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
Coverage against foreign country expropriation underwritten by the overseas private investment corporation (OPIC) for U.S.-owned companies investing in given developing countries. ...
Activities of interest in underwriting an application for life insurance to determine the rate classification (premium) for the applicant. For example, a sky diver is at greater personal ...
Point in time when a term life insurance policy terminates its coverage. ...
Dwelling insurance is how it’s called the most obvious coverage type under the homeowner’s insurance umbrella. It deals with the damages done to the physical structure of the ...
Sum returned to a policyowner by an insurance company under a participating policy. Dividends are not deemed as taxable distributions, as the Internal Revenue Service interprets them as a ...
The adjuster definition is directly related to insurance and, more exactly, insurance claims. An insurance adjuster is responsible for evaluating insurance claims to determine how liable ...
Person, business, or organization specified as the insured (s) in a property or liability insurance policy. In some instances, the policy provides broader coverage to persons other than ...
Coverage during the transfer of securities and monies, precious metals, and other specified types of valuables by armored guard services. Policies are specifically designed to fit an ...
Property acquired before marriage by gift, by inheritance, or bought with separate monies. ...
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