2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
The cost of insuring the item in question is determined through a process such as actuarial calculations. It is with the help of them that the cost of the services of the insurance company is calculated, as well as the amount of contributions that the insured will have to pay. And so that you don’t inadvertently count anything extra, it would be nice to understand how actuarial calculations are carried out in insurance.
To begin with, we emphasize that the relationship between insurers and the insured is built on the basis of a system of statistical and mathematical patterns that have been formed historically. The calculation of insurance is carried out using special mathematical formulas that reflect the mechanism for accumulating and spending the insurer's reserve fund in the long term. This is mainly for life insurance. However, in a broad sense, actuarial calculations can be applied to any type of insurance to determine its rates under certain conditions. With the help of them, the share of each insured in the creation of the reserve fund is also calculated, i.e. there is a differentiation of tariff rates ininsurance business.
As for the term "actuarial calculations", it comes from the name of the profession. An actuary (from the Latin "actuarmus" - "accountant") is a specialist who develops mathematical and statistical methods for calculating the amount of necessary reserves, loans and credits. These people solve problems that we most often call "actuarial" in insurance.
Actuarial calculations and their principles were first considered in the works of scientists of the 17th century: E. Halley, Jan de Witt, D. Graunt. In his book, Graunt studied mortality bulletins, and Witta reflected on determining the size of insurance premiums depending on the rate of growth of money and the age of the insured. Actuarial calculations were further developed in the works of Halley, whose mortality table is still used today.
To calculate the amount of contributions, the following indicators are used: the frequency of occurrence of insured events, the risk cumulation coefficient, the loss ratio and its frequency. In practice, insurance statistics are also often used, as well as generalizing indicators characterizing tariffs in the insurance business as a whole.
Finally, it should be noted that the determination of tariffs in insurance is one of the most complex and controversial issues that require close attention from the insurer. Therefore, specialists in this field should strive to apply the latest advances in computer technology, statistics and mathematics. ATslightly different methods are used in personal and property insurance, because in the first case it would be useful, for example, to look at demographic statistics, and in the second it is not at all important. Therefore, in personal insurance, special tables of average life expectancy and mortality are used to calculate the net rate, and in property insurance, tables of the rate of return in this industry.
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