INTRODUCTION TO INSURANCE

What is (business) risk ?

 The activity of protecting and profiting from corporate
resources and assets (Association of Insurance and Risks
Managers)
 An event or action that may adversely affect the
organization’s ability to maximize stakeholder value and to
achieve its business objective. Business risk arises as much
from the possibility that opportunities won’t be realized as it
does from possibility that threats will materialized(Ernst &
Young)
 Anything that prevents your organization from achieving a
corporate objective Dynamic entities won’t avoid risk,
but they will identify, measure and manage it on an
going basis, helping increase shareholder value
(KPMG)
The concept of risk
 Business always faces risk
 Risk could be handle personally by the company or
transfer to the other insurance company
 Transfer of risk is the basis of all insurance (doing
by Lloyd’s since 17th century)
Risk = resiko
 Sesuatu yang pasti terjadi
 Bersifat tidak pasti (uncertain)
 Tidak diketahui berapa besar
 Tidak diketahui kapan terjadi
 Mempengaruhi pencapaian tujuan bisnis
Type of Risk
Pure vs Speculative
 Pure risk : suatu ketidak pastian terjadi pasti
menimbulkan kerugian/tidak ada kemungkinan
menimbulkan keuntungan mobil rusak karena terbakar
 Speculative risk : suatu ketidak pastian terjadi bisa
menimbulkan kerugian atau keuntungan=>investasi, judi
Static vs Dinamic
> Static risk (bisa murni atau spekulatif ) berasal dari
masyarakat yang tidak berubah yang berada dalam
keseimbangan stabilpetir, topan
lanjutan
 Resiko dinamis terjadi karena ada perubahan dalam
masyarakat(bisa murni/spekulatif)urbanisasi, TKI,
pilkada/pemilu
Subjective vs Objective
>subjektif : berkaitan dengan kondisi mental seseorang
yang cemas/ragu2 akan kejadian tertentu(bisa
murni/spekulatif; bisa statis/dinamis)=>menafsir
perilaku individu menghadapi situasi yang akan
terjadi
>objektif : lebih mudah diamati/diukur dgn probablita
penyimpangan aktual dari yang diharapkan
What is risk management
 A coordinated process for measuring and managing risk on
a firm wide basis ( The New York Federal Reserve)
 The threat that internal and external events will adversely
affect our ability to achieve or goal and hence impact value
creation(Stephen Barlow at Prudential)
 About taking risk knowingly not unwittingly. An effective
RM structure allows an organization to understand
the risk in any initiative and take informed decision on
whether and how the risk should be managed.
 Corporate governance and RM is about how an
organization can better understand its risk to improve its
performance and deliver its objectives (KPMG)
 Risk Management Process
 Identify risk
 Measure/evaluate risk
 Select the RM techniques
 Implement and review techniques
>Risk identification
>Risk measurement
>Risk financing
>Risk control
What is insurance
 Is the main way for business and individual to reduce
the financial impact of risk occurring
 Risk => insurable risk and non insurable risk
 Insurable risk :
-measureable in financial term
-exist in a homogeneous groups
-probability of loss must be calculable
-must be accidental and beyond the control of
insured
> non insurable risk : war risk, earthquake
 is the pooling of fortuitous losses by
transfer of such risks to insurer, who agree to
indemnity insured for such losses, to
provide other pecuniary benefits on their
occurrence, or render services connected
with the risk (American Risk and Insurance
Association=ARIA)
ASURANSI (UU No 2/1992 )=NEW
LAW
• Asuransi atau pertanggungan adalah perjanjian
antara dua pihak atau lebih, dengan mana pihak
penanggung mengikatkan diri kpd tertanggung dgn
menerima premi asuransi, utk memberikan
penggantian kpd tertanggung karena kerugian,
kerusakan atau kehilangan keuntungan yang
dharapkan atau tanggung jawab hukum kepada pihak
ketiga yang mungkin akan diderita tertanggung, yang
timbul dari satu peristiwa yang tidak pasti, atau
untuk memberikan suatu pembayaran yg didasarkan
atas meninggal atau hidupnya seseorang yang
dipertanggungkan.
 4 KARAKTERISTIK
1. Pengumpulan kerugian (pooling of risk)
2. Pembayaran kerugian yg terjadi secara
kebetulan (payment of fortuitous losses)
3. Pengalihan resiko (risk transfer)
4. Ganti rugi (indemnification)
Dari UU No 2/1992:
- Usaha asuransi umum/kerugian
- Usaha asuransi jiwa
- Usaha reasuransi
Cont’d
 Management resiko(risk management)proses yang
bersifat sistematis dalam mengelola(to manage) ancaman
resiko
 RM is the overall process which defines the strategy to
identify and manage risk Three important aspects :
integrated, embedded, enterprise wide (Pamela Shimell,
The Universe of Risk)
 Integrated Risk Management or Enterprise Risk
Management yang menggambarkan keinginan/kesadaran
pentingnya untuk mengelola semua resiko dalam
perusahaan karena berpengaruh terhadap pencapaian
tujuan perusahaan
 HISTORY OF INSURANCE
 1666 : the great fire of London prompts the formation
fire insurance
 1688 : the beginning of Lloyd’s the insurance market
in coffee house in London
 1752 : Benyamin Franklin sets up the “Philadelphia
Contributorship”, the 1st insurance company in US
 1871 : The society of Lloyd’s is incorporated with Lloyds
Act
Cont’d
 1871 Otto von Bismarck’s liability law paves the way for
collective accident insurance for workers, a few years
later he introduce state accident insurance and
mandatory health insurance
 1906 : San Francisco earthquake
 1912 : The sinking of Titanic
 1992 : Hurricane Andrew produces biggest natural
catastrophe losses ever
 2001 : Terrorist attacks on Sept. 11, result the biggest
insurance losses in history
How insurance works
Business/company (B/C) ---- Insurance company (IC)
- IC takes the risk on behalf of the company or
individual
- B/C pay a fee
- insurance contract among IC and B/C policy
 Premium
 Underwriter : to evaluate whether to provide insurance
cover or not
 Reinsurance : insurers insure a risk again (depend on
size ad complexity of the risk)
 COMPANY

premium no contract
polis

INS CO RE INS
premium
Importance of reinsurance
 To protect an insurer against very large claim
 To reduce exposure to ‘peaks and troughs’
 To obtain the international spread of risk
 To increase the capacity of the direct insurer
The end of 1 st session
Source of Growth
 Present product New Product

Present Penetration Product dev

Market

New Market Dev Diversification

Market

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SWOT
 O

 stabilization growth

W S

 survival diversification
T
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