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
Model state regulation that governs method of selling life insurance to prevent fraud or misrepresentation by agents or insurers. A life insurance disclosure model regulation to help buyers ...
Coverage for the expenses incurred by a business resulting from the recall of products, whether defective or not. ...
Act that seals a contract and is noncancellable. surety bonds and fidelity bonds resemble insurance contracts in many ways. However, the surety, which is often an insurance company, cannot ...
Rules that insurance companies must follow in filing an annual financial statement known as the convention blank, with state insurance departments. The reported financial condition of an ...
Value of benefit or contribution allocated to an employee under a pension plan; method of determining benefits due a retired employee. Each private pension plan establishes rules for ...
Insurance coverage that will indemnify the insured in the event a foreign government or company does not abide by the terms and conditions of the contract in such instances as: Exportation ...
Salaries plus commissions plus overhead expenses plus office rent plus fees charged for memberships in industry associations and bureaus plus guaranty association assessments plus taxes ...
Will written totally in the handwriting of that individual whose name appears on the will. ...
Income supplement program under Social Security to provide a minimum monthly income to aged, blind, and disabled persons. The SSI payments, which were introduced in January 1974, make up ...
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