The branches of insurance classified according to the method of premium management
The task of an insurer is to collect premiums within the mutual insurance fund in order to be able to settle claims.
Two premium management methods are possible: management by distribution or management by capitalization.
In pay-as-you-go management, policyholders' premiums are immediately (ie during the same financial year) reallocated to the payment of claims. Pay-as-you-go management is therefore the direct application of the principle of pooling.
Capitalization, for its part, is a long-term management method which consists in capitalizing the premiums of policyholders using the compound interest method. This is referred to as financial capitalization, knowing that there is also life capitalization (which applies to life insurance contracts). In funded management, risk is measured through the use of a mortality table.
The premiums collected by pay-as-you-go constitute what are technically called the "technical provisions" of an insurance company, while the contributions managed by capitalization correspond to the "mathematical provisions" of an insurance company.
This difference in the method of managing premiums has given rise to the distinction between “Fire-Accident-Miscellaneous Insurance (IARD)” and “Life Insurance”.
Property and casualty insurance
Property and Casualty Insurance Branch Property and Casualty Insurance (Fire-Accident-Miscellaneous Risks) correspond to insurances for which the premiums are managed on a pay-as-you-go basis and include:
- property and liability insurance, which is part of damage insurance (see below);
- individual accident insurance and health insurance which form part of personal insurance (see below).
N.B .: In the non-life category, we also include transport insurance, which explains why we sometimes find these insurances mentioned under the acronym IARDT (Fire-Accident-Miscellaneous Risks-Transport).
Life insurance
Life insurance branch Life insurance corresponds to insurance for which the premiums are managed by capitalization. This branch includes all insurances whose risk is linked to the life of the insured:
- Life insurance,
- Death insurance,
- Savings insurance,
- Pension insurance
- Disability
- Inability
- La Tontine ...
The branches of insurance classified according to the method of compensation for claims
Depending on the nature of the risk insured, two types of compensation are available to an insurer to settle claims for its customers. Indeed, the insurer will compensate its policyholders by applying either the "indemnity principle" or the "lump sum principle".
The objective of the indemnity principle is to put the insured in a situation identical to that which was his before the occurrence of the loss: the service provided by the insurer must therefore correspond to the fairest compensation for the damage suffered, and not be a source of enrichment for the insured. The application of this principle assumes a good match between the real value of the insured property and the value for which it is insured.
N.B .: The Insurance Code authorizes the insurer to contractually limit the scope of its cover, by setting a maximum amount of compensation and a deductible.
In the event that, in order to compensate its customers' claims, the insurer is subject to the "lump sum principle", it is then required to pay the beneficiary (ies) the amounts contractually provided for. The flat-rate benefits therefore see their amount determined at subscription (and not at the time of the claim) and therefore do not require an assessment of the damage.
This difference in the method of compensation for claims has given rise to the distinction between "Damage Insurance" and "Personal Insurance".
Damage Insurance
Damage Insurance branch Damage insurance corresponds to insurance that obeys the indemnity principle in terms of compensation for claims, and includes:
- property insurance (insurance that warns the insured against direct financial losses that he may suffer as a result of attacks that may affect things or goods that belong to him);
- liability insurance (insurance that guarantees the insured against the repairs that he may owe to third parties, following the damage he has caused them and for which he has been held liable).
The purpose of Damage Insurance is to guarantee the assets of the insured.
Personal Insurance
Personal Insurance Branch Personal Insurance corresponds to insurance subject, as the case may be, to the "fixed or indemnity principle" of compensation for claims and includes:
- Health Insurance (accidents, sickness, invalidity, incapacity, medical expenses, etc.)
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