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
Government health care program in several European countries that has been proposed in various forms for the U.S., to be administered by the federal government. Plan A would cover all U.S. ...
Condition for inland marine liability insurance coverage that states a loss or claim must occur in the policy territory. Policy territory for a liability policy includes the U.S., its ...
Form that covers exposures associated with efforts to operate a business that is damaged by a peril such as fire. For example, a special electrical generator may have to be purchased in the ...
Part of the Balanced Budget Act of 1997 that permits medicare recipients to select coverage among various private health care plans to include HMOS, PPOS, POINT-of-SERVICE (POS), MEDICAL ...
Provision in insurance policies that states the deductible. ...
Person for whom the trust was created and who receives the benefits thereof. In many instances a trust is established to prevent the careless exhaustion of an estate. For example, the ...
act that prohibits employers from requiring employees to retire at age 70. Also, the act prohibits EMPLOYEE BENEFIT PLANS from discriminating against employees in the 40 to 70 age group ...
Coverage for a shipper (owner/sender) for property damage or loss of goods in transit through the post office. A trip transit insurance policy specifically excludes coverages on property ...
tort against another person's property, designed to detain or dispose of it in a wrongful manner. For example, wrongful selling of another person's automobile without permission would ...
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