Question

Identify each piece of information an actuary would need to calculate a premium for an auto liability policy. SEVEN 8. Explain how reinsurance works. Identify the types of reinsurance available and each of the parties to a reinsurance agreement. EIGHT 9.

Answer 1

8. A protection premium is the cash charged by insurance agencies for inclusion of auto liabilities. The measure of protection premiums charged by the insurance agencies is dictated by insights and numerical estimations done by statisticians of the insurance agency. The higher the probability of a claim and higher the protection, the higher the premiums usually are. The various types of vehicle insurance coverage are available to help protect you, your passengers and your vehicle in the event of an accident. The premium is decided on type of protection we need. Following information an actuary will need to calculate premium for an auto policy –

1. Liability coverage (Third party) – it covers bodily injury and property damage of third persons while driving.
2. Personal injury protection (Self) - It is to cover medical expenses of the owner/driver after an accident. In addition, it may also help cover other expenses incurred because of injuries — for example, child care expenses or lost income. It also adds extra cost in premium if opted.
3. Component coverage (The Vehicle) - This is coverage for bodily damage for the insured vehicle. The parts to be covered decided premium of liability. Some takes insurance for engine, other are not.
4. Coverage for theft, fire, natural disasters- According to the risk covered, the premium is decided.
5. Operating environment of the vehicle- if vehicle is operating in a risky place like mines, the premium will be more than to the vehicle running in city.
6. Cost of the vehicle at the time of insurance.