What is your understanding of insurance? What kind of industry do you think insurance is?

This is a question that practitioners want to answer when they see it. They quoted a lot of theories and knowledge to answer from three aspects. 1, the difference between insurance and savings, 2, the principle of insurance operation, 3, the anti-risk measures of modern people.

A, the difference between saving and buying insurance. China has a saying, today should be prepared for the uncertainty of the future. Saving and buying insurance are both ways to prepare for future uncertainty. What is the difference?

1. People's three risk preferences

Let me introduce three basic concepts to you: one is risk aversion, the other is risk preference and the other is risk neutrality. Three different attitudes towards risk.

For example, "I am willing to give it to you 10 yuan, but in a different way. One of them will be given to you 10 yuan without any risk. 10 yuan is 10 yuan. "

If you are willing to choose this way of giving, then you are a "risk averse" person. You don't want to take any risks. This 10 yuan, you should take it safely.

There are many ways to give money, saying, "I can give you 10% chance to get 100 yuan, and if you are lucky, you can get 100 yuan;" Of course, there is a 90% chance that you won't get any money. "

On average, this 10% chance of getting 100 yuan is the same as actually getting 10 yuan. Which one would you choose?

If you like risky choices, and the higher the risk, the more you like them, then you are a "risk preference" person.

If I give you 1% chance to get 1000 yuan, then 1% chance to get 1000 yuan, 100% chance to get 100 yuan, come to me.

But for you, if you like the choice of high risk and high return, you would rather get 1000 yuan at a time. If you really feel that way and can withstand the frustration of not getting money 999 times, then you are a "risk-oriented" person.

Such people are common in casinos. The gambling addict is addicted because he will do whatever it takes, and no matter how much money he loses, he will relive the feeling of making a lot of money. This kind of person is "risk-oriented".

Of course, there is another kind of person who is in between. It doesn't matter how it works. Just give me 10 yuan, give me a higher risk, give me a higher risk. This kind of person is called "risk neutral".

2. Reasons for saving

After explaining the three concepts of risk aversion, risk preference and risk neutrality, we will come back to answer the questions just raised. What is the difference between saving money and buying insurance?

I am still young and strong, and I may get sick when I am old. In order to prevent me from getting sick in the future, I will save money from today, and I will save 10% of my income every month for a rainy day. This is an exercise.

Another way is that I also spend 10% of my income every month to buy insurance.

What's the difference between these two practices?

The difference is that if I plan ahead, two different situations may happen in the future.

If I am old and not sick in the future, the money I save is still my money, and I don't need to spend it. At this time, I was lucky to keep my original income. I haven't spent all this savings, but I have earned it.

But if I am unlucky and ill, this savings will be used up, and my wealth will be reduced at this time.

Therefore, saving for a rainy day is characterized by changeable and risky future results. Either high or low, or you can keep the original savings, or the savings are used up.

3. Insurance principle

But the principle of buying insurance is different.

The principle of buying insurance is this: the future is uncertain, and I may fall into a different world in the future. You see, there are several different possible worlds in front of me: possible world one, possible world two and possible world three.

If I fall into these different possible worlds, my income will be different.

If I fall into a lucky world, I won't get sick in the future; If I fall into a less fortunate world, I may get sick and become poorer.

People who buy insurance know that they will face this situation in the future, and they also know that falling into different worlds will have different benefits. But they are risk-averse, don't like change, and don't like the possibility of high or low in the future. He wants a service: no matter which world he falls into, he wants his income to be the same.

You should pay attention to that it is not that he hopes to earn high or low income in the future, but that the service he hopes is unique. What he means is that he hopes to get the same income no matter which world he falls into in the future. What he wants is the feeling of "the same income"

Some people have this demand, and some people provide this service. This kind of service is insurance service.

You see, a person buys insurance for a rainy day and takes 10% of his income every month to buy insurance. After buying it, if he gets sick, the insurance company will pay for his medical expenses in advance. But if he is not sick, the insurance company will not compensate him. Which insurance company is stronger? I just sorted out the relevant content, hoping to help you: the latest list! Top Ten Insurance Companies in China

He just paid 10% of the income he paid to the insurance company every month and can't get it back. What is the money for? To buy this service that he hopes is "the same as his future income."

This is the difference between saving and buying insurance.

Save, and your future life will be high and low. If you don't get sick, you can spend the money you save and buy things.

But after you buy insurance, no matter what world you fall into, health or disease, your income is the same. If you are in good health, the insurance company will not compensate you for the money. If you get sick, the insurance company will compensate you for your medical expenses. As a result, your income remains the same.

Therefore, the insurance company is a commercial organization to meet your needs and provide you with "future income consistency" services.

This is a deal. In principle, if someone likes eating chocolate, someone will produce chocolate, and if someone likes drinking coffee, someone will produce and provide coffee. The principle is the same.

4. Three prerequisites for insurance services

What are the prerequisites for insurance companies to provide the "income consistency" service you need? It has three premises. What insurance companies want to insure must meet three basic standards: irrelevance, independence and probability.

What is to be guaranteed must be probabilistic, not deterministic. You are already ill, so it is not insurance, because there is no doubt about it. If you are already sick and want to be insured by the insurance company, it is not insurance. The insurance company subsidizes you and is good for you.

The risk probability of each policyholder is irrelevant. On the other hand, if the risk probability they have is related, and the risk is global and involves everyone, then the insurance company cannot set up insurance. For example, global nuclear pollution, global climate disaster, this kind of risk insurance company can not protect.

Every probability event has nothing to do with the wishes of the insured. In other words, the insured himself can't control the probability of getting out of danger. The sick insured can't control it and can be guaranteed; Traffic accidents can't be controlled by the insurer, which can be guaranteed.

Falling in love and breaking up cannot be guaranteed, because the insured has great subjective initiative in breaking up; If you fail the exam, you can't apply for insurance, because the applicant has great initiative in passing and failing the exam. If the insurance amount is too high, many students say that my pocket money is not enough and I don't want to take the exam this semester.

Therefore, the events that the insurance company claims must be probabilistic, irrelevant and independent.

summary

Three different attitudes towards risk: risk aversion, risk preference and risk neutrality, explain the difference between saving and buying insurance.

B, the principle of insurance operation The insurance company mentioned above is an institution that provides customers with "future income consistency" services. How do they provide this service? How do they compete with each other?

1. Operation and competition of insurance companies

Let's imagine that if there is only one insurance company in society, it will accept everyone's insurance. To simplify the discussion, we assume that everyone has a chance to get sick, but everyone's chance to get sick is related to age, and only to age: the older you are, the higher the chance and risk of getting sick.

In this case, an insurance company accepts everyone's insurance and everyone is insured in this insurance company. What will happen?

At this time, young people are basically not sick, but they also have to pay premiums; Old people often get sick and have to pay the same premium. At this time, the young man hitched a ride with the old man.

2. One of the competitive strategies of insurance companies: segmentation.

At that time, another insurance company came out and said to everyone:

You see, the business model of this insurance company is not good enough. I offer a better business model, that is, I intend to divide people into two types: one is called young people, the other is called old people, and people are divided into two types. Young people buy insurance for young people, and the premium is relatively low; Old people buy insurance for the elderly, and the premium is naturally higher.

The emergence of this second company is even more attractive. Many young people are willing to take out insurance in this second insurance company, because their chances of being taken advantage of are reduced, and of course the premiums they have to pay are also reduced.

At this time, the third insurance company ran out, he said:

I don't just divide the crowd into two kinds, young people and old people. I divide people into 100 species, and put people of the same age in a group.

It further subdivided the crowd. Of course, we can imagine that the third insurance company is more attractive than the second insurance company.

According to this logic, the competition among insurance companies will be more intense.

They don't just distinguish people according to the same age. Even people born in the same year were born in the first half or the second half. They also distinguish people by month, date and time of birth.

Because the smaller the share, the closer the risk of people in the same subgroup, the lower the possibility of being taken advantage of by others and the lower the premium to be paid, so they are more willing to buy insurance from such companies.

This is an important way for insurance companies to compete with each other and improve product quality. This is called isolation, which accurately subdivides the risks of different people.

The finer the crowd division, the fewer hitchhikers there are.

Of course, the assumption we just said is too idealistic. We say that a person's illness is related to only one factor, and it is related to age. Of course, this is not the case in reality. A person's chances of getting sick are related to many factors.

At this time, the insurance company will ask actuaries and people who specialize in probability statistics to carefully distinguish the risks caused by different factors, so as to accurately segment the complex population.

For example, in America, if you want to buy insurance for your car, it's simple. You go to the websites of different insurance companies, and there are a series of questions on the websites. You must answer:

How old are you? How long have you been driving? Are you single or married? What's the postal code of your home address? What is the zip code of your daily work address? What kind of car are you driving?

Of course, they know your violation record at once. According to all these factors, they can accurately calculate what kind of person you are, how careful you drive, and the probability of traffic accidents on your way to and from work every day.

This is a series of calculations made by the insurance company behind the scenes, that is, subdividing the people who come to insure.

The finer the insurance company subdivides the crowd, the less opportunities for each group member to take a ride, the lower the premium paid, and the greater the appeal of insurance. This is the first thing that insurance companies should do-segmentation.

4. The implementation of differentiation conforms to the principle of insurance management.

You see, insurance companies have to subdivide people and try their best to subdivide people's risks, but sometimes they encounter obstacles.

Ask people's age, gender, past medical history, where they live and whether they are married or not. The purpose of asking all these questions is to determine the risk of people in a small group.

But interestingly, with the development of new technologies, such as genetic screening technology, insurance companies can accurately predict the possibility of suffering from a certain disease in the future through genetic technology. Can this technology work? Does this technology involve discrimination?

Discrimination is actually different treatment. From an economic point of view, this is a neutral description, and discrimination is a very natural behavior. Discrimination in the insurance industry, that is, segmenting people, is a normal practice and conforms to the principle of insurance management.

But interestingly, it is illegal to distinguish people according to their genes in the United States, because politicians and most people think it is a kind of discrimination, so people can't be discriminated against, and everyone should enjoy insurance services fairly.

Now the problem is complicated. Is insurance a commercial service that everyone voluntarily buys? Or social welfare that is fair and open to all? This issue is still controversial.

5. The insurance company's second competitive trick: summation.

At the same time, insurance companies also do another thing, which is aggregation. In each subdivided group, it wants to increase the number of members in each subdivided group.

The more people with the same risk, the more accurate the mathematical expectation of risk among them, and the smaller the deviation-this is the principle of the law of large numbers-in this case, the lower the premium each group has to pay.

So insurance companies use both methods-subdivision and summation. The finer the risk division, the better, and the more people involved in each subdivision, the better.

Through these two measures, it can improve the cost performance of its insurance products, thus attracting more customers and improving its competitiveness.

summary

Today we talked about the basic competition principles of insurance, that is, subdivision and summation. What we want to emphasize here is that insurance is a self-sustaining, marketable and marketable commercial product. Although abstract, it is a self-sustaining business model.

C, modern anti-risk measures

Risk is actually an inevitable part of human society. Death, illness, unemployment, car accidents … all these may have a great impact on our lives. This is especially true for enterprises. Agriculture depends on the weather for food, with large industrial investment and high probability of failure, and it faces many uncertainties.

In ancient society, our human society was weak in taking risks. What do you mainly rely on? Rely on families and clans to understand risks. Do you think ancient scholars often had to rely on a rich boy in their own clan to help them get into Beijing to take exams? If any family has orphans and widows, it can only rely on the parents in the ancestral hall. These risk-taking mechanisms are linked by "consanguinity" and "region", which are fragile and difficult to quantify and cannot be popularized on a large scale. Therefore, human economic activities will be greatly restricted. However, modern financial markets and financial instruments have changed all this.

First, insurance: let the society share the risk of dispersing individuals.

A particularly interesting example is American agricultural insurance. In the summer of 20 12, the United States suffered the worst drought since 1956. Corn is the most seriously affected crop, and even there is no grain harvest in some places in the central and western regions. If you put this in ancient China, you will immediately see a large number of farmers in desperate circumstances. If you are not careful, it may be that "the people are in dire straits and bandits are everywhere".

Fortunately, agricultural insurance in the United States is particularly developed. It is a mechanism in which all farmers in the country pay a certain premium, and once the insured farmers have problems, these funds will be used to compensate their losses. Because of agricultural insurance, in the rare natural disaster of 20 12, farmers who planted corn found that their income not only did not decrease, but increased.

Why? Because of the disaster that year, the purchase price of corn in the market will rise, which increased by 60% at that time. The amount of insurance compensation is calculated by multiplying the historical output by the market price, so the income of a farmer before the disaster was about 1000 US dollars. Now, because the purchase price of corn in the whole market has gone up, the compensation he finally got can reach 1280 US dollars. In this way, with such an insurance mechanism, farmers can perfectly hedge the risks of natural disasters, and then gain a particularly great sense of life security.

Therefore, the risk-taking function of insurance gives us great freedom. Our dependence on nature has decreased, and our personal risks have also spread to social groups. This is the role of insurance. Let me give another example to see what changes financial risk sharing will bring to human society.

Second, stocks: let more people "enjoy the benefits and take risks."

As we all know, the Netherlands is the most powerful maritime empire in the world in the17th century, and the formation of this empire is actually closely related to the risk-taking function of a financial instrument.

16-17th century, there was an "East India Company" in the Netherlands, which wanted to develop ocean-going maritime trade, but ocean-going trade faced two constraints: First, the shipbuilding cost was too high; Secondly, the uncertainty of maritime trade is so great that it is difficult for you to complete such an expedition only by the captain or the crew themselves.

In order to solve this problem, the clever Dutch designed a mechanism: they let the Dutch buy the "shares" of the East India Company. As long as you buy the shares of this company, you can share the profits of the East India Company's ocean trade according to the subscription ratio, which is called "benefit sharing"; However, if the exploration fails, even if your investment sinks, this is called "risk * * *". Through such a mechanism of "benefits * * *, risks * * * *", the financial risks of ocean-going trade are shared with stock buyers. In this way, the East India Company raised a lot of money, and the crew had no worries. They boldly embarked on a journey to the East, creating an era of Dutch maritime empire.

Third, venture capital, venture capital: let the society share the risk of entrepreneurial innovation

Some people may ask, this happened in the Netherlands more than 400 years ago. Is the burden of financial risks still useful to us? Of course it works. For example, the most popular venture capital, venture capital has played a great role in promoting innovation and entrepreneurship. Many people start businesses in the sea, but starting a business is not fun. This is a narrow escape game. Don't say that ordinary people, even billionaires, may lose everything if they are not careful.

For example, elon musk, the founder of Tesla and a famous technology madman, dreamed of exploring the universe from an early age. In 2002, he was already very rich and founded a private enterprise named Space Exploration Technology Company to make rockets. He said ambitiously, "I want to realize the plan of human interstellar migration in the future." At first, he thought he was a billionaire and should do it alone. However, I never imagined that the rocket launch was no joke. Each launch costs hundreds of millions of dollars. From 2006 to 2008, space exploration technology company failed to launch many times, so even the billionaire Musk almost went bankrupt. So after that, Musk learned from a painful experience and decided to start accepting external financing. At that time, more than 100 venture capital institutions such as world-renowned funds and technology giants participated in this venture capital investment. In the E-round financing in early 1965, 438+05, institutions like Fidelity Fund and Google invested 10 billion dollars in Space Exploration Technology Company.

Well, now with the endorsement of venture capital and the burden of risk, Musk is bolder and faster, so his project is advancing faster and faster. By 20 10, space exploration technology company's Falcon 9 carrier rocket successfully put a "dragon spacecraft" model into the predetermined orbit, creating history at once. No private enterprise in history has been able to successfully launch rockets, but space exploration technology company has succeeded. After the success, space exploration technology company accepted a lot of rocket launching business, and even NASA was prepared to let them transport goods and astronauts for the International Space Station.

So you can also see from this story that, like the Dutch sea adventure, Musk's sky trip is also the product of such a financial "risk * * *". Without the support of venture capital, space exploration technology companies may have "died" before their dreams come true.

Therefore, we will say that these financial instruments, whether stocks or venture capital, have made our human ability to take risks break through the geographical and time constraints, individuals and enterprises have been given greater energy, and the scope of our human economic activities has been greatly expanded.

summary

1. Finance is by far the most effective mechanism for human society to achieve cross-regional, cross-time and large-scale "risk sharing".

2. Insurance can help individuals transfer and disperse risks in social groups, and improve our human independence and sense of security. 3. The function of "sharing profits and taking risks" helped the Netherlands to open up a powerful maritime empire. 4. Venture capital and venture capital share the risk of entrepreneurial innovation and expand the scope and ability of human economic activities.