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
Three basic plans are available to cover the costs of health care: commercial health insurance, private noncommercial (blue cross/blue shield), and social insurance (Social Security). ...
Associated insurers that are under common stock ownership or interlocking directorates. Such an arrangement makes it easier to exchange insurance products for sale to the consumer, reduces ...
Mathematical premise stating that the greater the number of exposures, (1) the more accurate the prediction; (2) the less the deviation of the actual losses from the expected losses (X - x ...
Obligation of the insured to report losses from a covered peril to the insurance company or its representative as soon after its occurrence as possible. ...
Coverage that protects a business, up to the policy limits, if actions or non-actions of the insured result in a legally enforceable claim for bodily injury, property damage, or personal ...
Refusal by an insurance company to underwrite or to continue to underwrite questionable risks in a given geographical area. This is an important civil rights issue. ...
Excess coverage over the first layer of medical insurance to provide for catastrophic medical payments. The first layer may be either group or individual medical insurance, or an individual ...
Device that enables the health maintenance organization (HMO) to present a premium quotation to the employer that would encourage the employer to replace the current health carrier. The POS ...
Same as term Associate in Automation Management: professional designation earned after the successful completion of three national examinations given by the insurance institute of America ...
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