The Markets for Insurance

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The Markets for Insurance
The service provided by insurance is not an homogeneous product. Various


types of insurance exist and they are not interchangeable. Therefore, it is not
strictly possible to speak of one insurance market, but rather of several markets.
A distinction is usually made between life insurance and non-life insurance, but
here again the product varies according to insurance cover and from one country
to another.
Because the motivation for buying insurance may differ from one case to
another, Karl Borch (1981) found it convenient to divide the field of insurance
into three classes of insurance:
(1) Life insurance, i.e., annuities and ordinary life insurance;
(2) Business insurance, i.e., the insurance bought by businessmen and
covering risks of all kinds;
(3) Household insurance, i.e., insurance bought by ordinary consumers.
The relative importance of the three classes of insurance may differ from
one country to another. Each class seems to require a special type of theoretical
analysis and the government through its supervising or regulatory authority
often takes different attitudes concerning the operations of the insurers and the
functioning of the market.
Another class should certainly be added to K. Borch classification, i.e.,
Group insurance or Employee Benefits which is insurance coverage other than
property and liability insurance bought by firms for their employees. Insurance
in this case is part of labour contract negotiations and is directly affected by the
existence of a social security system in the country. Unfortunately, data
available does not permit these classifications.

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