Insurance is a business that offers protection against financial loss. It works by having individuals or companies transfer their risk to an insurance company in exchange for paying premiums. The insurance company then compensates the customer in case of unexpected financial losses. In this article, we’ll explore how the insurance business operates and how it protects individuals and companies from financial risks.
Companies or individuals typically use insurance services as a safeguard against risks.
According to the Consumer Financial Protection Bureau, when purchasing insurance, it means someone is buying protection against unexpected financial losses. Insurance companies will pay customers’ losses if something bad occurs.
The workings of the insurance business
Quoting Small Business, companies or individuals who purchase an insurance policy transfer their risk there. In exchange for this service, customers pay a premium to the insurance business.
The size of the premium depends on how risky the customer is. The more risky, the higher the premium paid.
The insurance business is carried out by companies and supporting entities. Insurance companies are divided into three, namely general insurance companies, life insurance companies, and reinsurance companies.
Meanwhile, there are also three supporting insurance business entities, namely insurance broker companies, reinsurance broker companies, and insurance loss assessment companies.
1. General insurance company
A company that provides risk coverage, compensation for losses, damages, incurred costs, loss of profits, or legal liability to third parties. This may be experienced by policyholders due to an event occurring.
2. Life insurance company
A company that provides services in managing risk by providing payment to policyholders, insureds, or others who are entitled in the event of the insured’s death or living with an amount that has been predetermined and/or based on the management of funds.
3. Reinsurance company
A company that provides services in reinsuring against risks faced by Loss Insurance Companies, Life Insurance Companies, Guarantee Companies, or other Reinsurance Companies.
Supporting Insurance Business
1. Insurance Brokerage Company
A company that provides intermediary services in insurance coverage or Islamic insurance. And, handling the settlement of insurance claims, acting on behalf of the insured.
2. Reinsurance Brokerage Company
A company that provides intermediation services in placement of reinsurance and handling the settlement of reinsurance claims. Acts on behalf of insurance companies, assurance companies, or other reinsurance companies.
3. Insurance Loss Assessment Company
A company that provides assessment services for claims and or consultation services for insured objects.
In the insurance business, companies or individuals transfer their risks to insurance companies, and in return, they pay premiums.
There are three types of insurance companies: general insurance, life insurance, and reinsurance. Supporting insurance businesses include insurance brokers, reinsurance brokers, and insurance loss assessment companies.
In the insurance business, insurance companies have the task of providing protection and compensation to their customers.
How to build an insurance startup
To build an insurance startup, the following steps can be applied:
1. Market research
Study the insurance industry and target market. Determine the products and services to be offered.
2. Business planning
Create a business plan that includes products, target market, marketing strategy, and business model.
3. Assembling the team
Recruit a team with competence and experience in the insurance field.
4. Regulatory and permit compliance
Ensure the business complies with applicable regulations and obtains necessary permits and licenses.
Find sources of funding, such as investment from investors or loans from banks.
6. Technology and system development
Consider developing technology to aid in business operations and improve efficiency.
7. Marketing and sales
Develop a marketing and sales strategy to promote products and services to the target market.
8. Monitoring and evaluation
Continuously monitor and evaluate business performance to ensure long-term success.
To build an insurance startup, you must do market research, business planning, forming a competent team, complying with regulations and obtaining licenses, finding funding sources, developing systems and technology, creating marketing and sales strategies, and performing monitoring and evaluation, are important steps that must be applied.