March 2, 2014 10:12 PM IST
Definition:
Pricing Insurance Policy is a way by which we decide the premium rate that has to be paid for
policy by the policy holder.
To have a stable business and for the mutual benefit of both the insurer and policy holder we
have different methods of pricing policies.
Actuaries are responsible for calculating the premium rate.
Importance:
Pricing should be competitive to attract folks to have insured by them.
Both expected and expected claims and expenses must be taken into account.
Experience and statistical records are necessary rather anticipation in making assumptions
about pricing. Funding Methods: There are two types of traditional funding method. Mutual Benefit method: i.Amount is collected from the members after the death of a person. Demerits:
a) As the society cannot force its members to pay the amount, the amount that can be given
to the member cannot be determined.
b) As members die, the contribution from the old members increases which makes them to
withdraw from the group.
c) The same reason prevents the new member to join the group.
d) The members who die first are the most benefited ones. Assessment method:
i. Amount was collected in the beginning from the participants by framing the budget.
This post was edited by T Ghosh at March 2, 2014 10:12 PM IST