If you're a small business owner or operator and want to get an explanation of how the premium prices for the company, please read on. There are basically two ways that premiums can be calculated.
Group Insurance Rates
price (rate-making) process in the group insurance is essentially the same as prices in other industrijama.Društvo insurance company must generate enough revenue to cover their claims and costs, and contribute to the excess of the company. It differs in that price group insurance products initially determined on the basis of expected future events and may also be the subject of experience, so that the score of the final cost of the contract holder can be determined only after the coverage period has ended. Group insurance rates consists of two steps.
(1) determine the unit price, called the rate or premium rate for each unit used (eg, $ 1,000.00 life insurance, $ 1 per day hospital benefit, or $ 1 monthly fee income of disability)
(2) determining the total cost or premiums to be paid by the contract holder for all the coverage purchased.
Making access to the group insurance rates vary depending on whether the manual rating or experience rating is used. In the case of manual assessment, premium rate is determined independently of the particular group of applications experience. When used in experience rating, experience of past claims group to consider in determining future premiums for the group and / or adjust premiums after the last coverage period has ended. As in all rate decisions, the primary goal for all types of group insurance is to develop premium rates are adequate, reasonable, and equitable.
Rating Manual
in the manual rating process, premium rates are established for a wider class of group insurance. Manual rating is used with small groups for which no credible individual loss experience is available. This lack of credibility is due to the size of the group is such that it is impossible to determine whether the experience of a coincidence, or is truly a reflection of the exposure. Manual rating is also used to determine the initial premium for larger groups that are the subject of the visitor experience, especially when the group is written for the first time. In all but the largest group, the experience rating is used to combine manual rates and the actual experience of a given group to determine the final premium. The relative weights depend on the credibility of the group's own experience. Manual premium rate (also called tabular prices) are quoted in the rate of use. As noted earlier, the manual rate applicable to the particular case of group insurance to determine the average premium rate for the case to be multiplied by the number of giving units to obtain a premium for grupu.Ocjena process involves the determination of net premium rate, which is amount required to meet the cost of expected claims. For any classification, it shall be calculated by multiplying the probability (frequency) of claims arising from the expected amount (weight) of the application.
in the manual rating process, premium rates are established for a wider class of group insurance. Manual rating is used with small groups for which no credible individual loss experience is available. This lack of credibility is due to the size of the group is such that it is impossible to determine whether the experience of a coincidence, or is truly a reflection of the exposure. Manual rating is also used to determine the initial premium for larger groups that are the subject of the visitor experience, especially when the group is written for the first time. In all but the largest group, the experience rating is used to combine manual rates and the actual experience of a given group to determine the final premium. The relative weights depend on the credibility of the group's own experience. Manual premium rate (also called tabular prices) are quoted in the rate of use. As noted earlier, the manual rate applicable to the particular case of group insurance to determine the average premium rate for the case to be multiplied by the number of giving units to obtain a premium for grupu.Ocjena process involves the determination of net premium rate, which is amount required to meet the cost of expected claims. For any classification, it shall be calculated by multiplying the probability (frequency) of claims arising from the expected amount (weight) of the application.
adjustments to net premium rates in order to provide reasonable capital is complex. Some factors, such as premium taxes and fees vary with the premium charge. At the same time, the premium tax rate does not affect the size of the group, a commission rate of decline as group size increases. Cost of damage tend to vary with the number, not the size of claims. Allocation of indirect costs is always a difficult process as well as determining the risk of collection. Community rating system, originally developed by the Blue Cross Blue Shield, are often defined to limit the demographic and other risk factors are recognized. They usually ignore most or all of the factors necessary for the principal and the rate can be as simple as a rate refers to those with families. Few actuarial justification for charging all groups the same rate regardless of the expected morbidity. Community rating is mandated in some jurisdictions. This makes it a matter of public policy than the actuarial cost issue.
Experience Rating
Experience Rating
In fact, says charge is a weighted average of (1) damages subject to experience rating and (2) expected claims, with damages to be assigned a weight equal to the factor of trust and expected claims assigned a weight equal to one minus the credibility factor. damages subject to experience rating, after consideration of any stop loss provisions. Where the trust factor is one, subject to experience damage assessment will be the same as the claim charge. In such cases, the expected claims underlying the future rates will not be considered. So when a group of companies provide significant size, experience rating reflects the levels arising from these groups has its own unique risk characteristics. It has become common practice to group the financial benefits of good experience and hold them financially responsible for a bad experience at the end of each policy period. When the experience turns out to be better than expected in the future rating assumptions, the surplus can be accumulated in the account is called the premium stabilization reserve, claim fluctuation reserve, contingency reserve or surplus, or simply be vraćen.Povrat or called dividends (mutual companies), or return on experience rating (a joint stock company ).
the net result of a process commonly called experience rating account balance of the contract holder, the final state is attributed to the individual contract owners. As pointed out earlier in the balance or part balance can be restored to the contract vlasnika.Adekvatnosti group premium stabilization reserves affects dividends or rate adjustment decisions.