Rethinking the buying and selling of insurance

详细摘要

The buying and selling of insurance is not merely a commercial agreement between a seller and a buyer, nor simply the payment of an insurance ...

The buying and selling of insurance is not merely a commercial agreement between a seller and a buyer, nor simply the payment of an insurance premium in exchange for an insurance policy. Rather, it is an economic and financial decision that requires the buyer to understand the nature of the risks they face, their financial capacity to absorb potential losses, and the type of insurance protection they actually need.

At its core, insurance is a process of transferring financial risks from the insured to an insurance company in return for a specified premium, subject to the agreed policy terms, conditions and exclusions. In certain circumstances, retaining the risk and bearing its financial consequences may be a more appropriate option, provided that the individual or organisation has sufficient financial resources, reserves and solvency to do so.

Before making an insurance purchasing decision, the buyer should ask four fundamental questions: First: Do I Really Need Insurance? Do I need another party, namely an insurance company, to indemnify me against potential financial losses in return for a specified insurance premium? Or do I have sufficient financial resources, reserves and solvency to retain and bear these risks myself without transferring them to another party?

Answering this question requires an objective assessment of risks and a distinction between risks that can reasonably be retained and those that should be transferred to an insurance company, particularly risks involving substantial financial losses that could threaten the continuity of an economic activity or the financial stability of a family or organisation.

Second: What Should I Do to Protect Myself and My Property Against Risks and Losses? What preventive and precautionary measures should I take to reduce the likelihood of a risk occurring or minimise its financial consequences?

On the contrary, effective risk management and loss prevention are essential elements of the insurance relationship and…

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