Insurance companies create value by pooling and redistributing various types of risk. It does this by collecting premiums from everyone that it insures and then paying them out to the few that actually need them.
Insurance companies help consumers manage their risk. In exchange for premiums paid monthly, quarterly or annually, insurance companies offer to pay consumers a sum of money upon the occurrence of a predetermined event.
If the insurance policy covers theft and your car is stolen you should be able to claim from your insurance company for this incident. Each insurance company has a specific claims process so you need to make sure that you are fully aware of how this process works.
Insurance policies can be tailored to suit individual needs. Insurance companies may have in-house agents or they may liaise with brokers in order to provide insurance policies to consumers.
How do insurance companies make money?
By charging through premiums
This is one way that insurance companies make profits. It isn’t however the only way this is done.
By earning investment returns
Insurance companies charge additional costs for administration costs for monthly premium payments. Because money is pooled from numerous individuals, the insurance companies are able to earn money as a result.
What are some of the leading insurance companies in South Africa?
- Alexander Forbes
- Mutual & Federal
- Auto & General
- 1st For Women
- Dial Direct
What do consumers consider when deciding on an insurance company?
How fast claims are processed
This is a major factor, considering the fact that when consumers entrust their risk management to insurance companies it is with the expectation that the companies will facilitate efficient service.
Ease of access to its services
Registration with the relevant insurance regulatory body.