used as a savings and investment.
2) Business needs, such as: insurance on key persons (Insurance for the important people in the company); insurance on business owners (Insurance for business owners); employee benefits (employee benefits) and health insurance example set.
