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Your Medical Insurance May Not Cover You When You Travel
By kingmoore
If you open your passport to page two, you will see a warning that says that anyone who is considering foreign travel should find out what travel medical health insurance coverage, they will require Read more...
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Insurance Business|insurer’s Business Model
By adel khamis hassan
Insurer’s business model
Profit = earned premium + investment income - incurred loss - underwriting expenses.
Insurers make money in two ways:
1-through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks
2-by investing the premiums they collect from insureds.
The most difficult aspect of the business is the underwriting of policies.
Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly.
To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them.
Data is analyzed to fairly accurately project the rate of future claims based on a given risk.
Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure.
Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy.
Of course, from the insurer's perspective, some policies are winners (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are losers (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income).
An insurer's underwriting performance is measured in its combined ratio.
The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio.
The combined ratio is a reflection of the company's overall underwriting profitability.
A combined ratio of less than 100 percent indicates profitability, while anything over 100 indicates a loss.
Insurance companies also earn investment profits on “float”.
“Float” or available reserve is the amount of money, at hand at any given moment, that
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