Insurnce sector.docVIP

Ⅲ Insurance sector 1. Insurance and RisksA. What is insurance? 保险的定义　　Insurance is an arrangement by which one party (the insurer) promises to pay another party (the insured or policyholder被保险人，持保人) a sum of money if something happens which causes the insured to suffer a financial loss. The responsibility for paying such losses is then transferred from the policyholder to the insurer. In return for accepting the burden of paying for losses when they occur, the insurer charges the insured a price, the insurance premium保费. 　　Consider two next-door neighbors, Bob and Steve. Both own houses worth $80,000, but Bob has insured his house against possible loss by fire at a premium of $150 while Steve is uninsured. By insuring, Bob has been able to transfer the loss of $80,000 to his insurer. His financial position is therefore the same whether or not his house burns down: whatever happens all he has to pay is a premium of $150. Although Steve avoids paying $150, he has to bear the full costs of any fire. He is therefore $150 better off than Bob if there is no fire, but $79,850 worse off in the event of a conflagration火灾. 　　Insurance works because the insurer can collect premiums from a group of people in similar circumstances, not all of whom will suffer losses in any one year. These premiums are then pooled together, and used by the insurer to pay losses. Losses are thus shared out among all the policyholders rather than borne solely by the unlucky few. 　　Nowadays insurance not only shares losses among individuals and organizations, it also spreads them over time. This is possible because in years when losses are lighter than expected, insurers can build up reserves (out of premium contributions and their investment earnings) that can subsequently be used in more difficult years. B. Risks 　　Risk is present whenever human beings are unable to control or perfectly to foresee the future. Although we cannot foresee the future, we can to some extent measure it. When we