Let us see who is the trustee in this insurance sector:
The insurer is in the position of a trustee as it is managing the common fund,for and on behalf of the community of policyholders.It has to ensure that nobody is allowed to take undue advantage of the arrangemen.That means that the management of the insurance business requires care to prevent entry(into the group)of people whose risks are not of the same kind as well as paying claims on losses that are not accidental.The decision to allow entry is the process of underwriting of risk.Underwriting includes assessing the risk,which means,making an evaluation of how much is the exposure to risk.The premium to be charged depends on this assessment of the risk.The premium to be charged depends on this assessment of the risk.Both underwriting and claim settlements have to be done with great care.
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Saturday, November 28, 2009
Friday, November 27, 2009
Premiums in the policy
Let us see on what basis premiums are calcualted:
Premiums are the amount of money paid yearly or monthly or quaterly based on the policy taken by us.
The premium for insurance is based on expectations of the losses. These expectations are based on studies of occurences in the past and the use of statistical principles.There is,in statistics,a "law of large numbers".When you toss a coin,the chance,or probability,of a head or tail coming up is half.If the coin is tossed 10 times,one cannot be sure that the head will come up 5 times. If the coin is tossed 1 million times,the number of heads variation will be less as a percentage.So also,the larger the numbers(of risks)included in the pool,the better the chnaces that the assumptions regarding the probability of the risk occuring,will be realized in practice.In order to be amenable to statistical predictions,insures have to insure large numbers of risks.The larger the spread of the business,the better the experience in relation to expectations.The probability of risk being the basis of premium calculation,large numbers are necessary to ensure that the premium charged is viable or adequate.
Please post your valuable comments on this post.
Premiums are the amount of money paid yearly or monthly or quaterly based on the policy taken by us.
The premium for insurance is based on expectations of the losses. These expectations are based on studies of occurences in the past and the use of statistical principles.There is,in statistics,a "law of large numbers".When you toss a coin,the chance,or probability,of a head or tail coming up is half.If the coin is tossed 10 times,one cannot be sure that the head will come up 5 times. If the coin is tossed 1 million times,the number of heads variation will be less as a percentage.So also,the larger the numbers(of risks)included in the pool,the better the chnaces that the assumptions regarding the probability of the risk occuring,will be realized in practice.In order to be amenable to statistical predictions,insures have to insure large numbers of risks.The larger the spread of the business,the better the experience in relation to expectations.The probability of risk being the basis of premium calculation,large numbers are necessary to ensure that the premium charged is viable or adequate.
Please post your valuable comments on this post.
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