Oct 13, 2021

Insurance system

First of all, insurance is a socio-economic phenomenon.

The origin and development of the social phenomenon of insurance show that in order to ensure the stability of economic and social life, a means (through the collective power of by the general public) is needed to establish a large-scale fund to pay economic compensation for specific social members or groups due to a specific dangerous accident or lossat a specific time in order to achieve economic mutual assistance. Therefore, insurance is a form of economic mutual assistance in the sense of economics, embodied as a mutual economic system, making insurance a special economic mutual assistance tool to resist and prevent danger. Dispersing risks and digesting losses are the basic purpose and inherent function of insurance as well as the essential feature of insurance.

Insurance is such a system: when one encounters a disaster, insurance has the effect of “all for me” because of the help of others; when oneself is safe and others encounter disasters, insurance can help others and have the merit of “one for all”.

Through the friendly cooperation of participants in the economic mutual assistance system such as insurance, social attack or compensation funds can be established on the basis of reasonable cost-sharing, and the dangers concentrated on individual members of society or groups can be dealt with and shared among all the members who may encounter similar dangers or be shared among the whole society through product costs or service costs. The insurance and its application based on such a concept can be extremely useful and effectively meet the vast majority of social needs for transferring or sharing risks.

History of the insurance industry

The basic concept of insurance lies in economic mutual assistance, with mutual funds or cooperative funds to resist natural disasters or social crises. The insurance industry is composed of businesses, which are carried out for the purpose of realizing the insurance system, and the related activities.

It is generally believed that insurance in the modern sense originated from marine insurance in the late Middle Ages in Europe, which originated from the bottomry of maritime adventure in Italy in the Middle Ages, and the bottomry is a continuation of the ship mortgage contract of the Greek city-states in the 4th century AD. The institutional tool for the survival and development of the insurance industry is insurance policy or insurance contract. The early forms of recorded marine insurance contracts mainly include “mutuum gratis et amore” and “emptiovenditio” in the mid-14th century. With the development and changes of the maritime trade center, Lombard businessmen of Italy gradually spread the concepts and measures of insurance management to other countries in the European continent through Portugal and Spain. The concept and practice of insurance began to penetrate into areas other than marine insurance.

With the expansion of the insurance industry in different fields, after the 17th century, in addition to merchants specializing in the insurance business, insurance brokers who assist insurance merchants have gradually become a specialized occupation, prompting faster expansion of the insurance industry. The emergence of fire insurance companies in large numbers makes the fire insurance business one of the leading areas in the insurance industry. At the beginning of the 19th century, Britain first completed the Industrial Revolution, followed by other European countries. The capitalist economy achieved significant development, and the insurance industry expanded rapidly.

Meaning of insurance

The word “insurance” is derived from “sigurare”, which is a term often used in commercial documents in Italian coastal commercial cities in the 14th century. It has the meaning of mortgage, guarantee, protection, burden and so on.

The economic significance of insurance can be generally classified into three categories: “loss theory”, “dualistic theory” and “non-loss theory”.

The loss theory believes that insurance is a system or tool to compensate for losses caused by accidental practices or dangers.

The dualistic theory states that insurance should distinguish between life insurance and property insurance and explain their essence separately.

According to the non-loss theory, the explanation of insurance around loss compensation has certain limitations.

The legal meaning of insurance lies in that in the legal sense, insurance is a legal act that disperses risks, which means the insurant pays the insurer, and the insurer assumes the responsibility for payment in accordance with the contract in the event of an agreed insurance accident.

Meaning of insurance law

Insurance law is the general term for legal norms used to adjust and regulate insurance legal relations, insurance business, and the associated behaviors. As far as the content of insurance law is concerned, it is composed of insurance contract law and insurance industry law. The former regulates the rights and obligations of the parties to an insurance contract and their related parties and the latter is the laws and regulations concerning the supervision and management of insurance companies and insurance businesses.

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