Calculations of new insurance products?
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Arpit Surana
How does an insurance company or actuary calculate risk of different emerging products such as Drone insurance Since data is very less or negligent, so how does the premiums got calculated?
Mayank Goyal
arpit wrote:How does an insurance company or actuary calculate risk of different emerging products such as Drone insurance
Since data is very less or negligent, so how does the premiums got calculated?
If the company is new:
Most of the things work according to the past experience of the Actuaries who are pricing the products. The industry benchmark is another thing that comes in way to price the product or the data can be bought from outside sources to price a product or from the sources from where they originate.
If the Insurance is of new type:
This is all based on the idea of insuring of a particular thing. They can assume some failure rate and take the highest loss ratio possible with possible markup and so on. They use the data from the place where the insurance may be active as you say drone insurance it is already in US so the companies can get in touch with them for the data or so and adjust it with geographical factors.
Mayank wrote:arpit wrote:How does an insurance company or actuary calculate risk of different emerging products such as Drone insurance
Since data is very less or negligent, so how does the premiums got calculated?
If the company is new:
Most of the things work according to the past experience of the Actuaries who are pricing the products. The industry benchmark is another thing that comes in way to price the product or the data can be bought from outside sources to price a product or from the sources from where they originate.
If the Insurance is of new type:
This is all based on the idea of insuring of a particular thing. They can assume some failure rate and take the highest loss ratio possible with possible markup and so on. They use the data from the place where the insurance may be active as you say drone insurance it is already in US so the companies can get in touch with them for the data or so and adjust it with geographical factors.
Okay, but how does the first drone insurance was made.
One of the answers i got was,
The Actuaries calculate the Probability of failure of individual parts and costs associated to it and then accordingly calculate the premium of it…
Such as in Drone insurance Probability of failure of camera, failure of wings, etc.
So, how widely this phenomenon is used?
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