How Does Insurance Operate!
Insurers are professionals risk takers. They know the probability of different types of risk. Then they can calculate the premiums needed to create a fund large enough to cover any likely loss payments. Clearly only a proportion of the policyholder will require compensation from the fund at any one time.
The contribution paid by a policyholder is known as the premium. The premiums are paid to the insurers who is turn accumulate the money into a fund from which are paid.
Insurers are professionals risk takers. They know the probability of different types of risk. Then they can calculate the premiums needed to create a fund large enough to cover any likely loss payments. Clearly only a proportion of the policyholder will require compensation from the fund at any one time.For Example, in car insurance a young person with high-powered car, or a driver with a long history of accidents, will pay a higher premium than a mature and experienced driver with a modest saloon and a claim free record.
No comments:
Post a Comment