If it's easy to fix the price of one
manufactured good according to
materials cost and production expenses, it's different
for a life insurance policy,
which differs even from dwelling or car insurance policy since it can remain in
strength during 50 years or more.
Insurance companies
can in any way of knowing their costs exactly, theirs
incomes of placement or theirs
future technical results. In
consequence, they make
long-term projections which
rest on statistics or
actuarial data, with the mortality tables assistance,
the death rates with the various groups
of population age. They
also melting their estimates
with expenditure regards, interest rate
and futures death rate. These calculations are carried out
by actuaries who receive
actuarial mathematics training applied
to the life insurance.
Equitable Tarrifing
Before approving your proposal,
the insurance company must evaluate
the degree of risk you represent.
It is obvious that the risk grows
with age and deterioration of your health. The pooling of
similar risks makes it possible to obtain
an equitable tariffing. The statistics data are
joined together in order to divide the individuals
by “categories of risk”.
The insurance price - the premium - translated
the risk evaluation. More the risk
is weak for a category
data, plus the premium is weak.
To evaluate the risk, the insurer
takes many factors into account: the age, the sex, the
medical antecedents and the state of
health. Thus, in
average woman pay lower premiums
than men. Indeed, the
statistics clearly show
than men. Same for nonsmokers who pay lower premium rates. | 