The insurance industry is divided into three segments: life insurance, health insurance, and liability insurance. Policyholders pay regular premiums to receive coverage for losses. There are two types of ownership: shareholder ownership and mutual owned insurance companies.
The insurance industry refers to a collection of companies that manage risk to individual health and property by promising to reimburse policyholders for losses in exchange for regular payments. The industry is divided into three distinct segments: life insurance, health insurance, and liability insurance. Each operates on similar principles, but protects policyholders for very different reasons. There are two main types of ownership in the insurance industry.
The life insurance industry specializes in two types of policies designed around the life of the client. The most common type of life insurance policy is a guaranteed sum of money to be paid to a beneficiary after the policyholder’s death. The second, and less common, type of policy rewards an insured if they live past a specified age. In both cases, the policyholder pays a sum, ie a premium, to the insurance company at regular intervals to keep the policy active. If these payments are not made, the policy is voided and the beneficiaries are not charged any money.
Another type of coverage that focuses on the well-being of an insured is health insurance. The primary function of the health insurance industry is to absorb some or all of the costs associated with medical care. A health insurance policy covers an individual’s treatment visits to doctors, hospitals, and other specialists. There are a variety of payment methods, sometimes requiring a policyholder co-payment, which is a percentage of overall health care costs, in addition to a monthly premium. Health insurance is often partially underwritten by an employer. Other health insurance providers require cardholders to see certain approved health professionals.
The third type of coverage is the liability insurance industry, providing security for physical objects. The primary function of this industry is to protect automobiles, real estate, and personal property from loss. For example, if a house burns down or a car is in an accident, the insured usually receives the policy’s benefits for damages or losses.
The insurance industry covers these different fields, but companies are primarily owned in one of two ways. Shareholder ownership comes in the form of a public company that is owned by shareholders and is traditionally governed by a board of directors. Mutual owned insurance companies, on the other hand, are owned by the policyholders themselves and operate as a private company. These two organizational approaches are very different and provide benefits and drawbacks to policyholders.
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