RMIN 317 Lecture Notes - Lecture 2: Life Insurance, Vehicle Insurance, Risk-Free Interest Rate

• School: University of Calgary
• Department: Risk Management and Insurance
• Course: RMIN 317
• Professor: Martin Halek

Document Summary

Have to charge everyone an average of the group. The expected cost of claims that must be paid by the insurer for a. Represents the largest component of the fair premium for most. Homogeneous buyers contract or group of contracts types of insurance. Each buyer has the same loss distribution. Assume each buyer"s loss is independent of (uncorrelated with) the loss of other buyers. If an investment company makes lots of money investing, they will. At least the risk free rate charge their customers lower premiums. Assume last three are similar for every insurance company. The fair premium is the premium that is just sufficient to fund the insurers expected costs and provide a fair return on capital to owners. Result: insurers charge cost- or risk-based prices low cost. Group together insureds with similar characteristics and estimate the expected claim cost for members of each group. Find potential policyholders with the same characteristics.