Two Types Of Insurance Essay

Personal lines and commercial lines are the two major categories of insurance coverage. Personal lines cover individuals and families while commercial lines protect business firms, nonprofit organizations and government agencies. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another in exchange for a payment. Any risk that can be quantified can potentially be insured. Life insurance, health insurance and property and casualty insurance are several types of insurance that are available today.
An insurer, or insurance carrier, is a company selling the insurance. It can be classified according to its organizational form such as stock insurers, mutual insurers, reciprocal of exchanges and Lloyd’s of London. A stock insurer is an incorporated insurer with its capital divided into shares and owned by its shareholders. Its objective is to maximize stockholders ' profit by leveraging the value of stock. Mutual insurers on the other hand, are corporation owned by the policyholders who elect board of directors and appoint executive officers to manage the company. The board of directors of this corporation …show more content…
There are two types of expense ratios that are used to measure efficiency. Costs expenditure associated with underwriting activity is described as underwriting expenses. Loss adjustment expenses on the other hand, is the expenses associated with investigating and settling insurance claims while earned premiums refer to the portion of written premiums that have been earned during the accounting period. Insurers can also measure their performance through loss ratio that measures the percentage of earned or written premiums which goes toward paying claims and adjusting them if loss adjusted expenses is