1.08 Describe the nature of the insurance industry Acquire knowledge of the insurance industry to obtain a foundation for employment in insurance.

The role of insurance carriers in the insurance industry Insurance companies usually provide financial coverage of the loss that an individual is expected to suffer due to unforeseen events, and hence reduces the impact of a certain event. These companies reimburse the financial cost of a particular event against the premium they collect from people who purchases the policy from them The amount of the premium is dependent upon the probability of the happening of an event, its financial damage and the individuals whose risk can be pooled. For instance, if 500 geographically dispersed individuals take out the earthquake insurance on houses that are worth, $ 200,000 approximately, and the possibility of severe earthquake is once in every 50 years, then the cost of insurance will relatively be cheap. But the case is opposite if a large number of people in the insurance pool are likely to be affected by the earthquakes after every two years. The insurance premium is higher due to frequent payments insurance companies have to do in these cases.

Primary insurance carriers and reinsurance carriers. Property or liability insurance policy that covers up to the policy's limit (usually after deductibles) whether or not other policies cover the same risk. In contrast, excess insurance is triggered only when the primary insurance is exhausted.

Reinsurance Carrier Reinsurance is insurance purchased by insurers from other insurers to limit the total loss an insurer would experience in case of a disaster. Ordinarily, the business owner has little to be concerned with when it comes to reinsurance. However, recent events, such as the War in Iraq, the rise of terrorism, and recent natural disasters, have made it difficult for insurers to secure reinsurance and, as a result, insurers have left the market in some states or premiums for certain types of insurance have risen to an all-time high.

Primary Carrier Property or liability insurance policy that covers up to the policy's limit (usually after deductibles) whether or not other policies cover the same risk. In contrast, excess insurance is triggered only when the primary insurance is exhausted.

Distinguish among insurance agencies, insurance brokerages, and independent insurance consultants. Insurance agents are insurance professionals that serve as an intermediary between the insurance company and the insured. As a broad statement of law, an agent’s liability to their customers is administrative. That is, agents are only responsible for the timely and accurate processing of forms, premiums, and paperwork

Insurance Brokerage Brokers also have a higher duty, in most states, to their clients. Brokers have the duty to analyze a business and secure correct and adequate coverage for the business. This is a higher duty than the pure administrative duty of the agent. However, this expertise comes at a price. Brokers typically charge an administrative fee or premium payments are higher when purchased through a broker

Independent insurance consultants An independent agent is a licensed professional with strong customer and community ties who: Gives you excellent service and competitive prices, because agents can access the insurance coverage from multiple companies; Assists you when you have a claim; Is your consultant, working with you to help explain the different types of insurance and determining your unique needs; Offers you a choice of insurance plans and programs; Is a "value hunter," who looks after your pocketbook in finding the best combination of price, coverage and service; Offers one-stop shopping for a full range of products, such as home, renters, auto, and business insurance; and Can periodically review your coverage to keep it current.

Performance Activity Describe the function(s) of different types of businesses in the insurance industry (e.g., primary insurance carriers, reinsurance carriers, insurance agencies, insurance brokers, etc.) and develop a diagram that visually illustrates the relationship among the different types of businesses in the insurance industry. Explain the advantages and disadvantages of the different types businesses in the insurance industry. Explain ways in which the insurance industry impacts the economy?

Performance Activity What Your Risk Taking Style Quiz from CNN.com ( With just eight general life-style questions, each student is scored as a “thinker,” “gambler,” “daredevil,” etc. and given an explanation of your attitude toward risk according to the Risk taking Style Quiz.