Understanding The Role Of Insurance In Indonesian Economy

Abstract

Insurance is a form of risk management, primarily used to hedge against the risk of contingent loss (a potential loss dependent upon some future event occurring or not occurring). In essence, insurance is simply the equitable transfer of a risk of a loss from one entity, say the insured or the customer, to another (insurance company) in exchange for a premium (money paid to an insurance company for such protection). Insuring risks in the economy is a complex business that interacts with many aspects of our lives. The importance of insurance industry for one country’s economy can be measured in the size of the business, total number of its employees, the total assets, and/or its contribution to the national GDP. Insurance business plays a fundamental role in the modern society. If it weren’t for insurance, many important activities by state-owned companiescouldn’t take place, example given is a factory activity by national electricity company (PLN). Nowadays, insurance becomes a key component in the development of modern economy.