Uppsala universitet

4. Insurance Services
4.1 Insurance - A Definition
According to the Encyclopaedia Britannica, insurance is “a contract for reducing losses from
accident incurred by an individual party through a distribution of the risk of such losses among
a number of parties.” The definition goes on to say: “In return for a specified consideration, the
insurer undertakes to pay the insured or his beneficiary some specified amount in the event that
the insured suffers loss through the occurrence of a contingent event covered by the insurance
contract or policy. By pooling both the financial contributions and the ‘insurable risks’ of a
large number of policyholders, the insurer is typically able to absorb losses incurred over any
given period much more easily than would the uninsured individual” (Encyclopaedia
Britannica, Micropaedia, 1987, p. 335).
A briefer definition of insurance as a phenomenon is “the practice of sharing among
many persons, risks to life or property that would otherwise be suffered by only a few. This is
effected by each person paying a sum of money called a premium which, with those paid by all
the others, is put into a ‘pool’ or insurance fund, out of which money is paid to the few who
suffer loss” (Longman Dictionary of Business English, 1989).
The policyholder thus pays someone else a premium to bear his or her risk, knowing
that a possible future loss will be compensated for according to the premium paid. If lucky, the
policyholder will never have to experience the tangible results of the service of reduced risk
during the contracted policy period. On the other hand, the policyholder maintains a certain
uncertainty towards the service that he or she pays for, something that adds to the peculiarity
of insurance services.
4.2 Insurance Products

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A way to consider the different kinds of insurance is to view them in terms of objects insured,
contingencies insured against, payment methods for premiums, and possible benefits. Objects
insured can be of two kinds: either property or person including the object “corporate person.”
The term “property” encompasses most tangible forms of property, ranging from personal
effects via real estate and bank deposits, to ships and goods in transit. The person insured
includes for example aspects of life and health, ability to work, and retirement income.
Contingencies insured against may include almost anything, but a few examples are natural
accidents, such as fire and earthquakes, theft, professional malpractice, personal accidents, and
even mismanagement of a corporation. The manner of payment in both directions may vary
considerably, depending mainly on the type of policy. (Encyclopaedia Britannica, Micropaedia,
1987)