Page 18 - M1_Insurance Introduction Notes
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The insurance business, by its very nature, is
susceptible to fraud. Insurance is a risk distribution
system that requires the accumulation of liquid assets
in the form of reserve funds that are, in turn, available
to pay loss claims. Insurance companies generate a
large steady flow of cash through insurance premiums.
Steady cash flow is an important economic resource
that is very attractive and easily diverted. Large
accumulations of liquid assets make insurance
companies attractive for take over and loot schemes.
Insurance companies are under great pressure to
maximize the return on investing the reserve funds,
thus making them vulnerable to high yielding
investment schemes.
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