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
Same as term Builders Risks Forms: types of contracts that insure building contractors for damage to property under construction. The completed value form requires a 100% coinsurance ...
Prior to 1988, right to withdraw retirement assets before age 59 1/2 without having to pay a 10% penalty under the following circumstances: medical expenses are incurred. the plan ...
Liability insurance that provides coverage for the insured in the event the insured's negligent acts and/or omissions result in libel, slander, invasion of privacy, or false arrest suit. ...
Same as term American Risk and Insurance Association: membership organization of companies,academics, and individuals in the insurance business whose interest is to further education and ...
Inverse of the actuarial present value of a life annuity, taking the employee's life expectancy into account, to commence income payments at the normal retirement age of the employee. It is ...
Figure used in calculating a worker's primary insurance amount (PIA) to determine Social Security benefits in the following manner: calculate the number of years between the worker's ...
Health insurance coverage offered by some states for medical expenses and loss of income from nonoccupational disability. The merits of federal health insurance have been debated for some ...
Plan to control employer's health care cost through the introduction of practice guidelines or protocols for health care providers, and to improve the methods used by employers and ...
Annuity in which premium payments are used to purchase accumulation units, their number depending on the value of each unit. The value of a unit is determined by the value of the portfolio ...
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