10 Insurance pricing and General insurance.pptx

7/24/2019 10 Insurance pricing and General insurance.pptx

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Pricing Life InsuranceInsurance premium must Cover losses/ assessments Cover expenses

Yield a reasonable proftPresent value o uture

premiums must equal present

value o uture benefts Term insurance is the simplestexample

Based on mortality statistics


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Mortality Tables

Tool used by lie insurers to estimateprobabilities o death and survivalBased on actual datamoothed

!"oaded# or saety

Closely connected to populationmortality$ but %&T the same

'e(ect I%)'*+ lives only,ell enou-h o. economically to buy insuranceealthy enou-h to pass under0ritin- screens


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+i.erent Mortality Tables111

111 or di.erent purposesBased on timin- o insurancepurchase

!elect# mortality!)ltimate#

Based on product bein- purchased

Term lie insurance*ndo0ment

2nnuity


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Mortality


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Insurance Policy3s PremiumInsurance Policy3s Premium

'ate is the price one pays per unit o

covera-e

includes t0o parts4 Actuarially fair premium 5net

premium6 Loading4 expenses plus mar-in or proft

and contin-encies7ross Premium equals

'ate x amount o covera-e

purchased


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%et Premium

Present value o net premiumsequals present value o benefts

%et sin-le premium 5%P6 is the lump

sum amount that equals the presentvalue o benefts

2ll premium computations be-in 0ith

the %P2ll other payment arran-ements areinstallment plans to pay o. the %P


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%et in-le Premium

9 "ivin- pool 9 Claims Beneft 5:'s;$


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%et "evel Premium 5%"P6

%et level premium 8 net sin-lepremium divided by an annuity actorthat spreads payments over theselected period

Payments may be spread over anyperiod equal to or less than theperiod o covera-e


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Insurance Pricin-

Convertin- %P to %"P

2nnuity actor more precisely is

!Present value o an annuity due to's; or premium payin- period o nyears at a-e x#

Present value o annuity payments/number o entrants


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Insurance Pricin- HHConvertin- %Pto %"P

9 Be-innin- 9 "ivin- P= >actor =alue 1

?$@?;$A;; 's?$@?;$A;; : ;1


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%et "evel Premium

'emember %P 8 's;


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7ross premium

Be-in 0ith net premiums

%et level premium

=aluation net premium

+e loaded premium

2dd loadin- or*xpenses$ includin- taxes

Contin-ency mar-in

Proft mar-in

+ividendsJ

ChecK or compliance L competitiveness


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Constant amount per policy

>lat amount per 's;$


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Cover several sources o potential lossi-herHthanHexpected mortality

"o0erHthanHexpected interest

i-herHthanHexpected expenses$ taxes

i-herHthanHexpected lapse rates)sed di.erently in di.erent types opoliciesMinimal in nonparticipatin- contracts

Common in participatin- contracts HH savin-spaid bacK as dividends ater experience is Kno0n

Contin-ency Mar-ins


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"e-al 'equirements or'ates

2dequate

'easonable

%ot unairly discriminatory


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7eneral Insurance

People exposed to same risK poolmoney and share loss su.ered by ae0

Insurers acilitate the process bycollection o contribution in advanceand assure compensation in case o

loss It has to determine premium basedupon experience and proNections andmaintain trust to sustain and

compete


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7eneral Insurance Kinds

Motor Insurance >ire Insurance

Marine Insurance

*n-ineerin- Insurance "iability Insurance

Personal 2ccident

ealth Insurance

Miscellaneous Insurance


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;

General Insurance

>ire insurance is desi-ned to provide or fnancial lossto property due to fre and other related haOards1pecial type o insurance policies have uniquecovera-e such as risK o consequential dama-e$replacement/ reinstatement value$ multi location/

(oater and industrial all risK1 Marine insurance comprises o hull insurance and car-o

insurance1 ull insurance covers insurance o thecarrier o -oods1

Car-o insurance provide cover or losses/dama-es thatcould occur to -oods in transit on sea$ rail$ road and air1


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;?

Motor/2ccident Insurance is statutorily mandated to taKe care othose 0ho may -et inNured in an accident1

Third party liability policy

Comprehensive policy1

ealth/medical insurance covers

'eHimbursement o medical expenses related to specifc diseases

ospitalisation1

ome o the available policies are4 Individual/ 7roup Mediclaim

Policy$ Bhavishya 2ro-ya Policy$ an 2ro-ya Bima and overseasmedical cover1

"iability insurance policies cover several types o liabilities

*mployee liabilities$

*mployee state insurance liability$

%onHindustrial risKs$

Proessional liabilities

Product liabilities1


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Principles o 7eneralInsurance

Insurance is a contract1

*ssentials and implications o acontract apply1 2-reement

Consideration

Competence

"e-al &bNect


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Principle of Utmost Good Faith

Proposer to declare all inormation

preNudicial to acceptance o the o.er$

voluntarily4 2 -reater exposure than normally expected

*xternal actors that increase the risK

Previous losses and claims under other policies

2ny reusal or special rates by an insurer in thepast

*xistence o other non indemnity policies e1-1 lie

and accidents


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Proposer to declare all inormationpreNudicial to acceptance o theo.er voluntarily4 >ull acts related to subNect matter o

insurance >ire4 Construction$ &ccupancy$ aOardousnature$ fre detection/ f-htin- equipment

Marine4 PacKin-H sin-le/ double -unnyba-s$ old/ne0 drumsQ MachineryH %e0/ oldQ=essel carryin- -oodsQ Port o shipmentQ

+estination Motor4 Cubic capacity$ carryin- capacity$

model$ driver/ sel driven Personal 2ccident4 occupation$ a-e hei-ht

0ei-ht$ disability i any$ previous medical

historyThet Insurance4 =alue$ nature o stocK and


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Insurable Interest

,ithout Insurable Interest the contract is void

*ssentials

ome property$ ri-ht$ interest$ lie$ limb$ potential

liability capable o bein- insured

ubNect matter o insurance to be the property/

ri-ht/ interest

Insured to have a relation 0ith subNect matter o

insurance deprivation o 0hich 0ill brin- loss/

dama-e or create liability

'elationship o insured 0ith subNect matter duly

reco-niOed by la0


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Insurable Interest,hen to be present

>ire and miscellaneous4 all timeHat

proposal and claim Marine4 claim

2ssi-nment

Transerable by endorsement in marine$ ,ith consent o insurer in fre$ motor

and miscellaneous


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Insurance is a contract oIndemnity and nothin- more 5noproft to insured6

Indemnity provided throu-h Payment o loss

'epair 5motor insurance6

'eplacement 'einstatement e1-1 buildin-$

machinery


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"iability o insurer 'estricted to max o sum assured In case o under insurance4

5sum insured/ value6 : "oss

Insured is sel insurer or the rest

alva-e to be considered In case o buildin- policy$ 0ear tear

and depreciation$ in(ation bet0eendate o loss and replacement isincluded

2dditional a-reed cost i included in

premium


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Subrogationater payment toinsured insurer steps into the shoeso insured and can recover lossesrom third party 0ho caused it In case o "ie insurance and accident$

insurer does not -et this ri-ht andinsured can claim compensation romthird party as additional beneft

Insurer cannot recover more than ithas paid to insured


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ContributionIn case o insured -ettin-multiple cover rom more insurers on thesame subNect$ he can claim the loss romany insurer1 Payin- insurer can recoverproportionate loss rom other insurers

Perils Insured perils are the ones mentioned in policy

e1-1 fre li-htenin-$ storm$ thet

*xcepted/ excluded perils as specifcally

mentioned in policy )ninsured perils not mentioned in policy e1-1

dama-e due to smoKe or 0ater in fre insurance


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urveyor/"oss 2ssessor

Third Party2dministrator

Intermediaries

'einsurance

BroKer

BroKer

InsuranceCompany

IT ystems

ProviderBancassurance

2ctuary&ther

Intermediaries

2-ent

Risk

Adisory

Corporate

IndividualsCoHoperatives


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+irect Channels

Minimum physical contact Call Centres

Ideal or rene0al business

*conomic dispensin- o insurance related

inormation ervice related -uidance and support

eHIntermediaries Internet based inormation dispensin-

&ther remote terminals RiosKs


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BanK as 2-ent H Bancassurance

Provide readymade customer base

2pprox1 A

Documents

10 Insurance pricing and General insurance.pptx