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
Trust named from a private-letter ruling by the IRS that involved a trust established by a Jewish congregation on behalf of its rabbi. The operation of the trust involves the employer's ...
Independent, nonprofit, membership hospital plan. Benefits provided include coverage for hospitalization expenses subject to certain restrictions: for example, semiprivate room only. A ...
Coverage on fur coats as well as other clothes that have, fur trim. Protection is provided at any location on an all risks basis subject to the exclusions of wear and tear, war, and nuclear ...
Modification of split dollar life insurance policy in that the death benefit becomes payable upon the second death. This type of policy is ideal in those circumstances when estate taxes ...
Accrual or addition to life insurance benefits. ...
Total amount of insurance coverage available for an insured. ...
Addition to the homeowners INSURANCE POLICY AND COMMERCIAL PACKAGE POLICY that provides liability and medical coverage for damages resulting from the operation of motor boats too large to ...
Agency of the federal government formed as the result of bankruptcies of savings and loan associations during the 1930s. Insures deposits of customers up to $100,000 for each account. In ...
Trust whereby asset management is provided until a child reaches the age of majority. Upon reaching majority, the child has full use and control over the assets. The grantor of the trust ...
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