10 Roles and Functions of Insurance Companies

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10 Roles and Functions of Insurance Companies

10 Roles and Functions of Insurance Companies. In this case, there are a lot of explanations about insurance companies, which if you look at it in a glance it doesn’t look the same, maybe it is caused by the point of view of each of those who interpret it, but all the core or intent of the explanation are all the same. If you want to know about what an insurance company is, refer to the explanation below.

What is an insurance company ?? The definition of an insurance company is an institution that provides various insurance policies to protect someone or its customers from various types of loss risk by paying premiums regularly, insurance companies work by combining risks from a number of insurance policyholders. Here we will provide several functions of insurance companies.

Role and Function of Insurance Company

Role of Life Insurance

  • Family Protection (Protection in Family Income, Adjustment Funds, Bleaching Funds / Final Costs).
  • Saving (Old Age Funds and Education Funds)
  • Business Tools (Credit Protection, Mortgage Protection, Key-Person, Business Continuity / Going Concern, and Employee Welfare.
  • If the breadwinner is destined to die or is disabled, then the needs and welfare of his family will become less secure.

By becoming an insurance participant, specifically Sharia Insurance is expected at the time of the risk, investment returns from insurance benefits can replace income or as an adjustment fund for the family, so that the needs and welfare of his family, God willing, will be guaranteed.

Role of Insurance Losses

  • Fire Protection (House/building and its contents.)
  • Protection from Loss (theft of property in the house/building, theft of motorized vehicles, theft of money, and theft of goods)
  • Protection from damage (cars, motorcycles, houses/buildings, a business unit, ships and airships.)
  • Protection from Transportation (Money and Goods)
  • If a disaster or disaster occurs, an object will lose its function and use. And humans as users will experience loss or loss of benefits from the object.

The main function of insurance is as a mechanism of risk transfer/transfer or risk transfer mechanism, namely transferring risk from one party, namely the insured to the other party underwriter. This transfer of risk means removing the possibility of misfortune.

But for the insurer, the party can provide financial security facilities or a so-called financial security and there is calm or so-called peace of mind for the insured. As a reward, the insured is obliged to pay the premium in a relatively small amount when compared to the presence of potential losses that may be experienced.

10 Function of Insurance

  • As a Risk Controller.
  • As a Collection of Funds.
  • As a Manager of Balanced Premium.
  • It is said to be efficient because the amount of premium is relatively low compared to the risk burden borne by insurance.
  • Because insurance premiums are low, the doctrine for insurance is to seek the Law of the Large Number.
  • Insurance Can Transfer Risk
  • Insurance can be an investment
  • Guaranteed Balance of Premiums Paid with Protection
  • Insurance Serves to Protect the Risk of Bankruptcy
  • Insurance Can Help Improve National Economy

Functions of Insurance pdf

Risk Transfer

As a means or mechanism for transferring the possibility of a risk/loss (chance of loss) from the insured as an “Original Risk Bearer” to one or several underwriters (a risk transfer mechanism). So that uncertainty in the form of the possibility of a loss as a result of an unexpected event will turn into certainty insurance to change losses into compensation or claim compensation with premium payment terms.

Collection of Funds

As a fund collector from the community (policyholder) to be paid to those who experience disaster. The funds collected in the form of premiums or insurance costs paid by the insured to the insurer. Are managed in such a way that the funds are a brakeman. Which will later be used for pay for a loss that one of the insured might suffer?

Balanced Premium

To regulate in such a way that the premium payments made by each insured are balanced and reasonable compared to the risks that are transferred to the guarantor (equitable premium). And the size of the premium to be paid by the insured is calculated based on a premium rate (rate of premium) multiplied by the Sum Insured.

Functions of Insurance ppt

The function of insurance. In general, is as a means or mechanism for transferring the possibility of risk to one or several insurers who are insurable. Besides as a form of risk control (financially).

Primary Functions of Insurance

The main function of insurance is as a mechanism for transferring risk (risk transfer mechanism). Which is transferring risk from one party (the insured) to another party (guarantor). This transfer of risk does not mean eliminating the possibility of misfortune.

But the guarantor provides financial security and peace of mind for the insured. In return, the insured pays a premium in a very small amount when compared to the potential losses that he might suffer

Functions of Insurance Class 11

Insurance is one of the safeguards against future risks. However, there are a number of things you need to know about the actual function and purpose of insurance to further strengthen your intention to take part in an insurance program.

There are several main and additional functions that exist in the insurance program. The main function of insurance consists of 3 uses, namely:

Risk transfer

This means that the risk received by the customer will be transferred to the insurance company that applies as the guarantor. The amount of uncertainty of potential losses suffered by a customer as a result of an unexpected event will be replaced by the insurance in the form of compensation or compensation claims as compensation for premium payments by the customer.


Insurance companies collect funds originating from customers and then the funds will be managed in such a way as to develop. It is the results of management of funds from customers that will later be used to pay compensation claims if the customer experiences an unexpected risk or event and results in a loss.

Premium Balancing

The insurance company is in charge of managing the balance between premium payments and the risks to be borne by the insurance company. Thus, each party is not harmed by the agreement. For programs other than life insurance.

The amount of the premium amount will be determined based on the premium rate multiplied by the desired sum insured. Whereas in life insurance such as Commlife insurance for example. The amount of the premium is adjusted to the agreement or conditions set by the insurance company.

Nature and Function of Insurance

Properties of insurance. Insurance in accordance with the definition, arrangement, and forms have the following characteristics:

Nature of Agreement

All insurance is in the form of a certain agreement (ByzondereOvereenkomst). Which is an agreement between two or more parties with the intention of reaching an agreement and in which one or more promises to another person or more

The nature of reciprocity

Approval of insurance is a mutual agreement (Weder-Kerige-Overeenkomst) which means that each party promises to do something for the other party. The insured party promises to pay a sum of money (insurance money) to the insured party if a certain event will occur

Nature of the Company

Premium insurance held between the insurer and the insured party. Without legal ties between the insured and other people who are also the insured party to the insurer. In this case, the insurer is usually not an individual but a body that is a company. Meaning that it emphasizes the profit and loss in its actions.

Functions of Insurance Wikipedia

Understanding the functions and benefits of insurance is important before deciding to use it. Moreover, understanding of insurance in Indonesia is still low. This can be seen from the amount of public participation in insurance is still minimal aka not so many devotees.

In fact, insurance in general or specifically has a very large function and profit to provide compensation for protection funds in the long run, such as assets/assets, life insurance, and health insurance.

Join Insurance Means Active in Risk Transfer

One of the primary functions of insurance, other than as risk control. Also functions as a risk transfer mechanism or the transfer of the possibility of risk so that the possibility of uncertainty in the event of a loss caused by an unexpected event can be confirmed or certainty in the form of compensation loss or compensation for claims from insurance premiums paid.

Insurance as a means of collecting funds (insurance investment)

Insurance also functions to collect funds from customers or policyholders. The collected funds (from paid premiums) can be used and developed by insurance companies through more profitable investment channels. Because the duty of insurance companies is to raise funds. Therefore, investment is a choice that is often taken so that the money collected can be managed productively.

Insurance More Ensures Balanced Premium

The purpose of the balanced premium function of insurance company here is that insurance can be relied on as a guarantor for someone’s loss by paying a clear premium and the amount can be accounted for. The size of the premium that must be paid also depends on the premium rate that applies after multiplied by the sum insured.

Read Also: Comparison of Free Car Insurance Quotes with General Along With Progressive Insurance Offers

5+ Home Insurance Savings Tips

Your dwelling is commonly your most cherished asset that you just will need to protect. We made a listing of all discounts possibilities related with Household insurance policy. This record is among the most total viewpoint on home insurance discounts suggestions. Various insurance policy brokers contributed to this listing. So, let us start!
1. Change your content coverage
Leasing a Condo? You may frequently reduce your articles protection. No should insure your belongings to up to $250,000 when you only have a notebook and several IKEA household furniture!
2. Renovations
Renovating your own home may result in lessen house insurance coverage premiums, as residence insurance plan rates for more mature, poorly taken care of dwellings are usually better. Moreover, renovating only pieces of your dwelling (e.g. the roof) can cause insurance plan savings.
Incorporating a swimming pool for your household will probably guide to a rise in your insurance policy rates considering the fact that your liability ( e.g. the potential risk of somebody drowning) plus the value of your home have amplified.
Insurers want copper or plastic plumbing - possibly this is a great idea to upgrade your galvanized / guide pipes during your up coming renovation cycle.
5.Shop around
Research, Compare, and swap insurance policy organizations. There are plenty of insurance policy providers and their rate choices for the same policies might be quite distinctive, for that reason use various on the internet resources and talk to many brokers considering the fact that each and every will go over a confined range of coverage providers.


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