Insurance is a term used to refer to an action, system, or business in which financial protection (or financial compensation) for the life, property, health and so on gets reimbursed from unforeseen events that can occur such as death, loss, damage or illness, which involves regular premium payments within a certain period of time in exchange for a policy that guarantees such protection. [1]
The term "insured" usually refers to anything that obtains protection. [1]
Insurance under Law no. 2 Th 1992
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The agency that channels risk is called the "insured", and the body that accepts the risk is called the "insurer". The agreement between the two bodies is called policy: it is a legal contract that explains each protected terms and conditions. The fees paid by the "insured" to the "insurer" for the borne risk are called "premiums". This is usually determined by "insurers" for future claimable funds, administrative costs, and profits.
For example: a couple buying a house for Rp100 million. Knowing that losing their homes will lead them to financial ruin, they take insurance protection in the form of home ownership policies. The policy will pay for the replacement or repair of their houses in the event of a disaster. Insurance companies about their premium of Rp1 million per year. The risk of losing a home has been disbursed from the homeowner to the insurance company.
Insurance in the Book of Commercial Law (KUHD)
Definition of Insurance under the Commercial Code (KUHD), on insurance or coverage of its age, Chapter 9, Article 246: [2]
"Insurance or Coverage is an agreement in which an insurer binds himself to an insured, accepting a premium, to provide reimbursement to him for a loss, damage or loss of expected profit, which he may suffer for an event which is not certain."
Insurers use actuarial science
Insurers use actuarial science to calculate the risks they anticipate. Actuary science uses mathematics, especially statistics and probabilities, which can be used to protect risks to predict future claims with reliable accuracy.
For example, many people buy homeowners insurance policies and then they pay premiums to insurance companies. When a protected loss occurs, the insurer must pay a claim. For some insured, the insurance benefits they receive are much larger than the money they have paid to the insurer. Others may not make a claim. If averaged from all policies sold, the total claims paid out lower than the total premium paid to the insured, with the difference is the cost and profit.
Advantages of insurance companies
Insurance companies also benefit from investments. This is derived from the premium investments received until they have to pay claims. This money is called "float" [need referral] Insurers can get profit or loss from the price of float change and also interest or dividend in float. In the United States, the loss of property and deaths recorded by insurance companies was US $ 142.3 billion in the five years ended in 2003. But total profits in the same period were US $ 68.4 billion, as a result of float.
referece: https://id.wikipedia.org/wiki/Asuransi