Life insurance is a social economic system that works on cooperation, solidarity, solidarity and interdependence among the participating members by collecting and redistributing risks in a sound scientific system to reduce the burden of loss on the individual who is harmed
It is also an organized means of saving that works to develop the individual’s savings, and it is a system similar to an organized savings system, as the individual’s way to stop paying installments is linked to the provisions and rules of the organization, which makes these savings less vulnerable to risk, and thus life insurance works to develop and strengthen the elements of safety and provide long-term and continuous protection This is what makes it different from saving in banks or banks.
Life insurances are medium or long-term insurances, and the term of insurance in them ranges between ten years or more than thirty years – and this results in the need for insurance companies to form reserves provisions called mathematical reserves, and these reserves as a whole make up huge funds available for medium or long-term investment, and therefore Persons or life insurances have economic and social importance from the economic point of view, and the insurance sector, such as banks and banks, has huge funds from the savings of policy holders, and these funds are available for investment and play an important role in the country’s economy where policyholders’ funds can be invested in many purposes of development, taking into account the actuarial foundations And the principles of insurance and investment rules. The investment of these funds results in profits for the rights of policyholders, which are disbursed to them over the extension of the insurance period.
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These investments are considered rights of policy holders and not rights of shareholders. Therefore, the General Insurance Supervisory Authority was interested in developing laws and legislation that regulate the foundations and employment of the insured’s funds – and clarified the investment channels that can be invested in and the rates established for each type of investment so that these funds are not exposed to the risk of loss .
Life insurance or people’s insurance works to counter inflation and the lack of purchasing power of the currency, as the profits that are disbursed to policyholders work to compensate the insured for the shortfall that arises from the devaluation of the currency.
The importance of people’s insurance is focused on the elements of risk that result in loss of income due to death, reaching a certain age, or a long or limited period, as is the case in cases of illness, total disability, permanent penalty that is terminated for service, or any work that an individual can do.
Life insurance is divided into two main sections, which are individual life insurance and group life insurance, and each of these two sections has its characteristics, types and advantages, but each of them serves the same purpose, which is to provide insurance protection for the individual in the event of low or interruption of income in cases of death, illness, disability or old age. Each of them works to create the financial savings that a person needs on special occasions, such as marriages, school expenses, medical expenses or illness.
Individual life insurance
In terms of insurance coverage, individual life insurances are divided into two main parts: the first part is temporary insurance and the second is savings insurance.
Temporary life insurance
Its purpose is to compensate the insured in case of death during the insurance period by disbursing the amount of the insured insurance. This type of insurance is characterized by a low premium , and this type has no liquidation or recovery value, and it is in the same ruling as insurance against theft accidents or car insurance ends with the expiry of the policy period and the duration of the policy varies. Insurance in this type is between one and 30 years old, or when the insured reaches a certain age, such as 60, 65 or 70 years.
One of the most important types is temporary decreasing insurance, in which the insurance begins with a large amount, let it be ten thousand pounds, then decrease annually, let it reach zero after ten years (for a ten-year document). This type of insurance is suitable as a guarantee for loans in the case of buying a house or a car in installments, as it guarantees The document in this case pays the rest of the premiums that must be paid to the lender in the event of the death of the female insured, and there is another type of temporary insurance, which is the increasing temporary insurance, where the insurance starts with a small amount, let it be five thousand pounds, and then increases annually at a rate of 1000 pounds, for example, to reach 25 thousand EGP after 20 years (for a twenty-year policy) and this type of insurance is proportional to the cases in which the risk of death at the start of the insurance is high (after a surgery, for example) and the risk decreases by continuing the insurance period
Savings insurances, the most famous of which are life-long and blended insurance. This type of insurance combines insurance and savings, and the difference between life insurance and blended insurance is that blended insurance has a fixed term, let it be 10, 20 years. As for life insurance, it continues throughout the life of the insured, where the sum of insurance is paid in the event of the death of the insured. It is required to liquidate the policy, so it is possible to disburse a redemption value that is proportional to the period of the insured and the premiums paid.
As for mixed insurance, the sum insured is paid at the end of the insurance period, unless the death occurred before the end of the insurance period. The sum insured is due upon death. The premium for this type of insurance is relatively high and varies from one insurance company to another .
This type is divided into two main important sections – the first section is the mixed insurance joint in the profits and the second section is the mixed insurance not participating in the profits – and the difference between these two sections is that the documents issued with participation in the profits in which the premiums are relatively high, because the method of calculating it from the actuarial side depends On the basis of a low interest rate, the company pays dividends to policyholders in the form of high insurance amounts – and these high profits depend on the interest rate that the company was able to achieve in investing the insured’s money. Savings insurance is not limited to mixed insurance only, but many different types appeared – and for example:-
(1) Paying part of the insurance amount during the insurance period, but not after ten years, and paying the other part of the insurance amount at the end of the insurance period.
(2) Adding additional coverage to the insurance, in addition to the insurance amount in the event of death, for example, a monthly or annual pension from the date of death until the end of the insurance period, where the original insurance amount is disbursed..
And other different types.
There is also a special type known as insurance with a fixed term, where the amount of insurance in this case is not disbursed except at the end of the insurance period, whether the insured is alive or not. If the insured woman dies before the end of the period, the policy is exempted from paying the premiums and this insurance can be made by the head of the family of creating a capital for his children.
Takaful insurance does not differ from general life insurance except in terms of application and management of life insurance funds. As for the insurance aspect, the coverage is the same.. It is the payment of an amount in the event of death or at the end of the insurance period. In this type of insurance, it is divided into two basic funds:
The First Fund: It is called the Takaful Fund, where the female insured pays an insurance premium known as the Takaful premium. This section is considered (donation) from the insured to the Takaful Fund and is not refundable – and from these Takaful premiums, the death compensation that occurs during the insurance period is paid.
The second fund: It is the savings premium, which is invested in Sharia and Islamic aspects of investment and is paid to the insured at the time of his request, with a redemption value or at the end of the insurance period.
Group insurances do not differ from individual insurances in terms of insurance coverage. Group insurance contracts in which insurance amounts are paid in cases of death, total or partial permanent disability, or when the female insured reaches a certain age or after a certain period, and the insurance sums are disbursed either in the form of an immediate amount or a copy. monthly pension.
Group insurance, the most famous of its types, is when the employer, in his facility or factory, concludes a group insurance contract with an insurance or takaful company, in order to provide insurance protection for his worker against the risks of death or disability, or to disburse the insurance amount as a reward for leaving the service – thus reassuring the worker about the future and the future of his family. The employer is reassured that his workers perform the work in a reassuring manner, in a way that benefits everyone.
Group insurance is characterized by a low insurance cost for the insured individual, because the employer contributes with the worker to the performance of a large part of the premium.
The types of group insurances are the same as the types of individual insurances, which are temporary insurance and savings insurance, but this is done in different forms commensurate with the nature of each business owner.
Group insurances are not subject to the two underwriting rules that apply to individual insurances, because insurance takes place without medical procedures, but requires some special conditions.. For example: that the worker is regular at work and is not on sick leave.
Underwriting and pricing in individual insurance
Acceptance of individual insurances is done according to the underwriting rules set by the company.. This is when the insurance applicant fills out some forms and answers many questions about the financial health aspect so that the insurance applicant can be evaluated and the amount of insurance is proportional to his condition.
One of the most important general conditions in individual insurance policies is that the company’s issuance of the insurance policy was made on the basis of the data provided by the insurance applicant and that in case of fraud or fraud, the insurance becomes void and the insurance premiums are estimated according to complex actuarial bases and depends on the value of the sum insured, the insurance period and the types of insurance coverage So that the premium is sufficient for the insurance company and fair to the insured.
Analysis of surplus Surplus Analysis
Or analyze the results of income and expense accounts and study the various factors affecting the results of this calculation. The life insurance policy is a long-term document in which the insurance premium is determined in advance, and the insurance premium continues throughout the validity period of the policy, and the insured cannot modify the insurance premium, and the insurance premium is determined by more conservative actuarial bases than the rates expected.
The technical bases used in estimating the mathematical reserve are:
· Interest rate 0
· User table.
· Premium net account.
· Commercial premium account.
The method used.
The accounting reserve is also affected by the following: –
1) Distribution of life insurance portfolio issues during different years.
2) Distribution of individual life insurance types – for the different years of issuance.
3) The different types of insurance issued by the company (individual – group – popular)
– In addition to the re – insurance.
– Reinforcement of precautions.
– Duration of the company’s activity in the life insurance branch.
Factors affecting the outcome of life insurance
There are a number of factors affecting the results of the life insurance branch, positively or negatively, which can be summarized as follows: –
1) death rates.
2) Investment rates.
3) Rates of administrative expenses.
4) Rates of production expenses.
5) rates of construction expenses.
6) Cancellation rates.
7) Filter rates.
10) Arithmetic Reserve Method.
11) Annual issue size.
12) Different types of insurance (individual / group / popular).
13) Distribution of individual insurance types – according to the years of issuance.
14) Distribution of individual insurance types – according to the maturity years.
15) Profit distribution rate or to policyholders.
Life Insurance Results Worldwide
Middle East and Arab countries
The Middle East and North Africa region recorded life insurance premiums of $9.807 billion, down 0.5 % compared to 2017. Life insurance is still lagging behind and struggling to develop in this region. The market share of the sector does not exceed 17 % of the MENA portfolio in terms of premiums, the United Arab Emirates ranked first, followed by Morocco and Turkey . Just like non-life insurance, premiums decreased in Turkey (-30.9 % ), Iran (-24.6 % ) and Algeria (-17.1 % ) in 2018 compared to an increase of 10.8 % in 2017 for the latter country, Morocco and Kuwait both recorded and the United Arab Emirates increased by 18.4 % (+11 %). ) and (+6.9 % ) respectively
The evolution of life insurance premiums between 2017 and 2018
Global life insurance premiums grew just 0.2 % in real terms to $2,820 billion in 2018. This was a significant slowdown from 2017, mainly due to a downturn in China. It was also below the already weak annual average of the past 10 years (0.6 % ).
Total life premium growth in the developed market slowed to 0.8 % in 2018 from 1.2 % in 2017, largely due to the downturn in the largest developed EMEA markets. Growth in other developed regions improved. Premiums in the US rose significantly (by 2.4 % ) after a decline in the previous year, driven largely by savings products and a supportive economic environment. Premiums in developed Asia Pacific grew 1.4 % , reversing a contraction of the same size in 2017, buoyed by the recovery in Japan. Premiums in emerging markets fell 2.0 % in 2018 after a 13 % increase in 2017. The main driver behind the sharp turnaround was China, where premiums shrank 5.4 %. Due to tighter regulatory control over the distribution of savings
Policies Elsewhere in emerging Asia, life insurance premiums rose 7.0 % with strong growth in key markets. Growth has slowed considerably in emerging Europe and Central Asia, mainly due to a sharp contraction in Poland as sales of unit-related products fell. In Latin America, insurance premiums contracted for the second year in a row due to weak demand for savings products in Brazil, Chile and Colombia. Growth in the Middle East and Africa remained weak. China was the largest contributor to global premium growth in 2017, but
The situation was reversed in 2018. To the extent that its negative contribution (.60.6 ppi) neutralized most positive contributions from North America (0.5 ppi), advanced Asia Pacific (0.3 ppi) and emerging Asia excluding China (0.3 ppi). )
According to Sigma’s forecast, China will be the main driver of life sector growth in 2019/2020 with lower interest rates, traditional savings businesses will continue, and the future looking promising.
There will be stronger growth in global life insurance premiums in 2019/2020, at a rate well above the annual average in the past ten years.
This will be mostly driven by emerging markets, particularly the recovery back in China. In developed markets, life premiums will grow slowly, but also faster than the historical average.
The United States and Canada will outperform other developed markets in terms of outstanding growth rate.
On a business basis, traditional savings businesses will remain unattractive to consumers, especially in developed markets, due to low interest rates. While mortality protection gaps provide significant growth opportunities, mortality risks provide much lower premium sizes than savings policies
The role of the union
The Union seeks, through the life insurance committees, to prepare many models for life insurance contracts to guide the market, in addition to studying the obstacles facing life insurance in the Egyptian market and trying to find solutions andPractical proposals for the development of companies’ businesses on technical and marketing bases, which helps in increasing the volume of premiums and working to increase insurance awareness by various means and presenting the advantages of life insurance contracts to individuals and business owners to urge community members to participate in the various insurance coverages provided by insurance companies in addition to preparing micro life contracts It is suitable for small institutions and projects in order to raise awareness of the importance of life insurance coverage for business owners and officials in the state sectors, which were reluctant to insure in the past for any reasons, as well as introducing the advantages of group insurance contracts, including low prices compared to individual insurance policies, and what group insurance contracts represent as a means of psychological stability for workers in the facility. As well as a way to maintain the distinctive employment of the facility.