a system of measures under which a monetary (insurance) fund is established to compensate for losses or to pay other sums of money in cases of natural disasters, accidents, and other contingencies. Insurance, as K. Marx pointed out, is an economic necessity because social production needs funds to cover unusual losses caused by accidents and natural forces (see K. Marx and F. Engels, Soch., 2nd ed., vol. 24, p. 199).
Insurance developed in the Middle Ages, initially in commercial navigation, which was considered to involve many risks. Later it spread to other areas. Depending on the coverage, insurance is divided into property insurance (buildings, crops, livestock, household items, transportation) and personal insurance (life, health, disability).
In the USSR, state insurance is a new sociohistorical type of insurance, the basis for which was established by the nationalization of the insurance system. The need to nationalize insurance was substantiated by V. I. Lenin. For the first time, insurance became a state monopoly. General insurance matters are supervised by the Ministry of Finance of the USSR and the Central Administration of State Insurance, or Gosstrakh, an entity with economic accountability operating under the ministry. The Foreign State Insurance Committee, or Ingosstrakh, which operates on a joint-stock basis, conducts foreign business.
In the USSR, legislation regulates the arrangement and conditions of insurance and the types of insurance available. The Ministry of Finance of the USSR has established detailed regulations on different types of insurance. The legislations of the Union republics only deal with insurance issues that have been relegated to the jurisdiction of the republics by the legislation of the USSR.
The parties to an insurance arrangement are the insurance organization (Gosstrakh) and the insured, including kolkhozes and other cooperative and public organizations, as well as private citizens. Insurance may be obligatory, that is, the insurance contract is established exclusively by virtue of laws making the insurance obligatory, or voluntary, that is, the contract is made between the insurance organization and the insured. The insured pledges to make the specified payments to Gosstrakh, and, when covered damages occur, Gosstrakh pledges to pay the insured or some other person the insurance compensation if the policy is property insurance or the coverage if the policy is personal insurance.
A list of the property subject to obligatory insurance and to additional voluntary insurance is established by normative acts that regulate particular types of insurance. Generally, state property is not insured, and damage caused by natural disasters and other circumstances to property under the operational management of state organizations is compensated for from the state budget of the USSR. State property used by cooperative and public organizations as well as by private citizens is subject to obligatory insurance in accordance with the conditions (regulations) of its use. It may also be additionally insured at the discretion of the organizations or private citizens responsible for its preservation and maintenance. State organizations may insure property accepted for storage, sale, repair, or processing from citizens and kolkhozes and other cooperative and public organizations.
Insurance is obligatory for certain types of property belonging to kolkhozes, interkolkhoz organizations, and sovkhozes, such as crop yields, livestock, poultry, buildings, and transportation. It is also obligatory for the property belonging to private citizens, for example, for buildings and cattle. The law includes a comprehensive listing of the risks against which property is insured. The amount of insurance compensation is established by the law in advance and cannot be changed by an agreement of the parties. Other property belonging to cooperative and public organizations and to citizens is insured voluntarily.
An insurance contract must be drawn up in writing in the form of an insurance certificate, an insurance voucher, or an insurance policy issued by Gosstrakh.
The insured is obligated to pay insurance premiums to Gosstrakh, to maintain insured property in proper condition, to do everything possible to prevent the destruction of or damage to insured property, and, during and after a natural disaster or accident, to attempt to save insured property and prevent further damage to it. When a loss occurs, Gosstrakh is obligated to prepare a report on the damage incurred, to determine the amount of insurance compensation, and to pay the compensation according to an established time schedule.
Personal accident insurance is obligatory for passengers on railroads, water routes (except on suburban transit), airplanes, and public transportation (except on intraoblast transportation routes and on intrarepublic transportation routes in republics without oblast divisions). All passengers are considered insured from the moment of the call for boarding. The insurance fund for this purpose is collected during the sale of tickets and the collection of fees for the issuance of documents.
The life and health of the insured may also be covered by voluntary personal insurance. Such factors as a citizen’s age and state of health are taken into account when a personal insurance contract is prepared. There are various types of personal insurance, including mixed life insurance (including contracts with a double coverage clause), accident insurance, life insurance for loss arising out of death or disability, retirement insurance, children’s insurance, and employees’ insurance, which is paid by state, cooperative, and public organizations. A personal insurance contract may be drawn up naming a third party as beneficiary. The contract becomes effective upon the payment of the first premium. Gosstrakh pays the coverage regardless of whether or not the insured or the beneficiary receives payments from state social insurance and social security as compensation for the injury or damage suffered.
In capitalist countries property and personal insurance contracts are issued by large capitalist insurance companies. In these countries insurance is important in financing banking capital. Reinsurance is an agreement between insurance companies whereby one company undertakes to compensate another for part or all of the sum that the latter pays to its insured client. It is significant in the development of insurance and the concentration of insurance business in the hands of monopolies. A consequence of the concentration of capital, reinsurance in turn accelerates this concentration. The regulation of the insurance business by the bourgeois state is limited to the supervision by special government agencies of the establishment of the conditions of insurance and the creation, activity, and liquidation of insurance companies. Special laws on the supervision of insurance companies have been passed in most bourgeois countries.
A. IU. KABALKIN