Insurance Europe has produced a short, easy-to-read introduction to insurance. The booklet sets out the basic principles of insurance, explains what is insurable and the benefits of insurance, and outlines why the regulatory environment in which insurers operate is so important.
Insurance is the transfer of risk. It transfers the risk of financial losses as a result of specified but unpredictable events from an individual or entity to an insurer in return for a fee or premium. If a specified event occurs, the individual or entity can claim compensation or a service from the insurer.
Insurance is therefore a means of reducing uncertainty. In return for buying an insurance policy for a smaller, known premium, the possibility of a larger loss is removed. By pooling premiums and insured events, the financial impact of an event that could be disastrous for one policyholder is spread among a wider group.
Insurance is a cornerstone of modern life. Without insurance, many aspects of today’s society and economy could not function. The insurance industry provides the cover for economic, climatic, technological, political and demographic risks that enables individuals to go about their daily life and companies to operate, innovate and develop.
Despite this, the way insurance functions and its value are not always well understood. This booklet explains how insurance works, the value it provides and the importance of the regulatory environment in maximising the benefits that insurance can offer.
Full booklet
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