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In insurance claims , a total loss or write-off is a situation where the lost value, repair cost or salvage cost of a damaged property exceeds its insured value , and simply replacing the old property with a new equivalent is more cost-effective. ] ] Such a loss may be an "actual total loss" or a "constructive total loss". Constructive total loss considers further incidental expenses beyond repair, such as force majeure . In a total loss, the insurer must indemnify the assured in full, and ownership of the insured item thereby passes to the insurer under the legal process of " subrogation ". Although the policy determines the level at which the loss becomes total rather than partial, nevertheless the assured (and NOT the insurer) has the final say as to whether he wishes to make a partial or total claim. If the insured item is, say, a car or a house, the policy will normally give it a " market value " which may be less than the assured had in mind; any disagreement would need to be challenged, perhaps using arbitration . In marine insurance , policies may be valued (where the value of the ship or cargo is agreed) or unvalued (where a market value at the time of the claim would need to be ascertained). In the absence of fraud, the Marine Insurance Act 1906 states the agreed value in a valued policy is conclusive, except in cases of constructive total loss, as in the cases of the cruise ship Costa Concordia and the ship The Bamburi . ] ] ] Written off properties are usually demolished or torn down , scrapped , or recycled for parts after their policies are settled; so the insurer may be relieved not to have the insured item subrogated to him, as in Asfar v Blundell . ] Policies covering homes, vehicles, and other non- investment assets subject to depreciation may indemnify the insured to much less than the full replacement cost, so that the insured items may become "total losses" despite some residual value. ] ] An actual total loss of a vessel occurs when repair is physically or legally impossible. A total loss may be presumed when a ship disappears and no news is received within a reasonable time. ] Some legal authorities do not consider it an actual total loss if repair costs are merely prohibitive, ] while others include cases where the cost of repair would exceed the cost of the vessel. In any case, the term "legally impossible" covers instances where reconstruction would be so extensive that the resulting craft would be legally considered a new vessel. ] A constructive total loss is a situation where the cost of repairs plus the cost of salvage equal or exceed the value of the vessel. It also covers cases where the vessel has been abandoned in the reasonable belief that a total loss is inevitable. ] The calculation can be affected by environmental cleanup costs. ] Much of this section only relates to the insurance industry in North America. Other jurisdictions, for example Australia, have their own regulations. About one in seven car accident
cleanup costs. ] Much of this section only relates to the insurance industry in North America. Other jurisdictions, for example Australia, have their own regulations. About one in seven car accident claims results in a "total". ] Except in extreme circumstances, a vehicle that has been written off will not be completely worthless. This is because such a vehicle will usually still contain salvageable used parts, or at a bare minimum will still have value as scrap metal. All that is required for a vehicle to be a write-off is that it would cost more to return to marketable condition than the market value it would then have. So a vehicle of low value may even be written off when fully roadworthy, for example due to damage to paintwork or upholstery, such as from an interior fire, a " hail salvage ", or bullet-riddled or "biohazard car" with toxic chemical spills or decomposing bodies found inside. In many jurisdictions a vehicle designated as a total loss is sold by insurance companies to general public, auto dealers, auto brokers, or auto wreckers. The metrics insurance companies use to make the decision include the cost of the repairs needed plus the value of the remaining parts, added to the cost of reimbursing the driver for a rental while the car in question is repaired. citation needed ] If this figure exceeds the value of the car after it is repaired, the vehicle is deemed a total loss. Auto insurers generally settle total loss claims on one of three methods of claim settlement: ] In most jurisdictions, a decision by an insurer to write off a vehicle results in vehicle title branding , marking the car as "salvage" or (if repaired and reinspected under subsequent ownership) "rebuilt". If the vehicle is not severely damaged, however, it can be restored to its original condition. After a government approved inspection, the vehicle can be put back on the road. The inspection process may not attempt to assess the quality of the repairs. This function will be relegated to a professional mechanic or inspector. However, if the vehicle is severely damaged as per standards set by state or provincial governments, the vehicle is dismantled by an auto wrecker and is sold as parts or scrapped. ] Once a vehicle has been written off and repaired the vehicle may still lose value. Diminished value is the reduction in a vehicle's market value occurring after a vehicle is wrecked and repaired, otherwise called accelerated depreciation . To collect diminished value after a car accident , insurance companies usually ask for a diminished value report. In Canada, this is more commonly called accelerated depreciation ; how a person goes about reclaiming those losses in either country is a different process. In some US states, insurance companies acknowledge diminished value and provide this coverage direct to their consumers. In Canada, in order to recuperate the lost value after an accident, a person needs to retain legal counsel and order an acceleration
value and provide this coverage direct to their consumers. In Canada, in order to recuperate the lost value after an accident, a person needs to retain legal counsel and order an acceleration depreciation report on their car for the court's use. In marine insurance, conventional marine insurers such as Lloyds will issue policies covering hull & machinery, or cargo, whereas P&I clubs cover third-party risks (such as a carrier's damage to cargo), pollution risks, and war risks. The term "total loss" can refer to any of these risks, but commonly involves a loss of the hull or cargo. Total losses may be actual total loss or constructive. ] If the policy is a "valued" policy (so that the ship or cargo has an "agreed value" rather than a "market value"), then, in the absence of fraud, the agreed value is conclusive, but only for an actual total loss. In a constructive total loss, the agreed value is not conclusive. ] In aviation, the term "hull loss" is used in aviation accidents that damage the aircraft beyond economical repair, ] resulting in a total loss. The term also applies to situations when the aircraft is missing, the search for its wreckage is terminated, or when the wreckage is completely inaccessible. ]
Guaranteed Asset Protection (GAP) insurance (also known as GAPS ) was established in the North American financial industry . GAP insurance protects the borrower if the car is written off or totalled by paying the remaining difference between the actual cash value of a vehicle and the balance still owed on the financing. ] GAP coverage is mainly used on new and used small vehicles (cars and trucks) and heavy trucks. Some financing companies and lease contracts require it. ] GAP insurance covers the amount on a loan that is the difference between the amount owed and the amount covered by another insurance policy . ] Some GAP policies also cover the deductible. ] This coverage is marketed for low down payment loans, high interest rate loans and loans with 60 month or longer terms. GAP insurance is typically offered by a finance company at time of purchase. Most auto insurance companies offer this coverage to consumers. GAP insurance is often paid upfront and the purchaser is usually entitled to a refund of the unused portion of the premium if the vehicle is sold or refinanced before the end of the loan term. ] There are two ways of getting GAP coverage. The first type is an insurance policy sold by a broker. The second type is a waiver agreement sold by a Finance & Insurance Manager. The first is regulated by the insurance industry, the second is unregulated. citation needed ] In either case coverage is usually the same and sold as a soft product through the car dealership . Coverage is usually financed along with the lease/loan. Claims are subject to a total loss. The total loss is usually determined by the primary insurance company’s third-party appraiser . citation needed ] Exclusions to GAP insurance vary by country or state. Some exclusions include a maximum loss limit of $50,000 while others require a loan term of less than 84 months. ] GAP is an optional purchase, but many states in the US require that a car dealership offer GAP at the point of purchase. Other states require insurers to offer GAP if a client requests it. ] States such as Louisiana require that the purchaser sign a disclosure document as proof. ] ] Although GAP is optional, some finance companies require GAP as a condition to obtaining a loan. ] The Truth in Lending Act excludes GAP premiums from financial charges if GAP was not required by the creditor, the premiums were disclosed in writing, and the consumer provides a written request for the insurance. citation needed ]
A write-off is a reduction of the recognized value of something. In accounting , this is a recognition of the reduced or zero value of an asset. In income tax statements, this is a reduction of taxable income, as a recognition of certain expenses required to produce the income. In income tax calculation, a write-off is the itemized deduction of an item's value from a person's taxable income. Thus, if a person in the United States has a taxable income of $50,000 per year, a $100 telephone for business use would lower the taxable income to $49,900. If that person is in a 25% tax bracket , the tax due would be lowered by $25. Thus the net cost of the telephone is $75 instead of $100. In order for American business owners to write off business expenses, the Internal Revenue Service states that purchases must be both ordinary and necessary. ] This means that deductible items must be usual and required for the business owner's field of work. For example, a telemarketer may deduct the purchase of a telephone, since telephones are crucial for that line of work, whereas a professional musician may not. In business accounting, the term "write-off" is used to refer to an investment (such as a purchase of sellable goods) for which a return on the investment is now impossible or unlikely. The item's potential return is thus canceled and removed from ("written off") the business's balance sheet . Common write-offs in retail include spoiled and damaged goods. In commercial or industrial settings, a productive asset may be subject to write-off if it suffers failure or accident damage that is infeasible to repair, leaving the asset unusable for its intended purpose. Similarly, banks write off bad debt that is declared non collectable (such as a loan on a defunct business, or a credit card due that is in default), removing it from their balance sheets. A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. A negative write-off refers to the decision not to pay back an individual or organization that has overpaid on an account. Negative write-offs can sometimes be seen as fraudulent activity if those who overpay a claim or bill are not informed that they have overpaid and are not given any chance to reconcile their overpayment or be refunded. Some institutions such as banks, hospitals, universities, and other large organizations regularly perform negative write-offs, especially when the amount is considered low (e.g., $5 at some institutions or up to $15 or more at others). citation needed ] A write-down is an accounting treatment that recognizes the reduced value of an impaired asset . The value of an asset may change due to fundamental changes in technology or markets. One example is when one company purchases another and pays more than the net fair value
of an impaired asset . The value of an asset may change due to fundamental changes in technology or markets. One example is when one company purchases another and pays more than the net fair value of its assets and liabilities . The excess purchase price is recorded on the buying company's accounts as goodwill . If it becomes apparent that the purchased asset no longer has the value recorded in the goodwill account (i.e., if the asset cannot be resold at the same price), the value in the goodwill asset account is "written down". One example is when Rupert Murdoch 's News Corp bought Wall Street Journal publisher Dow Jones at a 60% premium in 2007, which News Corp. later had to write down by $2.8 billion because of declining advertising revenues. ] A write-down is sometimes considered synonymous with a write-off. ] The distinction is that while a write-off is generally completely removed from the balance sheet , a write-down leaves the asset with a lower value. ] As an example, one of the consequences of the 2007 subprime crisis for financial institutions was a revaluation under mark-to-market rules: "Washington Mutual will write down by $150 million the value of $17 billion in loans". ]
In insurance claims , a total loss or write-off is a situation where the lost value, repair cost or salvage cost of a damaged property exceeds its insured value , and simply replacing the old property with a new equivalent is more cost-effective. ] ] Such a loss may be an "actual total loss" or a "constructive total loss". Constructive total loss considers further incidental expenses beyond repair, such as force majeure . In a total loss, the insurer must indemnify the assured in full, and ownership of the insured item thereby passes to the insurer under the legal process of " subrogation ". Although the policy determines the level at which the loss becomes total rather than partial, nevertheless the assured (and NOT the insurer) has the final say as to whether he wishes to make a partial or total claim. If the insured item is, say, a car or a house, the policy will normally give it a " market value " which may be less than the assured had in mind; any disagreement would need to be challenged, perhaps using arbitration . In marine insurance , policies may be valued (where the value of the ship or cargo is agreed) or unvalued (where a market value at the time of the claim would need to be ascertained). In the absence of fraud, the Marine Insurance Act 1906 states the agreed value in a valued policy is conclusive, except in cases of constructive total loss, as in the cases of the cruise ship Costa Concordia and the ship The Bamburi . ] ] ] Written off properties are usually demolished or torn down , scrapped , or recycled for parts after their policies are settled; so the insurer may be relieved not to have the insured item subrogated to him, as in Asfar v Blundell . ] Policies covering homes, vehicles, and other non- investment assets subject to depreciation may indemnify the insured to much less than the full replacement cost, so that the insured items may become "total losses" despite some residual value. ] ] An actual total loss of a vessel occurs when repair is physically or legally impossible. A total loss may be presumed when a ship disappears and no news is received within a reasonable time. ] Some legal authorities do not consider it an actual total loss if repair costs are merely prohibitive, ] while others include cases where the cost of repair would exceed the cost of the vessel. In any case, the term "legally impossible" covers instances where reconstruction would be so extensive that the resulting craft would be legally considered a new vessel. ] A constructive total loss is a situation where the cost of repairs plus the cost of salvage equal or exceed the value of the vessel. It also covers cases where the vessel has been abandoned in the reasonable belief that a total loss is inevitable. ] The calculation can be affected by environmental cleanup costs. ] Much of this section only relates to the insurance industry in North America. Other jurisdictions, for example Australia, have their own regulations. About one in seven car accident
cleanup costs. ] Much of this section only relates to the insurance industry in North America. Other jurisdictions, for example Australia, have their own regulations. About one in seven car accident claims results in a "total". ] Except in extreme circumstances, a vehicle that has been written off will not be completely worthless. This is because such a vehicle will usually still contain salvageable used parts, or at a bare minimum will still have value as scrap metal. All that is required for a vehicle to be a write-off is that it would cost more to return to marketable condition than the market value it would then have. So a vehicle of low value may even be written off when fully roadworthy, for example due to damage to paintwork or upholstery, such as from an interior fire, a " hail salvage ", or bullet-riddled or "biohazard car" with toxic chemical spills or decomposing bodies found inside. In many jurisdictions a vehicle designated as a total loss is sold by insurance companies to general public, auto dealers, auto brokers, or auto wreckers. The metrics insurance companies use to make the decision include the cost of the repairs needed plus the value of the remaining parts, added to the cost of reimbursing the driver for a rental while the car in question is repaired. citation needed ] If this figure exceeds the value of the car after it is repaired, the vehicle is deemed a total loss. Auto insurers generally settle total loss claims on one of three methods of claim settlement: ] In most jurisdictions, a decision by an insurer to write off a vehicle results in vehicle title branding , marking the car as "salvage" or (if repaired and reinspected under subsequent ownership) "rebuilt". If the vehicle is not severely damaged, however, it can be restored to its original condition. After a government approved inspection, the vehicle can be put back on the road. The inspection process may not attempt to assess the quality of the repairs. This function will be relegated to a professional mechanic or inspector. However, if the vehicle is severely damaged as per standards set by state or provincial governments, the vehicle is dismantled by an auto wrecker and is sold as parts or scrapped. ] Once a vehicle has been written off and repaired the vehicle may still lose value. Diminished value is the reduction in a vehicle's market value occurring after a vehicle is wrecked and repaired, otherwise called accelerated depreciation . To collect diminished value after a car accident , insurance companies usually ask for a diminished value report. In Canada, this is more commonly called accelerated depreciation ; how a person goes about reclaiming those losses in either country is a different process. In some US states, insurance companies acknowledge diminished value and provide this coverage direct to their consumers. In Canada, in order to recuperate the lost value after an accident, a person needs to retain legal counsel and order an acceleration
value and provide this coverage direct to their consumers. In Canada, in order to recuperate the lost value after an accident, a person needs to retain legal counsel and order an acceleration depreciation report on their car for the court's use. In marine insurance, conventional marine insurers such as Lloyds will issue policies covering hull & machinery, or cargo, whereas P&I clubs cover third-party risks (such as a carrier's damage to cargo), pollution risks, and war risks. The term "total loss" can refer to any of these risks, but commonly involves a loss of the hull or cargo. Total losses may be actual total loss or constructive. ] If the policy is a "valued" policy (so that the ship or cargo has an "agreed value" rather than a "market value"), then, in the absence of fraud, the agreed value is conclusive, but only for an actual total loss. In a constructive total loss, the agreed value is not conclusive. ] In aviation, the term "hull loss" is used in aviation accidents that damage the aircraft beyond economical repair, ] resulting in a total loss. The term also applies to situations when the aircraft is missing, the search for its wreckage is terminated, or when the wreckage is completely inaccessible. ]
Financial risk is any of various types of risk associated with financing , including financial transactions that include company loans in risk of default . ] ] Often it is understood to include only downside risk , meaning the potential for financial loss and uncertainty about its extent. ] ] Modern portfolio theory initiated by Harry Markowitz in 1952 under his thesis titled "Portfolio Selection" is the discipline and study which pertains to managing market and financial risk . ] In modern portfolio theory, the variance (or standard deviation ) of a portfolio is used as the definition of risk. According to Bender and Panz (2021), financial risks can be sorted into five different categories. In their study, they apply an algorithm-based framework and identify 193 single financial risk types, which are sorted into the five categories market risk , liquidity risk , credit risk , business risk and investment risk . ] The four standard market risk factors are equity risk, interest rate risk, currency risk, and commodity risk: Equity risk is the risk that stock prices in general (not related to a particular company or industry) or the implied volatility will change. When it comes to long-term investing, equities provide a return that will hopefully exceed the risk free rate of return ] The difference between return and the risk free rate is known as the equity risk premium. When investing in equity, it is said that higher risk provides higher returns. Hypothetically, an investor will be compensated for bearing more risk and thus will have more incentive to invest in riskier stock. A significant portion of high risk/ high return investments come from emerging markets that are perceived as volatile. Interest rate risk is the risk that interest rates or the implied volatility will change. The change in market rates and their impact on the profitability of a bank, lead to interest rate risk. ] Interest rate risk can affect the financial position of a bank and may create unfavorable financial results. ] The potential for the interest rate to change at any given time can have either positive or negative effects for the bank and the consumer. If a bank gives out a 30-year mortgage at a rate of 4% and the interest rate rises to 6%, the bank loses and the consumer wins. This is an opportunity cost for the bank and a reason why the bank could be affected financially. Currency risk is the risk that foreign exchange rates or the implied volatility will change, which affects, for example, the value of an asset held in that currency. Currency fluctuations in the marketplace can have a drastic impact on an international firm's value because of the price effect on domestic and foreign goods, as well as the value of foreign currency denominate assets and liabilities. ] When a currency appreciates or depreciates, a firm can be at risk depending on where they are operating and what currency denominations they are holding. The fluctuation in currency markets can have
When a currency appreciates or depreciates, a firm can be at risk depending on where they are operating and what currency denominations they are holding. The fluctuation in currency markets can have effects on both the imports and exports of an international firm. For example, if the euro depreciates against the dollar, the U.S. exporters take a loss while the U.S. importers gain. This is because it takes less dollars to buy a euro and vice versa, meaning the U.S. wants to buy goods and the EU is willing to sell them; it is too expensive for the EU to import from U.S. at this time. Commodity risk is the risk that commodity prices (e.g. corn, copper, crude oil) or implied volatility will change. There is too much variation between the amount of risks producers and consumers of commodities face in order to have a helpful framework or guide. ] Financial risk measurement, pricing of financial instruments, and portfolio selection are all based on statistical models. If the model is wrong, risk numbers, prices, or optimal portfolios are wrong. Model risk quantifies the consequences of using the wrong models in risk measurement, pricing, or portfolio selection. The main element of a statistical model in finance is a risk factor distribution. Recent papers treat the factor distribution as unknown random variable and measuring risk of model misspecification. Jokhadze and Schmidt (2018) propose practical model risk measurement framework. ] They introduce superposed risk measures that incorporate model risk and enables consistent market and model risk management. Further, they provide axioms of model risk measures and define several practical examples of superposed model risk measures in the context of financial risk management and contingent claim pricing. Credit risk management is a profession that focuses on reducing and preventing losses by understanding and measuring the probability of those losses. Credit risk management is used by banks, credit lenders, and other financial institutions to mitigate losses primarily associated with nonpayment of loans. A credit risk occurs when there is potential that a borrower may default or miss on an obligation as stated in a contract between the financial institution and the borrower. ] Attaining good customer data is an essential factor for managing credit risk. Gathering the right information and building the right relationships with the selected customer base is crucial for business risk strategy. In order to identify potential issues and risks that may arise in the future, analyzing financial and nonfinancial information pertaining to the customer is critical. Risks such as that in business, industry of investment, and management risks are to be evaluated. Credit risk management evaluates the company's financial statements and analyzes the company's decision making when it comes to financial choices. Furthermore, credit risks management analyzes where and how the loan will be utilized and when the expected
statements and analyzes the company's decision making when it comes to financial choices. Furthermore, credit risks management analyzes where and how the loan will be utilized and when the expected repayment of the loan is as well as the reason behind the company's need to borrow the loan. Expected Loss (EL) is a concept used for Credit Risk Management to measure the average potential rate of losses that a company accounts for over a specific period of time. The expected credit loss is formulated using the formula: Expected Loss = Expected Exposure X Expected Default X Expected Severity Expected Exposure refers to exposure expected during the credit event. Some factors impacting expected exposure include expected future events and the type of credit transaction. Expected Default is a risk calculated for the number of times a default will likely occur from the borrower. Expected Severity refers to the total cost incurred in the event a default occurs. This total loss includes loan principle and interests. Unlike Expected Loss, organizations have to hold capital for Unexpected Losses. Unexpected Losses represent losses where an organization will need to predict an average rate of loss. It is considered the most critical type of losses as it represents the instability and unpredictability of true losses that may be encountered at a given timeframe. ] ] ] ] This is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). There are two types of liquidity risk: Valuation risk is the risk that an entity suffers a loss when trading an asset or a liability due to a difference between the accounting value and the price effectively obtained in the trade. In other words, valuation risk is the uncertainty about the difference between the value reported in the balance sheet for an asset or a liability and the price that the entity could obtain if it effectively sold the asset or transferred the liability (the so-called "exit price"). Operational risk is the risk of losses caused by flawed or failed processes, policies, systems or events that disrupt business operations. Employee errors, criminal activity such as fraud, and physical events are among the factors that can trigger operational risk. The process to manage operational risk is known as operational risk management . The definition of operational risk, adopted by the European Solvency II Directive for insurers, is a variation adopted from the Basel II regulations for banks: "The risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses". ] ] The scope of operational risk is then broad, and can also include other classes of risks, such as fraud , security , privacy protection , legal risks , physical (e.g. infrastructure shutdown) or environmental risks. Operational
is then broad, and can also include other classes of risks, such as fraud , security , privacy protection , legal risks , physical (e.g. infrastructure shutdown) or environmental risks. Operational risks similarly may impact broadly, in that they can affect client satisfaction, reputation and shareholder value, all while increasing business volatility. Previously, in Basel I , operational risk was negatively defined : namely that operational risk are all risks which are not market risk and not credit risk . Some banks have therefore also used the term operational risk synonymously with non-financial risks . ] In October 2014, the Basel Committee on Banking Supervision proposed a revision to its operational risk capital framework that sets out a new standardized approach to replace the basic indicator approach and the standardized approach for calculating operational risk capital . ] Contrary to other risks (e.g. credit risk , market risk , insurance risk ) operational risks are usually not willingly incurred nor are they revenue driven. Moreover, they are not diversifiable and cannot be laid off. This means that as long as people, systems, and processes remain imperfect, operational risk cannot be fully eliminated. Operational risk is, nonetheless, manageable as to keep losses within some level of risk tolerance (i.e. the amount of risk one is prepared to accept in pursuit of his objectives), determined by balancing the costs of improvement against the expected benefits. Wider trends such as globalization, the expansion of the internet and the rise of social media, as well as the increasing demands for greater corporate accountability worldwide, reinforce the need for proper risk management . Thus operational risk management (ORM) is a specialized discipline within risk management. It constitutes the continuous-process of risk assessment, decision making, and implementation of risk controls, resulting in the acceptance, mitigation, or avoidance of the various operational risks. Non-financial risks summarize all other possible risks Financial risk, market risk, and even inflation risk can at least partially be moderated by forms of diversification . The returns from different assets are highly unlikely to be perfectly correlated and the correlation may sometimes be negative. For instance, an increase in the price of oil will often favour a company that produces it, ] but negatively impact the business of a firm such an airline whose variable costs are heavily based upon fuel. ] However, share prices are driven by many factors, such as the general health of the economy which will increase the correlation and reduce the benefit of diversification. If one constructs a portfolio by including a wide variety of equities, it will tend to exhibit the same risk and return characteristics as the market as a whole, which many investors see as an attractive prospect, so that index funds have been developed that invest in equities in proportion to the
same risk and return characteristics as the market as a whole, which many investors see as an attractive prospect, so that index funds have been developed that invest in equities in proportion to the weighting they have in some well-known index such as the FTSE. However, history shows that even over substantial periods of time there is a wide range of returns that an index fund may experience; so an index fund by itself is not "fully diversified". Greater diversification can be obtained by diversifying across asset classes; for instance a portfolio of many bonds and many equities can be constructed in order to further narrow the dispersion of possible portfolio outcomes. A key issue in diversification is the correlation between assets, the benefits increasing with lower correlation. However this is not an observable quantity, since the future return on any asset can never be known with complete certainty. This was a serious issue in the late-2000s recession when assets that had previously had small or even negative correlations citation needed ] suddenly starting moving in the same direction causing severe financial stress to market participants who had believed that their diversification would protect them against any plausible market conditions, including funds that had been explicitly set up to avoid being affected in this way. ] Diversification has costs. Correlations must be identified and understood, and since they are not constant it may be necessary to rebalance the portfolio which incurs transaction costs due to buying and selling assets. There is also the risk that as an investor or fund manager diversifies, their ability to monitor and understand the assets may decline leading to the possibility of losses due to poor decisions or unforeseen correlations. Hedging is a method for reducing risk where a combination of assets are selected to offset the movements of each other. For instance, when investing in a stock it is possible to buy an option to sell that stock at a defined price at some point in the future. The combined portfolio of stock and option is now much less likely to move below a given value. As in diversification there is a cost, this time in buying the option for which there is a premium. Derivatives are used extensively to mitigate many types of risk. ] According to the article from Investopedia , a hedge is an investment designed to reduce the risk of adverse price movements in an asset. Typically, a hedge consists of taking a counter-position in a related financial instrument, such as a futures contract. ] The Forward Contract The forward contract is a non-standard contract to buy or sell an underlying asset between two independent parties at an agreed price and date. The Future Contract The futures contract is a standardized contract to buy or sell an underlying asset between two independent parties at an agreed price, quantity and date. Option contract The Option contract is a contract gives the buyer (the owner or
contract to buy or sell an underlying asset between two independent parties at an agreed price, quantity and date. Option contract The Option contract is a contract gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price prior to or on a specified date, depending on the form of the option. ACPM - Active credit portfolio management EAD - Exposure at default EL - Expected loss LGD - Loss given default PD - Probability of default KMV - quantitative credit analysis solution developed by credit rating agency Moody's VaR - Value at Risk, a common methodology for measuring risk due to market movements
An actuary is a professional with advanced mathematical skills who deals with the measurement and management of risk and uncertainty. ] These risks can affect both sides of the balance sheet and require asset management , liability management, and valuation skills. ] Actuaries provide assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms. ] The name of the corresponding academic discipline is actuarial science . While the concept of insurance dates to antiquity, ] ] ] the concepts needed to scientifically measure and mitigate risks have their origins in the 17th century studies of probability and annuities. ] Actuaries of the 21st century require analytical skills, business knowledge, and an understanding of human behavior and information systems to design and manage programs that control risk. ] The actual steps needed to become an actuary are usually country-specific; however, almost all processes share a rigorous schooling or examination structure and take many years to complete. ] The profession has consistently been ranked as one of the most desirable. ] In various studies in the United States, being an actuary was ranked first or second multiple times since 2010, ] ] ] and in the top 20 for most of the past decade. ] ] ] ] ] Actuaries use skills primarily in mathematics, particularly calculus -based probability and mathematical statistics , but also economics , computer science , finance, and business. For this reason, actuaries are essential to the insurance and reinsurance industries, either as staff employees or as consultants; to other businesses, including sponsors of pension plans; and to government agencies such as the Government Actuary's Department in the United Kingdom or the Social Security Administration in the United States of America. Actuaries assemble and analyze data to estimate the probability and likely cost of the occurrence of an event such as death, sickness, injury, disability, or loss of property. Actuaries also address financial questions, including those involving the level of pension contributions required to produce a certain retirement income and the way in which a company should invest resources to maximize its return on investments in light of potential risk. Using their broad knowledge, actuaries help design and price insurance policies, pension plans, and other financial strategies in a manner that will help ensure that the plans are maintained on a sound financial basis. ] ] Most traditional actuarial disciplines fall into two main categories: life and non-life. Life actuaries, which includes health and pension actuaries, primarily deal with mortality risk, morbidity risk, and investment risk. Products prominent in their work include life insurance , annuities , pensions, short and long term disability insurance , health insurance, health savings accounts , and long-term care insurance. ] In addition to these risks, social insurance programs are
annuities , pensions, short and long term disability insurance , health insurance, health savings accounts , and long-term care insurance. ] In addition to these risks, social insurance programs are influenced by public opinion, politics, budget constraints, changing demographics , and other factors such as medical technology , inflation , and cost of living considerations. ] Non-life actuaries, also known as "property and casualty" (mainly US) or "general insurance" (mainly UK) actuaries, deal with both physical and legal risks that affect people or their property. Products prominent in their work include auto insurance , homeowners insurance , commercial property insurance, workers' compensation , malpractice insurance, product liability insurance , marine insurance , terrorism insurance , and other types of liability insurance . ] Actuaries are also called upon for their expertise in enterprise risk management . ] This can involve dynamic financial analysis , stress testing , the formulation of corporate risk policy, and the setting up and running of corporate risk departments. ] Actuaries are also involved in other areas in the economic and financial field, such as analyzing securities offerings or market research . ] On both the life and casualty sides, the classical function of actuaries is to calculate premiums and reserves for insurance policies covering various risks. ] On the casualty side, this analysis often involves quantifying the probability of a loss event, called the frequency, and the size of that loss event, called the severity. The amount of time that occurs before the loss event is important, as the insurer will not have to pay anything until after the event has occurred. On the life side, the analysis often involves quantifying how much a potential sum of money or a financial liability will be worth at different points in the future. Since neither of these kinds of analysis are purely deterministic processes, stochastic models are often used to determine frequency and severity distributions and the parameters of these distributions. Forecasting interest yields and currency movements also plays a role in determining future costs, especially on the life side. ] Actuaries do not always attempt to predict aggregate future events. Often, their work may relate to determining the cost of financial liabilities that have already occurred, called retrospective reinsurance , ] or the development or re-pricing of new products. ] Actuaries also design and maintain products and systems. They are involved in financial reporting of companies' assets and liabilities. They must communicate complex concepts to clients who may not share their language or depth of knowledge. Actuaries work under a code of ethics that covers their communications and work products. ] As an outgrowth of their more traditional roles, actuaries also work in the fields of risk management and enterprise risk management for both financial and non-financial
and work products. ] As an outgrowth of their more traditional roles, actuaries also work in the fields of risk management and enterprise risk management for both financial and non-financial corporations. ] Actuaries in traditional roles study and use the tools and data previously in the domain of finance. ] The Basel II accord for financial institutions (2004), and its analogue, the Solvency II accord for insurance companies (in force since 2016), require institutions to account for operational risk separately, and in addition to, credit , reserve , asset , and insolvency risk. Actuarial skills are well suited to this environment because of their training in analyzing various forms of risk, and judging the potential for upside gain, as well as downside loss associated with these forms of risk. ] Actuaries are also involved in investment advice and asset management , and can be general business managers and chief financial officers . ] ] They analyze business prospects with their financial skills in valuing or discounting risky future cash flows, and apply their pricing expertise from insurance to other lines of business. For example, insurance securitization requires both actuarial and finance skills. ] Actuaries also act as expert witnesses by applying their analysis in court trials to estimate the economic value of losses such as lost profits or lost wages. ] The basic requirements of communal interests gave rise to risk sharing since the dawn of civilization. ] For example, people who lived their entire lives in a camp had the risk of fire, which would leave their band or family without shelter. After barter came into existence, more complex risks emerged and new forms of risk manifested. Merchants embarking on trade journeys bore the risk of losing goods entrusted to them, their own possessions, or even their lives. Intermediaries developed to warehouse and trade goods, which exposed them to financial risk . The primary providers in extended families or households ran the risk of premature death, disability or infirmity, which could leave their dependents to starve. Credit procurement was difficult if the creditor worried about repayment in the event of the borrower's death or infirmity. Alternatively, people sometimes lived too long from a financial perspective, exhausting their savings, if any, or becoming a burden on others in the extended family or society. ] In the ancient world there was not always room for the sick, suffering, disabled, aged, or the poor—these were often not part of the cultural consciousness of societies. ] Early methods of protection, aside from the normal support of the extended family, involved charity; religious organizations or neighbors would collect for the destitute and needy. By the middle of the 3rd century, charitable operations in Rome supported 1,500 suffering people. ] Charitable protection remains an active form of support in the modern era, ] but receiving charity is uncertain and often accompanied
charitable operations in Rome supported 1,500 suffering people. ] Charitable protection remains an active form of support in the modern era, ] but receiving charity is uncertain and often accompanied by social stigma . ] Elementary mutual aid agreements and pensions did arise in antiquity. ] Early in the Roman empire , associations were formed to meet the expenses of burial, cremation, and monuments—precursors to burial insurance and friendly societies . A small sum was paid into a communal fund on a weekly basis, and upon the death of a member, the fund would cover the expenses of rites and burial. These societies sometimes sold shares in the building of columbāria , or burial vaults, owned by the fund. ] Other early examples of mutual surety and assurance pacts can be traced back to various forms of fellowship within the Saxon clans of England and their Germanic forebears, and to Celtic society. ] Non-life insurance started as a hedge against loss of cargo during sea travel. Anecdotal reports of such guarantees occur in the writings of Demosthenes , who lived in the 4th century BCE. ] The earliest records of an official non-life insurance policy come from Sicily , where there is record of a 14th-century contract to insure a shipment of wheat. ] In 1350, Lenardo Cattaneo assumed "all risks from act of God, or of man, and from perils of the sea" that may occur to a shipment of wheat from Sicily to Tunis up to a maximum of 300 florins . For this he was paid a premium of 18%. ] During the 17th century, a more scientific basis for risk management was being developed. In 1662, a London draper named John Graunt showed that there were predictable patterns of longevity and death in a defined group, or cohort , of people, despite the uncertainty about the future longevity or mortality of any one individual. This study became the basis for the original life table . Combining this idea with that of compound interest and annuity valuation, it became possible to set up an insurance scheme to provide life insurance or pensions for a group of people, and to calculate with some degree of accuracy each member's necessary contributions to a common fund, assuming a fixed rate of interest. The first person to correctly calculate these values was Edmond Halley . ] In his work, Halley demonstrated a method of using his life table to calculate the premium someone of a given age should pay to purchase a life-annuity. ] James Dodson 's pioneering work on the level premium system led to the formation of the Society for Equitable Assurances on Lives and Survivorship (now commonly known as Equitable Life ) in London in 1762. This was the first life insurance company to use premium rates that were calculated scientifically for long-term life policies, using Dodson's work. After Dodson's death in 1757, Edward Rowe Mores took over the leadership of the group that eventually became the Society for Equitable Assurances. It was he who specified that the chief official should be
Dodson's death in 1757, Edward Rowe Mores took over the leadership of the group that eventually became the Society for Equitable Assurances. It was he who specified that the chief official should be called an actuary . ] Previously, the use of the term had been restricted to an official who recorded the decisions, or acts , of ecclesiastical courts , in ancient times originally the secretary of the Roman senate , responsible for compiling the Acta Senatus . ] Other companies that did not originally use such mathematical and scientific methods most often failed or were forced to adopt the methods pioneered by Equitable. ] In the 18th and 19th centuries, computational complexity was limited to manual calculations. The calculations required to compute fair insurance premiums can be burdensome. The actuaries of that time developed methods to construct easily used tables, using arithmetical short-cuts called commutation functions , to facilitate timely, accurate, manual calculations of premiums. ] In the mid-19th century, professional bodies were founded to support and further both actuaries and actuarial science, and to protect the public interest by ensuring competency and ethical standards. ] Since calculations were cumbersome, actuarial shortcuts were commonplace. Non-life actuaries followed in the footsteps of their life compatriots in the early 20th century. In the United States, the 1920 revision to workers' compensation rates took over two months of around-the-clock work by day and night teams of actuaries. ] In the 1930s and 1940s, rigorous mathematical foundations for stochastic processes were developed. ] Actuaries began to forecast losses using models of random events instead of deterministic methods . Computers further revolutionized the actuarial profession. From pencil-and-paper to punchcards to microcomputers, the modeling and forecasting ability of the actuary has grown vastly. ] Another modern development is the convergence of modern finance theory with actuarial science. ] In the early 20th century, some economists and actuaries were developing techniques that can be found in modern financial theory, but for various historical reasons, these developments did not achieve much recognition. ] ] In the late 1980s and early 1990s, there was a distinct effort for actuaries to combine financial theory and stochastic methods into their established models. ] In the 21st century, the profession, both in practice and in the educational syllabi of many actuarial organizations, combines tables, loss models, stochastic methods, and financial theory, ] but is still not completely aligned with modern financial economics . ] As there are relatively few actuaries in the world compared to other professions, actuaries are in high demand, and are highly paid for the services they render. ] ] The actuarial profession has been consistently ranked for decades as one of the most desirable. Actuaries work comparatively reasonable hours, in comfortable
paid for the services they render. ] ] The actuarial profession has been consistently ranked for decades as one of the most desirable. Actuaries work comparatively reasonable hours, in comfortable conditions, without the need for physical exertion that may lead to injury, are well paid, and the profession consistently has a good hiring outlook. ] Not only has the overall profession ranked highly, but it also is considered one of the best professions for women, ] and one of the best recession-proof professions. ] In the United States, the profession was rated as the best profession by CareerCast, which uses five key criteria to rank jobs—environment, income, employment outlook, physical demands, and stress, in 2010, ] 2013, ] and 2015. ] In other years, it remained in the top 20. ] ] ] ] ] ] Becoming a fully credentialed actuary requires passing a rigorous series of professional examinations, usually taking several years. In some countries, such as Denmark, most study takes place in a university setting. ] In others, such as the US, most study takes place during employment through a series of examinations. ] ] In the UK, and countries based on its process, there is a hybrid university-exam structure. ] As these qualifying exams are extremely rigorous, support is usually available to people progressing through the exams. Often, employers provide paid on-the-job study time and paid attendance at seminars designed for the exams. ] Also, many companies that employ actuaries have automatic pay raises or promotions when exams are passed. As a result, actuarial students have strong incentives for devoting adequate study time during off-work hours. A common rule of thumb for exam students is that, for the Society of Actuaries examinations, roughly 400 hours of study time are necessary for each four-hour exam. ] Thus, thousands of hours of study time should be anticipated over several years, assuming no failures. ] Historically, the actuarial profession has been reluctant to specify the pass marks for its examinations. ] ] To address concerns that there are pre-existing pass/fail quotas, a former chairman of the Board of Examiners of the Institute and Faculty of Actuaries stated: "Although students find it hard to believe, the Board of Examiners does not have fail quotas to achieve. Accordingly pass rates are free to vary (and do). They are determined by the quality of the candidates sitting the examination and in particular how well prepared they are. Fitness to pass is the criterion, not whether you can achieve a mark in the top 40% of candidates sitting." ] In 2000, the Casualty Actuarial Society (CAS) decided to start releasing pass marks for the exams it offers. ] The CAS's policy is also not to grade to specific pass ratios; the CAS board affirmed in 2001 that "the CAS shall use no predetermined pass ratio as a guideline for setting the pass mark for any examination. If the CAS determines that 70% of all candidates have demonstrated sufficient grasp
that "the CAS shall use no predetermined pass ratio as a guideline for setting the pass mark for any examination. If the CAS determines that 70% of all candidates have demonstrated sufficient grasp of the syllabus material, then those 70% should pass. Similarly, if the CAS determines that only 30% of all candidates have demonstrated sufficient grasp of the syllabus material, then only those 30% should pass." ] Actuaries have appeared in works of fiction including literature, theater, television, and film. At times, they have been portrayed as "math-obsessed, socially disconnected individuals with shockingly bad comb-overs", which has resulted in a mixed response amongst actuaries themselves. ]
This is an accepted version of this page Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management , primarily used to protect against the risk of a contingent or uncertain loss. An entity which provides insurance is known as an insurer , insurance company , insurance carrier , or underwriter . A person or entity who buys insurance is known as a policyholder , while a person or entity covered under the policy is called an insured . The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms. Furthermore, it usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship. The insured receives a contract , called the insurance policy , which details the conditions and circumstances under which the insurer will compensate the insured, or their designated beneficiary or assignee. The amount of money charged by the insurer to the policyholder for the coverage set forth in the insurance policy is called the premium . If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. A mandatory out-of-pocket expense required by an insurance policy before an insurer will pay a claim is called a deductible (or if required by a health insurance policy, a copayment ). The insurer may hedge its own risk by taking out reinsurance , whereby another insurance company agrees to carry some of the risks, especially if the primary insurer deems the risk too large for it to carry. Methods for transferring or distributing risk were practiced by Chinese and Indian traders as long ago as the 3rd and 2nd millennia BC, respectively. ] ] Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel capsizing. Codex Hammurabi Law 238 (c. 1755–1750 BC) stipulated that a sea captain , ship-manager , or ship charterer that saved a ship from total loss was only required to pay one-half the value of the ship to the ship-owner . ] ] ] In the Digesta seu Pandectae (533), the second volume of the codification of laws ordered by Justinian I (527–565), a legal opinion written by the Roman jurist Paulus in 235 AD was included about the Lex Rhodia ("Rhodian law"). It articulates the general average principle of marine insurance established on the island of Rhodes in approximately 1000 to 800 BC, plausibly by the Phoenicians during the proposed Dorian invasion and emergence of the purported Sea
principle of marine insurance established on the island of Rhodes in approximately 1000 to 800 BC, plausibly by the Phoenicians during the proposed Dorian invasion and emergence of the purported Sea Peoples during the Greek Dark Ages (c. 1100–c. 750). ] ] ] The law of general average is the fundamental principle that underlies all insurance. ] In 1816, an archeological excavation in Minya, Egypt produced a Nerva–Antonine dynasty -era tablet from the ruins of the Temple of Antinous in Antinoöpolis , Aegyptus . The tablet prescribed the rules and membership dues of a burial society collegium established in Lanuvium , Italia in approximately 133 AD during the reign of Hadrian (117–138) of the Roman Empire . ] In 1851 AD, future U.S. Supreme Court Associate Justice Joseph P. Bradley (1870–1892 AD), once employed as an actuary for the Mutual Benefit Life Insurance Company , submitted an article to the Journal of the Institute of Actuaries . His article detailed an historical account of a Severan dynasty -era life table compiled by the Roman jurist Ulpian in approximately 220 AD that was also included in the Digesta . ] Concepts of insurance has been also found in 3rd century BC Hindu scriptures such as Dharmasastra , Arthashastra and Manusmriti . ] The ancient Greeks had marine loans. Money was advanced on a ship or cargo, to be repaid with large interest if the voyage prospers. However, the money would not be repaid at all if the ship were lost, thus making the rate of interest high enough to pay for not only for the use of the capital but also for the risk of losing it (fully described by Demosthenes ). Loans of this character have ever since been common in maritime lands under the name of bottomry and respondentia bonds. ] The direct insurance of sea-risks for a premium paid independently of loans began in Belgium about 1300 AD. ] Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347. In the next century, maritime insurance developed widely, and premiums were varied with risks. ] These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance . The earliest known policy of life insurance was made in the Royal Exchange, London , on 18 June 1583, for £383, 6s. 8d. for twelve months on the life of William Gibbons. ] Insurance became far more sophisticated in Enlightenment-era Europe , where specialized varieties developed. Property insurance as we know it today can be traced to the Great Fire of London , which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren 's inclusion of a site for
effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren 's inclusion of a site for "the Insurance Office" in his new plan for London in 1667." ] A number of attempted fire insurance schemes came to nothing, but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance company, the "Insurance Office for Houses", at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by his Insurance Office. ] At the same time, the first insurance schemes for the underwriting of business ventures became available. By the end of the seventeenth century, London's growth as a centre for trade was increasing due to the demand for marine insurance . In the late 1680s, Edward Lloyd opened a coffee house , which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, including those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market Lloyd's of London and several related shipping and insurance businesses. ] Life insurance policies were taken out in the early 18th century. The first company to offer life insurance was the Amicable Society for a Perpetual Assurance Office , founded in London in 1706 by William Talbot and Sir Thomas Allen . ] ] Upon the same principle, Edward Rowe Mores established the Society for Equitable Assurances on Lives and Survivorship in 1762. It was the world's first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based." ] In the late 19th century "accident insurance" began to become available. ] The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in England to insure against the rising number of fatalities on the nascent railway system. The first international insurance rule was the York Antwerp Rules (YAR) for the distribution of costs between ship and cargo in the event of general average. In 1873 the "Association for the Reform and Codification of the Law of Nations", the forerunner of the International Law Association (ILA), was founded in Brussels. It published the first YAR in 1890, before switching to the present title of the "International Law Association" in 1895. ] ] By the late 19th century governments began to initiate national insurance programs against sickness and old age. Germany built on a tradition of welfare programs in Prussia and Saxony that began as early as in the 1840s. In the 1880s Chancellor Otto von Bismarck introduced old age pensions, accident insurance and medical care that formed the basis for Germany's welfare state . ] ] In Britain more extensive legislation was introduced by
Otto von Bismarck introduced old age pensions, accident insurance and medical care that formed the basis for Germany's welfare state . ] ] In Britain more extensive legislation was introduced by the Liberal government in the National Insurance Act 1911 . This gave the British working classes the first contributory system of insurance against illness and unemployment. ] This system was greatly expanded after the Second World War under the influence of the Beveridge Report , to form the first modern welfare state . ] ] In 2008, the International Network of Insurance Associations (INIA), then an informal network, became active and it has been succeeded by the Global Federation of Insurance Associations (GFIA), which was formally founded in 2012 to aim to increase insurance industry effectiveness in providing input to international regulatory bodies and to contribute more effectively to the international dialogue on issues of common interest. It consists of its 40 member associations and 1 observer association in 67 countries, which companies account for around 89% of total insurance premiums worldwide. ] Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that only some insureds may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an insurable risk , the risk insured against must meet certain characteristics. Insurance as a financial intermediary is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses. ] Risk which can be insured by private companies typically share seven common characteristics: ] When a company insures an individual entity, there are basic legal requirements and regulations. Several commonly cited legal principles of insurance include: ] To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, life insurance is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally three types of insurance contracts that seek to indemnify an insured: From an insured's standpoint, the result is usually the same: the insurer pays the loss and claims expenses. If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and then be "reimbursed" by the insurance carrier for the loss and out of pocket costs including, with the permission of the insurer, claim expenses. ] ] Under a "pay on behalf" policy, the insurance carrier would defend and pay a claim on behalf of the insured who would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf"
the insurance carrier would defend and pay a claim on behalf of the insured who would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language, which enables the insurance carrier to manage and control the claim. Under an "indemnification" policy, the insurance carrier can generally either "reimburse" or "pay on behalf of", whichever is more beneficial to it and the insured in the claim handling process. An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the "insured" party once risk is assumed by an "insurer", the insuring party, by means of a contract , called an insurance policy . Generally, an insurance contract includes, at a minimum, the following elements: identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be " indemnified " against the loss covered in the policy. When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims – in theory for a relatively few claimants – and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit . Policies typically include a number of exclusions, for example: Insurers may prohibit certain activities which are considered dangerous and therefore excluded from coverage. One system for classifying activities according to whether they are authorised by insurers refers to "green light" approved activities and events, "yellow light" activities and events which require insurer consultation and/or waivers of liability, and "red light" activities and events which are prohibited and outside the scope of insurance cover. ] Insurance can have various effects on society through the way that it changes who bears the cost of losses and damage. On one hand it can increase fraud; on the other it can help societies and individuals prepare for catastrophes and mitigate the effects of catastrophes on both households and societies. Insurance can influence the probability of losses through moral hazard , insurance fraud , and preventive steps by the insurance company. Insurance scholars have typically used moral hazard to refer to the increased loss due to unintentional carelessness and insurance fraud to refer to increased risk due to intentional carelessness or indifference. ] Insurers attempt to address
hazard to refer to the increased loss due to unintentional carelessness and insurance fraud to refer to increased risk due to intentional carelessness or indifference. ] Insurers attempt to address carelessness through inspections, policy provisions requiring certain types of maintenance, and possible discounts for loss mitigation efforts. While in theory insurers could encourage investment in loss reduction, some commentators have argued that in practice insurers had historically not aggressively pursued loss control measures—particularly to prevent disaster losses such as hurricanes—because of concerns over rate reductions and legal battles. However, since about 1996 insurers have begun to take a more active role in loss mitigation, such as through building codes . ] According to the study books of The Chartered Insurance Institute, there are variant methods of insurance as follows: Insurers may use the subscription business model , collecting premium payments periodically in return for on-going and/or compounding benefits offered to policyholders. Insurers' business model aims to collect more in premium and investment income than is paid out in losses, and to also offer a competitive price which consumers will accept. Profit can be reduced to a simple equation: Insurers make money in two ways: The most complicated aspect of insuring is the actuarial science of ratemaking (price-setting) of policies, which uses statistics and probability to approximate the rate of future claims based on a given risk. After producing rates, the insurer will use discretion to reject or accept risks through the underwriting process. At the most basic level, initial rate-making involves looking at the frequency and severity of insured perils and the expected average payout resulting from these perils. Thereafter an insurance company will collect historical loss-data, bring the loss data to present value , and compare these prior losses to the premium collected in order to assess rate adequacy. ] Loss ratios and expense loads are also used. Rating for different risk characteristics involves—at the most basic level—comparing the losses with "loss relativities"—a policy with twice as many losses would, therefore, be charged twice as much. More complex multivariate analyses are sometimes used when multiple characteristics are involved and a univariate analysis could produce confounded results. Other statistical methods may be used in assessing the probability of future losses. Upon termination of a given policy, the amount of premium collected minus the amount paid out in claims is the insurer's underwriting profit on that policy. Underwriting performance is measured by something called the "combined ratio", which is the ratio of expenses/losses to premiums. ] A combined ratio of less than 100% indicates an underwriting profit, while anything over 100 indicates an underwriting loss. A company with a combined ratio over 100% may nevertheless remain profitable due to
ratio of less than 100% indicates an underwriting profit, while anything over 100 indicates an underwriting loss. A company with a combined ratio over 100% may nevertheless remain profitable due to investment earnings. Insurance companies earn investment profits on "float". Float, or available reserve, is the amount of money on hand at any given moment that an insurer has collected in insurance premiums but has not paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest or other income on them until claims are paid out. The Association of British Insurers (grouping together 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the London Stock Exchange . ] In 2007, U.S. industry profits from float totaled $58 billion. In a 2009 letter to investors, Warren Buffett wrote, "we were paid $2.8 billion to hold our float in 2008". ] In the United States , the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance-industry insiders, most notably Hank Greenberg , do not believe that it is possible to sustain a profit from float forever without an underwriting profit as well, but this opinion is not universally held. Reliance on float for profit has led some industry experts to call insurance companies "investment companies that raise the money for their investments by selling insurance". ] Naturally, the float method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance-premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the underwriting, or insurance, cycle . ] Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid for. Claims may be filed by insureds directly with the insurer or through brokers or agents . The insurer may require that the claim be filed on its own proprietary forms, or may accept claims on a standard industry form, such as those produced by ACORD . Insurance-company claims departments employ a large number of claims adjusters, supported by a staff of records management and data entry clerks . Incoming claims are classified based on severity and are assigned to adjusters, whose settlement authority varies with their knowledge and experience. An adjuster undertakes an investigation of each claim, usually in close cooperation with the insured, determines if coverage is available under the terms of the insurance contract (and if so, the reasonable monetary value of the claim), and authorizes payment. Policyholders may hire their own public adjusters to negotiate settlements with the insurance company on their behalf.
(and if so, the reasonable monetary value of the claim), and authorizes payment. Policyholders may hire their own public adjusters to negotiate settlements with the insurance company on their behalf. For policies that are complicated, where claims may be complex, the insured may take out a separate insurance-policy add-on, called loss-recovery insurance, which covers the cost of a public adjuster in the case of a claim. Adjusting liability-insurance claims is particularly difficult because they involve a third party, the plaintiff , who is under no contractual obligation to cooperate with the insurer and may in fact regard the insurer as a deep pocket . The adjuster must obtain legal counsel for the insured—either inside ("house") counsel or outside ("panel") counsel, monitor litigation that may take years to complete, and appear in person or over the telephone with settlement authority at a mandatory settlement-conference when requested by a judge. If a claims adjuster suspects under-insurance, the condition of average may come into play to limit the insurance company's exposure. In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. In addition to this balancing act, fraudulent insurance practices are a major business risk that insurers must manage and overcome. Disputes between insurers and insureds over the validity of claims or claims-handling practices occasionally escalate into litigation (see insurance bad faith ). Insurers will often use insurance agents to initially market or underwrite their customers. Agents can be captive, meaning they write only for one company, or independent, meaning that they can issue policies from several companies. The existence and success of companies using insurance agents is likely due to the availability of improved and personalised services. Companies also use Broking firms, Banks and other corporate entities (like Self Help Groups, Microfinance Institutions, NGOs, etc.) to market their products. ] Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident ). A home insurance policy in the United States typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property. Business insurance can take a number of different forms, such
claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property. Business insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the business owner's policy (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs. ] Vehicle insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision . Coverage typically includes: Gap insurance covers the excess amount on an auto loan in an instance where the policyholder's insurance company does not cover the entire loan. Depending on the company's specific policies it might or might not cover the deductible as well. This coverage is marketed for those who put low down payments , have high interest rates on their loans, and those with 60-month or longer terms. Gap insurance is typically offered by a finance company when the vehicle owner purchases their vehicle, but many auto insurance companies offer this coverage to consumers as well. Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance, protects policyholders for dental costs. In most developed countries, all citizens receive some health coverage from their governments, paid through taxation. In most countries, health insurance is often part of an employer's benefits. Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as auto , workers compensation , and some liability insurances . Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity . In most states, a person cannot purchase a policy on another person without their knowledge. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance. Certain life insurance contracts accumulate cash values,
In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance. Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies , are financial instruments to accumulate or liquidate wealth when it is needed. In many countries, such as the United States and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. In the United States, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. Burial insurance is an old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a funeral . The Greeks and Romans introduced burial insurance c. 600 CE when they organized guilds called "benevolent societies" which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times. Property insurance provides protection against risks to property, such as fire , theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance , earthquake insurance , home insurance , inland marine insurance or boiler insurance . The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below: Liability insurance is a broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured. Often a commercial insured's liability
verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured. Often a commercial insured's liability insurance program consists of several layers. The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insurer to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary insurance or self-insured retention, the insured may have one or more layers of excess insurance to provide coverage additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies (policies that contain their own terms, conditions, and exclusions), "follow form" excess insurance (policie
Ageing (or aging in American English ) is the process of becoming older . The term refers mainly to humans , many other animals , and fungi, whereas for example, bacteria, perennial plants and some simple animals are potentially biologically immortal . ] In a broader sense, ageing can refer to single cells within an organism which have ceased dividing , or to the population of a species . ] In humans, ageing represents the accumulation of changes in a human being over time and can encompass physical, psychological, and social changes. ] ] Reaction time, for example, may slow with age, while memories and general knowledge typically increase. Ageing is associated with increased risk of cancer, Alzheimer's disease , diabetes , cardiovascular disease , increased mental health risks, and many more . ] ] Of the roughly 150,000 people who die each day across the globe, about two-thirds die from age-related causes. ] Certain lifestyle choices and socioeconomic conditions have been linked to ageing. ] Current ageing theories are assigned to the damage concept, whereby the accumulation of damage (such as DNA oxidation ) may cause biological systems to fail, or to the programmed ageing concept, whereby the internal processes (epigenetic maintenance such as DNA methylation ) ] inherently may cause ageing. Programmed ageing should not be confused with programmed cell death ( apoptosis ). Human beings and members of other species, especially animals, age and die. Fungi, too, can age. ] In contrast, many species can be considered potentially immortal : for example, bacteria fission to produce daughter cells, strawberry plants grow runners to produce clones of themselves, and animals in the genus Hydra have a regenerative ability by which they avoid dying of old age. Early life forms on Earth, starting at least 3.7 billion years ago, ] were single-celled organisms. Such organisms ( Prokaryotes , Protozoans , algae ) multiply by fission into daughter cells; thus single celled organisms have been thought to not age and to be potentially immortal under favorable conditions. ] ] However, evidence has been reported that aging leading to death occurs in the single-cell bacterium Escherichia coli , an organism that reproduces by morphologically symmetrical division. ] Evidence of aging has also been reported for the bacterium Caulobacter crescintus . ] and the single cell yeast Saccharomyces cerevisiae . ] ] Ageing and mortality of the individual organism became more evident with the evolution of eukaryotic sexual reproduction , ] which occurred with the emergence of the fungal/animal kingdoms approximately a billion years ago, and the evolution of seed-producing plants 320 million years ago. The sexual organism could henceforth pass on some of its genetic material to produce new individuals and could itself become disposable with respect to the survival of its species. ] This classic biological idea has however been perturbed recently by the discovery that the
to produce new individuals and could itself become disposable with respect to the survival of its species. ] This classic biological idea has however been perturbed recently by the discovery that the bacterium E. coli may split into distinguishable daughter cells, which opens the theoretical possibility of "age classes" among bacteria. ] Even within humans and other mortal species, there are cells with the potential for immortality: cancer cells which have lost the ability to die when maintained in a cell culture such as the HeLa cell line, ] and specific stem cells such as germ cells (producing ova and spermatozoa ). ] In artificial cloning , adult cells can be rejuvenated to embryonic status and then used to grow a new tissue or animal without ageing. ] Normal human cells however die after about 50 cell divisions in laboratory culture (the Hayflick Limit , discovered by Leonard Hayflick in 1961). ] A number of characteristic ageing symptoms are experienced by a majority, or by a significant proportion of humans during their lifetimes. Dementia becomes more common with age. ] About 3% of people between the ages of 65 and 74, 19% of those between 75 and 84, and nearly half of those over 85 years old have dementia. ] The spectrum ranges from mild cognitive impairment to the neurodegenerative diseases of Alzheimer's disease , cerebrovascular disease , Parkinson's disease and Lou Gehrig's disease . Furthermore, many types of memory decline with ageing , but not semantic memory or general knowledge such as vocabulary definitions. These typically increase or remain steady until late adulthood ] (see Ageing brain ). Intelligence declines with age, though the rate varies depending on the type and may, in fact, remain steady throughout most of the human lifespan, dropping suddenly only as people near the end of their lives. Individual variations in the rate of cognitive decline may therefore be explained in terms of people having different lengths of life. ] There are changes to the brain: after 20 years of age, there is a 10% reduction each decade in the total length of the brain's myelinated axons . ] ] Age can result in visual impairment , whereby non-verbal communication is reduced, ] which can lead to isolation and possible depression. Older adults, however, may not experience depression as much as younger adults, and were paradoxically found to have improved mood, despite declining physical health. ] Macular degeneration causes vision loss and increases with age, affecting nearly 12% of those above the age of 80. ] This degeneration is caused by systemic changes in the circulation of waste products and by the growth of abnormal vessels around the retina. ] Other visual diseases that often appear with age are cataracts and glaucoma. A cataract occurs when the lens of the eye becomes cloudy, making vision blurry; it eventually causes blindness if untreated. ] They develop over time and are seen most often with those that are older. Cataracts can be
the lens of the eye becomes cloudy, making vision blurry; it eventually causes blindness if untreated. ] They develop over time and are seen most often with those that are older. Cataracts can be treated through surgery. Glaucoma is another common visual disease that appears in older adults. Glaucoma is caused by damage to the optic nerve, causing vision loss. ] Glaucoma usually develops over time, but there are variations to glaucoma, and some have a sudden onset. There are a few procedures for glaucoma, but there is no cure or fix for the damage, once it has occurred. Prevention is the best measure in the case of glaucoma. ] In addition to physical symptoms, aging can also cause a number of mental health issues as older adults deal with challenges such as the death of loved ones, retirement and loss of purpose, as well as their own health issues. Some warning signs are: changes in mood or energy, changes in sleep or eating habits, pain, sadness, unhealthy coping mechanisms such as smoking, suicidal ideations, and others. ] Older adults are more prone to social isolation as well, which can further increase the risk for physical and mental conditions such as anxiety, depression, and cognitive decline. ] A distinction can be made between "proximal ageing" (age-based effects that come about because of factors in the recent past) and "distal ageing" (age-based differences that can be traced to a cause in a person's early life, such as childhood poliomyelitis ). ] Ageing is among the greatest known risk factors for most human diseases . Of the roughly 150,000 people who die each day across the globe, about two-thirds--100,000 per day--die from age-related causes . ] In industrialized nations, the proportion is higher, reaching 90%. ] ] ] In the 21st century, researchers are only beginning to investigate the biological basis of ageing even in relatively simple and short-lived organisms, such as yeast . ] Little is known of mammalian ageing, in part due to the much longer lives of even small mammals, such as the mouse (around 3 years). A model organism for the study of ageing is the nematode C. elegans – having a short lifespan of 2–3 weeks – enabling genetic manipulations or suppression of gene activity with RNA interference , and other factors. ] Most known mutations and RNA interference targets that extend lifespan were first discovered in C. elegans . ] The factors proposed to influence biological ageing fall into two main categories, programmed and error-related . ] Programmed factors follow a biological timetable that might be a continuation of inherent mechanisms that regulate childhood growth and development. ] This regulation would depend on changes in gene expression that affect the systems responsible for maintenance, repair and defense responses. ] Factors causing errors or damage include internal and environmental events that induce cumulative deterioration in one or more organs . ] One 2013 review assessed ageing through the lens of the
] Factors causing errors or damage include internal and environmental events that induce cumulative deterioration in one or more organs . ] One 2013 review assessed ageing through the lens of the damage theory, proposing nine metabolic "hallmarks" of ageing in various organisms but especially mammals: ] There are three main metabolic pathways which can influence the rate of ageing, discussed below: It is likely that most of these pathways affect ageing separately, because targeting them simultaneously leads to additive increases in lifespan. ] The rate of ageing varies substantially across different species, and this, to a large extent, is genetically based. For example, numerous perennial plants ranging from strawberries and potatoes to willow trees typically produce clones of themselves by vegetative reproduction and are thus potentially immortal, while annual plants such as wheat and watermelons die each year and reproduce by sexual reproduction. In 2008 it was discovered that inactivation of only two genes in the annual plant Arabidopsis thaliana leads to its conversion into a potentially immortal perennial plant. ] The oldest animals known so far are 15,000-year-old Antarctic sponges , ] which can reproduce both sexually and clonally. Clonal immortality apart, there are certain species whose individual lifespans stand out among Earth's life-forms, including the bristlecone pine at 5062 years ] or 5067 years, ] invertebrates like the hard clam (known as quahog in New England) at 508 years, ] the Greenland shark at 400 years, ] various deep-sea tube worms at over 300 years, ] fish like the sturgeon and the rockfish , and the sea anemone ] and lobster . ] ] Such organisms are sometimes said to exhibit negligible senescence . ] The genetic aspect has also been demonstrated in studies of human centenarians . Life span, like other phenotypes , is selected for in evolution. Traits that benefit early survival and reproduction will be selected for even if they contribute to an earlier death. Such a genetic effect is called the antagonistic pleiotropy effect when referring to a gene (pleiotropy signifying the gene has a double function – enabling reproduction at a young age but costing the organism life expectancy in old age) and is called the disposable soma effect when referring to an entire genetic programme (the organism diverting limited resources from maintenance to reproduction). ] The biological mechanisms which regulate lifespan probably evolved with the first multicellular organisms more than a billion years ago. ] However, even single-celled organisms such as yeast have been used as models in ageing, hence ageing has its biological roots much earlier than multi-cellularity. ] The Mediterranean diet is credited with lowering the risk of heart disease and early death. ] ] The major contributors to mortality risk reduction appear to be a higher consumption of vegetables, fish, fruits, nuts and monounsaturated fatty acids, such as by consuming
and early death. ] ] The major contributors to mortality risk reduction appear to be a higher consumption of vegetables, fish, fruits, nuts and monounsaturated fatty acids, such as by consuming olive oil. ] As of 2021, there is insufficient clinical evidence that calorie restriction or any dietary practice affects the process of ageing. ] People who participate in moderate to high levels of physical exercise have a lower mortality rate compared to individuals who are not physically active. ] The majority of the benefits from exercise are achieved with around 3500 metabolic equivalent (MET) minutes per week. ] For example, climbing stairs 10 minutes, vacuuming 15 minutes, gardening 20 minutes, running 20 minutes, and walking or bicycling for 25 minutes on a daily basis would together achieve about 3000 MET minutes a week. ] A meta-analysis showed that loneliness carries a higher mortality risk than smoking. ] Different cultures express age in different ways. The age of an adult human is commonly measured in whole years since the day of birth. (The most notable exception— East Asian age reckoning —is becoming less common, particularly in official contexts.) Arbitrary divisions set to mark periods of life may include juvenile (from infancy through childhood , preadolescence , and adolescence), early adulthood , middle adulthood , and late adulthood . Informal citation needed ] terms include " tweens ", "teenagers", "twentysomething", "thirtysomething", etc. as well as "denarian", "vicenarian", "tricenarian", "quadragenarian", etc. Most legal systems define a specific age for when an individual is allowed or obliged to do particular activities. These age specifications include voting age , drinking age , age of consent , age of majority , age of criminal responsibility , marriageable age , age of candidacy , and mandatory retirement age . Admission to a movie, for instance, may depend on age according to a motion picture rating system . A bus fare might be discounted for the young or old. Each nation, government, and non-governmental organization has different ways of classifying age. In other words, chronological ageing may be distinguished from "social ageing" (cultural age-expectations of how people should act as they grow older) and "biological ageing" (an organism's physical state as it ages). ] Ageism cost the United States $63 billion in one year according to a Yale School of Public Health study. ] In a UNFPA report about ageing in the 21st century, it highlighted the need to "Develop a new rights-based culture of ageing and a change of mindset and societal attitudes towards ageing and older persons, from welfare recipients to active, contributing members of society". ] UNFPA said that this "requires, among others, working towards the development of international human rights instruments and their translation into national laws and regulations and affirmative measures that challenge age discrimination and recognise older people as autonomous
of international human rights instruments and their translation into national laws and regulations and affirmative measures that challenge age discrimination and recognise older people as autonomous subjects". ] Older people's music participation contributes to the maintenance of interpersonal relationships and promoting successful ageing. ] At the same time, older persons can make contributions to society including caregiving and volunteering. For example, "A study of Bolivian migrants who moved to Spain found that 69% left their children at home, usually with grandparents. In rural China, grandparents care for 38% of children aged under five whose parents have gone to work in cities." ] Population ageing is the increase in the number and proportion of older people in society. Population ageing has three possible causes: migration, longer life expectancy (decreased death rate) and decreased birth rate. Ageing has a significant impact on society. Young people tend to have fewer legal privileges (if they are below the age of majority ), they are more likely to push for political and social change, to develop and adopt new technologies, and to need education. Older people have different requirements from society and government, and frequently have differing values as well, such as for property and pension rights. ] In the 21st century, one of the most significant population trends is ageing. ] Currently, over 11% of the world's current population are people aged 60 and older and the United Nations Population Fund (UNFPA) estimates that by 2050 that number will rise to approximately 22%. ] Ageing has occurred due to development which has enabled better nutrition, sanitation, health care, education and economic well-being. Consequently, fertility rates have continued to decline and life expectancy has risen. Life expectancy at birth is over 80 now in 33 countries. Ageing is a "global phenomenon", that is occurring fastest in developing countries, including those with large youth populations, and poses social and economic challenges to the work which can be overcome with "the right set of policies to equip individuals, families and societies to address these challenges and to reap its benefits". ] As life expectancy rises and birth rates decline in developed countries, the median age rises accordingly. According to the United Nations, this process is taking place in nearly every country in the world. ] A rising median age can have significant social and economic implications, as the workforce gets progressively older and the number of old workers and retirees grows relative to the number of young workers. Older people generally incur more health-related costs than do younger people in the workplace and can also cost more in worker's compensation and pension liabilities. ] In most developed countries an older workforce is somewhat inevitable. In the United States for instance, the Bureau of Labor Statistics estimates that one in four American workers
liabilities. ] In most developed countries an older workforce is somewhat inevitable. In the United States for instance, the Bureau of Labor Statistics estimates that one in four American workers will be 55 or older by 2020. ] needs update ] Among the most urgent concerns of older persons worldwide is income security. This poses challenges for governments with ageing populations to ensure investments in pension systems continues to provide economic independence and reduce poverty in old age. These challenges vary for developing and developed countries. UNFPA stated that, "Sustainability of these systems is of particular concern, particularly in developed countries, while social protection and old-age pension coverage remain a challenge for developing countries, where a large proportion of the labour force is found in the informal sector." ] The global economic crisis has increased financial pressure to ensure economic security and access to health care in old age. To elevate this pressure "social protection floors must be implemented in order to guarantee income security and access to essential health and social services for all older persons and provide a safety net that contributes to the postponement of disability and prevention of impoverishment in old age". ] It has been argued that population ageing has undermined economic development ] and can lead to lower inflation because elderly individuals care especially strongly about the value of their pensions and savings. Evidence suggests that pensions, while making a difference to the well-being of older persons, also benefit entire families especially in times of crisis when there may be a shortage or loss of employment within households. A study by the Australian Government in 2003 estimated that "women between the ages of 65 and 74 years contribute A$16 billion per year in unpaid caregiving and voluntary work. Similarly, men in the same age group contributed A$10 billion per year." ] Due to increasing share of the elderly in the population, health care expenditures will continue to grow relative to the economy in coming decades. This has been considered as a negative phenomenon and effective strategies like labour productivity enhancement should be considered to deal with negative consequences of ageing. ] In the field of sociology and mental health, ageing is seen in five different views: ageing as maturity , ageing as decline, ageing as a life-cycle event, ageing as generation, and ageing as survival. ] Positive correlates with ageing often include economics, employment, marriage, children, education, and sense of control, as well as many others. The social science of ageing includes disengagement theory, activity theory, selectivity theory, and continuity theory. Retirement, a common transition faced by the elderly, may have both positive and negative consequences. ] As cyborgs currently are on the rise ] some theorists argue there is a need to develop new definitions of ageing and for
faced by the elderly, may have both positive and negative consequences. ] As cyborgs currently are on the rise ] some theorists argue there is a need to develop new definitions of ageing and for instance a bio-techno-social definition of ageing has been suggested. ] There is a current debate as to whether or not the pursuit of longevity and the postponement of senescence are cost-effective health care goals given finite health care resources. Because of the accumulated infirmities of old age, bioethicist Ezekiel Emanuel , opines that the pursuit of longevity via the compression of morbidity hypothesis is a "fantasy" and that human life is not worth living after age 75; longevity then should not be a goal of health care policy. ] This opinion has been contested by neurosurgeon and medical ethicist Miguel Faria , who states that life can be worthwhile during old age, and that longevity should be pursued in association with the attainment of quality of life. ] Faria claims that postponement of senescence as well as happiness and wisdom can be attained in old age in a large proportion of those who lead healthy lifestyles and remain intellectually active. ] With age inevitable biological changes occur that increase the risk of illness and disability. UNFPA states that: ] "A life-cycle approach to health care – one that starts early, continues through the reproductive years and lasts into old age – is essential for the physical and emotional well-being of older persons, and, indeed, all people. Public policies and programmes should additionally address the needs of older impoverished people who cannot afford health care." Many societies in Western Europe and Japan have ageing populations. While the effects on society are complex, there is a concern about the impact on health care demand. The large number of suggestions in the literature for specific interventions to cope with the expected increase in demand for long-term care in ageing societies can be organized under four headings: improve system performance; redesign service delivery; support informal caregivers; and shift demographic parameters. ] However, the annual growth in national health spending is not mainly due to increasing demand from ageing populations, but rather has been driven by rising incomes, costly new medical technology, a shortage of health care workers and informational asymmetries between providers and patients. ] A number of health problems become more prevalent as people get older. These include mental health problems as well as physical health problems, especially dementia . It has been estimated that population ageing only explains 0.2 percentage points of the annual growth rate in medical spending of 4.3% since 1970. In addition, certain reforms to the Medicare system in the United States decreased elderly spending on home health care by 12.5% per year between 1996 and 2000. ] Beauty standards have evolved over time, and as scientific research in cosmeceuticals, cosmetic
United States decreased elderly spending on home health care by 12.5% per year between 1996 and 2000. ] Beauty standards have evolved over time, and as scientific research in cosmeceuticals, cosmetic products seen to have medicinal benefits like anti-ageing creams, has increased, the industry has also expanded; the kinds of products they produce (such as serums and creams) have gradually gained popularity and become a part of many people's personal care routine. ] The increase in demand for cosmeceuticals has led scientists to find ingredients for these products in unorthodox places. For example, the secretion of cryptomphalus aspersa (or brown garden snail) has been found to have antioxidant properties, increase skin cell proliferation, and increase extracellular proteins such as collagen and fibronectin (important proteins for cell proliferation). ] Another substance used to prevent the physical manifestations of ageing is onobotulinumtoxinA, the toxin injected for Botox. ] In some cultures, old age is celebrated and honoured. In Korea, for example, a special party called hwangap is held to celebrate and congratulate an individual for turning 60 years old. ] In China, respect for elderly is often the basis for how a community is organized and has been at the foundation of Chinese culture and morality for thousands of years. Older people are respected for their wisdom and most important decisions have traditionally not been made without consulting them. This is a similar case for most Asian countries such as the Philippines, Thailand, Vietnam, Singapore, etc. Positive self-perceptions of ageing are associated with better mental and physical health and well-being. ] Positive self-perception of health has been correlated with higher well-being and reduced mortality among the elderly. ] ] Various reasons have been proposed for this association; people who are objectively healthy may naturally rate their health better as than that of their ill counterparts, though this link has been observed even in studies which have controlled for socioeconomic status , psychological functioning and health status. ] This finding is generally stronger for men than women, ] though this relationship is not universal across all studies and may only be true in some circumstances. ] As people age, subjective health remains relatively stable, even though objective health worsens. ] In fact, perceived health improves with age when objective health is controlled in the equation. ] This phenomenon is known as the "paradox of ageing". This may be a result of social comparison ; ] for instance, the older people get, the more they may consider themselves in better health than their same-aged peers. ] Elderly people often associate their functional and physical decline with the normal ageing process. ] ] One way to help younger people experience what it feels like to be older is through an ageing suit . There are several different kinds of suits including the GERT (named as a
ageing process. ] ] One way to help younger people experience what it feels like to be older is through an ageing suit . There are several different kinds of suits including the GERT (named as a reference to gerontology ), the R70i exoskeleton, and the AGNES (Age Gain Now Empathy Suit) suits. ] ] ] These suits create the feelings of the effects of ageing by adding extra weight and increased pressure in certain points like the wrists, ankles and other joints. In addition, the various suits have different ways to impair vision and hearing to simulate the loss of these senses. To create the loss of feeling in hands that the elderly experience, special gloves are a part of the uniforms. Use of these suits may help to increase the amount of empathy felt for the elderly and could be considered particularly useful for those who are either learning about ageing, or those who work with the elderly, such as nurses or care centre staff. Design is another field that could benefit from the empathy these suits may cause. ] ] When designers understand what it feels like to have the impairments of old age, they can better design buildings, packaging, or even tools to help with the simple day-to-day tasks that are more difficult with less dexterity. Designing with the elderly in mind may help to reduce the negative feelings that are associated with the loss of abilities that the elderly face. The healthy ageing framework, proposed by the World Health Organation ] operationalizes health as functional ability, which results from the interactions of intrinsic capacity and the environments. Intrinsic capacity is a construct encompassing people's physical and mental abilities which can be drawn upon during ageing. ] Intrinsic capacity comprises the domains of: cognition, locomotion, vitality/nutrition, psychological and sensory (visual and hearing). ] A recent study found four "profiles" or "statuses" of intrinsic capacity among older adults, namely high IC (43% at baseline), low deterioration with impaired locomotion (17%), high deterioration without cognitive impairment (22%) and high deterioration with cognitive impairment (18%). Over half of the study sample remained in the same status at baseline and follow-up (61%). Around one-fourth of participants transitioned from the high IC to the low deterioration status, and only 3% of the participants improved their status. Interestingly, the probability of improvement was observed in the status of high deterioration. Participants in the latent statuses of low and high levels of deterioration had a significantly higher risk of frailty, disability and dementia than their high IC counterparts. ] The concept of successful ageing can be traced back to the 1950s and was popularized in the 1980s. Traditional definitions of successful ageing have emphasized absence of physical and cognitive disabilities. ] In their 1987 article, Rowe and Kahn characterized successful ageing as involving three components: a) freedom from
successful ageing have emphasized absence of physical and cognitive disabilities. ] In their 1987 article, Rowe and Kahn characterized successful ageing as involving three components: a) freedom from disease and disability, b) high cognitive and physical functioning, and c) social and productive engagement. ] The study cited previous was also done back in 1987 and therefore, these factors associated with successful ageing have probably been changed. With the current knowledge, scientists started to focus on learning about the effect spirituality in successful ageing. There are some differences in cultures which of these components are the most important. Most often across cultures social engagement was the most highly rated but depending on the culture the definition of successful ageing changes. ] The ancient Greek dramatist Euripides (5th century BC) describes the multiple-head
Gender includes the social, psychological, cultural and behavioral aspects of being a man , woman , or other gender identity . ] ] Depending on the context, this may include sex -based social constructs (i.e. gender roles ) as well as gender expression . ] ] ] Most cultures use a gender binary , in which gender is divided into two categories, and people are considered part of one or the other ( girls men ); ] ] ] those who are outside these groups may fall under the umbrella term non-binary . A number of societies have specific genders besides "man" and "woman," such as the hijras of South Asia ; these are often referred to as third genders (and fourth genders , etc.). Most scholars agree that gender is a central characteristic for social organization . ] The word is also used as a synonym for sex, and the balance between these usages has shifted over time. ] ] ] In the mid-20th century, a terminological distinction in modern English (known as the sex and gender distinction ) between biological sex and gender began to develop in the academic areas of psychology , sociology , sexology , and feminism . ] ] Before the mid-20th century, it was uncommon to use the word gender to refer to anything but grammatical categories . ] ] In the West, in the 1970s, feminist theory embraced the concept of a distinction between biological sex and the social construct of gender . The distinction between gender and sex is made by most contemporary social scientists in Western countries, ] ] ] behavioral scientists and biologists, ] many legal systems and government bodies, ] and intergovernmental agencies such as the WHO . ] The social sciences have a branch devoted to gender studies . Other sciences, such as psychology , sociology , sexology , and neuroscience , are interested in the subject. The social sciences sometimes approach gender as a social construct , and gender studies particularly does, while research in the natural sciences investigates whether biological differences in females and males influence the development of gender in humans; both inform the debate about how far biological differences influence the formation of gender identity and gendered behavior. Biopsychosocial approaches to gender include biological, psychological, and social/cultural aspects. ] ] The modern English word gender comes from the Middle English gender , gendre , a loanword from Anglo-Norman and Middle French gendre . This, in turn, came from Latin genus . Both words mean "kind", "type", or "sort". They derive ultimately from a Proto-Indo-European (PIE) root * ǵénh₁- 'to beget', ] which is also the source of kin , kind , king , and many other English words, with cognates widely attested in many Indo-European languages . ] It appears in Modern French in the word genre (type, kind, also genre sexuel ) and is related to the Greek root gen- (to produce), appearing in gene , genesis , and oxygen . The Oxford Etymological Dictionary of the English Language of 1882 defined gender as
also genre sexuel ) and is related to the Greek root gen- (to produce), appearing in gene , genesis , and oxygen . The Oxford Etymological Dictionary of the English Language of 1882 defined gender as kind, breed, sex , derived from the Latin ablative case of genus , like genere natus , which refers to birth. ] The first edition of the Oxford English Dictionary (OED1, Volume 4, 1900) notes the original meaning of gender as "kind" had already become obsolete. The concept of gender, in the modern social science sense, is a recent invention in human history. ] The ancient world had no basis of understanding gender as it has been understood in the humanities and social sciences for the past few decades. ] The term gender had been associated with grammar for most of history and only started to move towards it being a malleable cultural construct in the 1950s and 1960s. ] Before the terminological distinction between biological sex and gender as a role developed, it was uncommon to use the word gender to refer to anything but grammatical categories . ] ] For example, in a bibliography of 12,000 references on marriage and family from 1900 to 1964, the term gender does not even emerge once. ] Analysis of more than 30 million academic article titles from 1945 to 2001 showed that the uses of the term "gender" , were much rarer than uses of "sex" , was often used as a grammatical category early in this period. By the end of this period, uses of "gender" outnumbered uses of "sex" in the social sciences, arts, and humanities. ] It was in the 1970s that feminist scholars adopted the term gender as way of distinguishing "socially constructed" aspects of male–female differences (gender) from "biologically determined" aspects (sex). ] As of 2024, many dictionaries list "synonym for 'sex'" as one of gender' s meanings, alongside its sociocultural meaning. ] ] According to the Oxford English Dictionary, gender came into use as a synonym for sex during the twentieth century, initially as a euphemism, as sex was undergoing its own usage shift toward referring to sexual intercourse rather than malegender distinction is now only fitfully observed." ] Within the social sciences, however, use of gender in academia increased greatly, outnumbering uses of sex during that same period. In the natural sciences, gender was more often used as a synonym for sex . This can be attributed to the influence of feminism. Haig stated, "Among the reasons that working scientists have given me for choosing gender rather than sex in biological contexts are desires to signal sympathy with feminist goals, to use a more academic term, or to avoid the connotation of copulation." Haig also notes that "gender" became the preferred term when discussing phenomena for which the social versus biological cause was unknown, disputed, or actually an interaction between the two. ] In 1993, the US Food and Drug Administration (FDA) started to use gender instead of sex to avoid confusion with sexual
cause was unknown, disputed, or actually an interaction between the two. ] In 1993, the US Food and Drug Administration (FDA) started to use gender instead of sex to avoid confusion with sexual intercourse . ] Later, in 2011, the FDA reversed its position and began using sex as the biological classification and gender as "a person's self-representation as male or female, or how that person is responded to by social institutions based on the individual's gender presentation." ] In legal cases alleging discrimination , a 2006 law review article by Meredith Render notes "as notions of gender and sexuality have evolved over the last few decades, legal theories concerning what it means to discriminate "because of sex" under Title VII have experienced a similar evolution". ] : 135 In a 1999 law review article proposing a legal definition of sex that "emphasizes gender self-identification," Julie Greenberg writes, "Most legislation utilizes the word 'sex,' yet courts, legislators, and administrative agencies often substitute the word 'gender' for 'sex' when they interpret these statutes." ] : 270, 274 In J.E.B. v. Alabama ex rel. T.B. , a 1994 United States Supreme Court case addressing "whether the Equal Protection Clause forbids intentional discrimination on the basis of gender", the majority opinion noted that with regard to gender, "It is necessary only to acknowledge that 'our Nation has had a long and unfortunate history of sex discrimination,' id. , at 684, 93 S.Ct., at 1769, a history which warrants the heightened scrutiny we afford all gender-based classifications today", and stated "When state actors exercise peremptory challenges in reliance on gender stereotypes, they ratify and reinforce prejudicial views of the relative abilities of men and women." ] The word was still widely used, however, in the specific sense of grammatical gender (the assignment of nouns to categories such as masculine , feminine and neuter ). According to Aristotle , this concept was introduced by the Greek philosopher Protagoras . ] In 1926, Henry Watson Fowler stated that the definition of the word pertained to this grammar-related meaning: .mw-parser-output .templatequote{overflow:hidden;margin:1em 0;padding:0 32px}.mw-parser-output .templatequotecite{line-height:1.5em;text-align:left;margin-top:0}@media(min-width:500px){.mw-parser-output .templatequotecite{padding-left:1.6em}} "Gender...is a grammatical term only. To talk of persons...of the masculine or feminine g, meaning of the male or female sex, is either a jocularity (permissible or not according to context) or a blunder." ] In 1945, Madison Bentley defined gender as the "socialized obverse of sex". ] ] Simone de Beauvoir 's 1949 book The Second Sex has been interpreted as the beginning of the distinction between sex and gender in feminist theory , ] ] although this interpretation is contested by many feminist theorists, including Sara Heinämaa. ] ] Controversial sexologist John Money coined the term gender
sex and gender in feminist theory , ] ] although this interpretation is contested by many feminist theorists, including Sara Heinämaa. ] ] Controversial sexologist John Money coined the term gender role , ] ] and was the first to use it in print in a scientific trade journal in 1955. ] ] In the seminal 1955 paper, he defined it as "all those things that a person says or does to disclose himself or herself as having the status of boy or man, girl or woman." ] The modern academic sense of the word, in the context of social roles of men and women, dates at least back to 1945, ] and was popularized and developed by the feminist movement from the 1970s onwards (see Feminist theory and gender studies below), which theorizes that human nature is essentially epicene and social distinctions based on sex are arbitrarily constructed. In this context, matters pertaining to this theoretical process of social construction were labelled matters of gender . The popular use of gender simply as an alternative to sex (as a biological category) is also widespread, although attempts are still made to preserve the distinction. The American Heritage Dictionary (2000) uses the following two sentences to illustrate the difference, noting that the distinction "is useful in principle, but it is by no means widely observed, and considerable variation in usage occurs at all levels." ] The effectiveness of the medication appears to depend on the sex (not gender) of the patient. In peasant societies, gender (not sex) roles are likely to be more clearly defined. Gender identity refers to a personal identification with a particular gender and gender role in society. The term woman has historically been used interchangeably with reference to the female body, though more recently this usage has been viewed as controversial by some feminists . ] There are qualitative analyses that explore and present the representations of gender; however, feminists challenge these dominant ideologies concerning gender roles and biological sex. One's biological sex is often times tied to specific social roles and expectations. Judith Butler considers the concept of being a woman to have more challenges, owing not only to society's viewing women as a social category but also as a felt sense of self, a culturally conditioned or constructed subjective identity. ] Social identity refers to the common identification with a collectivity or social category that creates a common culture among participants concerned. ] According to social identity theory , ] an important component of the self-concept is derived from memberships in social groups and categories; this is demonstrated by group processes and how inter-group relationships impact significantly on individuals' self perception and behaviors. The groups people belong to therefore provide members with the definition of who they are and how they should behave within their social sphere. ] Categorizing males and females into social roles creates a
people belong to therefore provide members with the definition of who they are and how they should behave within their social sphere. ] Categorizing males and females into social roles creates a problem for some individuals who feel they have to be at one end of a linear spectrum and must identify themselves as man or woman, rather than being allowed to choose a section in between. ] Globally, communities interpret biological differences between men and women to create a set of social expectations that define the behaviors that are "appropriate" for men and women and determine their different access to rights, resources, power in society and health behaviors. ] Although the specific nature and degree of these differences vary from one society to the next, they still tend to typically favor men, creating an imbalance in power and gender inequalities within most societies. ] Many cultures have different systems of norms and beliefs based on gender, but there is no universal standard to a masculine or feminine role across all cultures. ] Social roles of men and women in relation to each other is based on the cultural norms of that society, which lead to the creation of gender systems . The gender system is the basis of social patterns in many societies, which include the separation of sexes, and the primacy of masculine norms. ] Philosopher Michel Foucault said that as sexual subjects, humans are the object of power, which is not an institution or structure, rather it is a signifier or name attributed to "complex strategical situation". ] Because of this, "power" is what determines individual attributes, behaviors, etc. and people are a part of an ontologically and epistemologically constructed set of names and labels . For example, being female characterizes one as a woman, and being a woman signifies one as weak, emotional, and irrational, and incapable of actions attributed to a "man". Butler said that gender and sex are more like verbs than nouns. She reasoned that her actions are limited because she is female. "I am not permitted to construct my gender and sex willy-nilly," she said. ] " is so because gender is politically and therefore socially controlled. Rather than 'woman' being something one is, it is something one does." ] More recent criticisms of Judith Butler's theories critique her writing for reinforcing the very conventional dichotomies of gender. ] According to gender theorist Kate Bornstein , gender can have ambiguity and fluidity . ] There are two ] ] contrasting ideas regarding the definition of gender, and the intersection of both of them is definable as below: The World Health Organization defines gender as "the characteristics of women, men, girls and boys that are socially constructed". ] The beliefs, values and attitude taken up and exhibited by them is as per the agreed upon norms of the society and the personal opinion of the person is not taken into the primary consideration of assignment of gender and imposition of
up and exhibited by them is as per the agreed upon norms of the society and the personal opinion of the person is not taken into the primary consideration of assignment of gender and imposition of gender roles as per the assigned gender. ] The assignment of gender involves taking into account the physiological and biological attributes assigned by nature followed by the imposition of the socially constructed conduct. Gender is a term used to exemplify the attributes that a society or culture constitutes as "masculine" or "feminine". Although a person's sex as male or female stands as a biological fact that is identical in any culture, what that specific sex means in reference to a person's gender role as a man or a woman in society varies cross-culturally according to what things are considered to be masculine or feminine. ] These roles are learned from various, intersecting sources such as parental influences, the socialization a child receives in school, and what is portrayed in the local media. Learning gender roles starts from birth and includes seemingly simple things like what color outfits a baby is clothed in or what toys they are given to play with. However, a person's gender does not always align with what has been assigned at birth. Factors other than learned behaviors play a role in the development of gender. ] The article Adolescent Gender-Role Identity and Mental Health: Gender Intensification Revisited focuses on the work of Heather A. Priess, Sara M. Lindberg, and Janet Shibley Hyde on whether or not girls and boys diverge in their gender identities during adolescent years. The researchers based their work on ideas previously mentioned by Hill and Lynch in their gender intensification hypothesis in that signals and messages from parents determine and affect their children's gender role identities. This hypothesis argues that parents affect their children's gender role identities and that different interactions spent with either parents will affect gender intensification. Priess and among other's study did not support the hypothesis of Hill and Lynch which stated "that as adolescents experience these and other socializing influences, they will become more stereotypical in their gender-role identities and gendered attitudes and behaviors." ] However, the researchers did state that perhaps the hypothesis Hill and Lynch proposed was true in the past but is not true now due to changes in the population of teens in respect to their gender-role identities. Authors of "Unpacking the Gender System: A Theoretical Perspective on Gender Beliefs and Social Relations", Cecilia Ridgeway and Shelley Correll , argue that gender is more than an identity or role but is something that is institutionalized through "social relational contexts." Ridgeway and Correll define "social relational contexts" as "any situation in which individuals define themselves in relation to others in order to act." ] They also point out that in addition to social
and Correll define "social relational contexts" as "any situation in which individuals define themselves in relation to others in order to act." ] They also point out that in addition to social relational contexts, cultural beliefs plays a role in the gender system. The coauthors argue that daily people are forced to acknowledge and interact with others in ways that are related to gender. Every day, individuals are interacting with each other and comply with society's set standard of hegemonic beliefs, which includes gender roles. They state that society's hegemonic cultural beliefs sets the rules which in turn create the setting for which social relational contexts are to take place. Ridgeway and Correll then shift their topic towards sex categorization. The authors define sex categorization as "the sociocognitive process by which we label another as male or female." ] The failure of an attempt to raise David Reimer from infancy through adolescence as a girl after his genitals were accidentally mutilated is cited as disproving the theory that gender identity is determined solely by parenting. ] ] Reimer's case is used by organizations such as the Intersex Society of North America to caution against needlessly modifying the genitals of unconsenting minors. ] ] Between the 1960s and 2000, many other male newborns and infants were surgically and socially reassigned as females if they were born with malformed penises, or if they lost their penises in accidents. At the time, surgical reconstruction of the vagina was more advanced than reconstruction of the penis , leading many doctors and psychologists, including John Money who oversaw Reimer's case, to recommend sex reassignment based on the idea that these patients would be happiest living as women with functioning genitalia. ] Available evidence indicates that in such instances, parents were deeply committed to raising these children as girls and in as gender-typical a manner as possible. ] : 72–73 A 2005 review of these cases found that about half of natal males reassigned female lived as women in adulthood, including those who knew their medical history, suggesting that gender assignment and related social factors has a major, though not determinative, influence on eventual gender identity. ] In 2015, the American Academy of Pediatrics released a webinar series on gender, gender identity, gender expression, transgender, etc. ] ] In the first lecture Sherer explains that parents' influence (through punishment and reward of behavior) can influence gender expression but not gender identity . ] Sherer argued that kids will modify their gender expression to seek reward from their parents and society, but this will not affect their gender identity (their internal sense of self). Sexologist John Money coined the term gender role in 1955. The term gender role is defined as the actions or responses that may reveal their status as boy, man, girl or woman, respectively. ] Elements surrounding gender roles
the term gender role in 1955. The term gender role is defined as the actions or responses that may reveal their status as boy, man, girl or woman, respectively. ] Elements surrounding gender roles include clothing, speech patterns, movement, occupations, and other factors not limited to biological sex. In contrast to taxonomic approaches, some feminist philosophers have argued that gender "is a vast orchestration of subtle mediations between oneself and others", rather than a "private cause behind manifest behaviours". ] Historically, most societies have recognized only two distinct, broad classes of gender roles, a binary of masculine and feminine, largely corresponding to the biological sexes of male and female. ] ] ] When a baby is born, society allocates the child to one gender or the other, on the basis of what their genitals resemble. ] However, some societies have historically acknowledged and even honored people who fulfill a gender role that exists more in the middle of the continuum between the feminine and masculine polarity. For example, the Hawaiian māhū , who occupy "a place in the middle" between male and female, ] ] or the Ojibwe ikwekaazo , "men who choose to function as women", ] or ininiikaazo , "women who function as men". ] In the language of the sociology of gender , some of these people may be considered third gender , especially by those in gender studies or anthropology. Contemporary Native American and FNIM people who fulfill these traditional roles in their communities may also participate in the modern, two-spirit community, ] however, these umbrella terms, neologisms, and ways of viewing gender are not necessarily the type of cultural constructs that more traditional members of these communities agree with. ] The hijras of India and Pakistan are often cited as third gender . ] ] Another example may be the muxe (pronounced ] ), found in the state of Oaxaca, in southern Mexico. ] The Bugis people of Sulawesi , Indonesia have a tradition that incorporates all the features above. ] In addition to these traditionally recognized third genders, many cultures now recognize, to differing degrees, various non-binary gender identities . People who are non-binary (or genderqueer) have gender identities that are not exclusively masculine or feminine. They may identify as having an overlap of gender identities, having two or more genders, having no gender, having a fluctuating gender identity, or being third gender or other-gendered. Recognition of non-binary genders is still somewhat new to mainstream Western culture, ] and non-binary people may face increased risk of assault, harassment, and discrimination. ] Two instruments incorporating the multidimensional nature of masculinity and femininity have dominated gender identity research: The Bem Sex Role Inventory (BSRI) and the Personal Attributes Questionnaire (PAQ). ] Both instruments categorize individuals as either being sex typed (males report themselves as identifying
The Bem Sex Role Inventory (BSRI) and the Personal Attributes Questionnaire (PAQ). ] Both instruments categorize individuals as either being sex typed (males report themselves as identifying primarily with masculine traits, females report themselves as identifying primarily with feminine traits), cross sex-typed (males report themselves as identifying primarily with feminine traits, females report themselves as identifying primarily with masculine traits), androgynous (either males or females who report themselves as high on both masculine and feminine traits) or undifferentiated (either males or females who report themselves as low on both masculine and feminine traits). ] Twenge (1997) noted that men are generally more masculine than women and women generally more feminine than men, but the association between biological sex and masculinity/femininity is waning. ] Some gendered behavior is influenced by prenatal and early life androgen exposure. This includes, for example, gender normative play, self-identification with a gender, and tendency to engage in aggressive behavior. ] Males of most mammals, including humans, exhibit more rough and tumble play behavior, which is influenced by maternal testosterone levels. These levels may also influence sexuality, with non-heterosexual persons exhibiting sex atypical behavior in childhood. ] The biology of gender became the subject of an expanding number of studies over the course of the late 20th century. One of the earliest areas of interest was what became known as "gender identity disorder" (GID) and which is now also described as gender dysphoria . Studies in this, and related areas, inform the following summary of the subject by John Money. He stated: The term "gender role" appeared in print first in 1955. The term gender identity was used in a press release, 21 November 1966, to announce the new clinic for transsexuals at The Johns Hopkins Hospital. It was disseminated in the media worldwide, and soon entered the vernacular. The definitions of gender and gender identity vary on a doctrinal basis. In popularized and scientifically debased usage, sex is what you are biologically; gender is what you become socially; gender identity is your own sense or conviction of maleness or femaleness; and gender role is the cultural stereotype of what is masculine and feminine. Causality with respect to gender identity disorder is sub-divisible into genetic, prenatal hormonal, postnatal social, and post-pubertal hormonal determinants, but there is, as yet, no comprehensive and detailed theory of causality. Gender coding in the brain is bipolar. In gender identity disorder, there is discordance between the natal sex of one's external genitalia and the brain coding of one's gender as masculine or feminine. ] Although causation from the biological— genetic and hormonal —to the behavioral has been broadly demonstrated and accepted, Money is careful to also note that understanding of the causal chains from biology
causation from the biological— genetic and hormonal —to the behavioral has been broadly demonstrated and accepted, Money is careful to also note that understanding of the causal chains from biology to behavior in sex and gender issues is very far from complete. ] Money had previously stated that in the 1950s, American teenage girls who had been exposed to androgenic steroids by their mothers in utero exhibited more traditionally masculine behavior, such as being more concerned about their future career than marriage, wearing pants, and not being interested in jewelry. ] ] There are studies concerning women who have a condition called congenital adrenal hyperplasia , which leads to the overproduction of the masculine sex hormone , androgen . These women usually have ordinary female appearances (though nearly all girls with congenital adrenal hyperplasia (CAH) have corrective surgery performed on their genitals). However, despite taking hormone-balancing medication given to them at birth, these females are statistically more likely to be interested in activities traditionally linked to males than female activities. Psychology professor and CAH researcher Dr. Sheri Berenbaum attributes these differences to an exposure of higher levels of male sex hormones in utero. ] In non-human animal research, gender is commonly used to refer to the biological sex of the animals. ] According to biologist Michael J. Ryan , gender identity is a concept exclusively applied to humans. ] Also, in a letter Ellen Ketterson writes, "hen asked, my colleagues in the Department of Gender Studies agreed that the term gender could be properly applied only to humans, because it involves one's self-concept as man or woman. Sex is a biological concept; gender is a human social and cultural concept." ] However, Poiani (2010) notes that the question of whether behavioural similarities across species can be associated with gender identity or not is "an issue of no easy resolution", ] and suggests that mental states, such as gender identity, are more accessible in humans than other species due to their capacity for language. ] Poiani suggests that the potential number of species with members possessing a gender identity must be limited due to the requirement for self-consciousness . ] Jacques Balthazart suggests that "there is no animal model for studying sexual identity. It is impossible to ask an animal, whatever its species, to what sex it belongs." ] He notes that "this would imply that the animal is aware of its own body and sex, which is far from proved", despite recent research demonstrating sophisticated cognitive skills among non-human primates and other species. ] Hird (2006) has also stated that whether or not non-human animals consider themselves to be feminine or masculine is a "difficult, if not impossible, question to answer", as this would require "judgements about what constitutes femininity or masculinity in any given species". Nonetheless, she asserts that
is a "difficult, if not impossible, question to answer", as this would require "judgements about what constitutes femininity or masculinity in any given species". Nonetheless, she asserts that "non-human animals do experience femininity and masculinity to the extent that any given species' behaviour is gender segregated." ] Despite this, Poiani and Dixson emphasise the applicability of the concept of gender role to non-human animals ] such as rodents ] throughout their book. ] The concept of gender role
The European Court of Justice ( ECJ ), formally just the Court of Justice ( French : Cour de Justice ), is the supreme court of the European Union in matters of European Union law . As a part of the Court of Justice of the European Union , it is tasked with interpreting EU law and ensuring its uniform application across all EU member states under Article 263 of the Treaty of the Functioning of the European Union (TFEU). ] The Court was established in 1952, and is based in Luxembourg . It is composed of one judge per member state – currently 27 – although it normally hears cases in panels of three, five or fifteen judges. ] The Court has been led by president Koen Lenaerts since 2015. ] The ECJ is the highest court of the European Union in matters of Union law , but not national law. It is not possible to appeal against the decisions of national courts in the ECJ, but rather national courts refer questions of EU law to the ECJ. ] However, it is ultimately for the national court to apply the resulting interpretation to the facts of any given case, although only courts of final appeal are bound to refer a question of EU law when one is addressed. The treaties give the ECJ the power for consistent application of EU law across the EU as a whole. The court also acts as an administrative and constitutional court between the other EU institutions and the Member States and can annul or invalidate unlawful acts of EU institutions, bodies, offices and agencies. ] The court was established in 1952, by the Treaty of Paris (1951) as part of the European Coal and Steel Community . ] It was established with seven judges, allowing both representation of each of the six member States and being an odd number of judges in case of a tie. One judge was appointed from each member state and the seventh seat rotated between the "large Member States" (West Germany, France and Italy). It became an institution of two additional Communities in 1957 when the European Economic Community (EEC), and the European Atomic Energy Community (Euratom) were created, sharing the same courts with the European Coal and Steel Community. The Maastricht Treaty was ratified in 1993, and created the European Union . The name of the Court did not change unlike the other institutions. The power of the Court resided in the Community pillar (the first pillar). ] The Court gained power in 1997, with the signing of the Amsterdam Treaty . Issues from the third pillar were transferred to the first pillar. Previously, these issues were settled between the member states. Following the entrance into force of the Treaty of Lisbon on 1 December 2009, the ECJ's official name was changed from the "Court of Justice of the European Communities" to the "Court of Justice" although in English it is still most common to refer to the Court as the European Court of Justice. The Court of First Instance was renamed as the "General Court", and the term "Court of Justice of the European Union" now officially designates
to refer to the Court as the European Court of Justice. The Court of First Instance was renamed as the "General Court", and the term "Court of Justice of the European Union" now officially designates the two courts, as along with its specialised tribunals, taken together. ] The Court of Justice consists of 27 Judges who are assisted by 11 Advocates-General . The Judges and Advocates-General are appointed by common accord of the governments of the member states ] and hold office for a renewable term of six years. The treaties require that they are chosen from legal experts whose independence is "beyond doubt" and who possess the qualifications required for appointment to the highest judicial offices in their respective countries or who are of recognised competence. ] In practice, each member state nominates a judge whose nomination is then ratified by all other member states. ] The President of the Court of Justice is elected from and by the judges for a renewable term of three years. The president presides over hearings and deliberations, directing both judicial business and administration (for example, the time table of the Court and Grand Chamber). He also assigns cases to the chambers for examination and appoints judge as rapporteurs called ' Judge-Rapporteur ' (reporting judges). ] The Council may also appoint assistant rapporteurs to assist the President in applications for interim measures and to assist rapporteurs in the performance of their duties. ] The post of vice-president was created by amendments to the Statute of the Court of Justice in 2012. The duty of the vice-president is to assist the President in the performance of his duties and to take the President's place when the latter is prevented from attending or when the office of president is vacant. In 2012, judge Koen Lenaerts of Belgium became the first judge to carry out the duties of the vice-president of the Court of Justice. Like the President of the Court of Justice, the vice-president is elected by the members of the Court for a term of three years. ] The judges are assisted by eleven ] Advocates General , whose number may be increased by the Council if the Court so requests. The Advocates General are responsible for presenting a legal opinion on the cases assigned to them. They can question the parties involved and then give their opinion on a legal solution to the case before the judges deliberate and deliver their judgment. The intention behind having Advocates General attached is to provide independent and impartial opinions concerning the Court's cases. Unlike the Court's judgments, the written opinions of the Advocates General are the works of a single author and are consequently generally more readable and deal with the legal issues more comprehensively than the Court, which is limited to the particular matters at hand. The opinions of the Advocates General are advisory and do not bind the Court, but they are nonetheless very influential and are followed in the
which is limited to the particular matters at hand. The opinions of the Advocates General are advisory and do not bind the Court, but they are nonetheless very influential and are followed in the majority of cases. ] In a 2016 study, Arrebola and Mauricio measured the influence of the Advocate General on the judgments of the Court, showing that the Court is approximately 67% more likely to deliver a particular outcome if that was the opinion of the Advocate General. ] As of 2003, Advocates General are only required to give an opinion if the Court considers the case raises a new point of law. ] ] According to Article 255 TFEU the judges and advocates-general are appointed by common accord of the governments of the Member States after consultation of a panel responsible for assessing candidates’ suitability. ] The Registrar is the Court's chief administrator. They manage departments under the authority of the Court's president. ] The Court may also appoint one or more Assistant Registrars. They help the Court, the Chambers, the President and the Judges in all their official functions. They are responsible for the Registry as well as for the receipt, transmission and custody of documents and pleadings that have been entered in a register initialled by the President. They are Guardian of the Seals and responsible for the Court's archives and publications. The Registrar is responsible for the administration of the Court, its financial management and its accounts. The operation of the Court is in the hands of officials and other servants who are responsible to the Registrar under the authority of the President. The Court administers its own infrastructure; this includes the Translation Directorate, which, as of 2012 ] employed 44.7% of the staff of the institution. ] The Court can sit in plenary session, as a Grand Chamber of fifteen judges (including the president and vice-president), or in chambers of three or five judges. Plenary sittings are now very rare, and the court mostly sits in chambers of three or five judges. ] Each chamber elects its own president who is elected for a term of three years in the case of the five-judge chambers or one year in the case of three-judge chambers. The Court is required to sit in full court in exceptional cases provided for in the treaties. The court may also decide to sit in full, if the issues raised are considered to be of exceptional importance. ] Sitting as a Grand Chamber is more common and can happen when a Member State or a Union institution, that is a party to certain proceedings, so requests, or in particularly complex or important cases. The court acts as a collegial body: decisions are those of the court rather than of individual judges; no minority opinions are given and indeed the existence of a majority decision rather than unanimity is never suggested. ] It is the responsibility of the Court of Justice to ensure that the law is observed in the interpretation and application of the Treaties of the
decision rather than unanimity is never suggested. ] It is the responsibility of the Court of Justice to ensure that the law is observed in the interpretation and application of the Treaties of the European Union . ] To enable it to carry out its duties, the Court has broad jurisdiction to hear various types of action. The Court has competence to, amongst other actions, rule on applications for annulment or actions for failure to act brought by a Member State or an institution; take actions against Member States for failure to fulfil obligations; and hear references for a preliminary ruling and appeals against decisions of the General Court . ] Under Article 258 (ex Article 226) of the Treaty on the Functioning of the European Union , the Court of Justice may determine whether a Member State has fulfilled its obligations under Union law. That action may be brought by the commission – as is practically always the case – or by another Member State, although the cases of the latter kind remain extremely rare. Only six interstate cases have been decided by the court: ] The commencement of proceedings before the Court of Justice is preceded by a preliminary procedure conducted by the commission, which gives the Member State the opportunity to reply to the complaints against it. The court has decided that if the European Commission does not send the formal letter to the violating member state no-one can force them. ] If that procedure does not result in termination of the failure by the Member State, an action for breach of Union law may be brought before the Court of Justice. If the Court finds that an obligation has not been fulfilled, the Member State concerned must terminate the breach without delay. If, after new proceedings are initiated by the commission, the Court of Justice finds that the Member State concerned has not complied with its judgment, it may, upon the request of the commission, impose on the Member State a fixed or a periodic financial penalty under Article 260 of the TFEU. ] By an action for annulment under Article 263 (ex Article 230) of the Treaty on the Functioning of the European Union , the applicant seeks the annulment of a measure (regulation, directive, decision or any measure with legal effects) adopted by an institution, body, office or agency of the EU. The Court of Justice has exclusive jurisdiction over actions brought by a Member State against the European Parliament and/or against the council (apart from Council measures in respect of State aid, dumping and implementing powers) or brought by one Union institution against another. The General Court has jurisdiction, at first instance, in all other actions of this type and particularly in actions brought by individuals. The Court of Justice has the power to declare measures void under Article 264 (ex Article 231) of the Treaty on the Functioning of the European Union . Under Article 265 (ex Article 232) of the Treaty on the Functioning of the European Union , the
void under Article 264 (ex Article 231) of the Treaty on the Functioning of the European Union . Under Article 265 (ex Article 232) of the Treaty on the Functioning of the European Union , the Court of Justice and the General Court may also review the legality of a failure to act on the part of a Union institution, body, office or agency. However, such an action may be brought only after the institution has been called on to act. Where the failure to act is held to be unlawful, it is for the institution concerned to put an end to the failure by appropriate measures. Under Article 268 of the Treaty on the Functioning of the European Union (and with reference to Article 340), the Court of Justice hears claims for compensation based on non-contractual liability , and rules on the liability of the Union for damage to citizens and to undertakings caused by its institutions or servants in the performance of their duties. Under Article 256 (ex Article 225) of the Treaty on the Functioning of the European Union , appeals on judgments given by the General Court may be heard by the Court of Justice only if the appeal is on a point of law. If the appeal is admissible and well founded, the Court of Justice sets aside the judgment of the General Court. Where the state of the proceedings so permits, the Court may itself decide the case. Otherwise, the Court must refer the case back to the General Court, which is bound by the decision given on appeal. No special procedure applies to allow for an appeal to proceed to the Court of Justice, except for cases which the General Court ruled on appeal against decisions of the independent Boards of Appeal of the EU agencies (as provided by Article 58a of the Statute of the Court). References for a preliminary ruling are specific to Union law. Whilst the Court of Justice is, by its very nature, the supreme guardian of Union legality, it is not the only judicial body empowered to apply EU law. That task also falls to national courts, in as much as they retain jurisdiction to review the administrative implementation of Union law, for which the authorities of the Member States are essentially responsible; many provisions of the Treaties and of secondary legislation – regulations, directives and decisions – directly confer individual rights on nationals of Member States, which national courts must uphold. National courts are thus by their nature the first guarantors of Union law . To ensure the effective and uniform application of Union legislation and to prevent divergent interpretations, national courts may, and sometimes must, turn to the Court of Justice and ask that it clarify a point concerning the interpretation of Union law, in order, for example, to ascertain whether their national legislation complies with that law. Petitions to the Court of Justice for a preliminary ruling are described in Article 267 (ex Article 234) of the Treaty on the Functioning of the European Union . A reference for a preliminary ruling
Petitions to the Court of Justice for a preliminary ruling are described in Article 267 (ex Article 234) of the Treaty on the Functioning of the European Union . A reference for a preliminary ruling may also seek review of the legality of an act of Union law. The Court of Justice's reply is not merely an opinion, but takes the form of a judgment or a reasoned order. The national court to which that is addressed is bound by the interpretation given. The Court's judgment also binds other national courts before which a problem of the same nature is raised. Although such a reference may be made only by a national court, which alone has the power to decide that it is appropriate do so, all the parties involved – that is to say, the Member States, the parties in the proceedings before national courts and, in particular, the commission – may take part in proceedings before the Court of Justice. In this way, a number of important principles of Union law have been laid down in preliminary rulings, sometimes in answer to questions referred by national courts of first instance. Rulings end with a dictum which summarises the decision which the Court has made and may direct how costs are to be managed. ] In the ECJ's 2009 report it was noted that Belgian, German and Italian judges made the most referrals for an interpretation of EU law to the ECJ. citation needed ] However, the German Constitutional Court has rarely turned to the European Court of Justice, which is why lawyers and law professors warn about a future judicial conflict between the two courts. On 7 February 2014, the German Constitutional Court referred its first case to the ECJ for a ruling on a European Central Bank program. ] In 2017 the German Constitutional Court referred its second case to the ECJ but contrary to the binding nature of the Court of Justice's preliminary rulings, the German Constitutional Court in 2020 refused to abide by the preliminary ruling. ] According to the German Constitutional Court, the Court of Justice's answer was unintelligble. ] In June 2021, the European Commission announced it would start infringement proceedings against Germany for the German Constitutional Court's refusal to abide by the Court of Justice's preliminary ruling. ] The constitutional courts of the member-states have in general been reluctant to refer a question to the European Court of Justice. ] These are the first references by each constitutional court: Procedure before the ECJ is determined by its own rules of procedure. ] As a rule the Court's procedure includes a written phase and an oral phase. The proceedings are conducted in one of the official languages of the European Union chosen by the applicant, although where the defendant is a member state or a national of a member state the applicant must choose an official language of that member state, unless the parties agree otherwise. ] However, the working language of the court is the language of the case being heard with French being the
must choose an official language of that member state, unless the parties agree otherwise. ] However, the working language of the court is the language of the case being heard with French being the common language for discussion, and it is in this language that the judges deliberate, pleadings and written legal submissions are translated and in which the judgment is drafted. ] The Advocates-General, by contrast, may work and draft their opinions in any official language, as they do not take part in any deliberations. These opinions are then translated into French for the benefit of the judges and their deliberations. ] However, all documents used in the case are in the language of that case and the only authentic version of the judgment handed down by either the Court of Justice or the General Court is that which appears in the language of the case. ] All the EU's judicial bodies are based in the Kirchberg quarter of Luxembourg City , Luxembourg . The Court of Justice is seated in the Palais de la Cour de Justice . Luxembourg City was chosen as the provisional seat of the Court on 23 July 1952 with the establishment of the European Coal and Steel Community . Its first hearing there was held on 28 November 1954 in a building known as Villa Vauban , the seat until 1959 when it would move to the Côte d'Eich building and then to the Palais building in 1972. ] In 1965, the member states established Luxembourg City as the permanent seat of the Court. Future judicial bodies (Court of First Instance and Civil Service Tribunal) would also be based in the city. The decision was confirmed by the European Council at Edinburgh in 1992. However, there was no reference to future bodies being in Luxembourg City. In reaction to this, the Luxembourg government issued its own declaration stating it did not surrender those provisions agreed upon in 1965. The Edinburgh decision was attached to the Amsterdam Treaty . With the Treaty of Nice Luxembourg attached a declaration stating it did not claim the seat of the Boards of Appeal of the Office for Harmonisation in the Internal Market – even if it were to become a judicial body. ] Over time ECJ developed two essential rules on which the legal order rests: direct effect and primacy . The court first ruled on the direct effect of primary legislation in a case that, though technical and tedious, raised a fundamental principle of Union law. In Van Gend en Loos v Nederlandse Administratie der Belastingen (1963), a Dutch transport firm brought a complaint against Dutch customs for increasing the duty on a product imported from Germany. ] The court ruled that the Community constitutes a new legal order, the subjects of which consist of not only the Member States but also their nationals. Consequently Community law may, if appropriately framed, confer rights on individuals which national courts are bound to protect. ] The principle of direct effect would have had little impact if Union law did not supersede national law.
framed, confer rights on individuals which national courts are bound to protect. ] The principle of direct effect would have had little impact if Union law did not supersede national law. Without supremacy the Member States could simply ignore EU rules. In Costa v ENEL (1964), the court ruled that member states had definitively transferred sovereign rights to the Community and Union law could not be overridden by domestic law. ] Another early landmark case was Commission v Luxembourg and Belgium (1964), the "Dairy Products" case. ] In that decision the Court comprehensively ruled out any use by the Member States of the retaliatory measures commonly permitted by general international law within the European Economic Community. That decision is often thought to be the best example of the European legal order's divergence with ordinary international law. ] Commission v Luxembourg and Belgium also has a logical connection with the nearly contemporaneous Van Gend en Loos and Costa v ENEL decisions, as arguably it is the doctrines of direct effect and supremacy that allow the European legal system to forgo any use of retaliatory enforcement mechanisms by the Member States. ] Links between the direct effect doctrine and the suppression of inter-state retaliation between the EU member states can be found in many of the landmark early decisions of the European Court of Justice, and in the writings of the influential French judge, Robert Lecourt , perhaps the most important member of the Court between 1962 and 1976. ] Further, in the 1991 case Francovich v Italy , the ECJ established that Member States could be liable to pay compensation to individuals who suffered a loss by reason of the Member State's failure to transpose an EU directive into national law. ] In 2008, the former German president Roman Herzog claimed that the ECJ was overstepping its powers. He was particularly critical of the court's judgment Mangold v Helm , which over-ruled a German law that would discriminate in favour of older workers. ] In 2011, the President of the Constitutional Court of Belgium , Marc Bossuyt , said that both the Court of Justice of the European Union and the European Court of Human Rights were taking on more powers by extending their competences, creating a threat of a "government by judges". He claimed that foreign judges were not always aware of the financial implications of their judgements on national governments. ] .mw-parser-output .geo-default,.mw-parser-output .geo-dms,.mw-parser-output .geo-dec{display:inline}.mw-parser-output .geo-nondefault,.mw-parser-output .geo-multi-punct,.mw-parser-output .geo-inline-hidden{display:none}.mw-parser-output .longitude,.mw-parser-output .latitude{white-space:nowrap} WikiMiniAtlas 49°37′17″N 06°08′28″E 49.62139; 6.14111
Life insurance (or life assurance , especially in the Commonwealth of Nations ) is a contract between an insurance policy holder and an insurer or assurer , where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policyholder typically pays a premium, either regularly or as one lump sum. The benefits may include other expenses, such as funeral expenses. Life policies are legal contracts and the terms of each contract describe the limitations of the insured events. Often, specific exclusions written into the contract limit the liability of the insurer; common examples include claims relating to suicide , fraud, war, riot, and civil commotion. Difficulties may arise where an event is not clearly defined, for example, the insured knowingly incurred a risk by consenting to an experimental medical procedure or by taking medication resulting in injury or death. Modern life insurance bears some similarity to the asset-management industry, ] failed verification ] and life insurers have diversified their product offerings into retirement products such as annuities . ] Life-based contracts tend to fall into two major categories: An early form of life insurance dates to Ancient Rome ; "burial clubs" ] covered the cost of members' funeral expenses and assisted survivors financially. In 1816, an archeological excavation in Minya, Egypt (under an Eyalet of the Ottoman Empire ) produced a Nerva–Antonine dynasty -era tablet from the ruins of the Temple of Antinous in Antinoöpolis , Aegyptus that prescribed the rules and membership dues of a burial society collegium established in Lanuvium , Italia in approximately 133 AD during the reign of Hadrian (117–138) of the Roman Empire . ] In 1851, future U.S. Supreme Court Associate Justice Joseph P. Bradley (1870–1892), once employed as an actuary for the Mutual Benefit Life Insurance Company , submitted an article to the Journal of the Institute of Actuaries detailing an historical account of a Severan dynasty -era life table compiled by the Roman jurist Ulpian in approximately 220 AD during the reign of Elagabalus (218–222) that was included in the Digesta seu Pandectae (533) codification ordered by Justinian I (527–565) of the Eastern Roman Empire . ] The earliest known life insurance policy was made in Royal Exchange, London on 18 June 1583. A Richard Martin insured a William Gybbons, paying thirteen merchants 30 pounds for 400 if the insured dies within one year. ] ] The first company to offer life insurance in modern times was the Amicable Society for a Perpetual Assurance Office , founded in London in 1706 by William Talbot and Sir Thomas Allen . ] ] Each member made an annual payment per share on one to three shares with consideration to age of the members being twelve to fifty-five. At the end of the year a portion of the "amicable
Allen . ] ] Each member made an annual payment per share on one to three shares with consideration to age of the members being twelve to fifty-five. At the end of the year a portion of the "amicable contribution" was divided among the wives and children of deceased members, in proportion to the number of shares the heirs owned. The Amicable Society started with 2000 members. ] ] The first life table was written by Edmund Halley in 1693, but it was only in the 1750s that the necessary mathematical and statistical tools were in place for the development of modern life insurance. James Dodson , a mathematician and actuary, tried to establish a new company aimed at correctly offsetting the risks of long-term life assurance policies, after being refused admission to the Amicable Life Assurance Society because of his advanced age. He was unsuccessful in his attempts at procuring a charter from the government . His disciple, Edward Rowe Mores , was able to establish the Society for Equitable Assurances on Lives and Survivorship in 1762. It was the world's first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" ] and "the basis of modern life assurance upon which all life assurance schemes were subsequently based". ] Mores also gave the name actuary to the chief official—the earliest known reference to the position as a business concern. The first modern actuary was William Morgan , who served from 1775 to 1830. In 1776 the Society carried out the first actuarial valuation of liabilities and subsequently distributed the first reversionary bonus (1781) and interim bonus (1809) among its members. ] It also used regular valuations to balance competing interests. ] The Society sought to treat its members equitably and the Directors tried to ensure that policyholders received a fair return on their investments. Premiums were regulated according to age, and anybody could be admitted regardless of their state of health and other circumstances. ] The sale of life insurance in the U.S. began in the 1760s. The Presbyterian Synods in Philadelphia and New York City created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. In the 1870s, military officers banded together to found both the Army ( AAFMAA ) and the Navy Mutual Aid Association (Navy Mutual), inspired by the plight of widows and orphans left stranded in the West after the Battle of the Little Big Horn , and of the families of U.S. sailors who died at sea. The person responsible for making payments for a policy is the policy owner, while the insured is the person whose death will trigger payment of the death benefit. The owner and insured may or may not be the same person. For example,
payments for a policy is the policy owner, while the insured is the person whose death will trigger payment of the death benefit. The owner and insured may or may not be the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantor and they will be the person to pay for the policy. The insured is a participant in the contract, but not necessarily a party to it. The beneficiary receives policy proceeds upon the insured person's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. If a policy has an irrevocable beneficiary, any beneficiary changes, policy assignments, or cash value borrowing would require the agreement of the original beneficiary. In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an insurable interest in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The insurable interest requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company that sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim ( Liberty National Life v. Weldon , 267 Ala.171 (1957)). Special exclusions may apply, such as suicide clauses, whereby the policy becomes null and void if the insured dies by suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the application may also be grounds for nullification. Most US states, for example, specify a maximum contestability period, often no more than two years. Only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding whether to pay or deny the claim. The face amount of the policy is the initial amount that the policy will pay at the death of the insured or when the policy matures , although the actual death benefit can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old). The insurance company calculates the policy
can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old). The insurance company calculates the policy prices (premiums) at a level sufficient to fund claims, cover administrative costs, and provide a profit. The cost of insurance is determined using mortality tables calculated by actuaries . Mortality tables are statistically based tables showing expected annual mortality rates of people at different ages. As people are more likely to die as they get older, the mortality tables enable insurance companies to calculate the risk and increase premiums with age accordingly. Such estimates can be important in taxation regulation. ] ] In the 1980s and 1990s, the SOA 1975-80 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. As well as the basic parameters of age and gender, the newer tables include separate mortality tables for smokers and non-smokers, and the CSO tables include separate tables for preferred classes. ] The mortality tables provide a baseline for the cost of insurance, but the health and family history of the individual applicant is also taken into account (except in the case of Group policies). This investigation and resulting evaluation is termed underwriting . Health and lifestyle questions are asked, with certain responses possibly meriting further investigation. Specific factors that may be considered by underwriters include: Based on the above and additional factors, applicants will be placed into one of several classes of health ratings which will determine the premium paid in exchange for insurance at that particular carrier. ] Life insurance companies in the United States support the Medical Information Bureau (MIB), ] which is a clearing house of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer often requires the applicant's permission to obtain information from their physicians. ] Automated Life Underwriting is a technology solution which is designed to perform all or some of the screening functions traditionally completed by underwriters, and thus seeks to reduce the work effort, time and data necessary to underwrite a life insurance application. ] These systems allow point of sale distribution and can shorten the time frame for issuance from weeks or even months to hours or minutes, depending on the amount of insurance being purchased. ] The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years, the mortality of that 25-year-old, non-smoking male is 0.66year. Consequently, in a group of one thousand 25-year-old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each participant to cover the relatively few expected
25-year-old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each participant to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year × $100,000 payout per death = $35 per policy.) Other costs, such as administrative and sales expenses, also need to be considered when setting the premiums. A 10-year policy for a 25-year-old non-smoking male with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market. Most of the revenue received by insurance companies consists of premiums, but revenue from investing the premiums forms an important source of profit for most life insurance companies. Group insurance policies are an exception to this. In the United States, life insurance companies are never legally required to provide coverage to everyone, with the exception of Civil Rights Act compliance requirements. Insurance companies alone determine insurability, and some people are deemed uninsurable. The policy can be declined or rated (increasing the premium amount to compensate for the higher risk), and the amount of the premium will be proportional to the face value of the policy. Many companies separate applicants into four general categories. These categories are preferred best , preferred , standard , and tobacco . Preferred best is reserved only for the healthiest individuals in the general population. This may mean, that the proposed insured has no adverse medical history, is not under medication, and has no family history of early-onset cancer , diabetes , or other conditions. Preferred means that the proposed insured is currently under medication and has a family history of particular illnesses. Most people are in the standard category. People in the tobacco category typically have to pay higher premiums due to higher mortality. Recent when? ] US mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of a policy. ] Mortality approximately doubles for every additional ten years of age, so the mortality rate in the first year for non-smoking men is about 2.5 in 1,000 people at age 65. ] Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status). ] Upon the insured's death, the insurer requires acceptable proof of death before it pays the claim. If the insured's death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim. Payment from the policy may be as a lump sum or as an annuity , which is paid in regular installments for either a specified period or for the beneficiary's lifetime . ] Death benefits are the primary feature of life insurance policies, and they provide a lump sum payment to the
regular installments for either a specified period or for the beneficiary's lifetime . ] Death benefits are the primary feature of life insurance policies, and they provide a lump sum payment to the beneficiaries of the policyholder in the event of the policyholder's death. The amount of the death benefit is typically determined at the time the policy is purchased, and it is based on factors such as the policyholder's age, health, and occupation. The death benefit is only payable if the policyholder dies while the policy is in effect. If the policyholder outlives the policy, the death benefit is not paid, and the policy will typically expire. Some policies may allow the policyholder to receive a portion of the premiums paid if they outlive the policy. The specific uses of the terms "insurance" and "assurance" are sometimes confused. In general, in jurisdictions where both terms are used, "insurance" refers to providing coverage for an event that might happen (fire, theft, flood, etc.), while "assurance" is the provision of coverage for an event that is certain to happen. In the United States, both forms of coverage are called "insurance" for reasons of simplicity in companies selling both products. citation needed ] By some definitions, "insurance" is any coverage that determines benefits based on actual losses whereas "assurance" is coverage with predetermined benefits irrespective of the losses incurred. Life insurance may be divided into two basic classes: temporary and permanent; or the following subclasses: term, universal, whole life , and endowment life insurance. Term assurance provides life insurance coverage for a specified term (usually 10–30 years). Term life insurance policies do not accumulate cash value, but are significantly less expensive than permanent life insurance policies with equivalent face amounts. Policyholders can save to provide for increased term premiums or decrease insurance needs (by paying off debts or saving to provide for survivor needs). ] Mortgage life insurance insures a loan secured by real property and usually features a level premium amount for a declining policy face value because what is insured is the principal and interest outstanding on a mortgage that is constantly being reduced by mortgage payments. The face amount of the policy is always the amount of the principal and interest outstanding that are paid should the applicant die before the final installment is paid. Group life insurance (also known as wholesale life insurance or institutional life insurance ) is term insurance covering a group of people, usually employees of a company, members of a union or association, or members of a pension or superannuation fund. Individual proof of insurability is not normally a consideration in its underwriting. Rather, the underwriter considers the size, turnover, and financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection . Group life insurance often
the underwriter considers the size, turnover, and financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection . Group life insurance often allows members exiting the group to maintain their coverage by buying individual coverage. The underwriting is carried out for the whole group instead of individuals. Permanent life insurance is life insurance that covers the remaining lifetime of the insured. A permanent insurance policy accumulates a cash value up to its date of maturation. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value. The three basic types of permanent insurance are whole life , universal life , and endowment . Whole life insurance provides lifetime coverage for a set premium amount. Universal life insurance (ULl) is a relatively new insurance product, intended to combine permanent insurance coverage with greater flexibility in premium payments, along with the potential for greater growth of cash values. There are several types of universal life insurance policies, including interest-sensitive (also known as "traditional fixed universal life insurance"), variable universal life (VUL) , guaranteed death benefit , and has equity-indexed universal life insurance . Universal life insurance policies have cash values. Paid-in premiums increase their cash values; administrative and other costs reduce their cash values. Universal life insurance addresses the perceived disadvantages of whole life—namely that premiums and death benefits are fixed. With universal life, both the premiums and death benefit are flexible. With the exception of guaranteed-death-benefit universal life policies, universal life policies trade their greater flexibility for fewer guarantees. "Flexible death benefit" means the policy owner can choose to decrease the death benefit. The death benefit can also be increased by the policy owner, usually requiring new underwriting. Another feature of flexible death benefit is the ability to choose option A or option B death benefits and to change those options over the course of the life of the insured. Option A is often referred to as a "level death benefit"; death benefits remain level for the life of the insured, and premiums are lower than policies with Option B death benefits, which pay the policy's cash value—i.e., a face amount plus earnings/interest. If the cash value grows over time, the death benefits do too. If the cash value declines, the death benefit also declines. Option B policies normally feature higher premiums than option A policies. The endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death. Typical maturities are ten, fifteen, or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness. Policies are typically traditional with-profits or
death. Typical maturities are ten, fifteen, or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness. Policies are typically traditional with-profits or unit-linked (including those with unitized with-profits funds). Endowments can be cashed in early (or surrendered) and the holder then receives the surrender value which is determined by the insurance company depending on how long the policy has been running and how much has been paid into it. Accidental death insurance is a type of limited life insurance that is designed to cover the insured should they die as a result of an accident. "Accidents" run the gamut from abrasions to catastrophes but normally do not include deaths resulting from non-accident-related health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurance policies. Such insurance can also be accidental death and dismemberment insurance or AD&D . In an AD&D policy, benefits are available not only for accidental death but also for the loss of limbs or body functions such as sight and hearing. Accidental death and AD&D policies pay actual benefits only very rarely, either because the cause of death is not covered by the policy or because death occurs well after the accident, by which time the premiums have gone unpaid. clarification needed ] Various AD&D policies have different terms and exclusions. Risky activities such as parachuting, flying, professional sports, or military service are often omitted from coverage. Accidental death insurance can also supplement standard life insurance as a rider . If a rider is purchased, the policy generally pays double the face amount if the insured dies from an accident. This was once called double indemnity insurance . In some cases, triple indemnity coverage may be available. Insurance companies also offer products targeted at niche markets, such as seniors. These policies are often low face value whole life insurance policies, allowing individuals (ages 50-90) to purchase affordable insurance later in life. These may also be marketed as final expense insurance or burial insurance and usually have death benefits between $1,000 and $50,000. citation needed ] A major reason for their popularity is their use of "simplified underwriting". With simplified underwriting, applicants are not required to take a medical exam; approval depends on the applicant's answers to a set of "yes" or "no" health questions as well as a check of their prescription drug history. Health requirements can vary substantially between exam and no-exam policies. It may be possible for individuals with certain conditions to qualify for one type of coverage and not another. citation needed ] . Pre-need life insurance policies are limited-premium whole life policies that are usually purchased by older applicants, though they are available to everyone. This type of insurance is designed to cover specific funeral
policies are limited-premium whole life policies that are usually purchased by older applicants, though they are available to everyone. This type of insurance is designed to cover specific funeral expenses that the applicant has designated in a contract with a funeral home . The policy's death benefit is initially based on the funeral cost at the time of prearrangement, and it then typically grows as interest is credited. In exchange for the policy owner's designation, the funeral home typically guarantees that the proceeds will cover the cost of the funeral, no matter when death occurs. Excess proceeds may go either to the insured's estate, a designated beneficiary, or the funeral home as set forth in the contract. Purchasers of these policies usually make a single premium payment at the time of prearrangement, but some companies also allow premiums to be paid over as much as ten years. Riders are modifications to the insurance policy added at the same time the policy is issued. These riders change the basic policy to provide some features desired by the policy owner. A common rider is accidental death . Another common rider is a premium waiver , which waives future premiums if the insured becomes disabled. Joint life insurance is either term or permanent life insurance that insures two or more persons, with proceeds payable on the death of either . Unit-linked insurance plans are unique insurance plans which are similar to mutual funds and term insurance plans combined as one product. The investor does not participate in the profits of the plan per se but gets returns based on the returns on the chosen funds. Some policies afford the policyholder a share of the profits of the insurance company—these are termed with-profits policies . Other policies provide no rights to a share of the profits of the company—these are non-profit policies. With-profit policies are used as a form of collective investment scheme to achieve capital growth. Other policies offer a guaranteed return not dependent on the company's underlying investment performance; these are often referred to as without-profit policies, which may be construed as a misnomer. by whom? ] According to section 80C of the Income Tax Act, 1961 (of the Indian penal code) premiums paid towards a valid life insurance policy can be exempted from the taxable income. Along with life insurance premiums, section 80C allows an exemption for other financial instruments such as Employee Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), and health insurance premiums are some of them. The total amount that can be exempted from the taxable income for section 80C is capped at a maximum of INR 150,000. ] The exemptions are eligible for individuals (Indian citizens) or Hindu Undivided Family (HUF). Apart from tax benefit under section 80C, in India, a policy holder is entitled for a tax exemption on the death benefit received. ] The
individuals (Indian citizens) or Hindu Undivided Family (HUF). Apart from tax benefit under section 80C, in India, a policy holder is entitled for a tax exemption on the death benefit received. ] The received amount is fully exempt from Income Tax under Section 10(10D). Where the life insurance is provided through a superannuation fund, contributions made to fund insurance premiums are tax deductible for self-employed persons and substantially self-employed persons and employers. However, where life insurance is held outside of the superannuation environment, the premiums are generally not tax deductible. For insurance through a superannuation fund, the annual deductible contributions to the superannuation funds are subject to age limits. These limits apply to employers making deductible contributions. They also apply to self-employed persons and substantially self-employed persons. Included in these overall limits are insurance premiums. This means that no additional deductible contributions can be made for the funding of insurance premiums. Insurance premiums can, however, be funded by undeducted contributions. For further information on deductible contributions see "under what conditions can an employer claim a deduction for contributions made on behalf of their employees?" and "what is the definition of substantially self-employed?". The insurance premium paid by the superannuation fund can be claimed by the fund as a deduction to reduce the 15% tax on contributions and earnings. (Ref: ITAA 1936, Section 279). ] Premiums paid by a policyholder are not deductible from taxable income, although premiums paid via an approved pension fund registered in terms of the Income Tax Act are permitted to be deducted from personal income tax (whether these premiums are nominally being paid by the employer or employee). The benefits arising from life assurance policies are generally not taxable as income to beneficiaries (again in the case of approved benefits, these fall under retirement or withdrawal taxation rules from SARS ). Investment return within the policy will be taxed within the life policy and paid by the life assurer depending on the nature of the policyholder (whether natural person, company-owned, untaxed, or a retirement fund). Premiums paid by the policy owner are normally not deductible for federal and state income tax purposes, and proceeds paid by the insurer upon the death of the insured are not included in gross income for federal and state income tax purposes. ] However, if the proceeds are included in the "estate" of the deceased, it is likely they will be subject to federal and state estate and inheritance tax . citation needed ] Cash value increases within the policy are not subject to income taxes unless certain events occur. For this reason, insurance policies can be legal and legitimate tax shelter wherein savings can increase without taxation until the owner withdraws the money from the policy. In flexible-premium policies,
reason, insurance policies can be legal and legitimate tax shelter wherein savings can increase without taxation until the owner withdraws the money from the policy. In flexible-premium policies, large deposits of premiums could cause the contract to be considered a modified endowment contract by the Internal Revenue Service (IRS), which negates many of the tax advantages associated with life insurance. The insurance company, in most cases, will inform the policy owner of this danger before deciding their premium. The tax ramifications of life insurance are complex. The policy owner would be well advised to carefully consider them. As always, both the United States Congress and state legislatures can change the tax laws at any time. In 2018, a fiduciary standard rule on retirement products by the United States Department of Labor posed a possible risk. ] Premiums are not usually deductible against income tax or corporation tax , however, qualifying policies issued prior to 14 March 1984 do still attract LAPR ( Life Assurance Premium Relief ) at 15% (with the net premium being collected from the policyholder). Non-investment life policies do not normally attract either income tax or capital gains tax on a claim. If the policy has an investment element such as an endowment policy, whole of life policy, or an investment bond then the tax treatment is determined by the qualifying status of the policy. Qualifying status is determined at the outset of the policy if the contract meets certain criteria. Essentially, long-term contracts (10+ years) tend to be qualifying policies and the proceeds are free from income tax and capital gains tax. Single premium contracts and those running for a short term are subject to income tax depending upon the marginal rate in the year a gain is made. All UK insurers pay a special rate of corporation tax on the profits from their life book; this is deemed as meeting the lower rate (20% in 2005-06) of liability for policyholders. Therefore, a policyholder who is a higher-rate taxpayer (40% in 2005-06), or becomes one through the transaction, must pay tax on the gain at the difference between the higher and the lower rate. This gain is reduced by appl
Pass Plus Scheme commonly referred to as Pass Plus is a scheme run in the United Kingdom aimed at new drivers who have recently passed the standard driving test , which helps to give drivers the confidence to drive on their own and to increase experience on the road. ] Pass plus is an optional course introduced by DVSA and is considered the best way to give additional driving experience to a qualified learner by an ADI (Approved Driving Instructor) that has been Pass Plus registered. ] The main aim of this course is to impart valuable knowledge to drivers who have recently passed the practical driving test, and who want to learn new skills and techniques, improve their anticipation and alertness and learn how to reduce accidents. This course is also sometimes considered as a more advanced course for the new drivers, who have recently completed the studies and haven't faced some situations during their driving lessons. The course is carried out by an approved driving instructor (ADI), who is qualified to teach the course. Pass Plus comprises six modules, ] each covering a different aspect of driving. These modules are: Some of the aspects may be covered in theory only, such as weather and night driving which require conditions that may be hard to replicate especially in the summer, or motorway driving if there is no motorway nearby. However, this is only done when a practical training session is not possible. The scheme takes a minimum of six hours to complete. The practical assessment is more lenient than that used in the standard driving test, and adherence to many rules that would otherwise constitute a major mistake in the main practical exam (such as parking at an angle) does not apply. It is only required that one is able to drive safely and legally. There is no examination at the end of the Pass Plus course; rather, a certificate is awarded once the instructor is satisfied with the candidate's competence. Each module must be completed to an achieved or exceeded standard, in order to pass: Achieved : successfully reached the driving standard required for each of the competencies. Exceeded : exceeded the driving standard required for each of the competencies. Many insurance companies offer cheaper car insurance to drivers who have completed the Pass Plus scheme. ] ]
Telematics is an interdisciplinary field encompassing telecommunications , vehicular technologies ( road transport , road safety , etc.), electrical engineering (sensors, instrumentation, wireless communications , etc.), and computer science ( multimedia , Internet , etc.). Telematics can involve any of the following: Telematics is a translation of the French word télématique, which was first coined by Simon Nora and Alain Minc in a 1978 report to the French government on the computerization of society. It referred to the transfer of information over telecommunications and was a portmanteau blending the French words télécommunications (" telecommunications ") and informatique (" computing science "). The original broad meaning of telematics continues to be used in academic fields, but in commerce it now generally means vehicle telematics . ] Telematics can be described as thus: Vehicle telematics can help improve the efficiency of an organization. ] Vehicle tracking is monitoring the location, movements, status, and behavior of a vehicle or fleet of vehicles. This is achieved through a combination of a GPS ( GNSS ) receiver and an electronic device (usually comprising a GSM GPRS modem or SMS sender) installed in each vehicle, communicating with the user (dispatching, emergency, or co-ordinating unit) and PC-based or web-based software. The data is turned into information by management reporting tools in conjunction with a visual display on computerized mapping software. Vehicle tracking systems may also use odometry or dead reckoning as an alternative or complementary means of navigation. citation needed ] GPS tracking is usually accurate to around 10–20 meters, ] but the European Space Agency has developed the EGNOS technology to provide accuracy to 1.5 meters. ] Trailer tracking refers to the tracking of movements and position of an articulated vehicle's trailer unit through the use of a location unit fitted to the trailer and a method of returning the position data via mobile communication network, IOT (Internet of things), or geostationary satellite communications for use through either PC- or web-based software. citation needed ] Cold-store freight trailers that deliver fresh or frozen foods are increasingly incorporating telematics to gather time-series data on the temperature inside the cargo container, both to trigger alarms and record an audit trail for business purposes. An increasingly sophisticated array of sensors, many incorporating RFID technology, is being used to ensure the cold chain . citation needed ] Freight containers can be tracked by GPS using a similar approach to that used for trailer tracking (i.e. a battery-powered GPS device communicating its position via mobile phone or satellite communications). Benefits of this approach include increased security and the possibility to reschedule the container transport movements based on accurate information about its location. According to Berg Insight, the installed base of
include increased security and the possibility to reschedule the container transport movements based on accurate information about its location. According to Berg Insight, the installed base of tracking units in the intermodal shipping container segment reached 190,000 at the end of 2013. ] Growing at a compound annual growth rate of 38.2 percent, the installed base reached 960,000 units at the end of 2018. citation needed ] Fleet management is the management of a company's fleet and includes the management of ships and/or motor vehicles such as cars, vans, and trucks. Fleet (vehicle) management can include a range of functions, such as vehicle financing, vehicle maintenance, vehicle telematics (tracking and diagnostics), driver management, fuel management, health and safety management, and dynamic vehicle scheduling. Fleet management is a function which allows companies that rely on transport in their business to remove or minimize the risks associated with vehicle investment, improving efficiency and productivity while reducing overall transport costs and ensuring compliance with government legislation and Duty of Care obligations. These functions can either be dealt with by an in-house fleet management department or an outsourced fleet management provider. ] The Association of Equipment Management Professionals (AEMP) ] developed the industry's first telematics standard. citation needed ] In 2008, AEMP brought together the major construction equipment manufacturers and telematics providers in the heavy equipment industry to discuss the development of the industry's first telematics standard. ] Following agreement from Caterpillar , Volvo CE, Komatsu , and John Deere Construction & Forestry to support such a standard, the AEMP formed a standards development subcommittee chaired by Pat Crail CEM to develop the standard. ] This committee consisted of developers provided by the Caterpillar/Trimble joint venture known as Virtual Site Solutions, Volvo CE, and John Deere. This group worked from February 2009 through September 2010 to develop the industry's first standard for the delivery of telematics data. ] The result, the AEMP Telematics Data Standard V1.1, ] was released in 2010 and officially went live on October 1, 2010. As of November 1, 2010, Caterpillar, Volvo CE, John Deere Construction & Forestry, OEM Data Delivery, and Navman Wireless are able to support customers with delivery of basic telematics data in a standard xml format. Komatsu, Topcon , and others are finishing beta testing and have indicated their ability to support customers in the near future. ] The AEMP's telematics data standard was developed to allow end users to integrate key telematics data (operating hours, location, fuel consumed , and odometer reading where applicable) into their existing fleet management reporting systems. As such, the standard was primarily intended to facilitate importation of these data elements into enterprise software systems such as those used
their existing fleet management reporting systems. As such, the standard was primarily intended to facilitate importation of these data elements into enterprise software systems such as those used by many medium-to-large construction contractors. Prior to the standard, end users had few options for integrating this data into their reporting systems in a mixed-fleet environment consisting of multiple brands of machines and a mix of telematics-equipped machines and legacy machines (those without telematics devices where operating data is still reported manually via pen and paper). One option available to machine owners was to visit multiple websites to manually retrieve data from each manufacturer's telematics interface and then manually enter it into their fleet management program's database. This option was cumbersome and labor-intensive. ] A second option was for the end user to develop an API ( Application Programming Interface ), or program, to integrate the data from each telematics provider into their database. This option was quite costly as each telematics provider had different procedures for accessing and retrieving the data and the data format varied from provider to provider. This option automated the process, but because each provider required a unique, custom API to retrieve and parse the data, it was an expensive option. In addition, another API had to be developed any time another brand of machine or telematics device was added to the fleet. ] A third option for mixed-fleet integration was to replace the various factory-installed telematics devices with devices from a third party telematics provider. Although this solved the problem of having multiple data providers requiring unique integration methods, this was by far the most expensive option. In addition to the expense, many third-party devices available for construction equipment are unable to access data directly from the machine's electronic control modules (ECMs), or computers, and are more limited than the device installed by the OEM (Cat, Volvo, Deere, Komatsu, etc.) in the data they are able to provide. In some cases, these devices are limited to location and engine runtime, although they are increasingly able to accommodate a number of add-on sensors to provide additional data. ] The AEMP Telematics Data Standard provides a fourth option. By concentrating on the key data elements that drive the majority of fleet management reports (hours, miles, location, fuel consumption), making those data elements available in a standardized xml format, and standardizing the means by which the document is retrieved, the standard enables the end user to use one API to retrieve data from any participating telematics provider (as opposed to the unique API for each provider that was required previously), greatly reducing integration development costs. ] The current draft version of the AEMP Telematics Data Standard is now called the AEM/AEMP Draft Telematics API Standard, which expands
previously), greatly reducing integration development costs. ] The current draft version of the AEMP Telematics Data Standard is now called the AEM/AEMP Draft Telematics API Standard, which expands the original standard Version 1.2 to include 19 data fields (with fault code capability). This new draft standard is a collaborative effort of AEMP and the Association of Equipment Manufacturers (AEM), working on behalf of their members and the industry. This Draft API replaces the current version 1.2 and does not currently cover some types of equipment, e.g., agriculture equipment, cranes, mobile elevating work platforms, air compressors, and other niche products. In addition to the new data fields, the AEM/AEMP Draft Telematics API Standard changes how data is accessed in an effort to make it easier to consume and integrate with other systems and processes. It includes standardized communication protocols for the ability to transfer telematics information in mixed-equipment fleets to end user business enterprise systems, enabling the end user to employ their own business software to collect and then analyze asset data from mixed-equipment fleets without the need to work across multiple telematics provider applications. To achieve a globally recognized standard for conformity worldwide, the AEM/AEMP Draft Telematics API Standard will be submitted for acceptance by the International Organization for Standardization (ISO). Final language is dependent upon completion of the ISO acceptance process. Satellite navigation in the context of vehicle telematics is the technology of using a GPS and electronic mapping tool to enable a driver to locate a position, plan a route, and navigate a journey. ] Mobile data is the use of wireless data communications using radio waves to send and receive real-time computer data to, from, and between devices used by field-based personnel. These devices can be fitted solely for use while in the vehicle (Fixed Data Terminal) or for use in and out of the vehicle (Mobile Data Terminal). See mobile Internet . The common methods for mobile data communication for telematics were based on private vendors' RF communication infrastructure. During the early 2000s, manufacturers of mobile data terminals/AVL devices moved to try cellular data communication to offer cheaper ways to transmit telematics information and wider range based on cellular provider coverage. Since then, as a result of cellular providers offering low GPRS (2.5G) and later UMTS (3G) rates, mobile data is almost totally offered to telematics customers via cellular communication. Wireless vehicle safety communications telematics aid in car safety and road safety. It is an electronic subsystem in a vehicle used for exchanging safety information about road hazards and the locations and speeds of vehicles over short-range radio links . This may involve temporary ad hoc wireless local area networks. Wireless units are often installed in vehicles and fixed locations, such
and speeds of vehicles over short-range radio links . This may involve temporary ad hoc wireless local area networks. Wireless units are often installed in vehicles and fixed locations, such as near traffic signals and emergency call boxes along the road. Sensors in vehicles and at fixed locations, as well as in possible connections to wider networks, provide information displayed to drivers . The range of the radio links can be extended by forwarding messages along multi-hop paths. Even without fixed units, information about fixed hazards can be maintained by moving vehicles by passing it backwards. It also seems possible for traffic lights, which one can expect to become smarter, to use this information to reduce the chance of collisions. In the future, it may connect directly to the adaptive cruise control or other vehicle control aids. Cars and trucks with the wireless system connected to their brakes may move in convoys to save fuel and space on the roads. When a column member slows down, those behind it will automatically slow also. Certain scenarios may required less engineering effort, such as when a radio beacon is connected to a brake light. In fall 2008, network ideas were tested in Europe, where radio frequency bandwidth had been allocated. The 30 MHz allocated is at 5.9 GHz, and unallocated bandwidth at 5.4 GHz may also be used. The standard is IEEE 802.11p, a low-latency form of the Wi-Fi local area network standard. Similar efforts are underway in Japan and the USA. ] Telematics technologies are self-orientating open network architecture structures of variable programmable intelligent beacons developed for application in the development of intelligent vehicles with the intent to accord (blend or mesh) warning information with surrounding vehicles in the vicinity of travel, intra-vehicle, and infrastructure. Emergency warning systems for vehicle telematics are developed particularly for international harmonization and standardization of vehicle-to-vehicle, infrastructure-to-vehicle, and vehicle-to-infrastructure real-time Dedicated Short-Range Communication ( DSRC ) systems. Telematics most commonly relate to computerized systems that update information at the same rate they receive data, enabling them to direct or control a process such as an instantaneous autonomous warning notification in a remote machine or group of machines. In the use of telematics relating to intelligent vehicle technologies, instantaneous direction travel cognizance of a vehicle may be transmitted in real-time to surrounding vehicles traveling in the local area of vehicles equipped (with EWSV) to receive said warning signals of danger. Telematics comprise electronic, electromechanical, and electromagnetic devices—usually silicon micro-machined components operating in conjunction with computer-controlled devices and radio transceivers to provide precision repeatability functions (such as in robotics artificial intelligence systems) emergency warning
operating in conjunction with computer-controlled devices and radio transceivers to provide precision repeatability functions (such as in robotics artificial intelligence systems) emergency warning validation performance reconstruction. Intelligent vehicle technologies commonly apply to car safety systems and self-contained autonomous electromechanical sensors generating warnings that can be transmitted within a specified targeted area of interest, i.e. within 100 meters of the emergency warning system for the vehicle's transceiver. In ground applications, intelligent vehicle technologies are utilized for safety and commercial communications between vehicles or between a vehicle and a sensor along the road. On November 3, 2009, the most advanced Intelligent Vehicle concept car was demonstrated in New York City when a 2010 Toyota Prius became the first LTE connected car . The demonstration was provided by the NG Connect project, a collaboration of automotive telematic technologies designed to exploit in-car 4G wireless network connectivity. ] Telematics technology has enabled the emergence of carsharing services such as Local Motion, Uber, Lyft, Car2Go , Zipcar worldwide, or City Car Club in the UK . Telematics-enabled computers allow organizers to track members' usage and bill them on a pay-as-you-drive basis. Some systems show users where to find an idle vehicle. ] Car Clubs such as Australia's Charter Drive use telematics to monitor and report on vehicle use within predefined geofence areas to demonstrate the reach of their transit media car club fleet. The general idea of telematics auto insurance is that a driver's behavior is monitored directly while the person drives and this information is transmitted to an insurance company. The insurance company then assesses the risk of that driver having an accident and charges insurance premiums accordingly. A driver who drives less responsibly will be charged a higher premium than a driver who drives smoothly and with less calculated risk of claim propensity. Other benefits can be delivered to end users with Telematics2.0 -based telematics as customer engagement can be enhanced with direct customer interaction. Telematics auto insurance was independently invented and patented ] by a major U.S. auto insurance company, Progressive Auto Insurance U.S. patent 5,797,134 , and a Spanish independent inventor, Salvador Minguijon Perez ( European Patent EP0700009B1 ). The Perez patents cover monitoring the car's engine control computer to determine distance driven, speed, time of day, braking force, etc. Progressive is currently developing the Perez technology in the U.S. and European auto insurer Norwich Union is developing the Progressive technology for Europe. Both patents have since been overturned in courts due to prior work in the commercial insurance sectors. ] Trials conducted by Norwich Union in 2005 found that young drivers (18- to 23-year-olds) signing up for telematics auto insurance have had a
due to prior work in the commercial insurance sectors. ] Trials conducted by Norwich Union in 2005 found that young drivers (18- to 23-year-olds) signing up for telematics auto insurance have had a 20% lower accident rate than average. ] In 2007, theoretical economic research on the social welfare effects of Progressive's telematics technology business process patents questioned whether the business process patents are pareto efficient for society. Preliminary results suggested that it was not, but more work is needed. ] ] In April 2014, Progressive patents were overturned by the U.S. legal system on the grounds of "lack of originality." The smartphone as the in-vehicle device for insurance telematics has been discussed in great detail ] and the instruments are available for the design of smartphone-driven insurance telematics. Several universities provide two-year Telematics Master of Science programs: In 2007, a project entitled the European Automotive Digital Innovation Studio (EADIS) was awarded 400,000 Euros from the European commission under its Leonardo da Vinci program . EADIS used a virtual work environment called the Digital Innovation Studio to train and develop professional designers in the automotive industry in the impact and application of vehicle telematics so they could integrate new technologies into future products within the automotive industry. Funding ended in 2013. ]
An odometer or odograph is an instrument used for measuring the distance traveled by a vehicle, such as a bicycle or car. The device may be electronic, mechanical, or a combination of the two ( electromechanical ). The noun derives from ancient Greek ὁδόμετρον , hodómetron , from ὁδός , hodós ("path" or "gateway") and μέτρον , métron ("measure"). Early forms of the odometer existed in the ancient Greco-Roman world as well as in ancient China . In countries using Imperial units or US customary units it is sometimes called a mileometer or milometer , the former name especially being prevalent in the United Kingdom and among members of the Commonwealth . dubious – discuss ] Possibly the first evidence for the use of an odometer can be found in the works of the ancient Roman Pliny (NH 6. 61-62) and the ancient Greek Strabo (11.8.9). Both authors list the distances of routes traveled by Alexander the Great (r. 336-323 BC) as by his bematists Diognetus and Baeton. However, the high accuracy of the bematists's measurements rather indicates the use of a mechanical device. For example, the section between the cities Hecatompylos and Alexandria Areion, which later became a part of the Silk Road , was given by Alexander's bematists as 575 Roman miles (529 English miles ) long, that is with a deviation of 0.2% from the actual distance (531 English miles). From the nine surviving bematists' measurements in Pliny's Naturalis Historia eight show a deviation of less than 5% from the actual distance, three of them being within 1%. Since these minor discrepancies can be adequately explained by slight changes in the tracks of roads during the last 2300 years, the overall accuracy of the measurements implies that the bematists already must have used a sophisticated device for measuring distances, although there is no direct mention of such a device. An odometer for measuring distance was first described by Vitruvius around 27 and 23 BC, during the First Punic War , although the actual inventor may have been Archimedes of Syracuse (c. 287 BC – c. 212 BC ). Hero of Alexandria (10 AD – 70 AD) describes a similar device in chapter 34 of his Dioptra . The machine was also used in the time of Roman Emperor Commodus ( c. 192 AD ), although after this point in time there seems to be a gap between its use in Roman times and that of the 15th century in Western Europe. ] Some researchers have speculated that the device might have included technology similar to that of the Greek Antikythera mechanism . ] The odometer of Vitruvius was based on chariot wheels of 4 Roman feet (1.18 m) diameter turning 400 times in one Roman mile (about 1,480 m). For each revolution a pin on the axle engaged a 400-tooth cogwheel thus turning it one complete revolution per mile. This engaged another gear with holes along the circumference , where pebbles ( calculus ) were located, that were to drop one by one into a box. The distance traveled would thus be given simply by counting the number of
gear with holes along the circumference , where pebbles ( calculus ) were located, that were to drop one by one into a box. The distance traveled would thus be given simply by counting the number of pebbles. ] Whether this instrument was ever built at the time is disputed. Leonardo da Vinci later tried to build it himself according to the description, but failed. However, in 1981 engineer Andre Sleeswyk built his own replica, replacing the square-toothed gear designs of Leonardo with the triangular, pointed teeth found in the Antikythera mechanism . With this modification, the Vitruvius odometer functioned perfectly. ] The odometer was also independently invented in ancient China , ] possibly by the prolific inventor and early scientist Zhang Heng (78 AD – 139 AD) of the Han dynasty . By the 3rd century (during the Three Kingdoms Period), the Chinese had termed the device as the 'jì lĭ gŭ chē' (記里鼓車), or ' li -recording drum carriage' (Note: the modern measurement of li = 500 m (1,640 ft)). ] Chinese texts of the 3rd century tell of the mechanical carriage's functions, and as one li is traversed, a mechanical-driven wooden figure strikes a drum, and when ten li is traversed, another wooden figure would strike a gong or a bell with its mechanical-operated arm. ] Despite its association with Zhang Heng or even the later Ma Jun (c. 200–265), there is evidence to suggest that the invention of the odometer was a gradual process in Han Dynasty China that centered around the huang men court people (i.e. eunuchs, palace officials, attendants and familiars, actors, acrobats, etc.) that would follow the musical procession of the royal 'drum-chariot'. ] The historian Joseph Needham asserts that it is no surprise this social group would have been responsible for such a device, since there is already other evidence of their craftsmanship with mechanical toys to delight the emperor and the court. There is speculation that some time in the 1st century BC (during the Western Han Dynasty), the beating of drums and gongs were mechanically-driven by working automatically off the rotation of the road-wheels. ] This might have actually been the design of one Luoxia Hong ( c. 110 BC ), yet by 125 AD the mechanical odometer carriage in China was already known (depicted in a mural of the Xiaotangshan Tomb ). ] The odometer was used also in subsequent periods of Chinese history. In the historical text of the Jin Shu (635 AD), the oldest part of the compiled text, the book known as the Cui Bao ( c. 300 AD ), recorded the use of the odometer, providing description (attributing it to the Western Han era, from 202 BC–9 AD). ] The passage in the Jin Shu expanded upon this, explaining that it took a similar form to the mechanical device of the south-pointing chariot invented by Ma Jun (200–265, see also differential gear). As recorded in the Song Shi of the Song Dynasty (960-1279 AD), the odometer and south-pointing chariot were combined into one wheeled device by engineers
Ma Jun (200–265, see also differential gear). As recorded in the Song Shi of the Song Dynasty (960-1279 AD), the odometer and south-pointing chariot were combined into one wheeled device by engineers of the 9th century, 11th century, and 12th century. The Sunzi Suanjing (Master Sun's Mathematical Manual), dated from the 3rd century to 5th century, presented a mathematical problem for students involving the odometer. It involved a given distance between two cities, the small distance needed for one rotation of the carriage's wheel, and the posed question of how many rotations the wheels would have in all if the carriage was to travel between point A and B. ] The historical text of the Song Shi (1345 AD), recording the people and events of the Chinese Song Dynasty (960–1279), also mentioned the odometer used in that period. However, unlike written sources of earlier periods, it provided a much more thoroughly detailed description of the device that harkens back to its ancient form ( Wade-Giles spelling): The odometer. is painted red, with pictures of flowers and birds on the four sides, and constructed in two storeys, handsomely adorned with carvings. At the completion of every li, the wooden figure of a man in the lower storey strikes a drum; at the completion of every ten li, the wooden figure in the upper storey strikes a bell. The carriage-pole ends in a phoenix-head, and the carriage is drawn by four horses. The escort was formerly of 18 men, but in the 4th year of the Yung-Hsi reign-period (987 AD) the emperor Thai Tsung increased it to 30. In the 5th year of the Thien-Sheng reign-period (1027 AD) the Chief Chamberlain Lu Tao-lung presented specifications for the construction of odometers as follows: ] What follows is a long dissertation made by the Chief Chamberlain Lu Daolong on the ranging measurements and sizes of wheels and gears, along with a concluding description at the end of how the device ultimately functions: The vehicle should have a single pole and two wheels. On the body are two storeys, each containing a carved wooden figure holding a drumstick. The road-wheels are each 6 ft in diameter, and 18 ft in circumference, one evolution covering 3 paces. According to ancient standards the pace was equal to 6 ft and 300 paces to a li; but now the li is reckoned as 360 paces of 5 ft each. ] The vehicle wheel (li lun) is attached to the left road-wheel; it has a diameter of 1.38 ft with a circumference of 4.14 ft, and has 18 cogs (chhih) 2.3 inches apart. There is also a lower horizontal wheel (hsia phing lun), of diameter 4.14 ft and circumference 12.42 ft, with 54 cogs, the same distance apart as those on the vertical wheel (2.3 inches). (This engages with the former.) ] Upon a vertical shaft turning with this wheel, there is fixed a bronze "turning-like-the-wind wheel" (hsuan feng lun) which has (only) 3 cogs, the distance between these being 1.2 inches. (This turns the following one.) In the middle is a horizontal wheel, 4 ft in
"turning-like-the-wind wheel" (hsuan feng lun) which has (only) 3 cogs, the distance between these being 1.2 inches. (This turns the following one.) In the middle is a horizontal wheel, 4 ft in diameter, and 12 ft circumference, with 100 cogs, the distance between these cogs being the same as on the "turning-like-the-wind wheel" (1.2 inches). ] Next, there is fixed (on the same shaft) a small horizontal wheel (hsiao phing lun) 3.3 inches in diameter and 1 ft in circumference, having 10 cogs 1.5 inches apart. (Engaging with this) there is an upper horizontal wheel (shang phing lun) having a diameter of 3.3 ft and a circumference of 10 ft, with 100 cogs, the same distance apart as those of the small horizontal wheel (1.5 inches). ] When the middle horizontal wheel has made 1 revolution, the carriage will have gone 1 li and the wooden figure in the lower story will strike the drum. When the upper horizontal wheel has made 1 revolution, the carriage will have gone 10 li and the figure in the upper storey will strike the bell. The number of wheels used, great and small, is 8 inches in all, with a total of 285 teeth. Thus the motion is transmitted as if by the links of a chain, the "dog-teeth" mutually engaging with each other, so that by due revolution everything comes back to its original starting point (ti hsiang kou so, chhuan ya hsiang chih, chou erh fu shih). ] Odometers were first developed in the 1600s for wagons and other horse-drawn vehicles in order to measure distances traveled. Levinus Hulsius published the odometer in 1604 in his work Gründtliche Beschreibung deß Diensthafften und Nutzbahrn Instruments Viatorii oder Wegzählers, So zu Fuß, zu Pferdt unnd zu Fußen gebraucht werden kann, damit mit geringer mühe zu wissen, wie weit man gegangen, geritten, oder gefahren sey: als auch zu erfahren, ohne messen oder zehlen, wie weit von einem Orth zum andern. Daneben wird auch der grosse verborgene Wegweiser angezeiget und vermeldet . ] In 1645, the French mathematician Blaise Pascal invented the pascaline . Though not an odometer, the pascaline utilized gears to compute measurements. Each gear contained 10 teeth. The first gear advanced the next gear one position when moved one complete revolution, the same principle employed on modern mechanical odometers. Odometers were developed for ships in 1698 with the odometer invented by the Englishman Thomas Savery . Benjamin Franklin , U.S. statesman and the first Postmaster General , built a prototype odometer in 1775 that he attached to his carriage to help measure the mileage of postal routes. ] In 1847, William Clayton and Orson Pratt , pioneers of the Church of Jesus Christ of Latter-day Saints , first implemented the Roadometer they had invented earlier (a version of the modern odometer), which they attached to a wagon used by American settlers heading west. ] It recorded the distance traveled each day by the wagon trains . The Roadometer used two gears and was an early example of an odometer
attached to a wagon used by American settlers heading west. ] It recorded the distance traveled each day by the wagon trains . The Roadometer used two gears and was an early example of an odometer with pascaline-style gears in actual use. ] In 1895, Curtis Hussey Veeder invented the Cyclometer . ] ] The Cyclometer was a mechanical device that counted the number of rotations of a bicycle wheel. ] A flexible cable transmitted the number of rotations of the wheel to an analog odometer visible to the rider, which converted the wheel rotations into the number of miles traveled according to a predetermined formula. In 1903 Arthur P. and Charles H. Warner, two brothers from Beloit, Wisconsin, introduced their patented Auto-meter . The Auto-Meter used a magnet attached to a rotating shaft to induce a magnetic pull upon a thin metal disk. Measuring this pull provided accurate measurements of both distance and speed information to automobile drivers in a single instrument. The Warners sold their company in 1912 to the Stewart & Clark Company of Chicago. The new firm was renamed the Stewart-Warner Corporation. By 1925, Stewart-Warner odometers and trip meters were standard equipment on the vast majority of automobiles and motorcycles manufactured in the United States. By the early 2000s, mechanical odometers would be phased out on cars from major manufacturers. The Pontiac Grand Prix was the last GM car sold in the US to offer a mechanical odometer in 2003; the Canadian-built Ford Crown Victoria and Mercury Grand Marquis were the last Fords sold with one in 2005. citation needed ] Most modern cars include a trip meter ( trip odometer ). Unlike the odometer, a trip meter is reset at any point in a journey, making it possible to record the distance traveled in any particular journey or part of a journey. It was traditionally a purely mechanical device but, in most modern vehicles, it is now electronic. Many modern vehicles often have multiple trip meters. Most mechanical trip meters will show a maximum value of 999.9. The trip meter may be used to record the distance traveled on each tank of fuel, making it very easy to accurately track the energy efficiency of the vehicle; another common use is resetting it to zero at each instruction in a sequence of driving directions, to be sure when one has arrived at the next turn. A form of fraud is to tamper with the reading on an odometer and presenting the incorrect number of milesspeedometer pair while on the road. Older vehicles can be driven in reverse to subtract mileage, a concept which provides the premise for a classic scene in the comedy film Ferris Bueller's Day Off , but modern odometers add mileage driven in reverse to the total as if driven forward, thereby accurately reflecting the true total wear and tear on the vehicle. The resale value of a vehicle is often strongly influenced by the total distance shown on the odometer, yet odometers are inherently insecure because they are under the control of
on the vehicle. The resale value of a vehicle is often strongly influenced by the total distance shown on the odometer, yet odometers are inherently insecure because they are under the control of their owners. Many jurisdictions have chosen to enact laws which penalize people who are found to commit odometer fraud . In the US (and many other countries), vehicle mechanics are also required to keep records of the odometer any time a vehicle is serviced or inspected . Companies such as Carfax then use these data to help potential car buyers detect whether odometer rollback has occurred. Research by Irish vehicle check specialist Cartell found that 20% of vehicles imported to Ireland from Great Britain and Northern Ireland had had their mileometers altered to show a lower mileage. ] Most odometers work by counting wheel rotations and assume that the distance traveled is the number of wheel rotations times the tire circumference, which is a standard tire diameter times pi (3.141592). If nonstandard or severely worn or underinflated tires are used then this will cause some error in the odometer. The formula is ( a c t u a l d i s t a n c e t r a v e l e d ) = ( ( f i n a l o d o m e t e r r e a d i n g ) − − ( i n i t i a l o d o m e t e r r e a d i n g ) ) ⋅ ⋅ ( a c t u a l t i r e d i a m e t e r ) ( s t a n d a r d t i r e d i a m e t e r ) {\displaystyle (actual\ distance\ traveled)={\tfrac {((final\ odometer\ reading)-(initial\ odometer\ reading))\cdot (actual\ tire\ diameter)}{(standard\ tire\ diameter)}}} . It is common for odometers to be off by several percent. ] Odometer errors are typically proportional to speedometer errors .
Usage-based insurance ( UBI ), also known as pay as you drive ( PAYD ), pay how you drive ( PHYD ) and mile-based auto insurance , is a type of vehicle insurance whereby the costs are dependent upon type of vehicle used, measured against time, distance, behavior and place. This differs from traditional insurance, which attempts to differentiate and reward "safe" drivers, giving them lower premiums and/or a no-claims bonus. However, conventional differentiation is a reflection of history rather than present patterns of behaviour. This means that it may take a long time before safer (or more reckless) patterns of driving and changes in lifestyle feed through into premiums. The simplest form of usage-based insurance bases the insurance costs simply on distance driven. However, the general concept of pay as you drive includes any scheme where the insurance costs may depend not just on how much you drive but how, where, and when one drives. ] Pay as you drive (PAYD) means that the insurance premium is calculated dynamically, typically according to the amount driven. There are three types of usage-based insurance: The formula can be a simple function of the number of miles driven, or can vary according to the type of driving or the identity of the driver. Once the basic scheme is in place, it is possible to add further details, such as an extra risk premium if someone drives too long without a break, uses their mobile phone while driving, or travels at an excessive speed. Telematic usage-based insurance (i.e. the latter two types, in which vehicle information is automatically transmitted to the system) provides a much more immediate feedback loop to the driver, ] by changing the cost of insurance dynamically with a change of risk. This means drivers have a stronger incentive to adopt safer practices. For example, if a commuter switches to public transport or to working at home, this immediately reduces the risk of rush hour accidents. With usage-based insurance, this reduction would be immediately reflected in the cost of car insurance for that month. citation needed ] The smartphone as measurement probe for insurance telematics has been surveyed ] Another form of usage-based insurance is PHYD (Pay How You Drive). Similar to PAYD, but also brings in additional sensors like accelerometer to monitor driving behavior. ] There are several issued patents ] and pending patent applications that have been filed worldwide on various inventions related to telematic auto insurance. These include: In order to make sure that patents did not hinder its Pay as You Drive development program, Norwich Union purchased the UK version of EP0700009 and obtained an exclusive license to any EU patents that may emerge from Progressive's EU patent applications. citation needed ] In June 2010, Progressive Auto Insurance filed a patent infringement lawsuit against Liberty Mutual over one of Progressive's Pay As You Drive auto insurance patents. ] In September 2010 Progressive
In June 2010, Progressive Auto Insurance filed a patent infringement lawsuit against Liberty Mutual over one of Progressive's Pay As You Drive auto insurance patents. ] In September 2010 Progressive Auto Insurance filed a declaratory judgment lawsuit against Hughes Telematics to have several its patents covering OBDII mounted wireless data loggers declared invalid. Progressive uses these devices from a competitive supplier, Xirgo Technologies . ] Telematics have been proposed or utilised in order to detect distracted driving . The use of telematics to detect drunk driving and Texting while driving has been proposed. ] A US patent application combining this technology with a usage based insurance product was open for public comment on peer to patent . ]
Odometer fraud , also referred to as "busting miles" (United States) or "clocking" (UK, Ireland and Canada), is the illegal practice of rolling back odometers to make it appear that vehicles have lower mileage than they actually do. Odometer fraud occurs when the seller of a vehicle falsely represents the actual mileage of a vehicle to the buyer. ] According to the Office of Odometer Fraud Investigation at the US Department of Transportation , ] odometer fraud is a serious crime and important consumer fraud issue. In the National Highway Traffic Safety Administration 's (NHTSA) 2002 odometer fraud study, the NHTSA determined that 450,000 vehicles were sold each year with false odometer readings, resulting in a cost of over $1 billion annually to car buyers in the US. ] In the UK, the Office of Fair Trading estimates the annual cost at £500m. ] Common examples of odometer fraud include situations where someone tampers with the odometer by rolling it back or replacing the odometer and failing to provide the required notice on the vehicle. According to AIM Mobile Inspections, ] an evaluator of new and used vehicles, the incidence of odometer rollback for the purpose of misrepresenting the mileage of off-lease used vehicles had increased by 30 percent since the beginning of 2011. A 2017 Motorcheck analysis of the Irish used car market showed 15% of all used cars for sale are clocked, with 70% of these cars being diesel engines. ] There are a number of ways in which a vehicle buyer might determine existence of possible odometer fraud. ] In the US, states require vehicle purchasers to obtain a title or certificate of registration due to federal laws . These titles contain information about a vehicle's odometer history. The information can be accessed through each state's Department of Motor Vehicles . Other options to detect odometer fraud include contacting the vehicle's former owners, conducting a mechanical inspection of the vehicle with particular attention to normal but harmless wear and tear such as to floor-mats and the rubber on pedals (or to suspiciously new such items), and checking the vehicle's history report (see used car for a list of vehicle history services in different countries). Modern cars often employ digital odometers. These odometers are said to be, in some cases, even easier to tamper with than mechanical odometers with the use of several electronic tools, most of which plug in via a car's OBD2 port. ] ]
The Progressive Corporation is an American insurance company. In late 2022, Progressive became the largest motor insurance carrier in the U.S. ] The company was co-founded in 1937 by Jack Green and Joseph M. Lewis, and is headquartered in Mayfield, Ohio . ] The company insures passenger vehicles, motorcycles, RVs, trailers, boats, PWC, and commercial vehicles. Progressive also provides home , life , pet , and other insurance through select companies. Additionally, Progressive offers auto insurance in Australia . The company ranked #88 on the 2023 Fortune 500 list of the top American corporations. ] Progressive was formed in 1937 by Joseph Lewis and Jack Green as Progressive Mutual Insurance Company. ] In 1956, the company found a niche by insuring more risky drivers. In 1965, Peter B. Lewis , son of Joseph Lewis, and his mother borrowed $2.5 million, pledging their majority stake as collateral, and completed a leveraged buyout of Progressive. ] ] In 1987, the sum of the company's written premiums surpassed $1 billion, and by 2016 that number reached $20 billion. ] ] Progressive boasts being the first auto insurance company to have a website and to allow customers to purchase policies via that site. Later, Progressive would pioneer the use of mobile browsers and smartphone apps for rating and managing policies. ] It was also the first to offer 24/7 claims reporting. ] The company operates in three segments: personal lines, commercial auto, and other indemnity . ] Progressive is one of the largest auto insurers in the United States, with over 13 million policies in force, ] along with State Farm , Allstate , GEICO , Nationwide Mutual Insurance Company , Farmers Insurance Group , and USAA . Progressive primarily offers its services through the internet, by telephone or through independent insurance agents. ] Progressive’s Agency business sells insurance through more than 30,000 independent insurance agents ] and progressiveagent.com where customers can quote their own policies and then contact an agent to complete the sale. In December 2009, Progressive announced it was selling car insurance in Australia . ] Initially called Progressive Direct, it rebranded as Progressive in 2011, and later rebranded as PD Insurance in 2019. ] Progressive's marketing campaign is known for offering quotes of its competitors along with its own quote. It was the first major insurer to offer auto policies through the phone and through its web site. In September 2007 Progressive began to offer Pet Injury coverage, which provides coverage for dogs and cats that are injured in a crash and is included at no additional cost with Collision coverage. ] Immediate Response Vehicles (IRVs) used by Progressive are specially modified Ford Explorers and Ford Escapes . ] Since 2008, many of Progressive's television advertisements have featured a woman named Flo (played by actress Stephanie Courtney ), who explains the benefits of Progressive Insurance. ] ] In December 2010, the
many of Progressive's television advertisements have featured a woman named Flo (played by actress Stephanie Courtney ), who explains the benefits of Progressive Insurance. ] ] In December 2010, the company introduced the "Messenger", as a complementary campaign. He was played by John Jenkinson. ] The Flo universe also includes Jamie ( Jim Cashman ), an awkward fellow Progressive employee; and Bill and Tom, rival insurance salesmen from the figurative straw man "A. Nother Insurance Company". Bill and Tom were largely discontinued after Allstate filed a claim with the Better Business Bureau alleging that Progressive was making a false claim that they offered discounts that Allstate and other insurance providers did not. ] In 2012, Progressive introduced another character, a personified box (voiced by Chris Parnell ) representing the company's products. It is portrayed as having an entourage (including a personal trainer). ] Progressive later added more characters like Flobot, Mara ( Natalie Palamides ), Dr. Rick , and Motaur to its advertising series. In 2019, Progressive began the At Home with Baker Mayfield ad campaign during the National Football League season. The campaign featured the Cleveland Browns quarterback living with his wife in FirstEnergy Stadium . ] After he was traded to the Carolina Panthers in the 2022 offseason, Mayfield stated that the advertisements will end, calling it a "missed opportunity". ] ] In 2022, Jon Hamm appeared in several TV commercials, as himself, unsuccessfully pursuing a romantic relationship with spokesperson Flo. ] According to a February 2011 Wall Street Journal article, Progressive has a leg up on its rivals in Pay As You Drive insurance, a form of vehicle insurance also generically known as usage-based insurance. ] Progressive has seven U.S. patents covering usage-based insurance methods and systems, with more patents pending. citation needed ] needs update ] Progressive began working on the concept in the mid-1990s and continues to refine the concept and bring it to the mass market. Snapshot is Progressive's Pay As You Drive , or usage-based insurance program. Snapshot is a voluntary discount program where drivers can save money on their car insurance by sharing their driving habits with Progressive. According to Progressive, Snapshot is best for people who drive less, in safer ways and during safer times of day. ] Snapshot customers can make changes to their driving habits that will lead to bigger discounts by checking their driving data and projected discount on progressive.com over the course of their initial policy period. ] Drivers plug a device the size of a garage door opener into the on-board diagnostic (OBD) port of their car. The device records and sends the driving data to Progressive, and Progressive uses that information to calculate the rate. After 30 days, customers find out if they're eligible for a discount based on that 30-day "snapshot" of their driving habits. At the end of a
Progressive uses that information to calculate the rate. After 30 days, customers find out if they're eligible for a discount based on that 30-day "snapshot" of their driving habits. At the end of a six-month policy period, Progressive calculates the customer's renewal discount and customers return the device to Progressive. The company doesn't take into account how fast the car goes although it does take into account how fast and frequently the vehicle operator brakes. Snapshot is voluntary and customers can opt out at any time. The customer is charged up to $50.00 if they do not return the snapshot device to Progressive should they decide not to engage in the program after receiving it. ] Snapshot is currently available in 45 states plus the District of Columbia. Because insurance is regulated at the state level, Snapshot is currently not available in Alaska, California, Hawaii, and North Carolina. ] On December 13, 2006, the company said earnings rose 58 percent in November as the company retained more of the premiums it collected because of comparisons to a month affected by Hurricane Katrina claims. ] In 1999, Progressive Auto Insurance was the title sponsor of the Super Bowl XXXIII halftime show . ] In January 2008, Jacobs Field in Cleveland, Ohio , home of the Cleveland Guardians , was renamed Progressive Field . Progressive signed a 16-year contract for the naming rights, as well as sponsorship rights to become the Official Auto Insurer of the Cleveland Indians. The agreement costs around $3.6 million per year. ] ( Mayfield Village, Ohio , where the company is based, is a suburb of Cleveland.) In March 2008, Progressive announced its title sponsorship of the Progressive Insurance Automotive X PRIZE and their funding of the $10 million prize purse. The Progressive Automotive X PRIZE is an international competition designed to inspire a new generation of viable, super fuel-efficient vehicles. The competition is open to teams from around the world that can design, build, and bring to market 100 MPGe (miles per gallon energy equivalent) vehicles. ] On December 14, 2010, the Gator Bowl Association announced that Progressive Insurance would become the title sponsor for the 2011 Gator Bowl ] college football bowl game. On September 24, 2019, Progressive became the official sponsor of Friday Night SmackDown broadcast on Fox. ] Starting in 2020, Progressive sponsored Roush Fenway Racing 's Ryan Newman car at races at Atlanta and Pocono. Starting in 2021, Progressive sponsored Sesame Street on PBS Kids replacing Blue Lizard Australian Sunscreen. Progressive has been the Title Sponsor of the National Marine Manufacturers Association (NMMA) boat shows since 2012, and will maintain title sponsorship through at least 2022. ] In 2002, the company settled with the State of Georgia in a class action lawsuit over diminished value claims brought by policyholders. ] Five years later, the company apologized after it was revealed they hired private
settled with the State of Georgia in a class action lawsuit over diminished value claims brought by policyholders. ] Five years later, the company apologized after it was revealed they hired private investigators to infiltrate a church group and pose as congregation members to collect information on litigants seeking redress from the company. Another lawsuit was filed by the litigants over the affair against the company for invasion of privacy and fraud . ] In 2009, Progressive was sued for allegedly deceiving policyholders by employing illegally operated, unlicensed body shops to make repairs on vehicles for their clients in order to save money. ] The court ruled in the company's favor on two of the counts and the other four were dropped, pending appeal . ] In 2012, the company was widely criticized online for how it handled the claims filed by the family of Kaitlynn Fisher. The 24-year-old died when the car she was driving was hit by another that had run a red light in Baltimore . Progressive fought to avoid paying out the claim to Fisher's estate. Fisher's insurance policy with Progressive included coverage in the event of an accident with an underinsured driver. The underinsured driver was found to be negligent in a jury trial brought by the Fisher family, in which the Fisher family contended that Progressive provided legal assistance to the defense. ] ] ] In two followup statements, Progressive explained that they did not "serve as the attorney for the defendant in this case" ] and then clarified that "s a defendant in this case, Progressive participated in the trial procedures on our own behalf." ] The company's position was that fault for the accident had not been clearly established, since three witnesses (the driver of the other car, that car's passenger, and Ms. Fisher's passenger) believed that Fisher had run a red light, and filed a motion to intervene to assert that she had been at fault, and therefore was not liable to pay the underinsured motorist claim. The lawyer for the Fisher family countered by noting that two of the three witnesses were not independent, saying "I have an issue with how they examined the evidence to abandon their insured" and introduced the idea the state insurance commissioner could find Progressive had acted in bad faith. As noted, Progressive lost the case and was ordered to pay the underinsured motorist claim in addition to a separate settlement with the Fisher family "to avoid a hearing before the state insurance commissioner". ]
The Global Positioning System ( GPS ), originally Navstar GPS , ] is a satellite-based radio navigation system owned by the United States government and operated by the United States Space Force . ] It is one of the global navigation satellite systems (GNSS) that provide geolocation and time information to a GPS receiver anywhere on or near the Earth where there is an unobstructed line of sight to four or more GPS satellites. ] It does not require the user to transmit any data, and operates independently of any telephone or Internet reception, though these technologies can enhance the usefulness of the GPS positioning information. It provides critical positioning capabilities to military, civil, and commercial users around the world. Although the United States government created, controls and maintains the GPS system, it is freely accessible to anyone with a GPS receiver. ] The GPS project was started by the U.S. Department of Defense in 1973. The first prototype spacecraft was launched in 1978 and the full constellation of 24 satellites became operational in 1993. After Korean Air Lines Flight 007 was shot down when it mistakenly entered Soviet airspace, President Ronald Reagan announced that the GPS system would be made available for civilian use as of September 16, 1983; ] however, initially this civilian use was limited to an average accuracy of 100 meters (330 ft) by use of Selective Availability (SA), a deliberate error introduced into the GPS data (which military receivers could correct for). As civilian GPS usage grew, there was increasing pressure to remove this error. The SA system was temporarily disabled during the Gulf War , as a shortage of military GPS units meant that many US soldiers were using civilian GPS units sent from home. In the 1990s, Differential GPS systems from the US Coast Guard , Federal Aviation Administration , and similar agencies in other countries began to broadcast local GPS corrections, reducing the effect of both SA degradation and atmospheric effects (that military receivers also corrected for). The US military had also developed methods to perform local GPS jamming, meaning that the ability to globally degrade the system was no longer necessary. As a result, President Bill Clinton signed a bill ordering that Selective Availability be disabled on May 1, 2000; ] and, in 2007 , the US government announced that the next generation of GPS satellites would not include the feature at all. Advances in technology and new demands on the existing system have now led to efforts to modernize the GPS and implement the next generation of GPS Block III satellites and Next Generation Operational Control System (OCX) ] which was authorized by the U.S. Congress in 2000. When Selective Availability was discontinued, GPS was accurate to about 5 meters (16 ft). GPS receivers that use the L5 band have much higher accuracy of 30 centimeters (12 in), while those for high-end applications such as engineering and land surveying are
to about 5 meters (16 ft). GPS receivers that use the L5 band have much higher accuracy of 30 centimeters (12 in), while those for high-end applications such as engineering and land surveying are accurate to within 2 cm ( 3 ⁄ 4 in) and can even provide sub-millimeter accuracy with long-term measurements. ] ] ] Consumer devices such as smartphones can be accurate to 4.9 m (16 ft) or better when used with assistive services like Wi-Fi positioning . ] As of July 2023 ] , 18 GPS satellites broadcast L5 signals, which are considered pre-operational prior to being broadcast by a full complement of 24 satellites in 2027. ] The GPS project was launched in the United States in 1973 to overcome the limitations of previous navigation systems, ] combining ideas from several predecessors, including classified engineering design studies from the 1960s. The U.S. Department of Defense developed the system, which originally used 24 satellites, for use by the United States military, and became fully operational in 1993. Civilian use was allowed from the 1980s. Roger L. Easton of the Naval Research Laboratory , Ivan A. Getting of The Aerospace Corporation , and Bradford Parkinson of the Applied Physics Laboratory are credited with inventing it. ] The work of Gladys West on the creation of the mathematical geodetic Earth model is credited as instrumental in the development of computational techniques for detecting satellite positions with the precision needed for GPS. ] ] The design of GPS is based partly on similar ground-based radio-navigation systems, such as LORAN and the Decca Navigator , developed in the early 1940s. In 1955, Friedwardt Winterberg proposed a test of general relativity —detecting time slowing in a strong gravitational field using accurate atomic clocks placed in orbit inside artificial satellites. Special and general relativity predicted that the clocks on GPS satellites, as observed by those on Earth, run 38 microseconds faster per day than those on the Earth. The design of GPS corrects for this difference; because without doing so, GPS calculated positions would accumulate errors of up to 10 kilometers per day (6 mi/d). ] When the Soviet Union launched its first artificial satellite ( Sputnik 1 ) in 1957, two American physicists, William Guier and George Weiffenbach, at Johns Hopkins University 's Applied Physics Laboratory (APL) decided to monitor its radio transmissions. ] Within hours they realized that, because of the Doppler effect , they could pinpoint where the satellite was along its orbit. The Director of the APL gave them access to their UNIVAC to do the heavy calculations required. Early the next year, Frank McClure, the deputy director of the APL, asked Guier and Weiffenbach to investigate the inverse problem: pinpointing the user's location, given the satellite's. (At the time, the Navy was developing the submarine-launched Polaris missile, which required them to know the submarine's location.) This led them and APL to develop
location, given the satellite's. (At the time, the Navy was developing the submarine-launched Polaris missile, which required them to know the submarine's location.) This led them and APL to develop the TRANSIT system. ] In 1959, ARPA (renamed DARPA in 1972) also played a role in TRANSIT. ] ] ] TRANSIT was first successfully tested in 1960. ] It used a constellation of five satellites and could provide a navigational fix approximately once per hour. In 1967, the U.S. Navy developed the Timation satellite, which proved the feasibility of placing accurate clocks in space, a technology required for GPS. In the 1970s, the ground-based OMEGA navigation system, based on phase comparison of signal transmission from pairs of stations, ] became the first worldwide radio navigation system. Limitations of these systems drove the need for a more universal navigation solution with greater accuracy. Although there were wide needs for accurate navigation in military and civilian sectors, almost none of those was seen as justification for the billions of dollars it would cost in research, development, deployment, and operation of a constellation of navigation satellites. During the Cold War arms race , the nuclear threat to the existence of the United States was the one need that did justify this cost in the view of the United States Congress. This deterrent effect is why GPS was funded. citation needed ] It is also the reason for the ultra-secrecy at that time. The nuclear triad consisted of the United States Navy's submarine-launched ballistic missiles (SLBMs) along with United States Air Force (USAF) strategic bombers and intercontinental ballistic missiles (ICBMs). Considered vital to the nuclear deterrence posture, accurate determination of the SLBM launch position was a force multiplier . Precise navigation would enable United States ballistic missile submarines to get an accurate fix of their positions before they launched their SLBMs. ] The USAF, with two thirds of the nuclear triad, also had requirements for a more accurate and reliable navigation system. The U.S. Navy and U.S. Air Force were developing their own technologies in parallel to solve what was essentially the same problem. To increase the survivability of ICBMs, there was a proposal to use mobile launch platforms (comparable to the Soviet SS-24 and SS-25 ) and so the need to fix the launch position had similarity to the SLBM situation. In 1960, the Air Force proposed a radio-navigation system called MOSAIC (MObile System for Accurate ICBM Control) that was essentially a 3-D LORAN. A follow-on study, Project 57, was performed in 1963 and it was "in this study that the GPS concept was born". That same year, the concept was pursued as Project 621B, which had "many of the attributes that you now see in GPS" ] and promised increased accuracy for Air Force bombers as well as ICBMs. Updates from the Navy TRANSIT system were too slow for the high speeds of Air Force operation. The Naval Research
see in GPS" ] and promised increased accuracy for Air Force bombers as well as ICBMs. Updates from the Navy TRANSIT system were too slow for the high speeds of Air Force operation. The Naval Research Laboratory (NRL) continued making advances with their Timation (Time Navigation) satellites, first launched in 1967, second launched in 1969, with the third in 1974 carrying the first atomic clock into orbit and the fourth launched in 1977. ] Another important predecessor to GPS came from a different branch of the United States military. In 1964, the United States Army orbited its first Sequential Collation of Range ( SECOR ) satellite used for geodetic surveying. ] The SECOR system included three ground-based transmitters at known locations that would send signals to the satellite transponder in orbit. A fourth ground-based station, at an undetermined position, could then use those signals to fix its location precisely. The last SECOR satellite was launched in 1969. ] With these parallel developments in the 1960s, it was realized that a superior system could be developed by synthesizing the best technologies from 621B, Transit, Timation, and SECOR in a multi-service program. Satellite orbital position errors, induced by variations in the gravity field and radar refraction among others, had to be resolved. A team led by Harold L. Jury of Pan Am Aerospace Division in Florida from 1970 to 1973, used real-time data assimilation and recursive estimation to do so, reducing systematic and residual errors to a manageable level to permit accurate navigation. ] During Labor Day weekend in 1973, a meeting of about twelve military officers at the Pentagon discussed the creation of a Defense Navigation Satellite System (DNSS) . It was at this meeting that the real synthesis that became GPS was created. Later that year, the DNSS program was named Navstar. ] Navstar is often erroneously considered an acronym for "NAVigation System using Timing And Ranging" but was never considered as such by the GPS Joint Program Office (TRW may have once advocated for a different navigational system that used that acronym). ] With the individual satellites being associated with the name Navstar (as with the predecessors Transit and Timation), a more fully encompassing name was used to identify the constellation of Navstar satellites, Navstar-GPS . ] Ten " Block I " prototype satellites were launched between 1978 and 1985 (an additional unit was destroyed in a launch failure). ] The effect of the ionosphere on radio transmission was investigated in a geophysics laboratory of Air Force Cambridge Research Laboratory , renamed to Air Force Geophysical Research Lab (AFGRL) in 1974. AFGRL developed the Klobuchar model for computing ionospheric corrections to GPS location. ] Of note is work done by Australian space scientist Elizabeth Essex-Cohen at AFGRL in 1974. She was concerned with the curving of the paths of radio waves ( atmospheric refraction ) traversing the ionosphere from
done by Australian space scientist Elizabeth Essex-Cohen at AFGRL in 1974. She was concerned with the curving of the paths of radio waves ( atmospheric refraction ) traversing the ionosphere from NavSTAR satellites. ] After Korean Air Lines Flight 007 , a Boeing 747 carrying 269 people, was shot down by a Soviet interceptor aircraft after straying in prohibited airspace because of navigational errors, ] in the vicinity of Sakhalin and Moneron Islands , President Ronald Reagan issued a directive making GPS freely available for civilian use, once it was sufficiently developed, as a common good. ] The first Block II satellite was launched on February 14, 1989, ] and the 24th satellite was launched in 1994. The GPS program cost at this point, not including the cost of the user equipment but including the costs of the satellite launches, has been estimated at US$5 billion (equivalent to $10 billion in 2023). ] Initially, the highest-quality signal was reserved for military use, and the signal available for civilian use was intentionally degraded, in a policy known as Selective Availability . This changed on May 1, 2000, with President Bill Clinton signing a policy directive to turn off Selective Availability to provide the same accuracy to civilians that was afforded to the military. The directive was proposed by the U.S. Secretary of Defense, William Perry , in view of the widespread growth of differential GPS services by private industry to improve civilian accuracy. Moreover, the U.S. military was developing technologies to deny GPS service to potential adversaries on a regional basis. ] Selective Availability was removed from the GPS architecture beginning with GPS-III. Since its deployment, the U.S. has implemented several improvements to the GPS service, including new signals for civil use and increased accuracy and integrity for all users, all the while maintaining compatibility with existing GPS equipment. Modernization of the satellite system has been an ongoing initiative by the U.S. Department of Defense through a series of satellite acquisitions to meet the growing needs of the military, civilians, and the commercial market. As of early 2015, high-quality Standard Positioning Service (SPS) GPS receivers provided horizontal accuracy of better than 3.5 meters (11 ft), ] although many factors such as receiver and antenna quality and atmospheric issues can affect this accuracy. GPS is owned and operated by the United States government as a national resource. The Department of Defense is the steward of GPS. The Interagency GPS Executive Board (IGEB) oversaw GPS policy matters from 1996 to 2004. After that, the National Space-Based Positioning, Navigation and Timing Executive Committee was established by presidential directive in 2004 to advise and coordinate federal departments and agencies on matters concerning the GPS and related systems. ] The executive committee is chaired jointly by the Deputy Secretaries of Defense and Transportation.

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