In the case of insurance companies trying to suppress the possibility of a fatal loss / large, it can transfer risk to another insurance company. This is called reinsurance, reinsurance companies that receive so-called reinsurers.
In addition to the five characteristics above, before it can be insured, the insurance company should consider the insurable interest and anti-selection. Insurable interest relating to the relationship between the insured and the recipient of compensation / benefits - in terms of loss potential. Example, insurance companies will not sell fire insurance policy to a person other than the owner of the building is insured. Insurable interest in this example is the ownership of an eye something that is insured. Similarly, family relationships, a reasonable financial linkages, is also a form of insurable interest. The definition of anti-selection (counter selection) refers to the presence of a greater tendency to take insurance because it has a level of risk above average. Example, people who have a record of poor health or risk of dangerous jobs tend to buy insurance. To reduce anti-selection effect, the insurer must be able to identify and classify the potential risk or loss. The process of identification and classification of the level of risk is called underwriting or risk selection. But that does not mean anti-selection led to the filing of insurance declined, due to the insured with the risk of losses above the average premium may be subject to sub-standard (special premium) due to sub-standard risk (specific risk) unless the possibility of much higher losses, the insurance application may be rejected.
In addition to the five characteristics above, before it can be insured, the insurance company should consider the insurable interest and anti-selection. Insurable interest relating to the relationship between the insured and the recipient of compensation / benefits - in terms of loss potential. Example, insurance companies will not sell fire insurance policy to a person other than the owner of the building is insured. Insurable interest in this example is the ownership of an eye something that is insured. Similarly, family relationships, a reasonable financial linkages, is also a form of insurable interest. The definition of anti-selection (counter selection) refers to the presence of a greater tendency to take insurance because it has a level of risk above average. Example, people who have a record of poor health or risk of dangerous jobs tend to buy insurance. To reduce anti-selection effect, the insurer must be able to identify and classify the potential risk or loss. The process of identification and classification of the level of risk is called underwriting or risk selection. But that does not mean anti-selection led to the filing of insurance declined, due to the insured with the risk of losses above the average premium may be subject to sub-standard (special premium) due to sub-standard risk (specific risk) unless the possibility of much higher losses, the insurance application may be rejected.
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