Often you find the difference in the amount of insurance premiums to policyholders. Of course, some of you want to know what affects the amount of insurance premiums. This will increase knowledge for all of you. In addition, you can also benefit from buying an insurance policy when you need it.
It is possible for each company to distinguish important values from the factors that affect the amount of insurance premiums. However, we can still grasp the basics of evaluating things that affects the amount of insurance premiums.
Actually, we can review the factors that influence the amount of insurance premiums from the side of insurance objects and from the statistical measurement approach. This opportunity, we will discuss the factors that influence the magnitude of the insurance premium from the statistical approach. Maybe on another occasion, we will discuss factors that affects the amount of insurance premiums from different sides.
Which Affects the Amount of Insurance Premiums: Risk Measurement.
We use statistical methods to estimate the possibility of future events. Of course, you cannot estimate precisely because your future events do not know. However, we can estimate the chance that the event will appear. Statistical methods can estimate the probability of an event occurring in the future.
If we can analyze historical data, we can find the estimated probability of an event. So we estimate probabilities in risk factors, such as stock prices, based on analyzing historical data that is certain to be known.
Of course, when analyzing historical data, we use assumptions. Here, we use the assumption that these data are good indicators for the future.
Once, you might have a question that connects with insurance, why do you need security protection? Of course, you are not alone. Many people have the same question.
You can parse the question to find answers. In the end, you mean doing a risk analysis. This is because you use a method to identify risks. Including you assess the damage that might arise.
We carry out risk analysis, meaning that we carry out a series of processes which include identifying risks, how much severity, and the probability of risk. So, we do a risk analysis starting with identifying a risk. After identifying the risk, the next step is to measure risk.
We can measure risk by looking at the potential for how much severity (damage) and the probability of the occurrence of these risks. We call risk likelihood for the probability of the occurrence of the risk. While the impact that will occur if the risk occurs, we refer to risk impact. Then we can know the risk value or risk exposure. Risk exposure is a multiplication between Risk Likelihood and Risk Impact.
Which Affects the Amount of Insurance Premiums: Frequency Measurement.
We need to measure the frequency of an object for a certain period of time. This frequency measurement is to find out how many times a type of risk can override an object type that can be exposed to risk.
We also need to take emergency level measurements. Measuring this level of gravity to find out how much the loss is. The value of this loss relates to the effect on the condition of the company. In insurance, we can measure the level of emergency based on claims that occur. Next, we will find Pure Premium. Pure premium is the product of multiplication of frequency and level of gravity.