A man walks into a bar. Ouch! Never mind, he’s insured. Here’s what it all means…
Insurance is all about peace of mind. You pay an insurance company money just in case something happens and you need help to sort it out. The principle is fairly straightforward: the number of people who get burgled will always be lower than the number of people who don’t. So, the money the millions of people who insure themselves against burglary pay covers the cost of replacing the TVs of the unlucky few. And exactly how much people pay for their insurance depends on how much risk there is of them needing to use it. This principle applies across all types of insurance, and you can get insured for almost anything. Footballers insure their legs, J-Lo insures her bum… Which is fair enough, because if it ever fell off she’d never be able to walk, let alone dance her way into the top ten, and she’ll need to get money from somewhere! (Hopefully not acting.)
Insurance breaks down into three main areas:
General insurance includes car and household and business insurance. It also includes a number of specialist areas covering everything from shipping and aviation (your private jet is not covered under your Dad’s household policy), down to pets and mobile phones.
Life insurance, sometimes known as ‘assurance’, deals with the slightly trickier business of insuring people. For example, your average middle-aged man has a lot of responsibilities that add up financially: mortgages, credit cards and kids who need feeding (as well as iPods). If he keels over and dies, his life insurance will kick in to make sure that his poor wife doesn’t get landed with the whole bill.
The final area, reinsurance, is the insurance that insurance companies have to take out themselves. Reinsurers give insurers the peace of mind to know that if, say, half of South Yorkshire ends up under water in the middle of Summer, they can afford to pay all those house repair bills without too much difficulty. And if you’ve ever looked at the Gherkin building in central London and wondered what goes on in there, it’s owned and (mostly) occupied by the world’s biggest reinsurer, Swiss Re (and not, as we’d hoped, by groovy people using it as a giant greenhouse for weird plants)… so now you know.
The jobs
Insurance employs millions of people around the world, many of whom do very specialist work…
Underwriters
No, not the people who make coffins and drive around in gloomy cars. Insurance underwriters are in charge of deciding whether the company will cover you in the first place, and how much it will cost. When you apply for insurance, you’ll be asked for all kinds of personal information, the answers to which help the underwriter decide. If you’re applying for car insurance, say, they will ask you how old you are where you live, what type of car you have and even what colour it is. If you’re 17, drive a red BMW and live in Vice City, the underwriter will charge you a lot more than he would a fifty year-old who drives a brown Morris Minor and locks his Ballamory garage every night.
Claims inspectors
When you’ve been burgled, or your house has burned down and you need to make a claim on your insurance, it is a claims inspector you’ll need to talk to.
They basically manage the whole process. They record your details, making sure your claim gets assessed quickly, and keep you informed on everything. They also help by finding locksmiths or glaziers after break-ins, arranging alternative accommodation or replacement cars if you need them, and generally focusing on getting the claimant’s life back to normal.
Loss adjustors
‘Hello. I’ve just been burgled and I’d like to make a claim on my insurance. They’ve stolen four Play Station 3s, my collection of antique Rolex watches, and a tiger.’
People exaggerate all the time… the temptation to add a few extras to the list after you have been burgled is just too great for some people. And loss adjusters are there to make sure the insurer pays for what was stolen (or burnt, or dropped down the stairs), and nothing else.
They write detailed reports for insurance companies, recommending how much the goods are worth. It’s an incredibly trustworthy position to be in and loss adjusters need to be absolutely impartial, making sure that both the insurer and the claimant are treated fairly. This means loss adjusters are not generally employed by the insurance company, but are independent agencies. There’s a lot of training involved, and to guarantee their reliability, it is important for them to have professional accreditation from the Chartered Institute of Loss Adjusters.
Brokers
Before you go anywhere near an insurance company, it’s wise to shop around because different insurers will offer wildly different deals.
But because insurers always ask you for lots of personal information, this process can be frustrating and time-consuming. Brokers are there to save you the hassle. They ask the questions once, and then go around each insurance company for you to get the best deal. A lot of broking, particularly in common areas like car insurance, is now done online. But individual brokers still play an important role in getting good deals for people who want to insure unusual, or particularly expensive things.
Actuaries
Behind every insurance contract is a complex mathematical formula, which is devised and worked out by a mathematical superbrain (otherwise known as an actuary). Take a life insurance policy, for example. A man is 53 years old, drinks three units of alcohol a week, smokes a cigar on his birthday, works in an office and does hardly any exercise. An actuary will take that information and, using the power of mathematics (statistics and algebra, anyway), predict how long he is likely to live and how health he’ll be in the future. That then tells the insurer how much the man needs to pay for his policy. If we think about that kind of maths for too long we start whimpering.
Useful links
www.actuaries.org.uk - the Actuarial Profession website
www.ey.com - the Ernst & Young degree programme
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