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2/2 W01/March 2017 Award in General Insurance

Introduction

In chapter 1, we saw how insurance benefits individuals and businesses, by providing a risk transfer
2 service. For this service to operate successfully, there must a marketplace.
Chapter Modern day insurance Modern day insurance is truly international; the process of insurance is no longer bounded in a country,
as we continuously try to spread risk and, consequently, the losses faced by insurers across countries
is truly international
and regions. More insurance companies, in addition to expanding their scopes of business by providing
more lines of insurance, also enter other countries to satisfy the demand for insurance by individuals
and businesses in those countries. All these movements are in line with the principles of insurance that
insurance companies can predict losses more accurately with an increasing number of risks insured and,
at the same time, minimise the risk of experiencing large losses by spreading their exposures
geographically. Furthermore, insurance companies can be more efficient in utilising their expertise and
resources through the expansion of their business.

Key terms

This chapter introduces the following terms and concepts:
Actuaries Agents Appointed representatives Captive insurers
Claims personnel Compliance officers Distribution channels Internal auditors
Insurance brokers Intermediaries Lloyd’s Loss adjusters
Loss assessors Mutual companies Price comparison websites Protection and indemnity
(P&I) clubs
Reinsurers Risk managers Underwriters

A Structure of the insurance market

The insurance market is made up of five main components: Reference copy for CII Face to Face Training
• Buyers.
• Insurers (sellers).
• Intermediaries (those who bring buyers and sellers together).
• Price comparison websites (aggregators).
• Reinsurers (a further means of spreading risk).
Consider this…
Think of any market with which you are familiar and identify the different ways in which sellers compete with one
another. Would competition in this market differ from competition in the insurance market?

Ifso,inwhatways?

All of these different groups of people communicate with each other and with the many other people
who work in or around the insurance market. The interaction between the main categories is easily
illustrated by a diagram as shown in figure 2.1.