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Insurance There is a certain risk associated with each area of human activity. Therefore, the risk and its impacts need to be defended in some way - and that is - to insure. Insurance is historically considered to be a form of risk shifting - the negative impact of accidents, from an economic or other entity to a special institution - an insurance company. Insurance is a non-productive sector of the economy ensuring the financial elimination (exclusion) of the negative consequences of accidental occurrences on the economic or other activity of the people. This business deals with enterprises - insurance companies (reinsurance undertakings), which are mostly in the form of a. Insurance a specific branch of the economy Financial service is a source of company development..


There is a certain risk associated with each area of human activity. Therefore, the risk and its impacts need to be defended in some way - and that is - to insure. Insurance is historically considered to be a form of risk shifting - the negative impact of accidents, from an economic or other entity to a special institution - an insurance company.

Insurance is a non-productive sector of the economy ensuring the financial elimination (exclusion) of the negative consequences of accidental occurrences on the economic or other activity of the people. This business deals with enterprises - insurance companies (reinsurance undertakings), which are mostly in the form of a.


  • a specific branch of the economy
  • Financial service
  • is a source of company development
  • it is a service for the population and business entities, respectively. government institution
  • does not mean a significant increase in security
  • it does not imply absolute certainty - it only carries the financial consequences for the individual risks of specific activities

Structure of insurance

  • Legislative organs
  • Insurance Supervision
  • Associations (unions) of insurance companies
  • Commercial insurance companies, Health insurance companies
  • Social insurance companies' reinsurance companies

Insurance companies may be specialized or universal. Supervision is exercised by the Ministry of Finance and its activities consist in the authorization of insurance activities, the control, compliance with legal regulations and the liquidity of insurers. The associations represent the interests of member insurance companies in negotiations with state administration bodies, foreign partners and perform professional advisory activity.

Basic terms used in insurance:

The risk - relates to the ambiguity of the course of economic or other processes, and especially the ambiguity of their results

  • poses a risk of a negative deviation from the target or the risk of loss of a wrong decision,
  • risk in this area is different from sports, in gambling, there is a speculative risk

Reinsurance Institutions - institutions that insure insurance companies in case of securing the funds of the insurance company in the event of the occurrence of large-scale events (e.g. Flood)

Reinsurance - The financial fee (amount) paid by one insurance undertaking to the other insurance company (reinsurance undertaking) for the transfer of part of the risk from the insurance contracts concluded

Damage prevention = active activity of insurance companies, which affects the amount of financial and material damage and the growth of overall social effectiveness (it is mostly a preventive activity)

Insurance risk - the sum of the risks covered by the insurance as it was assumed by the particular insurance company. It is defined by the insurance law framework, it has the stated validity (insurance period) and the local delimitation

Insurance conditions - general - cover more types of insurance

  • Special - individual types of insurance

Insurance policy (insurance policy)

  • builds upon the insurance conditions and finalizes a bilateral legal act on the basis of which the contractual insurance of the company or person
  • A written form of contract is required for insurance for a period longer than 1 year
  • The insurance contract contains as a rule the following: type of insurance, subject of insurance, insurance period, amount of indemnity, eventually method of its determination, amount of premium collected, method of payment of premiums, maturity
  • it can also be arranged for the benefit of someone other than the one who concluded the insurance. In this context, we use the terms - policyholder - that is, the person who has concluded an insurance contract with the insurance company and is obliged to pay the insurance premium and the insured - i.e. the one whose property, liability for damage, life or health is covered by the insurance. In most cases, the policyholder and the insured are the same person. The difference arises if the insurance is arranged for the benefit of someone other than the one who concluded the contract and paid the premium - e.g. Child Insurance (policyholder parent, insured child).

Insurance Benefit - represents the insurance payment of compensation for damage to property insurance, person and company, payment of accident, life, pension insurance. Its payment depends on the general and special conditions of insurance and individual types of insurance and especially on the insurance contract

Insurance - represents the payment for the transfer of the negative financial consequences of casualties from business entities or person to the insurance company (= fee)

Risk management

A special branch dealing with risk management and has several phases:

  1. risk analysis - risk assessment, evaluation of the measure threatening the economic activity of people at a specific level
  2. Risk control - based on the analysis and output are specific measures, which are later implemented in phase 3,
  3. Risk control and financing - measures to prevent risks, reduce the negative consequences, the economic expression of these measures is the control

The subject of risk management research is:

1. Risks by controllable physical losses, health damage

  • Damage and loss of property
  • Liability for damages
  • Interruption of economic or productive activity
  • Control errors

2. Risks can be controlled only in a limited way

  • Technological risks
  • Political risks
  • Social risks
  • Risks from the natural environment

Financial risk elimination is the subject of decision-making for risk management personnel and the decision is usually such that risks, events more or less predictable, recurring, and small-scale risks are eliminated from company's own funds. In terms of medium damage, they can also be reimbursed from their own funds, but companies create their own reserves for these cases. In the case of major damage, which would endanger the financial situation and the stability of the company, decision-making leads to insurance. Meaning that the entrepreneur or the firm transforms the possibility of the occurrence of catastrophic damage with previously unimaginable financial consequences, for a relatively small and well-known cost - the insurance premium - the insurance premium.


  • Creating insurance reserves through insurance requires regular premium payments, regardless of whether an insured event occurs or not. On the other hand, money is immediately available if insurance conditions are met

self-insurance - the company creates its own financial fund

a. insurance - through an insurance company

Both options are related to provisioning. RESERVES - Temporarily available financial (material) resources potentially intended to cover incidental needs.

RESERVE FUNCTION: - stabilization

  • help ensure the smoothness of the reproduction process
  • help ensure the reproducibility process is secure
  • help to ensure the flexibility of the reproduction process

Insurance Fund - special reserve fund to cover incidental events and needs related to the use of insurance methods

Categories (a) financial (monetary)

b. Retirement (Retirement = Revenue) - relates to the creation and use of such income

Insurance method - a set, usually mathematical methods related to defining ways to eliminate the consequences of randomness

Calculation of premiums

  • the purpose of the calculation is to cover the company's own costs as an enterprise, that the subject is

1st price of performance (services) - tariff premiums related to particular types of insurance

2. full own costs of the insurance service

  • Benefits (the dominant and predominant component)
  • administrative expenses of the insurance company (costs of running the insurance company - rent, water, wages, ...)

When calculating premiums, the compensation (compensation) between the insurance premium and the paid insurance premium is statistically calculated.

I = NI + CD + C + P

The premium is formed (calculation formula):

NI - net insurance, CD - compensation for damages, C - own costs, P - profit surcharge

Net insurance- is intended to provide insurance benefits, but if claims are lower than net insurance, the difference to the insurance reserve fund is deducted. According to the regulation, the insurance company must create the so-called basic reserve fund, the insurance reserves fund and the damages fund.

(Basic Reserve Fund - is intended to cover the difference between the actual premium paid and the net premium.

The Insurance reserve Fund - is intended for the payment of claims arising from reserve-based insurance. This insurance is set up on the agreed date and at the agreed rate.

The Damage Fund - it is made up of premiums and is intended to cover costs and allowances for the implementation of various measures to reduce damage.)

As part of the insurance calculation, they also set specific reserves (funds) and use calculation techniques for calculating insurance techniques based on statistical and mathematical methods, in particular the number of probabilities.

Instrument stabilization tools:

1. Specific Reserve Funds

  • Swing Reserve - Used to cover random fluctuations in the course of damage flows
  • Reserve of life insurance and pension insurance - serves to cover the future liabilities of the insurance company resulting from the concluded insurance contracts

2. reinsurance

The nature of insurance

Insurance has the character of monetary relations. It is an efficient creation and distribution of funds through insurance funds that make up insurers. Part of the funds are placed by the insurance company in the insurance reserves and the other amounts are used for the payment of the insurance. Insurance is a legal relationship between a company and a person that arises on the basis of an insurance contract or a law (law). The insurance has the following characteristics:

  1. Solidarity - it is reflected in the fact that policyholders contribute together to the creation of insurance funds, knowing that they do not need to get the premiums paid back and instead they will be paid to someone else.
  2. Conditional Return - it is shown that the insurance will be paid when the insured event arises.
  3. Ineffectiveness - It is evident that the insurance benefit is not dependent on the amount of the premium paid, ie it may be higher or lower than the premium paid.

Classification of insurance

The insurance can be divided according to various aspects:

A. By form

  1. statutory insurance - this insurance follows from a law which already provides for the creation of this insurance, insurance conditions, insurance rates, method of payment, etc. (statutory liability insurance for motor vehicle damage)
  2. Obligatory contractual insurance - Obligatory must be arranged under a legal regulation for certain activities (insurance of doctors, hunters, auditors)
  3. Contractual insurance - under contract and voluntary

B. Depending on the form of provisioning

  1. risk insurance - it is not known when the insured event will arise (accident, property, natural disasters)
  2. Reserve insurance - knows when the insured event will arise (life and retirement benefits)

C. By industry

  1. non-life - deals with property
  2. life - injury

D. By species


a. Household insurance

It is one of the most important types of insurance for both insurers and the population because they use this service by an estimate of about 2/3 of households. The predominant form of household insurance has the character of an associated form of property and liability insurance related to household facilities and the liability of its members.

Associated household insurance covers risks primarily natural, ie fire, explosion, lightning strikes, storms, floods, hail, landslide, rock fall, avalanches, tree fall, etc., that the apartment became uninhabitable as a result of the insured event. Under this type of insurance, items of higher value can be attached, such as paintings, antiques, computers, and automatic washing machines.

The premium rate is most often determined according to the insured sums, according to the rule "the higher the coverage, the higher the premium".

b. Insurance of buildings (buildings)

It is another important type of insurance of the population's property and occupies the 2nd place in the insurance structure, because roughly half the population lives in its own buildings. This insurance also has a composite character and the subject of the insurance is family houses, rental and dwelling houses, agricultural estates, holiday cottages, cottages, etc.

Associated insurance also includes liability for damages due to the owner of the building. Insurance covers the risks of natural, water, vandalism, vehicle impact, and liability for damage caused by the owner of the building.

The premium rate is based on the quality of the insured building and on the size of the built-up area.

c. Vehicle accident insurance

It applies in the case of damage the size and size of which the driver could not influence, but also in the case of damages partly or wholly damaging to him. The subject of insurance is motor vehicles (cars, motorcycles, trailers, semi-trailers, etc.). In Full Emergency Insurance, the risk of natural disasters, theft, vandalism and accidents is covered as a breakage or damage to an external event vehicle. As a rule, this insurance excludes natural wear, improper maintenance or driving by a person without a driving license. It is insurance without a sum of insurance and the maximum amount of performance is given by the time value of the vehicle at the time of the accident. In the construction of this insurance, so-called participation is used for each damage at the amount agreed in the insurance contract. This bonus also uses a bonus, i.e. a discount for a lossless course during the defined insurance period.

d. Motor Third Party Liability Insurance

From this insurance, the insured has the right to insure against the insured person in the event of the occurrence of the insured event, and to those who suffered such damage in connection with the operation of the motor vehicle of the insured. Due to the social liability of the protection of victims of traffic accidents, this insurance is compulsory in most countries, including us.

The following indemnities are granted as compensation from this insurance:

  • Compensation for loss of earnings during work-related incapacity (e.g. as a difference between average earnings and sickness)
  • compensation for retirement loss
  • Compensation for making social work more difficult
  • Replacement for expenditure incurred in connection with treatment
  • compensation for material damage
  • compensation for adequate funeral costs
  • one-off compensation for the survivors
  • reimbursement of subsistence costs

This insurance concerns the operation of motor vehicles of citizens and economic subjects.

e. Other types of property insurance and liability for damages to the population

They are, for example,

  • travel insurance, respectively. travel insurance and stay insurance
  • Occupational liability insurance

These other types of insurance regulate the general and special conditions, or individual insurance contracts, respectively.


a. Accident insurance

The content is the financial security of the insured person in the event of temporary or permanent bodily injury or death of the insured. The lowest entry age for accident insurance is 15 years, the highest is 70 years. The insurance is negotiated for the insured amount, the amount of which is determined by the amount and type of damage. It is also possible to insure the sums of basic insurance sums. In practice, this type of insurance is often combined with other types of insurance, i.e. life and retirement insurance.

b. Life insurance

At present, it presents a summary of different types of insurance that combine to varying degrees two basic components:

  1. the risk of death
  2. the risk of survival of the agreed age

It may contain other risks, such as the risk of injury. This type of insurance is based on its calculation from the demographic model - the so-called death tables. The tariff parameters are the entry age of the insured (insured or policyholder), the insured period, the period of payment of the premium, the type of the insured event, the amount of the insured sum insured and the health condition of the insured person.

c. Retirement insurance

Its purpose is to supplement the pensions provided as social security benefits. The basic pension insurance entitles an insured person to receive another pension at the time agreed before the insured's life from the first day of the month following that in which he reached the agreed age (retirement age). The insurance tariff is calculated separately for men and women and depends on the entry age of the insured.

d. Insurance of medical expenses abroad

The medical reimbursement of the necessary costs of treatment for the insured person can be paid in local currency or foreign.


a. Life insurance

The most widespread insurance of legal entities where the subject matter of insurance is movable and immovable property owned by business entities. The insured natural risk includes under general conditions primarily fire, lightning, flooding, etc. The insurance is operated on a sum insured, which is derived from the new value of the insured item or from the time value (value after deduction of wear). Sometimes the insured amounts are determined based on the market value of the item.

b. Theft or burglary insurance

The subject matter of the insurance is movable goods, the owner of which is a business entity, and the insurance is re-arranged to the insurance amount derived from the new or time value. Differences in rates can also be determined depending on the subject of the business, its hazards, depending on the risk zone. The advantage for determining the amount of insurance is also better security, and the insurance company provides premiums on premiums better than the required security.

c. Traffic insurance

Transport insurance applies to items transported, except for the means of transport used to transport them. It distinguishes between transport insurance in domestic transport, natural areas, emergency risk and theft over the period of transport. The construction of insurance benefits is the same as in the field insurance. Insurance in international transport is based on foreign insurance conditions, especially English, and distinguishes between 3 types of transport insurance:

  1. insurance with the exception of a special accident (having the lowest insurance coverage);
  2. insurance including special accident (also covers partial damage during normal traffic);
  3. All risks insurance (the widest coverage).

d. Machine Assurance

The subject matter is machines and their accessories, which are included with the insured amount in the list of machines, which is part of the insurance contract with the relevant business entity. This insurance covers the cases of sudden destruction or damage caused eg by a mistake in construction, material defect or manufacturing defect, steam, gas, short circuit of electrical equipment, etc. It is better known in special insurance conditions. This type of insurance excludes the permanent operation of the machine process, such as wear, corrosion, etc. The upper limit of insurance performance is the new value as the insurance amount stated in the contract.

e. Liability Insurance

It concerns legal entities in case of a legal regulation of the liability of a business entity for the damage caused to another in connection with the insured's activity. There has been introduced one type of statutory liability insurance for entrepreneurs' damages, the content of which is the payment of damages for which the entrepreneur is employed, employing at least one employee and is responsible for it under the Labor Code. This is compensation for accidents at work and occupational diseases. The premium is paid depending on the number of employees, and backwards for the past calendar year.

f. Credit Insurance

Its content covers the consequences of non-payment of the loan provided to clients of the insurance company (business or banking entities).

g. Breakdown Insurance

It includes primarily lost profit insurance and insured expenses, e.g. after a fire or damage caused by another natural disaster, where the production is not continued, but it is necessary to pay the wages of the workers, the energy costs, etc. The insurance contract must stipulate the maximum period after which the insurance company covers the lost profits and the inexpensively incurred costs.

h. Agricultural risk insurance

Insurance for agricultural risks is a specific type of insurance. It concerns the insurance of crops and livestock. Other insurance sectors related to agriculture are the same as those of industrial and business insurance.

i. Other types of insurance for agricultural and business risks

e.g.: - insurance of ships and aircraft

  • insurance of investment units
  • installation insurance
  • currency exchange insurance
  • glass insurance, etc.

Supplementary pension insurance with state contribution

Form of a state contribution, so that the next generations of citizens have the means to cover the difference between the wage or salary earned in the working age and the amount of the old-age pension, which will be reduced in the future. The provision of supplementary pension insurance and its provision is handled by newly established special institutions - pension funds.

Services provided by pension funds:

  • Payment of a retirement pension paid for life or for a fixed term
  • Payment of a retirement pension paid for a fixed period of time
  • Invalidity pension paid for life or for a fixed period when granting invalidity pension
  • Survivors' pensions paid in the event of the death of a participant in the supplementary pension scheme
  • One-off compensation - replaces regular payment of pensions
  • Disbursement of the surrender - includes contributions paid by the participant plus the corresponding share of the revenues of the pension fund

Health insurance

The Act regulates general health insurance and the conditions under which it is provided under the Health Care Act. Healthcare is provided by law as a care fully or partially covered by health insurance.

Care fully or partially covered by health insurance includes:

  • Diagnostic care, outpatient and institutional care, including rehabilitation and care for chronically ill
  • prevention according to generally binding regulations
  • provision of medicines and medical devices under the conditions laid down by law
  • transportation of sick and surrogate travel costs to the nearest contracted medical facility authorized to provide health care, if necessarily required by their state of health, local transport costs are not covered
  • Spa care and special medical care provided as recommended by the physician as a necessary part of the treatment process

Payers of health insurance are insured, employers, state.

Health insurance is provided by sectoral, sectoral, corporate or other insurance companies.

Basic economic activities in an insurance company

The insurance policy is otherwise understood by the policyholder (he wants to get at least as much as he has put into the insurance) and otherwise an insurance company that has to fulfil its obligations and still make a profit. The economic activities of the insurance company include 5 basic areas:

  1. Planning - which focuses on the expected economic outcomes, taking into account market and insurance opportunities. The most important plans are the financial plan, the plan of activities, the plan of insured events.
  2. Analyses and analyses - the task is to keep track of established economic tasks, to monitor economic activities and economic results. Analysis and analyses serve the insurer to manage and remedy shortcomings.
  3. Accounting and Informatics - Captures economic operations, allows their evaluation and shows the final state of the economy.
  4. The information system - in the insurance company is very complex due to the extensive activity of the insurance company. Provides data collection and processing for management purposes.
  5. Labor Economics - Includes processes related to efficient use of the workforce (deployment of workers, labour productivity, employee involvement in results). It also deals with the payroll of the insurance company.

Insurance activities

The insurer's business is based on insurance activities consisting of business activities, insurance management and liquidation activities.

Business Service - has the task of implementing insurance products on the market and also deals with maintenance of insurance, which includes customer contact, information gathering and contracting

Insurance Management - Provides continuous care for the conclusion of an insurance contract, carries out the receipt and checking of newly concluded contracts, carries out registration, registration, statistical processing, inevitable correspondence.

Claim settlement - is the result of the insurance business and the task of liquidation is to determine the amount of the indemnity and to make the payment of the sum insured to the insured. It contains a lot of procedures through event reporting, validation, administrative processing, calculation of billing, reporting and statistical processing.




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