Izabela
Jonek-Kowalska
Increasing the risk of economic activity is connected
with occurrence of possible measurable losses in case of its materialization.
However, the subject is capable of minimizing potential losses by transferring
them onto another entity. A facility allowing for such activities are
insurances. Their essence is reduced to releasing the subject from bearing the
financial effects of a specified event
and intercepting the effects of their occurrence by another subject.
Then, it is the subject’s feeling sure about the possibility of the event
occurrence that will result in suffering loss and wish to protect oneself from
the occurrence of that possibility by transferring it onto another subject that
underlain the insurance. Therefore, the aim of the insurance is to transfer the
possibility of loss occurrence to the subject ready to take over that risk
against proper payment together with that subject’s obligation to cover
possible losses in case of that event occurrence. The subjects rendering such
services are the insurers. By rendering the insurance protection the insurance
agencies release the insured from necessity to gather and freeze the means for
covering possible losses. Those subjects render the insurance protection by
means of the instrument as are the insurances.
The insurance can be defined as an economic and legal
category and method of financing the company’s risk. From
the economic point of view the insurance can be seen as an economic category
ensuring coverage of losses arisen out from the occurrence of the events
subjectively undesired by the subject who has obliged itself thereto. This
obligation results from the accepted insurance conditions included in the
insurance contract concluded. The parties to this contract are the insurant
i.e. the subject who transfers the obligation to cover possible loss, being the
result of the event occurrence specified as to its kind and that became the
subject of insurance by the insurer, against paying a premium. Then, in exchange of premium acceptance, the
Insurer takes over the risk from the insured as to occurrence of the events
subjectively undesired that effects in case of occurrence can be measurably
estimated. Therefore, the parties enters in relation by means of the insurance
contract. The characteristic feature of those relations is their equivalent
nature. It is a derivative of the situation in which the insurance became the
subject of market turnover. The results of subordination to rights governing
the market is fixing the equilibrium price of the subject of its turnover, e.g.
insurances.
From legal point of
view the insurance is always the legal relation. Therefore, pursuant to law,
the insurance is called the insurance relation, in which one person, entering
similar relations on a large-scale is obliged to cover future financial needs
resulting at the other person due to random events reoccurring at some regular
basis, whereas the other obliged person is obliged to some payment resulting
therefrom. This relation is confirmed by the insurance contract, which is the
named contract, since the law regulations determine its essence and basic
rights and obligations of the parties to the contract.
The effect of the insurance contract conclusion is
necessity to pay a premium. By the insurance premium one shall
understood the sum of money as the insurant is obliged to pay to the insurance
company for protection granted by it.[1] Zbigniew Łabno[2] considers that it can be assumed as a rule that the value of the
premium is conditional on the sum and scope of the insurance. Sharing his
opinion one can state that there is a straight relation between those factors.
It consists in that the higher the value and scope of insurance is the higher
the premium is.
The premium paid by insuring party is a price that is
to be paid for utilization of that risk financing facility. The said price is
the cost for the subject concluding the insurance contract and charges the
costs of the company’s activity.
The insurance can be
discussed also as the company’s risk financing method. It consists in
transferring by means of the insurance contract the necessity of financing
possible losses of the company onto the insurer, who taking over that risk
performs its further distribution onto the insurance community.
From the point of view of the economic subject the
insurance shall be the risk financing facility only if it guarantees full
insurance protection. By this term one shall understood the whole of actions,
which basic attribute is financial compensation of undesired consequences of
random factors or others, performed by the insurer at the conditions set forth
by him and accepted by the protected subject.[3]
Hence, the insurance can be recognized also as the company’s risk financing
method and in case of its materialization the coverage of arisen losses. Then,
creation of conditions for financial guarantees assurance on the one hand as
well as providing the insured with financing the suffered losses in result of
random event from the premiums collected by the insurant on the other becomes a
constitutive feature of the insurance. Its implementation reveals itself in the
insurance functions.
The literature of this subject points out three basic functions of
insurances, namely: insurance protection, preventive function and capital
accumulation. [4]
The insurance protection becomes the superior function
of insurances, which must be met for efficient and effective utilization
thereof in financing the risk of economic activity run by the company. It
reveals itself in creation of the conditions allowing for financial guarantees
assurance by the insurer to the insurant. Their implementation makes it
possible for the subject to give up the formation of own reserves for covering
the arisen damage. In consequence thereof it is possible to give up freezing a
part of means and thereby the possibility to use them in the company’s economic
activity. The effect of that action should be a growth of the subject operation
efficiency that in turn is vital for the degree of implementation of the
assumed objective. The
effectiveness of the insurance protection offered by the insurer is the
derivative of the insurance company’s compliance with the rule of reality,
completeness and generality of protection as it is considered pertinently by J.
Handschke[5].
The expression of the rule of insurance protection
reality is the insurant’s certainty as to that suffered loss will be covered
according to the conditions determined in the insurance contract. The said
certainty is confirmed by both legal and economic guarantees for obtainment of
such a benefit. Legal guarantees provides the insured with legal protection of
his business and in default thereof on the part of the insurer the possibility
to prosecute a claim under the insurance contract in a court. However the
economic guarantee reveals itself by financial readiness of the insurer to
fulfill the obligations under the concluded contracts. The security for such
kind of guarantees is not only the fund created from collected premiums but
also the obligatory reserves created to this end as well as the reinsurance
actions taken up by the insurer.
The rule of completeness reveals itself in that the
insured expects the insurer to cover all losses in full amount in case of
diminished value of property in result of the event occurrence that was the
subject of insurance. It refers to both direct loss and indirect loss resulting
therefrom and expressed in the form of lost profits as the injured person would
have achieved if the damage hadn’t occurred. The rule of completeness is
reflected in the insurance law, where it is treated as a rule of postulation
nature.
In turn the rule of
insurance generality reveals itself on the one hand in awareness of subjects as
to the possibility of using the insurance as the risk transfer facility and on
the other in the insurance products available on the market. Its implementation
will be the derivative of awareness as to the possibility of insuring
individual events as well as the facilities offered in this scope. This in turn
will decide about inclination of subjects to insure their actions. Z. Hellwig[6]
shows that the said inclination is not only the sign of civilizing level of
citizens and depends on the relation between the insurance costs and achieved
income but also on danger of loss of the possessed property. Then, the cost of
insurance as well as potential risk of property loss are decisive for
attractiveness of insurance and its particular products as the form of risk
financing. It forces the insurer to offer on the market the whole spectrum of
various insurance products for his customers.
The insurance addressed to the companies covers
with its scope the company’s property, civil liability, credit security,
guarantees, various financial losses and legal protection.
The
subject of insurance can be all movable and immovable property being the
proprietary of the insured, personal property of his employees, as well as
property being in possession or control of the insured. By the term of property[7] according to civil and legal interpretation
one shall understood the ownership and generality of property rights resulting
therefrom. This insurance is applied as the basics protection of possessed
property values against unexpected casualties. The characteristic feature of
this kind of insurances is payment of compensation up to the value equal to the
value of damage to property not greater than the insurance sum determined in
the contract.
The
term of civil liability [CL] is connected with the obligation arisen out in
connection with causing the damage to person or property of third person.
Therefore the civil liability is connected with the liability for damages (financial
liability) of one subject towards the other in connection with the damage
suffered in result of events determined in the insurance contract[8].
The injured person becomes the creditor towards the person responsible for
damage, and the said person (perpetrator of a damage) becomes the debtor in
this scope. Being said that liability under civil liability is a pledge of
paying compensation (in case of damage to property) or/and benefit (in case of
damage to person). Therefore, the essence of civil liability can be reduced to
the protection of the insured person property against threatening encumbrances
resulting from necessity to redress the caused damage on the one hand, and the
protection of the injured person from possible insolvency of the perpetrator of
the damage on the one hand by shifting the liability for damages of an
insurance person[9] onto the insurance company
Since the civil
liability is connected with unlimited financial liability, the CL insurances
includes the guarantee sum determining the upper limit of the insurer’s
liability. It means that the compensation is fixed and paid within the limits
of the civil liability of the insured, not higher then the value of the
guarantee sum determined in the contract.
Apart form CL insurances of compulsive nature
one can distinguish also voluntary civil liability insurances.
The insurance may cover also the obligations of
the company resulting form its current activity. Among them are the credit
insurances, securities, loss occurrence and legal protection. However the said
insurances are not very popular among the companies.
The scope and type of insurances utilized by the company shows
unambiguously its financing structure. It will be conditional on the company’s
awareness in this scope as well as on the attractiveness of that form of risk
financing, then in the justified opinion of T.
Sangowski [10] the insurance in comparison with
the other risk financing methods is a complex method since it includes the
following elements:
-
Risk control – in decision making process and at the stage
of contractual obligations performance (prevention),
-
Risk transfer – onto specialized
subject,
-
Risk diversification– by dividing
onto a group of subjects threatened with the similar risk,
-
Risk financing– at a price of
insurance premium,
-
Risk retention (stoppage) – by
leaving a part on own share.
The
presented discussion showing the insurance as the method for financing the risk
of conducted activity indicates that it can be competitive in relation to
self-insurance as well as risk.
Abstract: It is impossible to lead a company
without the risk. The risk defines the level of uncertainties connected with
achieving the aims. During running the business company has some possibilities
to reduce this risk by insurance. The essence of insurance concerns to
releasing company from financial consequences of unexpected events. Insurance
company takes those consequences. Therefore the source of insurances is the
conviction of possible events that could cause the loss. In a result the main aim
of insurance is transferring the risk of loss to insurance company against
demanded payment. In this case the insurance company is obliged to cover the
loss. Due to it insurance companies release firms from necessity of gaining and
locking up capital for covering losses. Therefore the main aim of this article
is presenting the essence of insurance and their role in running a company.
[1] P. Jedynak:: Ubezpieczenia
gospodarcze. Wybrane elementy teorii i praktyki. Księgarnia akademicka,
Kraków 2003, p.54
[2] Z. Łabno: Prawo ubezpieczeń gospodarczych. Wyższa Szkoła Bankowości i Finansów, Katowice 2001, p.55
[3] T. Michalski, A. Karmańska, A. Śliwiński, Ubezpieczenia gospodarcze. Ryzyko i metodologia oceny, Published by C.H. Beck, p. 2, compare with A. Banasiński, Ubezpieczenia gospodarcze, Poltext, Warszawa 1993, p. 13
[4] more information in: T. Sangowski, Ubezpieczenie gospodarcze, Poltext,
Warszawa 1998, p.78 and Podstawy
ubezpieczeń. Vol. I – mechanizmy i funkcje, collective work by J.
Monkiewicz, Poltext, Warszawa 2000, p. 66.
[5] J. Handschke, Gospodarcze i społeczne znaczenie ubezpieczeń gospodarczych, [ibidem:] collective work by T. Sangowskiego, SAGA PRINTS, Poznań, p.48-49
[6] Z. Hellwig, Problemy i zagrożenia, [ibidem:] Analiza i metody zmniejszania ryzyka w polskim systemie ubezpieczeń majątkowych, collective work by W. Ronki-Chmielowiec, AE, Wrocław 1998, p.
[7] K. Szymańska Jak i gdzie ubezpieczyć
majtek firmy Gdańsk Ośrodek Doradztwa i Doskonalenia Kadr 1997r. p.
30
[8] J. Reps, S. Reps, Ubezpieczenia majątkowe i osobowe, Warszawa 1997, p. 111
[9] B. Kęszycki, „Prawo ubezpieczeń gospodarczych”, Wyższa Szkoła Bankowa, Poznań 1999, p. 118
[10] T. Sangowski, Ubezpieczenia gospodarcze, Poltext, Warszawa 1998, porównaj E. Kowalewski, Ryzyko w działalności człowieka p.57