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Pure Risk: Fire, Lightning etc. Insurable Speculative Risk or Dynamic Risk: Inherent to a business.

. Outcome of a business decision Not Insurable. Law of Large Numbers: As sample size increases, expected and actual get closer Indemnity: Amount paid out when the risk is encountered. Loadings: 3 kinds Mortality Expenses (normally 18 % to 25 %) Interest

Actual Premium = Mortality + Expenses Interest IRA: Insurance Regulatory Authority Mortality Table: Shows the rate of death at different ages based on past data In case of General Insurance, Loss Experience of Damage is used instead of Morta lity Factor Whether a factor is insurable or not depends on following: Must be large number of people with similar potential for loss Loss must be definite Loss must be cause financial burden Loss must be calculable Insurance must be affordable

Classification of Insurance: Binder: Agent with powers to bind the insurer Re-insurer: Insurers insurer Underwriter: Person who decides whether to accept the risk or not Loss Adjuster: Investigator and loss assessor for claims Public Adjuster: An agent of the insured for claims LIA/MIB: Associations supported by insurers for collecting data on bad risk Rate Bureau: Authority for insurance pricing Life Insurance: es Term: For a specific term Whole Life: Whole life time of the insured person Endowment: Similar to term. Benefits are available for rest of the life Universal: Investment portion goes to money market instead of long term securiti

If the insurance of the house is on actual cash value basis, amount to be paid i s decided by insurance company using current replacement cost depreciation If the insurance of the house is on replacement cost basis and is of 80% of the replacement cost, the insurer would pay for fixing the house without any deducti on. Terms and condition in insurance contract usually contain following:

Person or property insured Premium amount Sum assured When will the claims be paid? When the claims will not be paid? What recourse is available to the insured if he were to dispute the decision of the insurance company? Rights, duties and responsibilities of both insured and insurer Defaulting premium clause

Forms of Insurer: o o o o o o o o o o o o o o o Mutual E.g. SFI Co-operatives No profit motives Insured are the owners Surplus to be distributed to policy owners Stock Profit oriented Shares traded on stock exchanges Captive Microsoft covers its own employees through self administered scheme Subsidiary of a conglomerate Set up to take care of insurance needs of a group Taps the re-insurance market Syndicate Lloyds of London Several underwriter coming under a single banner Government Social insurance like pension, medical etc Export credit guarantee Pools Large risks like satellite, nuclear plant etc Reciprocal arrangement between insurer P & I Club Protection and Indemnity club

Types of Insurance: Life: o o o o P&C: o o o o o o Life Whole Life Term Life Endowment Universal variation of whole life Health Annuities and Pensions Personal Auto covers injuries to self and others Home includes content of home as well Medical Accident Travel Commercial Property machinery

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Liability bodily injury Group Health Machinery Transit Specialist Business Aviation Profitability Space Risks Construction Credit

Actuarial Department: Establish premium rates, reserve liabilities, non-forfeiture values Analysis of earnings and determine dividends Designing new policies and forms Conduct mortality and morbidity studies Supervise underwriting practices Product design Administration of business

Underwriting department: Establishes standards for selection of lives Appointment of medical examiners through the medical department Underwriting of risk

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