BusinessofInsuranceCompanies
Insurancecompaniesdotwotypesofbusiness。Oneisgeneralinsuranceagainstvariousformsofrisk，andtheotherislong—terminsurancewhichismainlylifeinsurance。
Generalinsurerswillagreetopayapersonorcompanyasumofmoneyintheeventofsomethinghappeningornothappening。It’sabigbusinesstoday。Iftheprojectsucceeds，shareholdersinyourcompanywillexpecttobepaidadividend。Ifyouaskaninsurerto
underwriteyourproject，thenhewillrequireapaymentinadvance，apremium。Iftheprojectsucceeds，hekeepsthepremium，butyoudon’tpayhimanythingelse。Payingapremiumtoaninsurerorunderwriterisoftencheaperthanpayingadividendtoshareholders。Iffewerdividendsarepaidtoshareholders，thenmoremoneycanbekeptasretentiontofinancethecompany’snextproject。
Anothertypeofinsurancebusinessisthelifeinsurance。Itdiffersbasicallyfromgeneralinsuranceinthatitisbasednotonriskbutoncertainty—thecertaintythateachofuswillonedaydie。Lifeinsuranceisthebasisofpensionfundswhichprovideforretirementandguardagainstothercontingenciessuchasill—health，butisbestseenbythefinancialeconomistasameansofcollectingmanysmallsavingstoputtogetherintolargeinvestments，inshort，asaformofintermediation。