No one likes to pay for insurance premiums, but most people recognize the value of spreading the cost of paying for claims over a wider pool of payees. Some of the more typical subjects for coverage include life, health fire, theft and vehicle policies. The companies that manage these policies help to reduce impact of a catastrophic event to insured individuals. Companies that manage the intake and outgo of funds must work to protect the pool of funds by reducing costs. They must also work to increase the number of policy holders so as to make the individual risk even less. By reducing the need for payouts of claims, the insurers have more funds to work with in order to reduce premiums or to establish more funds for investment.

Insurers take advantage of huge masses of data available in order to define the level of risk for a certain type of policy. The companies can have a role in reducing risk by supporting regulations and laws and by funding research and treatments. Companies can also reward actions of policy holders to reduce the level of risk in homes and vehicles. Risk management related to vehicles might include providing lower rates for adding seat belts, air bags, anti-lock brakes to manufacturers' list of required equipment.

Vehicle owners might get discounts if they use after-market devices such as anti-theft devices. In the event of an unauthorized use of a vehicle, policy holders can track the automobile using GPS technology. Some systems will render the car inoperable so that it can be retrieved by the proper authorities. In some cases, the thief is locked into the car until authorities arrive to detain him or her.

Risk management for health policies can take an entirely different path. The insurers might take an active role in education about cardio-vascular disease, diabetes or early cancer detection and treatment. Long term activities could be to fund research efforts to find cures or treatment of diseases.

Risk management for homeowners and renters might include rewards in the form is reduced cost on policies. If the homeowner installs a smoke detector or a fire alarm, risk of fire damage is lowered so premium costs can be lowered. Intruder alarms help to prevent loss from burglary or vandalism in the home.

Managing risk is an important part of the function of insurance companies. They need to control costs in order to increase the funds available in the capital pool. Risk reduction also works to reduce the cost to the insured.

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Article Submitted By: Lonnie Nuckols
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