RMI 2101 Study Guide - Midterm Guide: Jacques Louis Randon, Life Insurance, Standard Deviation

• School: Temple University
• Department: Risk Management and Insurance
• Course: RMI 2101
• Professor: Michael Mc Closkey

Document Summary

Risk leads to uncertainty leads to variation around expected losses vs. actual. Planned losses lead to expected losses (e(x)) lead to expected severity. Gross premium is premium charged for insurance per exposure unit. Although insurer doesn"t know all the costs until the last claim is settled. Losses lead to expenses lead to administration. Amount of gross premium sufficient to pay for losses only (p*). Actual losses may not be equal to expected losses. Insurers face an additional risk estimation risk. Influences on the size of the risk charge. If confident of p* estimate, small risk charge: life insurance, auto insurance, homeowner"s association. Lots of past information experience to estimate p*. If not confident of p* estimate, risk large and very high. Not much past information high risk charge! General office administration expenses or fixed costs. P* on a group of similar units. P* = (0)(0. 85) + (1000)(0. 10) + (5000)(0. 30) + (10000)(0. 20) = .