Nepal Travel Insurance

You can have your fingers crossed but you can't afford to shut your eyes. It is very normal for things to go wrong on holidays. You could fall ill or have an accident. Somebody might steal your money or luggage, your visit might be cancelled or cut short through injury or illness, and your family may need to fly out to be with you if there is a serious incident. Taking out travel insurance can cover all these risks and more.

However, you should check the small prints of your travel insurance policy very carefully to see if any exclusion might apply. Firms often apply dirty tricks to doctor the wordings in the quote to maximize their profits. These exclusions might contain injury or death through acts of terrorism or nature; accidents caused through drinking alcohol or engaging in dangerous sports or problems arising from a previous illness that you have not declared to the insurer. If you are not sure whether you are covered for any of the above, you should check with your insurer. The 4 locations where injuries are most likely to occur in Nepal are as follows:

* Roads
* Hotels
* Remote locations
* Trekking tract

The following are just some of the benefits of the Travel Bond Policy.

Cancellations and Curtailments
If you have to cancel your holiday or cut it short due to the sickness or injury of a close member of the family, someone you are traveling with or staying with, travel insurance covers all expenses that you are not able to get back.

Medical Expenses
Insurance firm will pay medical expenses and hospital fees, including any costs of getting you to hospital (land, water, or air ambulance) if you were to fall sick or injure yourself. If medical staffs consider that you require medical emergency repatriation in that case the costs of getting you home, with a trained nurse or doctor are included in the cover.

Personal Belongings
The value of personal effects and luggage is covered for items accidentally lost, stolen, or damaged. Apart from that, travel documents such as tickets, visas and passports are also insured against loss or theft.

Baggage Delay
Insurance firm will reimburse you the cost of purchasing necessities in the event of your baggage being delayed or lost for more than 24 hours.

Personal Money
You are covered for the theft of cash and traveler's cheques from your person as well as safety deposit boxes.

Important
Please note this is just some of the benefits available to you and will be subject to terms and conditions. You should read the policy documents and schedule of cover to determine the suitability of cover.

History of life and general insurance in Nepal

History of life and general insurance in Nepal

History of general insurance in Nepal goes back to B.S.2005(1948 A.D.). Right from 1950 A.D.,a number of companies started their operation in General insurance. Presently 15 companies are transacting general insurance business. But start and growth of life insurance has been very slow.

Life Insurance Corporation of India started life insurance business in Nepal but its function was mostly confined to Kathmandu city.

LIC stopped its operation in 1972 A.D. Life insurance business was taken over by Rashtriya Beema Sansthan in B.S.2029 after its incorporation on B.S. 2024/09/01 (16-12-1967 A.D.) and by National life and General Insurance Company in B.S.2045(1989A.D.) after its incorporation on B.S.2043/02/19 (2-6-1986)A.D.

The insurance activities were regulated by Insurance Act 2026(1969). The Act and the regulations were modified and new Insurance Act and Regulations were enacted in 2049(1992). Beema Samiti observes and regulates the insurance activities in Nepal as per the provisions of Insurance Act 2049 and Insurance regulations 2049.

Even though the performance of RBS has been impressive, the reach and density of insurance has been very low even in comparison with the insurance density in developing nations.

Policy Related

What are the different types of life insurance available with the company?
What is eligible age to apply for life insurance?
What is the difference in purchasing policy from the company or from the agent?
Can one change purchased policy?
Can sum assured added or deducted in future?
Can insured term/period increased or decreased in tenure?
What is bonus? How is it paid?
Will the insured receive medical expenses incase of an accident?
What is the provision for lost policy?
What are the different types of life insurance available with the company?

Endowment, Anticipated, Mortgage, Whole life insurance, Mortgage Redemption etc
top What is eligible age to apply for life insurance?

Immediately after birth but risk cover will only start after eight years of age.
top What is the difference in purchasing policy from the company or from the agent?

It is advised to all concerned to buy insurance policy from agent one can also buy the policy from the company but the individual service provided by the agent will not be there.
top Can one change purchased policy?

Policy once purchased can not be changed. However some clauses like mode of premium payment, nominees are changeable.
top Can sum assured added or deducted in future?

No, sum assured of a policy could not be added or deducted.
top What is bonus? How is it paid?

Profit earned by insurer in the process of running insurance company is bonus. It is paid in the event of death of policy holder or maturity of policy, whichever occurs first.
top Will the insured receive medical expenses incase of an accident?

No life insurance policy covers only death risk no any medical benefit is given.
top What is the provision for lost policy?

Policy document/ policy paper are very important legal agreement associated with the insurance contract. Therefore, serious safety is required to preserve the policy. But, if lost due to some reason one must immediately apply for duplicate copy. However necessary official procedure has to be completed and some official charge has to be paid.
top

Premium Related

What if one is unable to pay premium to continue the policy?
In what interval can I pay premium?
What are the methods to deposit premium?
What if the agent doesn’t deposit premium in the company that one has paid him? Who will be the responsible in such case?
How policy premium could be paid if one migrates?
Shall insured bear the loss from sum assured, if company goes into loss?
Is there any provision to pay premium from abroad? Can one pay from credit card?
How can one get statement histories?
What if one is unable to pay premium to continue the policy?

Stop the contract or surrender the policy; provided two yearly premiums are paid.
top In what interval can I pay premium?

Premium can be paid in any mode, quarterly, half yearly, yearly and also monthly basis for salary saving scheme.
top What are the methods to deposit premium?

Premiums can be deposited either directly by cash or in various bank accounts provided by the company
top What if the agent doesn’t deposit premium in the company that one has paid him? Who will be the responsible in such case?

Agent will be personally responsible for money received; no one else will be responsible.
top How policy premium could be paid if one migrates?

The policy premium can be paid from any place of the world to continue the policy.
top Shall insured bear the loss from sum assured, if company goes into loss?

No, insured do not have to bear any responsibilities toward the loss of the company.
top Is there any provision to pay premium from abroad? Can one pay from credit card?

Yes, premium can be paid by credit card or by demand draft or any other convenient banking transaction.
top How can one get statement histories?

One can get statement of premium paid from the agent or branch offices of the company.
top

Maturity/Lapse/Revival Related

Can one take loan from the deposited premium?
What is the minimum maturity period in life insurance policy offered by the company?
What is the sum of amount one is paid on completion of the term?
What is the maximum time allowed for renewal of lapse policy?
Can insured term/period increased or decreased in tenure?
How lapsed policy could be revived if the insured is in foreign country?
Will the premium paid refunded if policy discontinued?
Can one take loan from the deposited premium?

Yes loan can be received to the extent of certain limit of premium paid but one must had paid at least two years annual premium.
top What is the minimum maturity period in life insurance policy offered by the company?

Usually five years. However, it may differ by policy purchased.
top What is the sum of amount one is paid on completion of the term?

On completion of term or maturity one is paid sum assured and bonus (if policy is with profit).
top What is the maximum time allowed for renewal of lapse policy?

Any lapse policy could be renewed within three years of lapse date. Nevertheless, various condition applies in renewing depending upon the term, age, sum assured etc.
top Can insured term/period increased or decreased in tenure?

Term/Period of a policy could not be chanted.
top How lapsed policy could be revived if the insured is in foreign country?

In case of lapsed policy of insured living in foreign country, an application with all necessary documents has to be sent to the company.
top Will the premium paid refunded if policy discontinued?

Premium will not be refunded. However if the policy had run for minimum of two years some surrender value could be received.

top

Nominee/Beneficiary Related

How survival benefit could be received by beneficiary if insurer is out of the country?
Whom can one select as nominee to be beneficiary on one policy?
What if nominee dies?
How survival benefit could be received by beneficiary if insurer is out of the country?

An application of insured along with original policy and identification card of the beneficiary is required.
top Whom can one select as nominee to be beneficiary on one policy?

Any close relative or any one insurer chooses.
top What if nominee dies?

Change the nominee before policy matures
top

insurance policy in Nepal

Insurance Policy

Travel Insurance can only be sold to those clients arranging their travel arrangements with Flights to Johannesburg. Travel Insurance MUST be purchased within 14 days of making your confirmed booking.

Worldwide Single Trip Policies Premiums quoted in £ ’s.

Adult Child (2-17 yrs)

Up to 5 days 24.68 12.34

Up to 10 days 37.60 18.80

Up to 17 days 43.48 21.74

Up to 24 days 49.35 24.68

Up to 31 days 59.93 29.97

Worldwide AnnualMulti Trip Policies
Single: £ 98.10 Family, based on 2adults & 2 children: £ 163.90.
Maximum stay onany one trip, 31 days. Excludes Cruise cover. Rates on request.

Age Limits:

Single Trip Policies;

* can be sold to those under 66 at the date of travel at standard premium
* can be sold to those aged 66 to 69 atthe date of travel x150% of the standard premium. Europe only.
* can be sold to those aged 70 to 75 atthe date of travel x200% of the standard premium. Europe only.

Annual Multi Trip Policies;

* can be sold to those under 66 at the date of policy commencement.
* no cover for persons aged 66 and over
* All above policies are only available to persons resident in the United Kingdom or Channel Islands at the time of purchase.

Pre-Existing Medical Conditions

This policy will not cover anything other than what is clarified and has the following exclusion for you to be aware of within the policy wording. If you are unsure then please request a copy of the policy wording.
Please note that this policy will not provide cover for the following conditions:-

Heart/circulatory related condition (e.g. hypertension, heart attack or stroke), arterial disease, kidney disease, respiratory condition (excluding well controlled mild asthma), cancer or cancerous condition.

The policy also excludes claims where the insured person or anybody upon whom their travel is dependant.

* has been hospitalized, received advice, medication or treatment in the twelve months prior to the booking of the policy,
* is on a waiting list awaiting further treatment or investigation, has been given a terminal prognosis
* is traveling specifically to seek medical advice or treatment or is traveling against medical advice.

Schedule of Charges

Description Cover (per insured) Excess

Cancellation & Curtailment Up to £ 2990 £ 40

Catastrophe Up to£ 490 £ 40

Medical Expenses (inc. Emergency Repatriation) Up to £ 5,000,000 £ 65

Hospital Benefit £ 10 per day up to £ 490 Nil

Mugging £ 40 per day up to £ 1,000 Nil

Personal Effects & Baggage Up to£ 1,490 £ 40

Single Item Limit £ 190

Valuables Total Limit £ 190

Travel Documents Up to £ 240

Delayed Baggage Up to £ 90

Personal Money Up to £ 490 £ 40

Cash Limit £ 190

Cash Limit (age under 18) £ 90

Travel Delay £ 10 for first 12hr. Nil

period, £ 10 each 12 hr.

period thereafter

up to£ 90

Holiday Abandonment Up to £ 2990 £ 40

Hijack £ 50 per day Nil

up to£ 1,000

Missed Departure Up to £ 240 £ 40

Personal Accident Max. Benefit £ 15,000 Nil

Perm. Total Disablement £ 15,000 Nil

Loss of Limb (s) or Sight £ 15,000 Nil

Death £ 5,000 Nil

Death (age under 18) £ 5,000 Nil

Personal Liability Up to £ 2,000,000 £ 240

Legal Expenses Up to £ 15,000 £ 240

Scheduled Airline Failure Up to £ 3,000 Nil

Winter Sports Cover
The following benefits are only available when additional winter sports premium is paid, or when Annual Multi-Trip cover is effected:

Description Cover (per insured) Excess

Ski Equipment (Owned) Up to £ 490

Single Item Limit £ 250 £ 40

Hired Items Limit Up to £ 150

Ski Hire £ 30 per day up to £ 290 £ 40

Ski Pack £ 50 per day up to £ 190 Nil

Piste Closure £ 30 per day up to £ 290 £ 40

Avalanche closure upto £ 190 £ 40

Global insurance industry

Global insurance industry
Life insurance premia written in 2005
Non-life insurance premia written in 2005

Global insurance premiums grew by 11% in 2007 (or 3.3% in real terms) to reach $4.1 trillion. The macro-economic environment was characterised by slower economic growth in 2007 and rising inflation. Profitability improved in life insurance and fell slighlty in the non-life sector during the year. Life insurance premiums grew by 12.6%, accelerating in the advanced economies with the exception of Japan and Continental Europe. Non-life insurance premiums grew by 7.6% during the year. Figures for premium income are not yet available for 2008, but the insurance industry is likely to see a slowdown in new business and falling investment revenue.

Advanced economies account for the bulk of global insurance. With premium income of $1,681bn, Europe was the most important region, followed by North America ($1,330bn) and Asia ($814bn). The top four countries accounted for nearly 60% of premiums in 2007. The US and UK alone accounted for 42% of world insurance, much higher than their 7% share of the global population. Emerging markets accounted for over 85% of the world’s population but generated only around 10% of premiums.

Insurance companies may be classified into two groups:

* Life insurance companies, which sell life insurance, annuities and pensions products.
* Non-life, General, or Property/Casualty insurance companies, which sell other types of insurance.

General insurance companies can be further divided into these sub categories.

* Standard Lines
* Excess Lines

In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.

In the United States, standard line insurance companies are "mainstream" insurers. These are the companies that typically insure autos, homes or businesses. They use pattern or "cookie-cutter" policies without variation from one person to the next. They usually have lower premiums than excess lines and can sell directly to individuals. They are regulated by state laws that can restrict the amount they can charge for insurance policies.

Excess line insurance companies (aka Excess and Surplus) typically insure risks not covered by the standard lines market. They are broadly referred as being all insurance placed with non-admitted insurers. Non-admitted insurers are not licensed in the states where the risks are located. These companies have more flexibility and can react faster than standard insurance companies because they are not required to file rates and forms as the "admitted" carriers do. However, they still have substantial regulatory requirements placed upon them. State laws generally require insurance placed with surplus line agents and brokers not to be available through standard licensed insurers.

Insurance companies are generally classified as either mutual or stock companies. Mutual companies are owned by the policyholders, while stockholders (who may or may not own policies) own stock insurance companies. Demutualization of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century. Other possible forms for an insurance company include reciprocals, in which policyholders 'reciprocate' in sharing risks, and Lloyds organizations.

Insurance companies are rated by various agencies such as A. M. Best. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.

Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.

Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100% subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.

The types of risk that a captive can underwrite for their parents include property damage, public and product liability, professional indemnity, employee benefits, employers' liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance.

Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:

* heavy and increasing premium costs in almost every line of coverage;
* difficulties in insuring certain types of fortuitous risk;
* differential coverage standards in various parts of the world;
* rating structures which reflect market trends rather than individual loss experience;
* insufficient credit for deductibles and/or loss control efforts.

There are also companies known as 'insurance consultants'. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.

Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.

The financial stability and strength of an insurance company should be a major consideration when buying an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies, such as Best's, Fitch, Standard & Poor's, and Moody's Investors Service, provide information and rate the financial viability of insurance companies.

Health Insurance For Part-Time Employees?

Health Insurance For Part-Time Employees?
I understand your frustration with finding cost-effective insurance that will cover pre-existing conditions. You have several options. You can have your husband ask his employer to add your family on to the group plan. He will be paying for the plan completely out of his paycheck, with no help from the employer. However, if he is on GROUP health, there are generally less hang-ups about pre-existing conditions with the insurance company, and the rates can be cheaper. The other option is - don't disclose everything!! Please, please see my site, http://www.health-insurance-low-cost.net, to learn how to navigate these treacherous waters, especially the page on "Medical History". Basically, you need to make decisions on how you will USE your insurance from now on, and decisions about disclosure, BEFORE you ever talk to an insurance company. When an insurance company asks you about pre-existing conditions, they are not so much wanting to know about your past, but trying to figure out what expenses they will be paying for in the future. You need to make decisions on how you will be using the insurance, then reflect that back to the insurance company. I know your frustration, I've lived it, and that's the whole reason I created my site. You CAN find a good policy if you do your homework (and yes, Blue Cross is too expensive, I've used them and dropped them). Best wishes!

Health insurance and Dental insurance

Types of insurance

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "perils". An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are (non-exhaustive) lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). A homeowner's insurance policy in the U.S. typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.

Business insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and (b) the business owner's policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.[9]

[edit] Auto insurance
Main article: Vehicle insurance
A wrecked vehicle

Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy. Auto insurance provides property, liability and medical coverage:

1. Property coverage pays for damage to or theft of your car.
2. Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
3. Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

An auto insurance policy comprises six kinds of coverage. Most countries require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements. Most auto policies are for six months to a year.

In the United States, your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium. [10]

[edit] Home insurance
Main article: Home insurance

Home insurance provides compensation for damage or destruction of a home from disasters. In some geographical areas, the standard insurances excludes certain types of disasters, such as flood and earthquakes, that require additional coverage. Maintenance-related problems are the homeowners' responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.[11]


Health insurance and Dental insurance

Health insurance policies by the National Health Service in the United Kingdom (NHS) or other publicly-funded health programs will cover the cost of medical treatments. Dental insurance, like medical insurance, is coverage for individuals to protect them against dental costs. In the U.S., dental insurance is often part of an employer's benefits package, along with health insurance.

[edit] Disability

* Disability insurance policies provide financial support in the event the policyholder is unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgages and credit cards.
* Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work.
* Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.
* Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.

[edit] Casualty

Casualty insurance insures against accidents, not necessarily tied to any specific property.
Main article: Casualty insurance

* Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
* Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.

[edit] Life
Main article: Life insurance

Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.

Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.

Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.

In many countries, such as the U.S. and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.

In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.

Insurers' business model

Insurers' business model

The business model can be reduced to a simple equation: Profit = earned premium + investment income - incurred loss - underwriting expenses.

Insurers make money in two ways: (1) through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insured parties.

The most complicated aspect of the insurance business is the underwriting of policies. Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. Of course, from the insurer's perspective, some policies are "winners" (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are "losers" (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income); insurance companies essentially use actuarial science to attempt to underwrite enough "winning" policies to pay out on the "losers" while still maintaining profitability.

An insurer's underwriting performance is measured in its combined ratio. The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss.

Insurance companies also earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out. The Association of British Insurers (gathering 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the London Stock Exchange.

In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Naturally, the “float” method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or insurance cycle. [7]

Property and casualty insurers currently make the most money from their auto insurance line of business. Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. Additionally, property losses in the United States, due to unpredictable natural catastrophes, have exacerbated this trend.

[edit] Claims

Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid for, though one hopes it will never need to be used. Claims may be filed by insureds directly with the insurer or through brokers or agents. The insurer may require that the claim be filed on its own proprietary forms, or may accept claims on a standard industry form such as those produced by ACORD.

Insurance company claim departments employ a large number of claims adjusters supported by a staff of records management and data entry clerks. Incoming claims are classified based on severity and are assigned to adjusters whose settlement authority varies with their knowledge and experience. The adjuster undertakes a thorough investigation of each claim, usually in close cooperation with the insured, determines its reasonable monetary value, and authorizes payment. Adjusting liability insurance claims is particularly difficult because there is a third party involved (the plaintiff who is suing the insured) who is under no contractual obligation to cooperate with the insurer and in fact may regard the insurer as a deep pocket. The adjuster must obtain legal counsel for the insured (either inside "house" counsel or outside "panel" counsel), monitor litigation that may take years to complete, and appear in person or over the telephone with settlement authority at a mandatory settlement conference when requested by the judge.

In managing the claims handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, fraudulent insurance practices are a major business risk that must be managed and overcome. Disputes between insurers and insureds over the validity of claims or claims handling practices occasionally escalate into litigation; see insurance bad faith.

Commercially insurable risks typically share seven common characteristics.

1. A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.[2] The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
2. Definite Loss. The event that gives rise to the loss that is subject to the insured, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
3. Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
4. Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.
5. Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S. Financial Accounting Standards Board standard number 113)
6. Calculable Loss. There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
7. Limited risk of catastrophically large losses. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer's appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.