Assurance Companies

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The term 'assurance company' is synonymous with the term 'insurance company'. Assurance was the original term used by financial companies who took on their clients' risk in exchange for a monetary fee. 'Assurance' gradually grew to indicate long term insurance while 'insurance' was used for short-term insurance. In modern times, 'insurance' has all but completely replaced 'assurance' even in the long term insurance field. Therefore when one refers to 'assurance companies', you are also referring to 'insurance companies'.





Insurance/Assurance operates on a "risk sharing" model. This model works as follows:

1) A person or organisation approaches a financial company and requests that that company takes on some or all of its risk.

2) The financial company or 'assurance company' assesses the amount of risk and decides on a premium (price) to be paid for taking on the risk.

3) If the premium is acceptable, the person or organisation becomes a policyholder and pays the assurance company for its services.

Insurance companies (assurance companies) typically specialise in either short-term insurance, long term insurance or both. Some smaller companies have managed to enter the market by offering niche insurance products.

Currently South African insurance companies offer some of the following:

Life insurance
Annuities
Pension Plans
Motor insurance
Home Insurance
Business Insurance

Consumers also have the choice of buying insurance products from a traditional insurance company via a broker or through a direct insurance company. Santam is a good example of a broker-based traditional insurer while MiWay is a good example of a direct insurer. Both models have their positives and negatives.

The role of insurance brokers should not be overlooked in the insurance industry. Insurance brokers are invaluable sources of information regarding insurance and are able to source products to meet their clients' needs. They are also well regulated in South Africa to ensure that consumers are protected as much as possible.