In all these organizations insurance premiums are calculated. Let’s take a closer look at what it is.
This should be sufficient for: Cover expected claims during the policy period. Create reserves. Cover the costs of the insurance company. Provide a business with a certain profit. The upper limit of the cost of insurance services is determined by two factors: its level of demand and the size of the discount rate applied to deposits. In addition, the amount of the premium is affected by: The structure and size of the insurance portfolio. It represents the total amount of risk. Management fee. There are 2 ways to determine insurance rate is legislative and independent methods. The first is used for mandatory types of insurance, the second – for voluntary insurance. From insurance rate calculated by the organization depends largely on its financial stability.
It is part of the rate to create an insurance reserve, which, in turn, is used for subsequent payments under the contract. Two elements of this part are distinguished.Insurance rate is risk rate and premium. At the expense of the former, reserves are built up, from which payments are made later in the event of an accident. The risk rate is considered the basis of the tariff.
The risk premium is linked to the constitution of a reserve fund in case the number of accidents exceeds the number foreseen. If the policy provides for several different insured events, the calculation is made separately for each risk.
Types of insurance
They are divided by the method of constitution of the fund and the calculation of the insurance rate. The main types are:
- Risk insurance. This includes business other than life insurance where the insurer is not obliged to pay the insured amount at the end of the contract period. They are not associated with the accumulation of the amount during the term of the agreement.
- Endowment insurance. In this case, payments are provided in the event that the insured entity survived to the end of the contract period and when it died during that period. In determining the amount of the contribution in the latter case, the accumulated component is included in the net rate. At the expense of the latter, there is an accumulation of the amount that will be paid at the end of the insurance period.
In this insurance rate a part includes the costs of: Conducting insurance business. Creation of a fund of preventive measures. Profit of the insurer from the operation performed.