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
Quality of investments of insurance companies. State insurance regulators establish rules for company investments. Authorized investments vary, depending on whether a company is a life ...
Percentage of life insurance or other insurance policies remaining in force; percentage of policies that have not lapsed. The higher the percentage, the greater the persistency. Since it is ...
In ocean marine insurance, provision stipulating that upon the collision of two or more ships, when all ships are at fault, all owners and shippers having monetary interests in the voyage ...
Three types of damages can be awarded to a plaintiff: Special Damages reimbursement for out-of-pocket expenses, including medical bills, legal charges, cost of repairing damaged or ...
Coverage usually provided as part of the special Multiperil insurance (smp) policy, generally replaced by the commercial package policy, through the attachment of the Blanket Crime ...
Organization of brokers and securities dealers in the over-the-counter market operating under the auspices of the Securities and Exchange Commission (SEC). Its purpose is to enforce, on a ...
Feature of property and casualty policy providing coverage without a reduction in the policy's limits after a loss is paid. For example, if the limit of coverage under a property policy is ...
Typical non qualified plans of life insurance for key employees include: permanent life insurance dividends generated by the policy are used to pay the income tax of the key employee that ...
Transportation firm that carries only select customers' goods and is not obligated to carry any particular customer's goods even if that customer is willing to pay. Contrast with common ...
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