Introduction
Insurance companies have been known to prefer large companies for business. The companies would rather indulge in companies that are massive in size. What appears to be the universal rule for many insurance companies is that the bigger the size, the more preferable a client will be. Many reasons can be used to explain the position taken by these insurance companies. However, the one fundamental factor that controls how business is done is the force behind this notion; money. It is evidenced that big businesses result in big money.
The insurance firms are likely to enter into a contract with large enterprises instead of a small group of people because in large companies there are many employees, and the risks are spread. For every insurance contract, the first prerequisite is the risk assessment. In large companies, the risk can be widely spread among the large number of workers. The spreading of the risk makes it possible for the insurance firm to gain from the insurance policies that are set by the insurance firm. According to Neelam Gulati in his book principles of insurance management, the first and primary thing an insurance company does in a contract of insurance is the evaluation of the risk (53). It is more likely for the insurance company not to gain when it comes to small groups of individuals than big corporates.
When dealing with large firms that offer employment based work, the insurance deals with fixed marketing expenses. In that case, the number of the insured is known and also the cost is mainly incurred in reference to the firm rather than the individual. In the case the workers increase than the cost will just be spread. The insurance companies in their planning will just have to include the cost in a general manner when it comes to dealing with large organizations. On the other hand, when dealing with minute groups of individuals, the insurance company is likely to experience variable costs. The insurance firm will not know how to budget for the cost and may be at risk of spending more on marketing cost than expected.
Large firms have a large number of employees. For insurance firms, a large number of workers translate to a higher premium at the end of the insurance policies. The gains for an insurance company come from premiums and also it is easy for insurance companies to cover a risk when they have enough to cover the risk. Large firms offer increased premiums for the insurance firms as compared to a small group of individuals (Bourhis, Ray, 20). On the same note, insurance companies use the concept of pooling together funds to cover a loss that occurs when a risk happens. If the insurance company deals with larger companies, it is in a good condition to be able to cover losses.
For insurance firms, they have to consider the size of the farm and also the number of people involved. According to the article by congressional budget office, key issues in analyzing major health insurance policies (7), the insurance would most probably choose large firms. The reason is that there are policies that the large firms offer the workers that the government does not regulate. In that, there will be less or no regulations. On the other hand, for policies that are offered by all kinds of firms or a small group of people there is vast federalism and regulations that may not be attractive to the insurance firms.
Lastly, for large companies with many workers in most cases the employer deducts the amount of premium to be paid and sends them to the insurance firm. They have an easy time when dealing with large firms due to the set bureaucracies. Small group of individuals may not have set rules that make it easy for insurance companies to collect the premium.
Conclusion
Work cited
Bourhis, Ray. Insult to Injury: Insurance, Fraud, and the Big Business of Bad Faith. San Francisco, Calif: Berrett-Koehler Publishers, 2005.
Congress, congressional Budget office. Key issues in analyzing major health insurance proposals. 7-8. 2008
Gulati, C.N. Principles of Insurance Management. 53. New Delhi Excel books 2007
