Why insurance companies face underwriting losses?
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ravjot
Those students who have studied CT-5,are already familiar with premium calculation of different life insurance policies,but few are aware of the fact that this is not the actual premium that is charged to the customer. The actual premium that is charged to the customers is very low than what is being calculated,this is due to competition. This is the main reason why insurance companies face ‘underwriting losses’.
Where,”Underwriting Income” is the difference between premiums collected on insurance policies by insurer and expenses incurred and claims paid out.
Sometimes,huge claims and disproportionate expenses may result in an “Underwriting Loss” rather than income,for the insurer.
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