Group 1&2&4 Material for Aspirants !!
Insurance was introduced in the United States of America around the time all the states were merged into a single nation and the insurance sector have been growing tremendously since then. The first ever insurance company in the U.S was The Philadelphia Contributionship co-founded by Benjamin Franklin and he was Americas’ first insurer (Beattie, 2019). The company started off with providing fire insurance being the first type of insurance offered to the public and as time progressed numerous types of insurance were developed based on the new risks that had arisen in the modern business (The Philadelphia Contributionship, n.d.). Currently the insurance sector in the United States is broadly classified into ‘Life & Health’ and ‘Property & Casualty’.
Life insurance is a contract where the insurer guarantees to pay a death benefit to the beneficiary of the insured party upon the death of the insured party in exchange for a premium either paid as a lump sum or in instalments to the insurer by the policy holder. The first life insurance policy was introduced in the U.S seven years after the introduction of fire insurance policy (Beattie, 2019). The types of life insurance in the U.S can be broadly divided into permanent and term life insurance. As the name suggests permanent life insurance is for the whole life and term life insurance provides coverage for a specified period of time. The insurers are always on the look out to sell policies which transfer the risk of policy to the insured party and thus more interested in term life and universal life policies which transfer the risk to the insured party unlike the whole life policy (McFie, 2018)
Some of the major leading life insurance companies in the U.S are the Northwestern Mutual, New York Life, MetLife Inc., Prudential Financial etc. The source of revenue for these companies is the collection of premium from the policy holders. Additionally, these companies reinvest these collected premiums in other low-risk investments and earn interest from it.
The excess of revenue and interest over the claims and expense will be accounted for as profits in the books (Aggarwal, 2017). However, these companies have shifted their focus to underwriting of annuities instead of the usual traditional life insurance. Such annuities allow the policy holders to earn a fixed or variable income stream for a specified term or whole life (Insurance Information Institute).
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