Insurance Companies

Insurance Companies provide various forms of insurance and investment services to individual and charge a fee (called a premium) for this financial service. In general, the insurance provides a payment to the insured (or a named beneficiary) under conditions specified by the insurance policy contract.These conditions typically result in expenses or lost income, so the insurance is a means of financial protection. It reduces the potential financial damage incurred by individuals or firms due to specified conditions.

Common types of insurance offered by insurance companies include:
Life insurance,
Property and Casualty insurance,
Health insurance and
Business insurance.
Many insurance companies offer multiple type of insurance.

An individual's decision to purchase insurance may be influenced by the likelihood of the conditions that would result in receiving an insurance payment. Individuals who are more exposed to specific conditions that cause financial damage will purchase insurance against those conditions. Consequently, the insurance industry faces an adverse selection problem, meaning that those who are most likely to need insurance are most likely to purchase it. Furthermore, insurance can cause the insured to take more risks because they are protected. This is known as the moral hazard problem in the insurance industry.

Insurance companies employ underwriters to calculate the risks of specific insurance policies. The companies decide what types of policies to offer based on the potential level of claims to be paid on those policies and the premiums that they can charge.