The insurance business is the business of taking over the risk from the customer to be borne by the insurance company. The way to cover the risk is to use the accumulated premium funds paid by the customer to cover the claim of the customer who is affected by the disaster/risk.
Simply put, take the example of a merchant association, there are 100 people who are members of insurance by paying a premium of Rp. 3 million. The accumulated total premium collected is IDR 300 million. It is estimated that from 100 traders, there are five people who are affected by the disaster with losses of Rp. 50 million each, so that the total loss is Rp. 250 million.
Insurance companies that act as risk bearers use the accumulated premiums to cover the risk of claims by traders who are affected by the disaster. Meanwhile, those who are not affected by the disaster cannot accept dependents from the insurance company.
The work process of an insurance company is divided into 3 simple stages, namely:
Attracting Customers:
Insurance companies offer products and look for someone who will become a customer. The insurance company will divide each insurance buyer or policyholder into different parts. So, if you use health insurance, it will not be mixed with life insurance or anything else. The insurance will cover each of your losses according to the amount taken by the policyholder.
Collecting Premium:
Customers will be given a premium payment schedule which is usually done every month. Through this premium payment, the amount of money from each customer will be processed in order to overcome the problems experienced by other customers and who make claims to insurance companies. So, the system run by insurance companies is the circulation of money from customers to cover the risks experienced by other customers.
Paying Claims:
If there is a claim from a customer who is at risk, the insurance company must pay it in accordance with the provisions. The insurance company will ensure that the occurrence of claims made by customers is truly a disaster and not an intentional event. In the clause of the policy, there is usually an agreement that if the incident has an intentional element, compensation will not be given by the insurance company.
Having insurance will help you to no longer be afraid to face the future. If you are better prepared to face the future, everything will run more safely and comfortably. Understanding how the insurance company works above will make you more determined to join the insurance program.