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The primary function of insurance is to act as a risk transfer mechanism through the creation of a common pool of resources by the collection of equitable premiums.
An insurance company sets itself up to create and operate such a pool. It takes contributions, in the form of insurance premiums, from many people and pays the losses of the few. The contributions have to be enough to meet total losses in any one-year period and cover the other costs of operating the pool.
The result is that the insurer can fix a premium and the person insuring knows, subject to the type of cover purchased, that he will not have to pay any more at the end of the year.
The existence and perpetuation of insurance companies is as a result of the benefits of insurance to the public and individuals. Insurance services provides the following basic benefits:
- Peace of Mind
- Loss Control or minimization
- Socio-Economic Benefits
- Inflow of Investment funds
- Invisible earnings to economy
General Insurance is based on the following Principles of Insurance:
- Insurable Interest
- Utmost Good Faith
At COLFIRE we have separated the insurance services provided into five broad headings that will be developed further: