Definition of Insurance - E-JOURNAL
There are several definitions of insurance. The word insurance is taken from the Dutch assuratie. The word is not a native Dutch term but comes from the Latin assecurare which means convincing people.
The definition of insurance in the Commercial Code Article 246 according to Dahlan Siamat in his book Management of Financial Institutions is: “Insurance or guarantee is an agreement, whereby an insurer binds himself to an insured, by receiving a premium to compensate him for a loss. , damage, or loss of expected profits, which may occur due to an unspecified event” (2004).
Another definition of insurance in Law no. 12 of 1992 concerning Insurance Business according to Dahlan Siamat in his book Management of Financial Institutions is: “Insurance or guarantee is an agreement between two or more parties, whereby the insurer binds himself to the insured, by receiving insurance premiums, to provide compensation to the insured due to loss, damage or loss of expected profits, or legal liability to third parties that may be suffered by the insured, arising from an uncertain event, or to provide a payment based on the death or life of an insured person” (2004).
Another understanding of insurance, according to Mark R. Green translated by Soeisno Djojosoedarso in his book Principles of Insurance Risk Management, is: “Insurance is an economic institution that aims to reduce risk, by combining in one management a number of objects that are quite large in number, so that the loss is completely predictable within certain limits” (2003).
Meanwhile, according to Herman Darmawi in his book Risk Management, insurance can be defined from two angles, namely: “First, insurance is protection against financial risks provided by the insurer. Second, insurance is a tool for combining risks from two or more people or companies through actual donations. or who are promised to establish a fund to pay claims” (2000):
From the definition of insurance above, it can be concluded that:
- An insurance company is an insurer who is entitled to receive a premium as payment from the insured, where this premium is used to carry out its obligations, namely paying compensation to the insured.
- The insured party has the obligation to pay a premium to the insurance company as a sign of transferring the insured’s risk to the insurer, and is entitled to compensation from the insurer in the event of the required adverse events.
- Insurance is a financial institution that underwrites the risks of other parties.
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