RUSSIA – INSURANCE Market Faces Losses of $35 BILLION. Increased Costs will IMPACT GLOBAL ECONOMY

Hi, welcome back to Joe blogs. This video is the next in a series looking at the financial implications of Russia’s invasion of Ukraine on the global economy. And in today’s video, I want to talk to you about insurance. So Insurance is something that we all need and we take for granted that we can get insurance and it’ll be cost effective. And we know that when we ensure something, we’ve got peace of mind. That if something goes wrong in the future, then we can make a claim and get paid our money back. But the flip side of that, peace of mind. And the fact that it’s embedded in our everyday, existence means that it’s important cost in our household budget, but it’s not just personal insurance that I want to talk about today. Business insurance is a really big part of international trade and it’s something that’s been impacted heavily by the Ukraine crisis. So, in this video, I’m going to go through all the different aspects of insurance, so, we’ll look at business insurance. We’ll look at buildings Insurance. We’ll look at the aviation sector. We’ll talk about what

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insurance is and the cost Of it to the insurance companies and how the costs of this war to the insurance company are going to impact on both your daily life and also on the global economy. So, before we get into all of that, if I can ask you to give me a thumbs up at some point during this video, if you’re enjoying the content and also to subscribe if you haven’t done so already, and don’t forget that, I always include chapters in my videos. So, if there’s a section, you’re not that interested in, it’s really easy to skip over it. And if you’d like to support the channel, please have a look in the description below where you’ll find a link to both, buy me a coffee and patreon.Insurance is a contract between an individual and an insurance company that spreads risk in exchange. For premium payments, the insurance company accomplishes this by charging enough in premium payments from the insured, participants to exceed, the amount. The company has to pay out for insured losses. Insurance companies base charges on their Actuarial calculation of the risk. They insure Insurance has been in existence for centuries, dating back to the second and third, centuries BC, when Merchants paid an extra fee to shipping companies for reimbursement. If their cargo was lost at Sea in order for insurance to be profitable, it must be the kind of loss that happens often enough. So that there is a pool of insured people willing to pay premiums in addition, the covered loss must be calculable so that the insurance company can estimate the frequency of losses, and how much the loss might be one major legal constraint on insurance. Is that the person receiving, the Indemnification must have an insurable interest. This is what Wishes insurance from gambling. For instance, Fred could not purchase fire insurance on his neighbor’s house because Fred would not suffer any Financial loss if his neighbor’s house burned down. So that’s what insurance is but how do insurance companies actually make profit? Or the easiest example to talk about is life insurance so if you want to take out life insurance policy that pays out ten thousand dollars in the events of your death. The way an insurance company will price that policy is they will look at how old you are how healthy you are and what your life expectancy is forecast to be based upon a number of different facts. So if you’re looking for a policy that pays out ten thousand dollars, the insurance company will work out how much the monthly premium needs to be to make sure that they make some profit on that policy on average. So they will ask you a variety of different questions

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whether or not you smoke, whether there’s any history of heart disease or other serious illnesses, what job you do, whether you’re married, whether you have any children, all of those different questions will then build up a profile, which gives the insurance company, the ability to forecast, your average Life expectancy. So if you’re a healthy non-smoking, female age 30, they may forecast that your life expectancy is 80 years and therefore, they will know that on average. If you start a policy you’ll be paying into that policy for 50 years. So the monthly premium may be set at thirty dollars per month and over a 50-year period that would guarantee that the insurance company is going to receive eighteen thousand dollars. So, therefore, it would be heavily in profit, but it will be even more in profit because the insurance company doesn’t take your monthly premium and just leave it lying in the bank, they will invest that money. So, insurance companies are also fund managers. So a lot of the big insurance companies also, run pension funds and big fund management arms. And what they will do is take that monthly premium and invest it. So they’ll invest it into the stock market and into property in a

BUSINESS INSURANCE 

variety of other assets with the view to making a return on that money. So if they can take that Thousand dollars over the lifetime of that policy and double that money or treble that money, then they will turn that into 30 or 40 or 50 000. Now, the policy only pays out ten thousand dollars in the event of your death. So there is a big profit to be made by the insurance companies, but all of this depends upon them getting their algorithms, right? And getting their forecasting, right? Because if you die the day, after you take out your policy, they’ll have to pay you ten thousand dollars and they’ll have only received one premium. So, there is a risk factor with all insurance companies. So they need to constantly be reevaluating their systems. Making sure they’ve got their calculations right to make sure that they’ve got some profits to ensure the future viability of the insurance company itself. So the insurance industry is entirely based on forecasting probability and the law of averages. They know that on average people will live to around 80 years of age. So if you die, early Offset by lots of other people, who’ll live to 90 or 100 or 110. So on average people are dying age 80 and they know that they’re going to make some money. So what types of insurance are that and how does it affect you? Well, depending on you and your lifestyle and what you do you may have multiple Insurance policies if you drive a vehicle then you’ll need to have that vehicle insured in most countries around the world. It is a law to have insurance because when you go out on the road if you cause an accident or you do something that injures somebody else, you’ll need to be insured for that so that they can make a claim against you to either repair their car. Or if they’ve got personal injuries that are life affecting, they will sue you and want some compensation for that. So, car insurance is something that a lot of people have. And most people are familiar with that type of insurance. If you own a property, then you’ve probably got two different

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types of insurance that relate to that property. You’ll have buildings, insurance, that relate to something happening to the building.Thing that you own, if you lose it all in a fire health and life insurance are also very common policies that a lot of people have. So life insurance is what? We just discussed in the events of your death. It pays out to your relatives, but health insurance is a really important thing in a lot of countries. So most countries around the world you have to pay for medical care and therefore you want to have some form of insurance in the event. That something happens to you. You need some emergency treatment, or you become ill and you need to be able to pay for the medication and the services that you’re receiving. And finally business insurance is one of the major groups of insurance these days. All businesses around the world will need a variety of insurances, whether it’s ensuring the building that they’re operating within whether it’s trade credit Insurance. So they’re actually ensuring their business with other countries and other counterparties or whether it’s ensuring for their employees. In the event, that there’s an accident and somebody makes a claim against the company or insurance for intellectual property, right? So, if you get, su Somebody says that you’re stealing their copyright or their ideas or cyber insurance, which is a

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growing part of the market, and this is protecting against cyber attacks and companies coming against you and trying to destroy the software in your business and bring your business to a grinding halt. So, you can see how many different types of insurance there are. And depending on what you do and how complicated your life is, you may find that you’ve got 10 or 15 or 20 different insurance policies that affect you and therefore, you’re having to pay the premiums on these policies every single month. And it’s now a really big part of everybody’s household budget and a really big part of all businesses. Budgets Business insurance is essentially the same concept as what I’ve just talked about for life insurance, but it’s based on different factors and different probabilities. So, there’s more expertise needed and a lot more analysis. So if you’re a business and you’re doing trade internationally, you’ll need to ensure that trade in the event of something untoward happening. So if you’re an exporter for example and your exporting Goods, you’ll need to ensure those goods in case something happens to them in transit. So the ship that you put them on syncs or if something happens at the port and you’re good to get damaged and therefore are worthless before they reach your