Personal Insurance

I. INTRODUCTION

There is nobody that can deny that at this point in time insurance has become a very big part of our lives. From the mandatory car insurance to optional ones, from those that protect us from things we have no control over to those that protect others from our own actions, almost everybody is connected with this field in one way or another.

At a very basic level, insurance can be seen as basically a sort of risk management. In other words, what insurance does is evaluate the risk involved with a certain action and then calculate an equivalent monetary compensation. The general concept is that one person will pay a small sum of money on a regular basis in return receiving a guarantee from the insurance company that in case something goes wrong they will receive a monetary compensation.

When it comes to insurable risks, from a commercial point of view, all of these share some common characteristics:

- A large number of homogeneous exposure units – in other words, insurance for the masses. A large number of individuals are covered in a particular type of insurance. An example of this is the car insurance policy. There are of course some exception, like “Lloyd’s” which is known to insure some more unusual aspects, as well as satellite insurance, focusing on low frequency occurrence events.

- Definite Loss - the loss which leads the insured to claim compensation must be proven, and have a known cause, have occurred at a known place and a known time.

- Accidental Loss – the event that triggered the loss must be out of the control of the beneficiary of the policy.

- Large Loss – the damaged incurred by the insured must be significant, from his point of view, as well as that of the insurance company.

- Affordable Premium – the client must be able to afford an insurance policy the covers his or her needs.

- Calculable Loss – the insurance company must be able to evaluate the incurred loss.

- Limited risk of catastrophically large losses – a company issuing insurance must evaluate the risk properly and decide whether or not the possibly of a loss is too great for them to cover.

Personal insurance is divided into two major categories: life insurance, which covers the risk of death, and non-life insurance (medical, travel, accident), that insures the physical integrity and health of a person.

II. HISTORY OF PERSONAL INSURANCE

Insurance began as a way of reducing the risk of traders, as early as 5000 BC in China and 4500 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in 17th century England, originally as insurance for traders : merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London.

The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived.

Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation.

As you can see life insurance has moved quite a lot from when it first started. Major corporations with great world interaction and power have surfaced. Companies that have a lot to say in both the economic and political world have come to exist. The market right now is in a boom and there are many life insurance companies coming to life.

III. ROMANIAN PERSONAL INSURANCE MARKET

The Romanian insurance market has passed through a permanent process of growth which ended up in 2004 to exceed the threshold of 1 billion Euros, in the frame of a small awareness and confidence of the population towards insurance, even now after 15 years.

The globalization process of the financial markets affected also the Romanian market even before Romania became member of the European Union. The globalization brought about benefits (especially under the form of increase in the quality of the services provided to clients) but also disadvantages for local companies (significant costs in logistics and training in order to cope with the international groups).