This is how the insurance company Works
How insurance works: Helping others clients who got disasters
Insurance business is a business taking over risk from customers to be certified by insurance companies. How to cover the risk is by use the accumulated premium funds paid by customers to cover the clients who got disaster.
take the example of merchants association there are 100 people who joined in insurance by paying Rp3 million. The accumulated total premium collected is Rp300 million. It is estimated that from 100 traders, there are five people affected by the disaster with losses of Rp50 million each so that the total loss is Rp250 million.
Insurance companies that act as risk insurers use the accumulated premium to cover the risk of affected traders. But, the unaffected can't get dependent from the insurance company.
Working Process of Insurance Company
The work process of the insurance company uses three simple steps:
1. Attracting Customers
Insurance companies offer products and look for someone who will become a customer. The insurance company will divide each insurance buyer or policyholder into different sections.
So, if you use health insurance, it will not be mixed with life insurance or anything else. Insurance will cover your losses.
2. Collecting Premiums
Customers will be given a schedule of premium payment which is you need to pay every month. Through this premium payment, the amount of money from each customer will be processed to overcome the problems experienced by other customers and who make claims to the insurance company. So, the system of the insurance company is repeats the rotation of money from customers to cover the risks experienced by other customers.
3. Paying Claim
If there is a claim from a customer that got disaster, the insurance company shall pay in accordance with the condition. The insurance company will make sure that the incident of the customer's claims is really a disaster and not a deliberate incident. In the policy clause, there is usually an agreement that if the incident has intentional elements, the compensation will not be granted by the insurance company.
How Does the Insurance Company Glance at Risk Management Business?
Some system work and how to manage risk by this insurance company you need to know.
1. The customer is officially registered as a participant of the insurance program after signing the agreement as outlined in the form of an insurance policy.
2. The registered customer insurance program is required to pay the premium. All premiums from customers will enter the insurance pool. New or old members of the status are the same, that is promised insurance companies will be paid a sum of money if the insured losses occur, as long as the premiums that become obligations have been paid.
3. Join the insurance program like buying big money with small money. That is, risk can happen anytime. You could just join the insurance program yesterday and today there is a risk then you can claim. These benefits can be obtained from the insurance program.
4. The insurance company will consider every risk of the product being run by collecting data and making it in the form of risk statistics that contain:
- Predict the number of people who will actually file a claim within a period. Insurance companies must be careful to estimate the number of people who will experience a loss in the first year, the next year, and then.
-Predict the number of customers who do not claim within a period so that the insurance company can pay a claim that is much larger than the premium money received from the policyholder.
-Detailed customer information statistics can be grouped according to risk characteristics to calculate premium rates based on risk groups. The term is a classification of risk or underwriting. By imposing risk-based premiums, insurance companies can act fairly to all policyholders.
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