Page 57 - RISK Management IC 86

The Insurance Times

are restored or at least brought closer to their former economic
position.

Funds for investment

n Insurance premiums are normally payable in advance and held
by the insurer till the time of payment of claims. This enables
the insurers to invest these funds, which is always sizable,
and earns attractive returns on the investments made.

Disadvantages

n Although the advantages of purchasing insurance as a tool in
management of risks are numerous, insurance has a few
disadvantages also

Operating expenses

n The Insured pays more than what is his share in the losses
that the group is likely to experience because of the expenses
listed below. Insurers incur expenses in loss control measures,
in acquisition of insurance business, claim settlement activities,
in risk inspections and rating activities, and other general
administrative works.
These expenses and a reasonable amount of profit for the
insurer must be charged to the premium payable by the insured.
Thus the premium paid by the insured is more than expected
value of losses.

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