Insurance, its types, and the extent of its impact on economic activity

Insurance was not a recent activity, but rather arose in ancient times with the idea of cooperation, and it developed with the progress of human life until it reached the image it has in our modern era. In addition to being considered a means of protection from danger, it has a positive effect on many economic variables, and most importantly… All of this is because it works to mobilize savings in order to finance productive investments, which are considered the foundation of progress.
Developed countries have come a long way in the field of the insurance industry, and have provided a suitable climate for it by establishing an information network at home and abroad and allocating highly experienced administrative competencies and successful financial institutions. Beyond this, the major insurance companies in the world have tended to strengthen their position. In the market, whether by increasing its capital or through the merger process, this is what made it able to provide insurance services of a high standard and at competitive prices, thus keeping pace with the variables of the economic environment.

Algeria, like other Third World countries, chose in the wake of independence a common development model at that time, which is the state’s monopoly on economic transactions, including the insurance sector, whose role does not differ much due to its actual contribution to economic activity in implementing the development plans that the Algerian state seeks to achieve. The state gave it great importance by establishing several national companies that work to insure all the risks present in economic life, and with Algeria’s entry into economic reforms, it was necessary to reorganize the insurance sector, which also witnessed a reform revolution that ultimately culminated in the opening of the field of insurance through a decree. 95-07 of January 25, 1995, thus giving new horizons to the process of insurance competition and improving the services provided by these institutions to the Algerian customer. From all of this we say:
The problem:
What is the importance of insurance in the Algerian economy, or how effective is it in driving the pace of economic development, and what are its future prospects?
Through this problem, the following questions arise:

  • What is insurance and what are its principles and characteristics?
  • What is the impact of insurance on vital economic variables?

Through these questions, the following hypotheses are crystallized:
1- Insurance is considered one of the basic pillars on which the economic development policy in any country is built, due to the provision of significant financial resources for the benefit of productive projects, facilitating credit, and reducing inflation.

2- The absence of insurance culture in Algerian society is what made its impact on the economic sector limited.
Reasons for choosing the topic:
The professor proposed it as part of the requirements for studying for a master’s degree.
Importance of the topic:
The importance of insurance is evident in the dual role that insurance activity plays in economic development by providing the necessary guarantees to achieve the latter’s plans on the one hand and collecting a significant sum of financial resources from which productive projects benefit. Therefore, the importance of the topic appears in the role that insurance plays in economic life.
Approach followed:
In our study of this topic, we adopted the descriptive analytical method by listing the facts in relation to the analytical method, adopting the following plan:

  • In the first chapter, we worked on clarifying the basic concepts of insurance, its principles, and the characteristics that distinguish it. Then we moved to the departments and types of insurance in Algeria and the extent of their impact on vital economic variables.
    In the second chapter, we worked to determine the reality of the insurance market by narrating its historical development, then regulating the insurance market before and after the issuance of Order 95-07, and what products the insurance market provides in light of the economic reforms.

Chapter One: The concept of the nature of insurance and the extent of its impact on economic activity

The first section: basic concepts of insurance
In its simple concept, insurance is considered to provide security in order to face the risk that is likely to occur in the future, in order to give the investor the necessary confidence to penetrate his unknown world, which is the investment environment. The latter, i.e. insurance, is considered the element that refutes all social, economic, and sometimes even security obstacles, through its special advantage in supporting the human investor in the event of damage. Therefore, man will rush from time immemorial to invent this technology that provides him with the appropriate conditions for production and work. So, what do you see in what definition this insurance is revealed, when did it arise, what are the foundations upon which it is based, the characteristics that distinguish his mind, and the divisions to which it belongs. We will include all of this in this section.

The first requirement: the origins and concept of insurance
1- The origins of insurance:
As a result of the commercial policy adopted during the 14th century, on which economic thought was based at that time, especially on both sides of the Mediterranean, the economic man turned to what is known as the sea disc in order to guarantee his goods. The shipowner or merchant would borrow money in advance from the owner of the capital and they pledged to him to return it. In the case of plus, he has interest if the ship arrives safely, but if the ship is destroyed, he keeps the loan amount, and from this we notice that the insurance institution is the owner of the money and the insurer is the merchant. If the commodity is destroyed, the owner of the money pays compensation, which is the loan, but if it arrives safely The merchant pays the insurance premium, which is interest. As for insurance technicians, it was by the French legislator in the 17th century, and this is due to the policy of encouraging industry pursued by the French state at that time, which necessarily required insurance of commercial risks resulting from the export of goods produced on the seas and oceans, and England followed suit. Italy, the Netherlands, and Spain. It also established the first insurance company in England in 1720 in the field of marine insurance, after several companies spread in European countries.

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