Before taking out insurance, you need to know how an insurance company works. To help understand this, we have provided a detailed explanation of the insurance company’s business model based on internet research and discussed with some friends who are insurance experts. Let’s divide the model into components:
Take and invest
Request
Marketing
Take and invest
Roughly speaking, we can say that the business model of the insurance company is to include in premium income and investment more value than the cost spent on losses when presenting the fair price, the client will receive.
Income can be explained by the following formula:
Income = premiums received + investment income – losses incurred – technical insurance costs.
Insurance companies acquire assets in two ways:
Underwriting is the process used by an insurance company to select the risk to be insured and the amount of the premium to be charged to cover that risk.
Invest the value you gain with a premium.
The business model of an insurance company has a complex side effect, namely the actuarial science of pricing, which relies on statistics and probabilities to estimate the value of future claims with a specific risk. Once the price has been determined, the insurance company will allow or reject the risk through an underwriting process.
Insured Liability
Given the frequency and severity of the insured liability, as well as the estimated average payments, the rate remains modest. The company reviews all historical loss data, updates it based on present value, and then compares it to the premiums earned to assess the adequacy of the interest. Companies also use cost-loss ratios. Simply put, we can say that when comparing losses with the relativity of losses, different risk characteristics are assessed. For example, a double premium should be charged for multiple loss policies. Of course, there is still room for more complex calculations with multivariate analysis and parametric calculations, always using historical data as input for possible future losses.
Business profit is the amount of the premium charged at the end of the policy less the amount paid on claims. We also have an acceptance from A.K.A. combined ratio. This is measured by dividing the amount of damage and cost by the premium. If it is above 100% we call it the underwriting loss, and if it is below 100% we call it the underwriting profit. Remember that there is an investment share within the company’s business model, which means that the company can make a profit even if there is an underwriting loss.
Placing Stocks
Insurance companies take advantage of their investments by placing stocks. This is the amount that will be received as a bonus over time and not paid out on claims. Investments in stocks begin when the insurance company receives the premiums and end when the insurance premium is paid. Because this specific period is the length of the accrued interest.
The U.S. insurance company, a personal accident and property insurer, raised $ 142 billion in the five years to 2003, with combined stock placement income of $ 68 billion over the same period. Many industry professionals believe that it is always possible to take advantage of the stock offering without insurance. There are, of course, many ideas now. Finally, when signing a new insurance policy, it is important to keep in mind that the market was bearish during the recession and insurance companies stopped making variable investments, which required a revaluation of premiums, meaning they will rise. Price. This is therefore not the time to register or extend your coverage. Changing the timing of profit for non-profits is known as the adoption cycle.
Research
The real “product” that the insurance industry pays for is the settlement of losses and losses, as we call it the mere benefit of the insurance company. Insurance company representatives or negotiators can assist clients with claims or they can be completed personally by the company. Many requirements are used by appraisers and supported by registrars and data entry specialists in the company’s claims department. The classification of shellfish is based on a severity criterion and is provided to applicants. Claims auditors have different claims settlement powers, depending on their experience and knowledge. Sales are followed by an investigation in collaboration with the customer to determine if they are covered by the contract. Research brings commission and income to the customer.
Government Agency
Sometimes a client can hire a government agency to contract an insurance company on their behalf. On more complex policies where claims are difficult to resolve, customers can usually use a separate additional policy to cover the state’s appraisal costs, called general insurance. By managing the complaint handling function, the company tries to meet the requirements in the areas of customer satisfaction, administrative costs and leakage compensation. Insurance fraud usually stems from this balance, resulting in fraudulent insurance practices with serious risks that companies manage and eliminate. Disputes between customers and insurers often lead to legal disputes. The practice of claim handling and its validity are growing issues.
Marketing
Insurance companies use negotiators and agents to open markets and insure their customers. These negotiators are either affiliated with a company or self-employed, making them subject to the terms and conditions of many other insurance companies. It has been proven that the implementation of the insurance company’s objectives is achieved through specialized and individual services of agents.
