I.

II. Risks in the insurance business

 Insurance risks are risks related to the ability of an insurance company to incur losse due
to premiums collected that are insufficient to cover the costs of compensation for
insurance event.
 These risks relate to all processes in an insuance company, each with a different
likelihood and degree of impact: risks in insurance (provisioning, reinsurance), asset risks
(market, credit, liquidity) to operational risks (product development, sales and
distribution, exploitation, compensation)…
III. Principles of commercial insurance operation
1. Absolute honesty/almost good faith
 This principle is reflected right from the time the enterprise researches to draft an
insurance contract to the issuance, exploitation of insurance, and implementatioon of
business transactions with customers (insurance participants).
 First of all, this principle also requires insurance participants to be honest when declaring
risks in insurance participation to help insirance enterprises determine the appropriate fee
for the risks they undertake.
 In addition, fraudulent acts ainmed at profiteering insurance when notifying and declaring
damages for compensation will be handled by the law.
 Besides, the principle of absolute honesty re quires insurance enterprises to be
responsible for considering conditions and terms to draft contracts to ensure the interests
of the two parties. The product provided by the insurance is a product of service, so when
buying, the insured cannot hold it in his hand like other material products to evaluate the
quality and price… but can only get a contract promised to secure.
1. Absolute honesty
 Whether the quality of insurance products is guaranteed or not, whether the price
(premium) is reasonable or not, whether the insured’s benefits are fully and fairly
guaranteed or not … are mainly based on the honesty of insurance company.
 In additon, the insured must also be abliged to accurately and truthfully declare the
information in the insurance policy.
 This imformation is always the basis for determining insurance premiums for each
insurance object.
2. The sharing of the majority to the less
 Insurance in general, commercial insurance in particular, creates a “ majority contribution
to the misfortune of the few on the basis of bringing together many people with similar
risks into communities to disperse the financial consequences of losses
 The larger the number of participants, the more dispersed the losses, the less the risk
minimized as shown in the minimum premium payable so that each person does not
significantly affect his or her productive activities,
 Since the compensation is often much greater than the fee, commercial insurance must be
based on this principle: Accordingly, the consequences of the risk that occurs to one or a
 few people will be offset by the money raised from many people who are likely to be at
the same risk.
3. The principle of insurable interests.
 This principle requires the insured to have a financial benefit lost of the insured object is
at risk. In other words, the insured must have some relationship with the insured and be
recognized by law.
 The relationship can manifest itself through ownership, possession, use, property rights,
custody and alimony rights and obligations for the insured objected.
4. The principle of risk dispersion.
 One expenrience in the operation of commercial insurers is not to take too great risks,
beyond the financial capabilities of the company. However, to avoid the taboo of refusing
insurance, while ensuring business operation, insurance companies apply the princple of
risk dispersion
 There are two risk dispersal methods used by insurers: coinsurance and reinsurance
 If in coinsurance. Multiple insurers receive the same guarantee for a major risk,
reinsurance is a method in which one insurer receives a guarantee for a major risk, then
cedes a portion of the risk to one or more other insurers.