Insurance is a vital aspect and an extensive industry in the market. Its main function is to protect against future risks and losses for instance accidents, fire, floods, disability; health related issues, as well as death. It can also be detailed as a financial protection against any risks that may arise in an uncertain future. The insurance industry is wide and covers various areas of the economy for instance transport, health and even businesses among others. Traditionally, insurance has been characterized as covering two types of risk. The first is pure risk, which is one that has only a single chance of loss. For instance financial losses incurred from medical expenses. In such a situation, there is no chance of benefit. Another example of risk that requires insurance is speculative risk. For instance, the market value of a building would be influenced by trends in the market and their speculative nature. Insurance industries have different plans that make sure that everyone is able to receive an insurance cover. This would be depended upon the individual’s age group or even level of income among other factors (Kongstvedt, 2001).
Insurance helps to lower risks because of the policy that it entails. The risks involved are lowered because the costs that might be incurred because of the risks are distributed. One concept that can be used to explain this is the moral hazard. Moral hazard arises whereby insurance changes the moral behavior of the insured individual or organization. For instance when a house is insured, the individual paying for premiums would try to reduce the risks. This can be through taking fire safety measures in the house as well as insuring that flammable materials are not left in places that could make it a fire hazard. Another example is the case of care providers. The direct payments act as an insurance cover to care providers during the course of their work. Thus, the local council enables care providers to have a form of insurance cover for their safety during times of emergency and this lowers the risks they might face. This is a form of payment usually applied in the UK (Thomas, 2000).
Medical insurance
Medical insurance is a type of insurance that deals with the health of individuals. This type of insurance helps to cover the medical expenses that would be incurred in case of illnesses. Thus, when an individual is insured, they save a certain amount of money in a stipulated pattern. The insurance company collects this money, and when the individual suffers any medical condition that requires funds, then the insurance company pays for these costs (Thomas, 2000).
The health insurance industry makes sure that everyone can have access to medical services based on the fact that they have saved enough money to pay for the medical services. The industry also has in place measures like the Health maintenance Organization (HMO), which is composed of a group of doctors, hospitals as well as medical practitioners who offer health care services at a flat monthly rate. This cost of health care is less using this method in comparison with the traditional health insurance. This is because HMO is in contract with specific health care providers and deals with a large number of patients. This way, it is easier to negotiate as a representative of the patients making health care services cheaper for them. It also utilizes preventive medical health care which has long term benefits. Therefore, it ensures every citizen has access to medical services because of the medical cover (Kongstvedt, 2001).
The health insurance industry in general is composed of private and non-governmental companies that provide cover for most citizens especially in the United States. Other people also get their health cover from employers and the government, which runs some health insurance companies (Schoen, 2010).
Different structures (of health insurance) in various countries
Insurance companies are also organized in a way to make sure that they provide cover irrespective of the backgrounds of whoever wants to be insured. One such example is Medicare, whereby the industry is comprised of a public program. This program is applied in the US and can be described as a public program. Health insurance does not only cover social programs of insurance but also covers such medical risks like disability or long-term care of the elderly. This type of medical insurance also takes care of the health expenses of the dependents under its cover. This health program also covers patients who have terminal renal failure, in addition to those who have permanent disabilities. From research, it has been realized that this type of cover has led to the improvement of the health of patients, especially those with chronic illnesses (Schoen, 2010).
Israel also has another effective medical insurance cover. The majority of those covered by insurance programs is students. This is because the number of seminary students is higher in comparison to other countries like the US. Furthermore, these students face more medical conditions within the country thus the need to be insured. This fact will explained later on in detail. Thus, the type of insurance applicable should be comprehensive. This way, it will be able to cater for all students in case of illness. The students are exposed to various medical conditions and Health maintenance Organization (HMO), which is composed of a group of doctors, hospitals as well as medical practitioners who offer health care services at a flat monthly rate, would be the best insurance plan applied to cover the students thus reduce costs (Pearson, 2006).
Business model for the insurance company
Insurance companies follow various business models based on the fact that they are also formed in order to gain profits. Insurance companies in the world over have increased their premiums because of the global economic crisis. The structure of most insurance covers is in a way that funds are saved so that when losses are incurred, the funds saved are given back to the insured party so that they can go back to their original position before the losses. The structure is also formed in a way to make certain that the business or individual insured is based on their degree of exposure to risk. The rates involved would be higher if the risks that the business would face are high. Those with lower risks will pay less in terms of premiums as determined by the insurance company. With that in mind, insurance companies follow a model whereby the premiums they charge are influenced by external factors like the economy and the risks involved (Carrin, 2008).
One of the business models applied by insurance companies is by the provision of private insurance covers. This is a direct insurance cover that individuals purchase to cover themselves. The individuals decide the kind of policy that suits them most. For example, an individual who is a traveler would look for travel insurance that covers all their trips. This can be through a temporary travel insurance to cover the exact duration of the trip or multipolicy that covers the passenger for unlimited trips (Carrin, 2008).
The role of government
There exist some cases whereby governments run insurance companies. Thus citizens are able to get cover from the government. One such program is Medicaid. It is a program under the health insurance industry funded by both the states and the federal governments but it is applied at the state level. This program is to benefit individual who have low incomes. It provides health care to children and families that have low incomes. This program can be described as a form of social welfare since it provides healthcare to the poor in the society (Pearson, 2006).
In conclusion, insurance is an extremely significant aspect since it helps to cushion against the adverse effects that could result from risks and losses. Therefore, it is a highly significant element to ensure economic development and sustainability of an individual’s existence and their dependants as well.
References
Kongstvedt, P. (2001). The Managed Health Care Handbook, Fourth Edition, Aspen Publishers.
Thomas P. (2000). Individual Medical Expense Insurance. The American College.
Schoen, C. et al. (2010). How Health Insurance Design Affects Access to Care and Costs, By
Income, In Eleven Countries. Health Affairs.
Pearson, C. (ed). (2006). Direct Payments and Personalization of Care. Edinburgh: Dunedin
Academic Press.
Carrin, G. et al. (2008). Universal coverage of health services: tailoring its implementation.
Bulletin of the World Health Organization, 86(11), 817–908.
