Section 3　The classification of insurance

With the development of insurance business, more and more types of insurance are classified into several kinds within the offices of insurance companies. Generally speaking, insurance offices are classified into departments or business units. Each of them deals with different types of insurance business. The following classification is very common.

3.1　Ordinary life insurance

Ordinary life insurance includes many kinds of assurances. Here are some of them in the following.

3.1.1　Term life insurance

Term life insurance refers that if the insured dies or completely disabled, the insurance company will pay the benefits according to the insurance contract. If the insured is still alive at the end of the insurance period, the insurance contract will terminate naturally, the insurance company no longer bears the liability and does not return the premium to the insured.

Term life insurance covers 10 years, 15 years, 20 years, or until 50 years old or 60 years old. It has the advantages of low premium, high guarantee and the payment of insurance benefits will be exempt from income tax and estate tax.

Term life insurance is more suitable people with low income and high demand for security and the young people who have just started their career.

3.1.2　Personal accident insurance

Personal accident insurance refers that when the insured suffers accidental events and causes death or disability, the insurance company pays capital sums to the insured or beneficiary according to the agreement of the insurance contract. According to the different types of insurance, personal accident insurance can be divided into simple accident insurance and additional accident insurance. Simple accident insurance means that the liability is limited to accident insurance only, which includes personal accident insurance, highway passenger accident insurance and driver accident insurance. Additional accident insurance includes two kinds: one is additional accident insurance, the other is accident insurance with other insurance liability.

In addition to the purchase of personal accident insurance by individuals, it is also possible for companies to arrange cover on behalf of their employees. These arrangements made by employers on behalf of the employees are also called employer's liability and many organizations arrange group life insurance for their employees.

3.1.3　Group life insurance

Employer's liability insurance is compulsory in western countries. So employers must arrange special terms for life insurance for their staff and workers during the period of their employments. In the event of death or disability, the capital sums are paid by the insurance company instead of the employers.

3.2　Property loss insurance

In a broad sense, property insurance refers to property loss insurance, liability insurance, credit insurance, bond insurance and agriculture insurance. In a narrow sense, property insurance refers to property loss insurance including ordinary property insurance, cargo transit insurance, construction insurance, etc. Some of them will be discussed in the following.

3.2.1　Motor vehicle insurance

Motor vehicle insurance is a kind of commercial insurance which provides compensation for the personal injury or property loss caused by natural disaster or accident. It is a kind of insurance for the motor vehicles such as automobile, car, tram, battery car, motorcycle, tractor, etc. It is one of the largest sources of premium income for all insurance companies in the insurance market of the world. Motor vehicle insurance policy can cover the third party liability, fire risk and theft risk. It was reported that the original insurance income of motor vehicle insurance premium in China's insurance market reached ￥777.3 billion yuan in 2021.

3.2.2　Marine cargo transport insurance

Marine cargo transport insurance is the insurance under which the insurer takes the goods transported by sea as the subject matter of insurance. When the losses caused by natural disasters and accidents occur in the sea in the process of transportation, the insurer will provide compensation to the policyholder. The marine policies include three areas of risk traditionally: the hull, cargo and freight.14 The payment of freight can be divided into prepaid freight and freight payable at destination. Prepaid freight is not returned whether the goods loss or not. The arrival freight is the freight that the owner will pay after the goods arrive at the destination. When the ship is shipwrecked, the goods are lost, the freight will also be lost. In this case, the owner has an insurable interest in arrival freight, therefore he can take out freight insurance.

The risks against which these items are normally insured are collectively termed “perils of the sea”. The perils of the sea can be classified into two kinds: One is the natural disasters or natural calamities, the other is the accident event.15 Natural calamities include atrocious weather, lightning, tsunami, earthquake or volcanic eruption, flood and disaster beyond manpower. Accident events include grounding, stranded, sunk, fire, violent pilferage, jettison, collision, missing, overturn and the careless, negligent and malicious act by captain or crew. In China, Marine cargo insurance can be divided into three kinds. They are basic, additional and special risks. The basic risks include Free from Particular Average, With Particular Average and All risks. Additional risks include General Additional Risks, Special Additional Risks and Specific Additional Risks.

3.2.3　Property insurance

All kinds of properties face the risk of losses or damages whether natural disasters or accidents happen. Property insurance includes material and immaterial property and its related interests. Property in the material form and its related interests can be regarded as the subject matter of insurance, such as aircraft, satellites, power plants, large engineering, automobiles, trucks, ships, plants, electric equipment, furniture, etc. In China, property insurance can be divided into two kinds. One is the household property insurance. The other is the enterprises' property insurance. The household property insurance covers the bedclothes and dresses, furniture, house decoration, electric appliances, etc. The enterprises' property insurance covers houses, buildings as well as the affiliated facilities, machinery and equipment, etc.

3.3　Liability insurance

Non-material form of property and its related interests usually refer to all kinds of liability insurance. It is necessary for us to learn about general liability， and it includes employer's liability, public liability insurance, product liability insurance and professional indemnity liability insurances, etc.

3.3.1　Employer's liability insurance

Employer's liability insurance covers the injury or death of the employees during the work.16 When an employer is held legally liable to pay damages to an injured employee or to the representatives of someone fatally injured, he can make a claim to the insurance company to provide him with exactly the same amount he must pay out to the injured person or his beneficiary. The policy will also pay certain expenses such as lawyer's fees or doctor's charges where an injured man has been medically examined. The intention is to ensure that the employer does not suffer financially, but is compensated for any money he may have to pay in respect of a claim. The policy covers only the personal injury resulting in loss or damages. It dose not cover the property loss or damages of the employee.

3.3.2　Public liability insurance

Public liability insurance covers the accident that causes injury or death of the customers when they are in the public places.17 If a person or customer goes shopping in the supermarket and is injured because of the wet floor, if a football fan watches an important football match in stadium and is injured because of the crowded audience and if a couple see a film in a cinema is injured because of the collapse of the chair or the fire, the supermarket, the stadium or the cinema is liable for the injury of the persons in all these cases.

3.3.3　Product liability insurance

Product liability insurance covers the accident causing injury or death of the consumers when they use the product.18 If a person is injured by any product that he purchase from the supermarket and he can show that the seller or in some cases the manufacturer, is responsible or liable, he can make a claim to the related parties for damages. It was reported 10 years ago that in China, some products, for example, the water heater, caused death of the some consumers because of product defectiveness when they are taking bath in winter. And also some fruit juice jellies caused the death of a small baby due to the defective design or without the warning cautions to the parents.

3.3.4　Professional indemnity liability insurance

Professional indemnity liability insurance can arise when lawyers, accountants, doctors or surgeons, insurance brokers and a whole range professional man or woman, do or say something resulting in others who suffer from a loss or loss of a lawsuit.19 For example, a lawyer may give advice carelessly resulting in a client losing money. That client would then be able to sue the lawyer for an amount equal to what he had lost. Therefore lawyer can buy professional indemnity liability insurance to meet the cost of any lawsuit against him.

3.3.5　Personal public liability insurance

As we know, all of us bear a responsibility to everyone not to cause him to his body or damage his property. Liability may arise when you own a house, keep a pet, participate a sports activity or just cross the street without looking left or right.20 There was a case in UK （Clark V. Mrs. Shepstone,1968） that Mrs. Shepstone stepped from the pavement without looking ahead and caused a motor cyclist to swerve sharply to avoid her. The motorbike crashed and the pillion passenger, Mr. Clark, suffered severe injury. He sued Mrs. Shepstone and eventually accepted ￡28 500 in compensation. If Mrs. Shepstone has not got a personal public liability insurance, she would have borne the liability to pay compensation to Mr. Clark and would have been confronted with serious financial crises.

Professional terms

insurance　　　保险

uncertainty　　　不确定性

peril　　　风险事故

hazard　　　风险因素

unpredictability　　　不可预测性

underlying idea　　　言下之意

premium　　　保险费

moral hazard　　　道德风险

potential risk　　　潜在风险

financial risk　　　财务风险

insured　　　被保险人

pure risk　　　纯粹风险

speculative risk　　　投机风险

fundamental risks　　　基本风险

natural disaster　　　自然灾害

political interventions　　　政治干涉

particular risks　　　特殊风险

technological unemployment　　　技术性失业

insurable　　　可以保险的

commercial insurance transaction　　　商业保险交易

insurance applicant　　　保险投保人

insurer　　　保险人

insurance benefit　　　保险给付

function of insurance　　　保险的功能

risk transfer mechanism　　　风险转嫁机制

financial indemnity　　　经济补偿

property insurance　　　财产保险

subject-matter of insurance　　　保险标的

insurance contract　　　保险合同

life insurance　　　人寿保险

common pool　　　共同基金

idle fund　　　闲置资金

collect premiums　　　收取保费

spread the cost of the few losses　　　分散少数人的成本

attractive business　　　有吸引力的行业

fair and equitable premium　　　公平合理的保险费

charge premium　　　收取保险费

interest-dependent　　　利益相互依赖

subsidiary functions　　　附加功能

loss prevention　　　损失预防

make a survey　　　开展检验

assess the degree of risk　　　评估风险程度

risk management　　　风险管理

other related departments　　　其他相关部门

overall return　　　全部的回报

government security　　　政府债券

money market fund　　　货币市场基金

real estate　　　不动产，房地产

take out insurance　　　购买保险

policy　　　保险单

stability to the society　　　社会的稳定

types of cover　　　承保的种类

ordinary life insurance　　　普通人寿保险

term life assurance　　　定期人寿保险

sum assured　　　保险金额

face amount of the policy money　　　保单面值

issue a policy　　　签发一张保险单

capital sums　　　资本总额，保险金额

weekly benefit for up to 104 weeks　　　连续每周给付至104个星期为止

compensation　　　赔偿

employer's liability　　　雇主责任保险

group life insurance　　　团体人寿保险

property loss insurance　　　财产损失保险

liability insurance　　　责任保险

credit insurance　　　信用保险

bond insurance　　　保证保险

agriculture insurance　　　农业保险

cargo transit insurance　　　货物运输保险

construction insurance　　　建筑保险

motor vehicle insurance　　　机动车辆保险

third party liability　　　第三者责任保险

theft risk　　　盗窃保险

comprehensive policy　　　综合保险

marine cargo transport insurance　　　海洋货物运输保险

hull insurance　　　船舶保险

freight insurance　　　运费保险

prepaid freight　　　预付运费

freight paid on delivery　　　到付运费

grounding　　　搁浅

stranded　　　触礁

violent pilferage　　　暴力盗窃

jettison　　　投弃

collision　　　碰撞

missing　　　失踪

overturn　　　倾覆

negligent and malicious act　　　疏忽和恶意行为

Free from Particular Average　　　平安险

With Particular Average　　　水渍险

All Risks　　　一切险

General Additional Risks　　　一般附加险

Special Additional Risks　　　特别附加险

Specific Additional Risks　　　特殊附加险

household property insurance　　　家庭财产保险

enterprise's property insurance　　　企业财产保险

affiliated facility　　　附属设备

Notes to the chapter

1. Risk can be defined as the possibility or uncertainty of damage and loss, but It does not mean that the damage and loss have happened on a certain property.

风险可定义为损失发生的可能性或者不确定性，但是并不是说某一财产已经发生了损失。

2.Risk is a combination of hazards. Risk is unpredictability, it means that the actual results are different from predicted results.

风险是危险因素的结合体。风险的不可预测是指实际结果与预测的结果不一样。

3.First of all, risk refers a state of doubt about the future.

首先，不确定性指的是一种对未来的疑虑。

4.We can conclude that uncertainty is not dependent on whether you recognize it or not. It always exists around us.

我们能推断不确定性不依赖于你是否承认。不确定性总是在我们身边。

5.Peril means the possibility that something is likely to cause injury, pain, harm, or loss and damage.

风险事故是指某事物可能造成伤害、痛苦和损失的可能性。

6.Non-financial risk would refers to anything that is not monetary or that which cannot be associated or viewed in terms of money.

非财务风险是指不与货币有关或不以货币衡量。

7.Pure risk refers to a loss or not loss. There is no chance of gaining profits.

纯粹风险是指可能造成损失或收支平衡，没有机会获取利润。

8.Speculative risk refers to a loss, no loss or the chance of gaining profits.

投机风险包括损失、收支平衡或有机会获取利润。

9.Fundamental risks are those which arise from causes outside the control of any one individual or even a group of individuals.

基本风险是指任何个人或团体无法控制的风险。

10.Insurance can be defined as the “term used to refer to a commercial insurance transaction whereby an insurance applicant, as contracted, pays insurance premiums to the insurer, and the insurer bears an obligation to indemnify for property loss or damage caused by an occurrence of a possible event that is agreed upon in the contract, or to pay the insurance benefits when the insured person dies, is injured or disabled, suffers diseases or reaches the age or term agreed upon in the contract.”

保险可以定义为“投保人根据合同约定，向保险人支付保险费，保险人对于合同约定的可能发生的事故因其发生所造成的财产损失承担赔偿保险金责任，或者当被保险人死亡、伤残、疾病或者达到合同约定的年龄、期限等条件时承担给付保险金责任的商业保险行为”。

11.Another function of insurance is to provide financial indemnity and insurance benefit.

保险的一项职能是提供经济补偿和保险给付。

12.They pay the claims and spread the costs of the few losses among all the policyholders.

保险人支付赔偿费用，并将少数损失成本分摊给所有保单持有人。

13.Even after we take all these operating costs into accounts, insurance companies are still one of the money-making business in the world.

即使我们把所有这些运营成本都考虑在内，保险公司仍然是世界上赚钱的行业之一。

14.The marine policies include three areas of risk traditionally: the hull, cargo and freight.

传统的海上保险包括三个领域的风险：船舶、货物和运费。

15.The perils of the sea can be classified into two kinds: One is the natural disasters or natural calamities, the other is the accident event.

海上风险可分为两类：一类是自然灾害，另一类是意外事故。

16.Employer's liability insurance covers the injury or death of the employees during the work.

雇主责任保险承保雇员在受雇期间的伤残或死亡。

17.Public liability insurance covers the accident that causes injury or death of the customers when they are in the public places.

公众责任保险承保客户在公共场所因意外事故造成的伤残或死亡。

18.Product liability insurance covers the accident causing injury or death of the consumers when they use the product.

产品责任保险承保客户使用产品时因意外事故造成的伤残或死亡。

19.Professional indemnity liability insurance can arise when lawyers, accountants, doctors or surgeons , insurance brokers and a whole range of professional men or woman, do or say something resulting in others who suffer from a loss or loss of a lawsuit.

职业赔偿责任保险承保律师、会计师、医生、外科医生、保险经纪人等专业人士所说或所做的事情造成客户或病人的损失或败诉造成的损失。

20.Liability may arise when you own a house, keep a pet, participate a sports activity or just cross the street without looking left or right.

当你拥有一所房子、养了一个宠物，参加了一项体育活动，或者横穿马路时没有往左或往右看，责任就产生了。

Exercises

Ⅰ. Questions.

1.Give the definition of risk.

2. Give examples to tell the difference between peril and hazard.

3.What is moral hazard?

4.Give examples to show that we are surrounded by risks.

5.Give the definition of insurance.

6.Tell the primary function of insurance.

7.Tell the subsidiary function of insurance.

8.Tell the role of insurance.

Ⅱ.Find out a word in the text that matches the same explanation and write down the word on the right column.

1.Something that is uncertain or causes one to feel uncertain

1.____________

2.A person or organization covered by insurance

2.____________

3.An amount to be paid for a contract of insurance

3.____________

4.Not able to be predicted

4.____________

5.A person or company that underwrites an insurance risk

5.____________

6.（Of a boat, sailor, or sea creature） left aground on a shore

6.____________

7.Throw or drop something from an aircraft or ship

7.____________

8.An instance of one moving object or person striking violently against another

8.____________

9.The state of being legally responsible for something

9.____________

10.A document detailing the terms and conditions of a contract of insurance

10.____________

Ⅲ.True or false judgments.

1.Without insurance, there is no risk.（　）

2.Uncertainty is not dependent on whether you recognize it or not. It always exists around us. （　）

3. Ice or slippery road is the hazard and traffic accident is the peril. （　）

4. The consideration of peril is important when an insurer decides whether or not it should insure some risk and what premium to charge. （　）

5. Pure risk refers loss or a break-even situation. There is chance of gaining profits.（　）

6. Speculative risk refers to a loss, a break-even or the chance of gaining profits.

（　）

7. The primary function of insurance is to act as risk transfer mechanism. （　）

8. The another function of insurance is to provide financial indemnity and investment.（　）

9. Insurance itself is also the important aspect of risk management.（　）

10. Motor vehicle insurance is very popular, for there are so many motor vehicles in each city. （　）

Ⅳ. Multiple choices.

1.When we use the word _____, we mean it will possibly cause losses or damages to someone when it happens.

A. “risk”

B. “danger”

C. “peril”

D. “hazard”

2.Risk can be defined as the possibility or _____ of loss and damage, but not the damage and loss that have occurred on a certain property.

A. probability

B. uncertainty

C. unpredictability

D. impossibility

3._____ means the possibility that something is likely to cause injury, pain, harm, or loss and damage.

A. Risk

B. Danger

C. Hazard

D. Peril

4.Risk is _____, which refers that the actual results may differ from predicted results.

A. predictable

B. possible

C. impossible

D. unpredictable

5.Factors which may influence the outcome are referred to as _____.

A. risk

B. hazard

C. peril

D. danger

6.The proximity of the house to the river is the _____.

A. risk

B. hazard

C. peril

D. danger

7.We know that the owner of the car can transfer the financial consequences to the insurer, in return for paying _____.

A. a commission

B. a premium

C. expenses

D. fees

8._____ is a kind of popular insurance, for there are so many motor vehicles in each city. And it is also the major source of premium income in the insurance market.

A. Motor vehicle insurance

B. Life insurance

C. Cargo transit insurance

D. Glass insurance

9._____risk refers loss or a break-even situation. There is no chance of gaining pro-fits.

A. Particular

B. Pure

C. Speculative

D. Basic

10.A _____ risk is one where the result or the outcome can be measured by money.

A. Particular

B. Pure

C. financial

D. economic

Ⅴ. Translation from English to Chinese.

1. If a boy plays football in a busy road, what will happen to him? If a man uses a machine when he does not know it is in trouble and dangerous, what will happen to him? And if a passerby dose not know the wall alongside the pavement is dangerous and about to fall down because of being for long years out of repair, what will happen to him? In the above three examples, there is a factor of risk and uncertainty. The boy may keep out of danger, but he may hit by a certain car. The machine may fall down suddenly and hit the passerby. If he is lucky, the machine dose not explode until he has done the work. And if the wall suddenly fall down, it can hit the passerby. If he is quick enough, he may escape from the weakened wall.

In a word, whether the risk happens or not depends on luckiness and fortune in above three examples. We can conclude that uncertainty is not dependent on whether you recognize it or not, it always exists around us.

2. As we know, all of us bear a responsibility to everyone not to cause him to his body or damage his property. Liability may arise when you own a house, keep a pet, participate a sports activity or just cross the street without looking left or right. There was a case in UK (Clark V. Mrs. Shepstone,1968) that Mrs. Shepstone stepped from the pavement without looking ahead and caused a motor cyclist to swerve sharply to avoid her. The motorbike crashed and the pillion passenger, Mr. Clark, suffered serious injury. He sued Mrs. Shepstone and eventually accepted ￡28 500 in compensation. If Mrs. Shepstone has not got a personal public liability insurance, she would have borne the liability to pay compensation to Mr. Clark and would have been confronted with serious financial crises.

Ⅵ. Translation from Chinese to English.

1. 风险是损失的不确定性，是损失的可能性。

2. 风险不可预测是指实际结果与预测的结果不一样。

3. 洪水是危险事故，靠近河边的房子是危险因素。

4. 风险因素本身不是损失的原因，但是能够增加或减少风险的发生。

5. 物理风险因素是指与风险的物理特征有关。

6. 道德风险是指某一方可能更愿意去冒险，因为不用承担因风险带来的成本。

7. 哪里有风险，哪里就有保险。

8. 财务风险是指其结果能够用货币计算的风险。

Ⅶ. Case analysis.

1. Suppose you want to establish a small business. The business is about a small grocery, selling foodstuffs and various household supplies. Describe the ways in which risk may affect your business. How you deal with the business? Describe the pure risks and speculative risks.

2. There is a large multi-nation petroleum company. It spends a large sum of money each year on insurance premiums. Talk about the benefits for the company, for the community and for the government.