In general the insurance companies are classified in two categories for the sake of simplification. The first type is the company that sells life insurance such as term, permanent, universal, variableand whole life insurance as well as pensions and annuities products. The other type of company is the one that sells all other types of insurances such as car insurance and other products.

Why Only Two categories

The above division is on the basis of time period related with the insurances. The life insurances are for long periods. For decades a person is insured and at the death a benefit is given to that person's beneficiaries. The second type of insurances is for short time periods.

Classification of Insurance companies

General classification of insurance companies is either a mutual company or stock company. In case of former, the policy holder's own the company whereas in the latter the stock of the insurance company is owned by the stockholders.

Other types of Companies

There are other forms of insurance companies present in the market too. There is a reinsurance company and captive company.

Reinsurance companies

These companies insure other insurance companies. This provides a means for an insurance company to reduce their own risk of loosing everything if there is a mass scale loss such as in case of floods. The reinsurance companies are few and have huge reserves.

Captive Insurance companies

These companies are established for specific purposes such as financing of the risk that comes for the parent group. You can say that the risks involved with the customers of the parent company are finance by these insurance companies. The captive insurance company can be further divided into three forms. One is pure captive that is subsidize of its parent company alone. Second is mutual captive in which the risks of several insurance members in the market are insured and the third is the association captive company in which commercial, professional or industrial association risks are insured.

Benefits of Captive companies

Captive insurance companies are beneficial in providing economic and commercial benefits. They do so by generating cash flow flexibility, risk management in insurance and reductions in cost. These companies also benefit the sponsors in providing the coverage for certain risks that are either not covered in the local market or they are too expensive.

Types of Risks that can be covered

The captive companies can cover several risks of the parent company such as property damage, product and public liabilities; employ benefit and liabilities, medical aid and car expenses and professional indemnity. The captive insurance company may have less exposure to the above mentioned risks because reinsurance companies are also used extensively. Captive insurance companies today are playing a vital role in the risk management and financing of the risks of parent company. The reason is that in any coverage the premium is quite high, the coverage differs form country to country and less credit for deductibles.

Insurance Consultant Company

These companies work like brokers and get paid for their services to the customer for finding a good insurance policy.

Third Part Administrators

These are the companies that may sometimes handle the claim services of insurance companies and perform the underwritings.