Monday, June 28, 2010

Introduction to Insurance Products

The rise of unit-linked insurance business today marks a shift in market penetration of life insurance from life insurance products to traditional life insurance products that promised a modern investment returns as well as better able to contribute to significant premium growth.
It is also not free from the influence that consumers have started to rationally define and decide what kind of products they want to buy insurance. The above statement is not an exaggeration aimed at a mechanism to
decide what product to buy and why should these products to be purchased.

Life insurance business is a service business, where the form is not a product produced in the form of goods but services and activities are abstract or "intangible". Services sold was a guarantee of protection for consumers (clients), relating to the life and the life within a certain period or for life. That is what is meant by the terms "life assurance", which should not be taken literally ie "life assurance", but "guarantees relating to life", wherein the related amount of money and time.

Guarantees in life insurance ranged from less than one year to lifetime, and the deposit will be exhausted gradually consumed in line with the passage of time. In it contained a promise of security from life insurance companies to provide compensation in the form of a sum of money if the insured is experiencing such events: death, disability, illness and reach old age. Guarantees are implicitly gives an assurance to its customers on problems uncertainty about lost revenues due to the occurrence of these events.
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In this first article will discuss several types of life insurance products marketed by life insurance companies in Indonesia and also recognize the benefits offered by any of these products are life insurance. Life insurance products offered on the market basically consists of three forms, namely Term Insurance, Whole Life Insurance and Endowment Insurance, where these products are categorized as traditional products. While life insurance products traditionally developed by attaching the instrument-the instrument of investment in it and the transparency of both the consolidated statement of costs and benefits that the insured will be obtained later, is categorized as a modern insurance products, such as unit-linked insurance products.


Many types of life insurance products offered by life insurance companies, which is basically a combined Endowment Insurance with Term Life Insurance and Whole Life Insurance. For example, Endowment Insurance with death benefits of two times or greater than the benefits due. There is also a life insurance product that provides death benefits in the form of sum assured plus all the premiums paid. Premium refund given if insured dies at any time, is a product of Whole Life Insurance. Endowment Insurance products in which payment of insurance benefits provided by either an annual or monthly periodical called Anticipation of potential future Endowment. Huge benefit given periodically be varied eg by increasing every year by 2%, 5%, 10% or more. Other types of Endowment Insurance products are often found in the market, such as:

• Scholarship Fund. This product is Endowment Insurance products are associated with school fees, usually known by the name of Insurance Scholarship, School Fee, and others.
• Gradual Fund. This product is also shaped exactly Endowment Insurance Pure Insurance Endowment, where if the insured is alive at the end of given year during the insurance period, insurance benefits will be paid certain percentage of sum assured.


The availability of various forms of instruments of money market securities, bonds and various savings programs, however, also has a direct impact on life insurance products, namely reducing the attractiveness of cash value life insurance policy traditional. Consumers more and more interested to participate in trading using a faster instrument profitable. State and tendencies to force insurance companies to create or design a life insurance products by combining the advantages of life insurance cash value (ie the nature of forced savings, etc.), and wide selection of products that provide higher profits. This product is called at the time of the creation of a universal life insurance.

During its development, many insurance companies issuing life insurance types of life insurance with the product or the same type of policy is accompanied with the advantages of each policyholder. The names of these products is also changing, for example challenger, complete life, solution and so on to attract prospective customers to buy its products. The names of life insurance products are in principle based on universal life products.


As described in the previous section, the development of life insurance products can be classified according to its period, ie traditional life insurance products and modern life insurance products. The characteristics of traditional life insurance products are: The

• Large coverage premiums and money fixed (constant) since the commencement of insurance until the expiration of insurance.
• predetermined premium payment schedule, for example, every year, six months, three months or monthly.
• Since the contract began in cash value policy can already known.
• Composition of the cost, mortality table and interest rate is not specified and is not known by the prospective policyholder.
• Large interest rate enjoyed by the policyholder is constant throughout the insurance contract.

While for modern life insurance products have the following characteristics:

• Composition of the premium specified separately between pure insurance premiums, fees and interest rates.
• All the details are known by the prospective policyholder.
• The premium payment and the amount of money can change coverage, and has no fixed schedule, modern life insurance product because it allows the existence of any additional premium.
• This product requires the administration of a far more complicated than traditional life insurance products, therefore this product has a share of premiums for a substantial investment and should be managed professionally.
• Prospective policyholders may decide where the funds (premium) are invested, such as stocks, bonds, money market deposits, time deposits and so forth.
• cash value of this policy is determined by the performance of the investment committee of insurance companies that manage, so that policyholders do not know exactly how much cash value he would receive if lapse.
• The form of life insurance Whole Life Insurance usually with added some riders such as personal accident and total pemanent and disability.

The characteristics described above, gives a better picture in identifying insurance products that are categorized as traditional and modern. Of course, every product has a value of plus minus if the views of any features mentioned above. The decision to determine which insurance products best suited to be purchased, into a comprehensive consideration for prospective insureds other than as a goal the protection of applicants itself. Consideration could be the return result will be the main preference in deciding to buy such insurance products. In the next article will discuss about the great benefits of buying a life insurance product.


ERM - Enterprise Risk Management (risk management) is an important factor that must be considered firm. A framework for comprehensive and integrated to manage credit risk, market risk, operational risk, working capital and transfer risks to maximize corporate value.

Seven components of the ERM program to run properly:

1. The owner shall ensure that the board and management have formed the organization and control the right companies to measure and manage corporate risks.
2. Line management integrating risk management into corporate activities, including business development,
product, relations management, pricing and more.
3. Portfolio to incorporate risk management, incorporating the effects of diversification, and monitor the risks to establish risk limits.
4. Transfer the risk to reduce risk is considered too high, more cost efficiency to transfer risk to third parties and to maintain the company's portfolio of risk.
5. Risk analysis to measure the risk, analysis and reporting tools to measure corporate risk.
6. Provision of data and technology to support analysis and reporting process.
7. Owner berkomunkasi and report risk information to the person who appointed the company.

Wednesday, June 16, 2010

Managing Emotions in the Workplace

Perhaps the description of such figures is quite familiar to you: coworkers who never have a pleasant words, whether in the regular weekly internal meetings as well as in the chat in the cafeteria for lunch. People like this usually takes the energy in a brainstorming session because his comments are "not important".

Their tendency to easily "bore" is also disturbing. In short, their negativity can contaminate
the life of the office. As affirmed by the Wharton School of Management Professor Sigal Barsade who studied the influence of emotions in the workplace, emotion was contagious. "Various emotions spread from one person to another like a virus," he said.

Barsade join the team of writers paper "Why Does Affect Matter in Organizations?" In the study of organizational behavior, "affect" is another word for "emotion". And, answers to written questions from the paper's title: mood, emotions and attitudes of all employees have an influence on performance, decision making, creativity, turnover, teamwork, negotiation and leadership. "Everybody brings their emotions to work," says Barsade.

"You bring your brain to work. You may also bring your emotions when working. The various feelings that stir the performance."
In the paper, Barsade and his team detailing the existence of three different types of feelings:
1. Discrete, is instant emotions, like love, anger, fear and disgust.
2. Mood, namely the long-term feelings and not related to specific causes, such as someone who is gay, or inferior.
3. Dispositional, or personal qualities inherent in a person who 'defines' the relevant overall. We often hear people comment, "He's always happy," or, "He's always been prejudice."

According to Barsade, some people do have better control of his emotions than others. However, it does not mean that the people in surrounding areas not affected by their mood. "You might not realize that you're showing your emotions, but that's reflected in facial expressions or body language. The emotions that we do not realize it could affect our thinking and behavior," he said.
To the managers suggested Barsade transfering positive emotions, such as by saying, "I know you're worried. Things do not look good, but you know we have a way to overcome it and we can work together."

Employees will appreciate honesty like that and can get a sense of comfort to be optimistic.

The Girl with the Dragon Tattoo

5 Malevolent Executive Failed

An executive or manager was clearly not an easy job. In their hands of the company's future lies with its stakeholders. That's why, you do not be too having caution when appointed as CEO, director or even a manager. One-one you actually make the company stumbled, went bankrupt, lost, eliminating jobs for employees, and so on. Your reputation as a professional would ever tarnished.

  • Results of research by the Research Team Tuck School of Business, Dartmouth (under Sydney Finkelstein), against employed several business failures in a number of developed countries shows how the failure of the company is determined more by the poor quality of
    the leader personally. Fuss, these personal qualities associated with admirable personal qualities of leaders themselves. Automation is the most destructive people who have extraordinary intelligence and talents. They always appear attractive, displaying the personal charm, and inspire others. Photos often decorate their faces magazines world-class business types Forbes, Fortune, Business Week, and so forth.

    From the search for a list of companies that failed executives, ranging from Rubbermaid company to Enron, Wang Labs, Sony, and Samsung, this research team succeeded in formulating the seven executives who fail the character. This character must be a record company at all levels, from managers to CEOs.

    Nature 1. They see themselves and their organizations to dominate their environment.

    An executive must have big ambitions and act proactively for success, but the basis of this action must be based on the philosophy of the right. Successful leaders act proactively because they realize that they do not dominate the environment. They know, however the success in the past, they are still faced with a changing environment. They must continue to introduce new initiatives because they are unable to ensure everything happens according to expectations. Integration planning must be constantly adjusted and reviewed.

    Leaders who see themselves and the environment dominate their companies forget this. They really confident with their ability to control what will happen and ignore the role of chance and condition against their success. They think they will be able to dictate to the environment. They felt that the success of themselves and their companies because they make it happen.

    Nature 2. There was no line between personal interests with corporate interests.

    Executive ability Management to identification interests in detail could cause them to take decisions that are not wise. In addition to treating the company as something they need to protect and exaggerated, CEOs who identified company interested too much could treat the company as an extension of themselves. They lead the company to do something that makes sense for him, but not necessarily make sense for the company. They seemed to act as the owner of the company and the right to do anything with the name of good of the company. Though, actually more for their own interests.
    These executives have the mentality to take advantage of the company in order to bring own ambition, although it was not the best way to make a profit. Samsung CEO Kun-Hee Lee decided to enter the automotive business more because he liked the car. Saatchi brothers continued to expand his company, regardless of whether it produces income, but more due to the expansion of personal ego.

    Nature 3. They think has all the answers

    It's hard not to be impressed with detailed business leaders who know everything that is important. They are very easy make the complicated situation into something that makes sense. Beyond all that, they were given the advantage to make good decisions in any situation.

    Fair if later, the mass media and the public to admire them. They are executives who can take dozens of decisions in one minute, gave orders that have a major impact for the company, could face a crisis many times, and is able to digest the situation in one second that for others it took several days to do it. At higher levels within the company, they are executive prototype is superb and should be followed. They are considered an ideal figure who always has a lot of answers to all problems, and able to give an answer as soon as the question was asked.

    What happens to the executive overview of this kind is actually a scam. In the world of business conditions are constantly changing with innovation and only really take place constantly, nobody has an answer for long periods. Leaders who are always making quick decisions do not make the opportunity for deepening. This is very bad, because they already have the answers, without ever learning to find new answers. Their instincts, something that is often very important, always encourage rapid inference, does not allow the period of uncertainty, including uncertainty as it was something that really what it is.

    People around the CEO is sometimes encourage the habit of making quick decisions this. They want to follow leader who always had an answer. In fact, this sort of thing actually plunged the company into trouble.

    Nature 4. They rudely replace those who are not 100% supportive.

    CEO with a great vision to believe that the main part of his job is to instill confidence in that vision to the whole company, invites everyone to work together realizing that vision. If a manager does not show full support, the CEO will feel his vision ignored. In turn, the CEO will ask the manager to support the plan or leave. This is the character shown by Roger Smith at GM, Jill Barad at Mattel, Bill Farley at Fruit of the Loom, Wolfgang Smith at Rubbermaid, and others.

    Surely this kind of CEO action is unnecessary and destructive. CEOs do not need everyone in the company just confirmed what he had to say. The differences can actually improve the vision that they were able to overcome problems when they arise in the future.

    Nature 5. Being a malevolent company spokesman, obsessed with the company image

    Leader in this category is a high-profile executive, wants to always be in front of the public. They spend a lot of time by giving public speeches, appearing on TV, interviewed by reporters, build incredible charisma. They were brilliant inspire confidence in the public, employees, potential job seekers, and its main investors.

    Monday, June 14, 2010

    Pension Funds in Indonesia

    Pension Funds in Indonesia can be separated into 2 categories:
    1. DPPK (Dana Pension Pemberi Kerja) –EPF (Employer Pension Fund)
    2. DPLK (Dana Pension Lembaga Keuangan) –FIPF (Financial Institution Pension Fund)

  • Type of pension plans:
    1. Defined Contribution Plan

    2. Defined Benefit Plan

    Pension Fund
    Employer Pension Fund (EPF) – DPPK
    - EPF is a separate entity of the company.
    - To set up an EPF, the company has to apply for legal license from the Ministry of Finance.
    - Type of Plan: Defined Contribution or Defined Benefit
    - Defined Contribution (DC) Plan:
    The benefit is the accumulation of the contribution plus interest at retirement age
    - Defined Benefit (DB) Plan:
    The benefit is determined in a fixed amount at the attainment of retirement age. The formula is as follows:
    Factor x Year of Service x Final Pension able Salary
    - The retiree has to transfer the lump sum benefit to a monthly income benefit by purchasing an annuity plan from a Life Insurance Company

    Financial Institution Pension Fund (FIPF) – DPLK
    FIPF is a separate entity of the Life Insurance Company or Bank.
    - To set up a FIPF, the Life Insurance Company or Bank has to apply for legal license from the Ministry of Finance.
    - Type of Plan: Defined Contribution
    Defined Contribution Plan:
    The benefit is the accumulation of the contribution plus interest at retirement age.
    - The retiree has to transfer the lump sum benefit to a monthly income benefit by purchasing an annuity plan from a Life Insurance Company.

    Marketing Activities

    Marketing activities in the context of marketing investments refer to marketing communications, brand identity creation and other promotional activities. Each of this activities is carried out with the sole purpose of making the company and its products favorable to customers.

    As such, even though the company includes a number of other functions and activities, selling the company
    comes under the purview of marketing. In such a scenario, marketing activities must be viewed in the broader context of selling a company or its image to potential customers.

    When marketing investments are utilized to achieve much broader objectives that expand beyond the narrow confines of the marketing department, measuring the outcomes of this investments should also be in line with such broader objectives.

    The second challenge in measuring marketing productivity is the separation of marketing activities from other actions of a company. Even though many marketing investment are made for the company as a whole, only marketing productivity is measured and not the returns on the company as a whole. As such, it does not project the actual complete picture. Isolating marketing activities from other company activities only compounds this problem.

    Saturday, June 12, 2010

    The Day of Love

    This now global festival of romantic love and its accompanying chocolates, cards and flowers was surprisingly named after two early Christian Martyrs (Valentine of Terni and Valentine of Rome) who were later sainted.

    The story of these men has been embroidered over the years into various myths and legend. In one version of the tale, valentine resists a law attributed to the Roman Emperor Claudius II ordering that young men remain single.

    In other version of the myth, valentine is imprisoned by Claudius and subsequently falls in love with the daughter of his jailer. Before he is executed sends her a note signed, “from your valentine”.

    In the middle ages, literary legend Geoffrey Chaucer and the flourishing
    Tradition of courtly love cemented valentine’s day into the calendar, turning it into a romantic holiday.

    Chaucer’s Parliament is set in the fictional context of a valentine day’s tradition, but of course no such tradition existed before Chaucer wrote about it.

    Valentine’s Day was reinvented in the 1840s when an American woman, Esther Howland, created the first mass produced cards which were made of embossed paper lace. The traditional exchange of love notes has now blossomed into an industry that sees an amazing one billion cards sent every year.

    In a rather telling confirmation of the oft heard female assertion that mean are unromantic, it has been estimated that a disproportionate 85 percent of these cards are purchased by women. Most recently in a send-up of po-faced political correctness, Valentine’s Day has been renamed Single Awareness Day by some bright spark.

    Lose Weight

    Five Point Plant to Help You Lose Weight

    1. Reduce Fat and Cholesterol

    By eliminating fried foods and instead grilling, steaming and baking. Use low fat products.

    2. Increase Fibre

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  • By eating whole grains and snacking on fruit and vegetables.

    3. Control Calories

    By eating in moderation and saying no to second helpings.

    4. Reduce Sugar

    In beverages and cooking, basically cut out all high sugar foods.

    5. Reduce Salt

    In your home cooking and avoid pre packaged meals.

    Fat : 1 Gram = 9 Calories

    Protein : 1 Gram = 4 Calories

    Carbohydrates : 1 Gram = 3.5 Calories

    Alcohol : 1 Gram = 7 Calories

    Saturday, June 5, 2010

    Glossaries of Trading

    1.        Trading Volume, Value and Frequency:
    Figures of trading volume, value and Frequency are calculated once, except on the stock exchange’ members trading data. Trading Frequency refers to number of transaction.
    2.       Number of shares (number of issued shares):
    This figures is number of listed shares after adjustment when bonus and rights issues, share splits and consolidations are made.
    3.       Number of listed shares:
    This figures refers to the total number of shares that is already listed and can be traded at the exchange.
    4.       Market Capitalization:
    This figures indicates the aggregate number of shares multiplied by regular market closing price.
    5.       Stock exchange Composite Index
                       = Σ(Regular Closing Price * Number of Shares)  x 100
    Base Value
    Base Value
              = Σ(Base Price * Number of Shares)
    6.       Individual Index
                       = Regular Closing Price  x 100
    Base Value
    7.       To calculate the stock exchange Composite Index and Stock Individual Index, Base Price and Base Value are adjusted
    when bonus and rights issues, share splits and consolidations are made. Base price for new listed companies is
    IPO price.
    8.       To calculate Financial Ratio, the latest financial reports are used.
    ·                    Earning Per Share (EPS): The figure of EPS is derived by dividing the Profit after Taxation by number of issued shares. We annualized the EPS when interim reports are used (see the Financial statement dates and Financial Year Ends).
    ·                    Price Earnings Ratio (PER)
                                 = Regular Closing Price  
    ·                    Book Value per Share (BV): The figure of BV is derived by dividing the Total Shareholders’ Equity by number of issued shares.
    ·                    Price to Book Value (PBV)
                                 = Regular Closing Price  
    ·                    Return On Asset (ROA)
                                 = Net Income  x 100
       Total Assets
    ·                    Return On Equity (ROE)
                                 = Net Income  x 100
    ·                    Net Profit Margin (NPM)
                                 = Net Income  x 100
        Total Sales
    ·                    Operating Profit Margin (OPM)
                                 = Operating Income  x 100
              Total Sales

    Source of Profit Insurance

    In the pricing insurance, sources of profit depend on:

  • 1.        Interest
              Profit will happened if interest earned less than interest credited
    2.       Cost of Insurance
              Cost of insurance charges less than death benefit paid
    3.       Expense Charges
              Expense charges less than expenses and commissions
    4.       Surrender Charges

    Annuity Policies

    Annuities are insurance policies that pay their beneficiaries for as long as these beneficiaries are alive. They solve the problem of planning consumption in a world with uncertain lifetimes and indemnify individuals against the risk of outliving their resources. In return for an initial capital payment, a life annuitant is assured of receiving a constant income stream for the remainder of his life. The annuity provider (an insurance company) pools mortality risk

  • across individuals and offers each annuitant a payout that in theory exceeds the income he could earn if he invested his annuity premium in a financial asset, such as a bond. The annuity's additional return derives from the mortality risk facing the annuitant pool. The insurance company does not pay out the full amount of the annuity premium to annuitants that die earlier than the aggregate mortality experience would suggest. The principal that the insurance company does not pay out to those who die unexpectedly early permits a higher payout for those who remain alive.

    Annuities are sometimes referred to as “reverse life insurance.” A life insurance policyholder pays the insurer each year until he or she dies. When the insured individual dies, the insurance company pays a lump sum to the beneficiaries of the life insurance policy. With annuities, the annuitant makes a lump-sum payment to the insurance company before the annuity payout begins. In return, the insurance company makes payments to the annuitant until the annuitant’s death.

    By James M. Poterba

    From Single Star to Team Player

    A single star is someone who performs really well in his or her job but does not help others. Or one asks for help and is sometimes even abrasive when asked to do something for the company that does not benefit him or her directly. The problem with these people is that they can poison the organization—they set a bad example for others if executives keep rewarding and

    promoting them. Managers may feel that they need them, of course, as they do perform well. So it is pretty gutsy to fire them in today's rather poor economic environment. But if you're really serious about building a collaborative company and want to reap the economic rewards from doing so, you have to screen for single stars

    Companies, industries, and functions that reward hugely based on individual performance are prone to this problem. It is a problem in investment banking and can also be a problem in sales organizations where individuals are compensated for their own sales and not for helping others and sharing best practices.

    Many companies have focused on knowledge management the last couple of years. While that has been a good start, it is only one part of the overall challenge of creating an effective collaborative organization. KM is only a special case of instilling a collaborative organization, which also includes coordinating activities and doing joint work across organization boundaries.

    Why Employees Don't Collaborate
    Executives first need to understand why people in the organization are not collaborating and sharing as much as they should.
    There are four obstacles involving employees' motivations and abilities that must be overcome.

    First, unwillingness to seek advice and learn from others. Employees may not want to seek advice across the organization, either because they believe they cannot learn anything or because there is a prevailing norm that people ought to fix their problems themselves. No electronic knowledge management system can fix this problem; simply making documents and links to experts available does not help if employees do not want input from others.

    Another method is to recruit employees who have a natural inclination to ask for help. A chain of restaurants in the U.S. does this deliberately. At interview, it asks: "What obstacles have you faced in a previous job that prevented you from doing a good job and how did you overcome these obstacles?" The desirable answer should include asking for help and communicating the problem to others, not trying to be a hero and fix it alone.

    Second, there is inability to find expertise. There is often someone who knows the answer to a problem but it may be nearly impossible to connect the person who has the expertise with the one who needs it. Clearly, databases and electronic search engines serve a useful role here but more in the capacity of being "electronic yellow pages" than as self sufficient electronic repositories. In most management consulting companies, for example, consultants upload sanitized documents containing their finished work into databases, which are then accessed by other consultants who review prior work and contact the consultants who did it.

    However, technology has its limits. Expert directories become out of date and do not fully capture what each person knows. More importantly, they do not allow for creative combinations of ideas and individuals. Companies therefore need to cultivate people who know where experts and ideas reside. These "connectors" tend to be long-timers who have worked in many different areas in the company and hence have an extensive personal network. They see opportunities for new value creation based on the combination of talent, ideas, and expertise in different units.

    Then there is unwillingness to help. Is knowledge hoarded in your company? Employees may be willing to seek advice but others are sometimes reluctant to share it. The growing emphasis on performance management has fuelled this problem: People no longer have the time to help others, or they do not care, because they are only asked to deliver on their own targets. While performance is important, executives also need to develop incentives to help others and cultivate a shared identity among employees. This is a notorious problem in many investment banks, where bankers chase their own opportunities without properly assisting others.

    Lastly, there is the inability to work together. A "chemistry" problem can sometimes prevent people working well together, even if they want to and are part of a project team. It is a very different problem from the other three obstacles and requires different responses, including training sessions on teamwork, coaching people as they try to work together, and the development of strong relations between people from different units.

    For example, a study of time-to-market performance of new product development projects in a high-technology company found that project engineers who worked with engineers from other divisions took 20 to 30 percent longer to complete their projects when they had not established a personal relationship. Engineers found it hard to articulate, understand, and absorb complex technologies that were transferred between divisions when they had not learned to work together beforehand.

    Managers must respond to each of these obstacles in different ways. For example, developing an electronic knowledge management system will not help if the underlying problem is that employees hoard knowledge and will not seek help; it will only make people cynical about collaboration. Likewise, making promotion contingent on the extent to which people seek advice from others will not help if there is no way of identifying experts. All four obstacles need to be overcome for effective collaboration to occur. Solving one problem, but not the others, will not help.

    by Morten Hansen

    Back to Basic

    Back to Traditional Insurance

    Back to basic is a strategy is always used by insurance company in stead of exist in global finance crisis. Global finance crisis is end

  • of weakness of world economic and make company to distant for while from stock market. Investment product is related by stock market like unit link, is not anymore good product. Unit link is modern insurance. This product is primary investment than protection. Even we can choice kind of investment, such link fixed income. Investment link is almost same with mutual fund.

    Falling off stock exchange at the economic crisis also drop off investment value in insurance link. The consequence, people keep away from insurance link product. In order to insurance company can survive, insurance link shifted to protection product. That strategy is called back to basic. That strategy is appropriate with basic of insurance company. At beginning, insurance company accepting or protecting risk from society. Life insurance used to risk transfer for cause of death. Retired people can buy annuity for risk transfer cause of life is too long. Society can protect their property with buy general insurance for loss risk, damage risk or fire risk to their property.

    Economic crisis changing focus selling from modern insurance to traditional insurance, such term life, whole life, health insurance, personal accident and general insurance. Insurance product with protection become prime attention at economic crisis.

    We hope term of back to basic always remain in order to society aware of insurance.


    Fertility rates vary not only from country to country and from time to time; they can be affected by economic and social factors as well.

    TRENDS IN FERTILITY are rated as the most difficult of the demographic variables to project (others being immigration, emigration, mortality, labor force participation, and ages at certain vital events such as marriage). And while fertility rates are extremely difficult

  • to project and predict, they usually represent the most important modeling variable in any population model. These models, in turn, are of critical importance to many users, including social security actuaries who must use these data to project future benefit/contribution cost ratios.

    A fertility rate is a measure of the average number of children a woman will have during her lifetime (obviously limited to her childbearing years). In most countries, three general demographic trends have been observed: reductions in infant mortality, increased life expectancy, and decreasing fertility rates.

    Some of Economic Theories of Fertility Rate Trends

    Richard Easterlin (1987). Easterlin postulated that fertility rates do, and would continue to, rise and fall with a cycle of two generations or about 40 to 50 years (peak to peak or trough to trough). He explains that members of small birth cohorts (when fertility rates are low) will have an easier time entering the job market, achieving good wages, and getting promotions. In contrast, those in large birth cohorts (when fertility rates are high) will have problems that can be seen as the mirror image (difficulty in entering the labor force, lower wages, and slower promotions).

    Those members of the smaller birth cohorts who achieve a higher standard of living sooner will marry sooner, will have their first child sooner, and will ultimately have more children in total. Twenty years later, this new larger set of birth cohorts will find it harder to achieve the same standard of living and will marry later, have their first child at an older age, and ultimately have fewer children.

    Diane Macunovich (1996). Easterlin’s theories assume that females play essentially a passive role in the fertility patterns. Macunovich, on the other hand, adds a factor to the basic Easterlin model that accounts for the female wage impact on fertility. Over the past 50 years, women have obtained higher levels of education, entered the labor force in increasing numbers, and achieved independent monetary resources. Macunovich believes that while an increase in a male’s relative income (versus his material expectation) will cause a resultant rise in fertility rates, an increase in a female’s relative income will produce downward pressure on fertility. These contradictory indications, therefore, need to exist in
    any successful theory of fertility rate movement.

    Butz and Ward (1977). The theories of William Butz and Michael Ward include three critical factors: the proportion of women in the labor force, women’s earnings, and men’s earnings. As analyzed previously, fertility rates are positively correlated to men’s earnings but are negatively correlated to women’s earnings. During recessions, when family income is lower, couples will have fewer children because of the high direct costs associated with childbearing. However, economic prosperity may not automatically bring higher fertility rates if women’s labor force participation rates rise.

    The Butz and Ward model states that times of economic prosperity are the most expensive times for employed women to have children. For women in the labor force, there will be a delay in childbirth and fertility rates can actually decrease. In summary, Butz and Ward explain that fertility rates are positively related to family income and negatively associated with women’s employment and wages. The correlation between women’s wages and fertility is stronger the larger the proportion of women employed.

    John Ermisch (1983). Ermisch’s theory distinguishes between women who work and those who do not. Ermisch explains that as more females choose to work most of their lives, the average age at first birth increases and the intervals between births decrease. In particular, women employed in professional positions tend to wait longer between marriage and the birth of their first child.
    In single-earner households (with only a male wage earner), if the male wage rises rapidly and the cost of children remains constant, that family will have more children.

    For two-wage-earner families, however, where the wife has to leave the work force or interrupt a career path to have children, the opportunity cost of having children is high. A child would demand more of the couple’s time and lower the family’s income due to the loss of the wife’s earnings.

    When the number of females in the labor force increases, fertility tends to decrease even during times of economic growth. Ermisch also found that the increased probability of divorce may keep the fertility rate down.

    Social Causes
    Education: A woman’s education is a critical element in explaining resultant fertility rates and movements. Higher female education is universally associated with lower and delayed fertility. Higher female education, however, is also positively correlated with the probability of the child’s survival. In a somewhat similar fashion, one finds higher fertility in rural areas (especially where this makes ducation more difficult) than in urban areas. This may also reflect differential access to family planning information.

    Evidence shows that fertility declines as a country’s population becomes more urban and as women become more highly educated. In Jordan, for example, women with no formal education had a fertility rate of 6.9, while those with secondary school or higher education had a fertility rate of 4.1.

    Religion: In places where religion has an influence on fertility, that influence can be strong. For example, Italy and Spain are both countries with a high percentage “Catholic” population. Historically, this would have led to an expectation of elevated fertility. However, Spain and Italy have the two lowest fertility rates in the world. Thus, one must conclude that religion is not as influential in these countries as was the case historically. As another example, the United States is now a more “religious” country than Canada. About 34 percent of U.S. women of childbearing age practice their religion on a weekly basis, which is almost double the 18 percent proportion in Canada.

    Greater religious observance tends to go along with higher marriagerates and lower divorce rates. This tends to result in high- er fertility rates because people expect to stay in a more stable relationship and are, therefore, more likely to have children.

    Obviously, myriad factors can and do affect fertility rates. Some are economic in nature, others are more social. Clearly, however, couples have more control now over how many children they want to have and when they want to have them. Many families are choosing to start their families later.

    This may be due to economic difficulties or the growing fragility of conjugal relationships. Having postponed the birth of a first child, however, delays all childbearing, which often results in a smaller number of children than desired. This, in turn, is a partial explanation of generally falling rates of fertility in industrialized countries, with the United States being a
    notable outlier.

    Robert l. Brown is director of the institute of
    Insurance and pension research in the
    Department of statistics and actuarial science
    At the university of waterloo in waterloo,
    Ontario, canada. He also wishes to
    Acknowledge the assistance of claire norville
    And rocio gomez in the preparation of this