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Insurance - the definition of insurance, the origin of insurance and its types

Definition of insurance:

There are many definitions of insurance, and these definitions, in fact, are of great benefit to insurance, since by studying these definitions with each other, finally a complete and comprehensive definition of insurance is arrived at.

Definition of legal insurance:

A distinction must be made between three different legal categories when examining the definition of insurance for jurists, and these categories are the courts, the legislator, and the jurists. Courts generally avoid defining insurance based on the legislator's definition of it.
The Egyptian Insurance Legislature defines in Article No. (747) a civilian as follows:

"The insurance is a contract by which the insurer is obliged to pay the insured or the beneficiary in whose favor the insurance was stipulated an amount, a paid income or any other economic compensation in the event of an accident or risk indicated in the contract. made in exchange for a premium or any economic payment that the insured has made to the insured.

The previous definition focuses on the legal aspect regarding the parties to the contract and the obligations derived from it. Regarding the definition of insurance, Dr. Muhammad Ali Arafa knows it in his book (Explanation of the New Civil Law on Insurance and Small Contracts) as follows:

"Insurance is a technical process practiced by an agency whose task is to collect as many similar risks as possible and assume their consequences by compensating each other and in accordance with statistical laws. This requires that the trustee or whoever is designated in case of insured risk make an economic compensation paid by the insurer in exchange for the first fulfillment of the quotas agreed in a Secure document.

The previous definition is characterized by a focus on the technical aspect on which the insurance is based, in addition to the legal aspect, since the definition clarified that the insurance process is the collection of similar risks and the distribution of the losses derived from them using statistical methods and determining the commitment of both the insured (the insurance premium) and the commitment of the insurer (compensation).

Definition of insurance economists and actuaries:

Economists focus in their definition of insurance on income, wealth and the impact of risks and accidents on them, whether due to scarcity or annihilation, and on the other hand actuaries are interested in introducing them in the measurement methods and in particular with regard to the probability of occurrence of the accident and the expectation of loss.

A system whereby a large and uncertain financial loss (the value of the entire insurance object) is replaced by a confirmed small financial loss (the insurance premium), or in other words, a preference for confirmation over uncertainty.

Definition of insurance professionals:

Insurance has been defined by many insurance professionals, and it is noted in all these definitions that they differ in some sub-aspects, but are consistent in the essence of the insurance process, and we will present the following most important definitions:

1. (Insurance is a means to compensate the individual for the economic loss that occurs as a result of the occurrence of a certain risk, distributing this loss to a large group of people, all of whom are exposed to this risk, according to prior agreement ) (Professor Ahmed Gad Abdel Rahman).

2. (Insurance is a system that reduces the phenomenon of uncertainty present with the trustee by transferring several specific risks to the insurer who undertakes to indemnify the insured for all or part of the economic loss incurred) (Dr. Salama Abdullah ).

3. (Insurance is a method by which the risks to which a group of people and establishments are exposed are collected by collecting contributions that are considered as capital from which compensation is paid and that works to reduce risk) (Williams and Haynes).

4. (A social system to replace uncertainty with certainty by collecting risks) (CALP).

5. A project to reduce the uncertainty of the insured by transferring the burden of certain risks to the insurer, who undertakes to compensate the first, even partially, for the economic damage he has incurred (this is recognized).

6. A social system that provides financial compensation for the effects derived from dangers, and these compensations are paid with the result of the contributions collected from all the members participating in the system (Hensel).

From the above, a complete definition of insurance can be reached:

"Insurance is a system that aims to reduce the risk faced by the individual or establishment and in which the insured obtains a commitment in his favor or in the interest of others of the other party, which is the insurer, by virtue of the which pays a certain amount to the realization of the risk in exchange for the payment of the insurance premium, provided that the insurer collects similar risks and predicts the value of financial obligations derived from its realization. "

The most important feature of the above definition is that it combines all the main features of insurance, which are:

A. Accumulate losses
B. Risk deviation
C. Compensation for accidental losses

The origin and development of insurance

Observers of the emergence and development of insurance find that insurance began as a cooperative system that included people exposed to the same risk with the aim of reducing the value of this loss from the shoulders of the person who joined it by distributing this loss to all the people who participate in this cooperative system, and these people often know each other. Some people live in the same area and have a common interest.

Historians mention that the ancient Egyptians were the first to practice insurance in this cooperative way through funeral societies that were widespread at that time. These sums were provided by funeral societies that existed at the time.

It was mentioned in Ibn Khaldun's introduction that the members of the trading caravans agreed among themselves to share the loss suffered by any of them as a result of the death of a camel during the winter and summer journey, and the loss was distributed among the members of the trip, and they also agreed to compensate those who lost their trade with them as a result of the death of their camels. Previous method.

Marine insurance is considered the oldest of all types of insurance, which is why it is known that merchants practiced this insurance more than seven hundred years ago, during ship loan operations that were widespread at that time, so Shipowners were loaned money equivalent in value to the price of the ship and the goods it carried on the basis of which it was established. The borrower must repay this loan in addition to 20% to 30% of its value in case the ship arrives safely at the port of arrival, but if the ship sinks, the owner is not obliged to return anything.

Regarding life insurance, historians mention that the first document was issued in London in 83 AH 1, and it is worth noting that life insurance was present in the presence of marine insurance, as some marine insurance documents in The ship also included life insurance for the captain and sailors. It is known that the advantages that funeral societies provided to the ancient Egyptians were nothing more than a form of life insurance.

In terms of fire safety, it received great attention after the famous London fire that occurred on Friday, September 2, 1666 AD, which lasted four days and nights and caused the destruction of about 8% of the city's buildings in that moment. The losses caused by this fire were estimated at some £ 10 Million.

As for personal accident insurance, it flourished and its importance appeared as soon as trains, cars and airplanes appeared, and it can be said that the interest in personal accident insurance was at the end of the first half of the 19th century.

The rise of insurance in Egypt:

Insurance did not appear in Egypt until the early 19th century, and when the West learned its way to Egypt and the independence of its economies, most types of insurance entered Egypt to serve its interests in the region, and that was with the beginning of the second half of the 19th century and this situation continued until the year 6 AH 19, and in the year 7 AH 19 The Egyptian Reinsurance Company was established to carry out reinsurance business in the Egyptian market with a capital of half a million pounds. Then Law No. 117 of 1961 was enacted to nationalize all insurance companies so that their property could pass to the state and the General Insurance Corporation of Egypt was established. National insurance companies and existing companies became (Misr Insurance Company - Al Sharq Insurance Company - Al Ahlia Insurance Company - Egyptian Reinsurance Company) and then private sector insurance companies appeared to practice insurance, namely (Suez Canal Insurance Company - Al Mohandes Insurance Company - Delta Insurance Company - The Company Pharaonic Insurance) Then joint insurance companies appeared in light of economic openness, which are (Egyptian American Insurance Company - Arab International Company for Insurance in Free Zones - African Reinsurance Company yen).

Types of insurance:

Insurance can be divided into several forms, each of which differs depending on the primary purpose of the investigation and the investigator's view of insurance operations. The following are the most important divisions a person can find in the insurance field:

Theoretical insurance division:

Insurance can be divided according to the body that carries out the insurance activity into two main types:

A. Private insurance:

This type of insurance includes all fields of insurance that are not practiced by the government but are practiced by agencies or companies, and this type of insurance includes the following types:

1. Personal insurance:

It is that type of insurance that is related to the person of the trustee and covers the risks that cause a decrease in the future income of the person or in the ability of the person to earn money, and is divided into two parts:

First section: Life insurance:

There are three types:

• Life insurance.
• Death insurance.
• Life and death insurance together.

Section Two: Injury Insurance:

It is divided into two types:

• Personal Accident Insurance.
• Health insurance.

2. Property insurance:

These are the types of insurance that cover risks where the object of the insurance is human property, including:

Marine insurance - fire insurance - theft insurance - livestock insurance - glass breakage insurance - property insurance for earthquakes, volcanoes, disturbances, revolutions and wars - insurance of agricultural crops against rains and natural phenomena.

3. Liability insurance:

These are the types of insurance that cover liability risks, the most important of these types are the following:

• Civil liability insurance for car, boat and aircraft owners.

• Ensure the civil liability of the owners of public places such as cinemas, theaters, restaurants and hotels.

• Work accident and occupational disease insurance.

• Civil liability insurance for owners of buildings, premises and garages.

• Civil liability insurance for contractors.

• Obtaining civil liability for food producers and distributors.

• Secure civil liability for those in the liberal professions such as engineers, accountants, doctors, beauty salon owners, pharmacists, and others.

• Ensure the owner's civil liability to the neighbors for the damage caused by a fire that broke out in his building and spread to the buildings and properties of the neighbors.

• Insure the tenant's civil liability before the landlord for damages caused by a fire in the premises that were rented to him.

B. Government insurance:

It is all insurance with which the State interferes with the intention of subsidizing it or imposing it obligatorily to protect a certain group, such as the compulsory insurance against automobile accidents, social insurance where the state participates in defraying part of the costs in addition to the part of the employer and the worker. Government social insurance includes disability, death, old age and social health insurance.

The practical division of insurance

In England, insurance is divided into four types:

1. Life insurance
2. Fire insurance
3. Marine insurance
4. Accident insurance

As for the situation in the United States, the division differs from state to state, and all species are generally placed in two different groups:

C. Insurance groups of people:

It includes individual and group life insurance, industrial life insurance and disability insurance.

Group B of property and civil liability insurance:

These include fire insurance, marine insurance, civil liability, breach of trust, credit insurance, theft, glass breakage ... etc.

Types of insurance in Egypt

In Egypt, Law No. (10) of 1981 on supervision and control of the insurance sector in its first article, which was modified by Law No. (91) for 1995, defines the different branches of insurance as follows:

First: Personal insurance and fund formation operations, which include the following branches:

1. Life insurance of all kinds.

It refers to all insurance operations in which the risk of the insured is related to the life of the people and their purpose is to pay sums for the death of a specific person or for their permanent or partial total or partial disability or for having reached a certain age or a pension guarantee paid to him or his beneficiaries for life or for a specified period. It also includes life insurance, the benefits of which are related to investments in securities.

2. Personal accident insurance and long-term medical treatment, including:

A. Long-term personal accident insurance:

It refers to all insurance operations whose term is greater than one year and in which the insured risk is related to the person and is the consequence of an accident that results in death or disability.

B. Long-term medical treatment insurance:

It refers to all insurance operations whose period exceeds one year and is intended to grant cash benefits to the insured in cases of disability due to illness, as well as to cover the costs of medical treatment.

3. Fund formation operations.

 It refers to all operations whose purpose is to form capital to be spent on a certain date in exchange for periodic fees or installments without this being related to life or death prospects.

Second: Property and civil liability insurance that includes the following branches:

1. Insurance against fire risks and the insurance usually attributed to it.
2. Insurance against risks of land, river, sea and air transport, and liability insurance related thereto.
3. Insurance of ship hulls, machinery, tasks and liability insurance related to them.
4. Aircraft hull, machinery and equipment insurance and related liability insurance
5. Automobile insurance and related liability insurance.
6. Engineering insurance, liability insurance related thereto, and the insurance customarily attributed to it.

7. Oil insurance includes the following types:

A. Safe against the dangers of drilling and exploration.
B. Insurance against the risks of petroleum manufacturing and refining.
C. Insurance against the dangers of pumping oil into pipelines.
D. Comprehensive insurance for oil installations at all stages.
M. Insurance against the risks of loss of income from oil installations.
F. Liability insurance related to previous risks.