Reinsurance Tutorials #9 - Season 3
Hi everybody 👋
Today, and for the ninth Reinsurance Tutorials video of the season, we will talk about "How to calculate a premium : risk premium calculation"
This subject will be addressed by CCR Re experts François Cahu and Hoang Anh Nguyen.
Let’s start! ⏬
[Hoang Anh Nguyen] : Good morning, my name is Anh Nguyen, I am an Underwriter from Cambodia - Philippines - Laos - Vietnam - P&C. And today, I am accompanied by François.
[François Cahu] : Thanks, Anh, I am François Cahu, I am Senior Vice President Non Life Treaties Central and Northern Europe.
[Hoang Anh] Thank you for joining us for this presentation on the topic:
How to calculate a premium: Risk premium calculation.
What is an Insurance Premium?
[François] : An insurance premium could be understood as the amount of money that a policyholder (could be an individual or business) pays for an insurance contract to cover their interests, for example : healthcare, motor, properties, life insurance, etc. Therefore, the premium is an income for the insurance company.
[Hoang Anh] : Simply put, premiums are what you pay insurance companies in exchange for coverage.
It also represents a binding liability, as the insurer must provide coverage for claims being made against the policy. Failure to pay the premium may result in the cancellation of the contract.
[François] : The policyholders may also be responsible for an insurance deductible, which is the amount they pay before the insurer starts covering the costs of a claim.
How an Insurance Premium Works?
[Hoang Anh] : Policyholders may choose among several options for paying their insurance premiums:
in installments —monthly or semi-annually— while others may require an upfront payment in full before any coverage starts.
What are the Key Factors affecting Insurance Premiums?
[François] : The price of the premium depends on a variety of factors, including: the type of coverage, the nature of covered risk, claim history, etc. There may be additional charges payable to the insurer on top of the premium, including VAT, other taxes or services fees.
[Hoang Anh] : It is worth mentioning that after the end of the insurance period, insurance premiums may be revised upward or downward depending on different factors: the overall claims result, the change in insured value, the relationship between the policyholders and the insurer (getting some discount for long-term loyalty). However, in this hardening market situation, it is more likely that the insurance premium will tend to increase each year.
How are Premiums calculated?
[François] : Insurance companies generally employ actuaries to determine risk levels and premium prices for a given insurance policy.
Insurers use the premiums paid by their policyholders to cover liabilities associated with the policies they underwrite. They may also invest in the premium to generate higher returns. This can offset some costs of providing insurance coverage and help an insurer keep its prices competitive.
[Hoang Anh] : While insurance companies may invest in assets with varying levels of liquidity and returns, they are required to maintain a certain level of cash flow at all times. State insurance regulators set the number of liquid assets necessary to ensure insurers can pay claims.
[François] : Thanks a lot Anh, for joining me in this presentation. And thank you for watching it.
[Hoang Anh] : You’re welcome François. I hope you get everything about how to calculate a premium. Thanks for watching this video. Goodbye.
Bye for now 👋
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