Reply To: how do insurance companies make profit ?

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January 25, 2019 at 9:17 am #24430
Arpit Surana
Participant

    UmangGarg wrote:

    But when we calculate premiums, don’t we take interest rate we get on premiums into account? Why are we separately counting investment income then? Doesn’t underwriting profit include the interest earned on premiums?

    Plz answer.

    Thanks in advance

    Sent from my Redmi 4 using Actuarial Info mobile app

    No we don’t take interest rate into account while calculating premiums, we only take discounting rate into account.

    Interest rate is the rate of money that will be earned through investment, which is not certain. So that’s why we need to take investment income separately into account.