Rate Making
Process of calculating a premium so that it is adequate-sufficient to pay losses according to expected frequency and severity, thereby safeguarding against the insurance company becoming insolvent; reasonable-the insurance company should not be able to earn an excessive profit; and not unfairly discriminatory or inequitable. Theoretically, it can be said that each insurance applicant should pay a unique premium to reflect a different expectation of loss, but this would be impractical. Instead, classifications are established for applicants to be grouped according to similar expectation of loss. Statistical studies of a large number of nearly homogeneous exposures in each underwriting classification enable the projection of losses after adjustments for future inflation and statistical irregularities. The adjusted statistics are used to calculate the pure cost of protection, or pure premium, to which the insurance company adds on loads for agent commissions, premium taxes, administrative expenses, contingency reserves, other acquisition costs, and profit margin. The result is the gross premium to be charged to the insured.
Popular Insurance Terms
Person (the transferee to whom the property is transferred) who is at least two generations younger than the person (the transferor) who is transferring the property. This type of property ...
Method used to determine the policyholder's return on premiums paid into a life insurance policy. This method is illustrated in two ways:.Surrender of Policy Approach calculation of the ...
Section in some property insurance contracts that eliminates further coverage for buildings after they have collapsed from causes other than fire or explosion. For example, fire coverage ...
Dividends of a participating life insurance policy deemed by the Internal Revenue Service to be a return of a portion of premiums and thus not subject to taxation. ...
Coverage for dental services under a group or individual policy. ...
New rule entitled "Accounting for Certain Investments in Debt and Equity Securities," which requires most fixed maturity investments to be listed on the INSURANCE COMPANY'S FINANCIAL ...
The definition of contract of adhesion or, as it is also known, an adhesion contract is explained as an agreement between two parties where one party has more power than the other when the ...
Same as term Blanket Position Bond: covers all employees of a business on a blanket basis with the maximumlimit of coverage applied separately to each employee guilty of a crime. ...
Hazard covered under catastrophe reinsurance. This form of excess of loss reinsurance protects the ceding company for loss above the retention limit caused by multiple catastrophic events. ...
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