tag:blogger.com,1999:blog-2761684730989137546.post9048136969978632409..comments2024-03-28T07:50:06.102-04:00Comments on Mike Norman Economics: Rate Making: How Insurance Premiums Are Setmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-2761684730989137546.post-30744403931720885502017-01-17T16:05:00.770-05:002017-01-17T16:05:00.770-05:00If a corp. with 50,000 employees goes out to UNH t...If a corp. with 50,000 employees goes out to UNH to buy insurance for their workforce nationwide, do you think they tell UNH: "just price it like we have only one employee!" <br /><br />You have to get the exposure units UP.... as a buyer...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-77063521703155968862017-01-17T15:59:01.207-05:002017-01-17T15:59:01.207-05:00"individual mandate" implies an exposure..."individual mandate" implies an exposure unit of 1.... doesnt sound ideal to say the least...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-71027429495758834402017-01-17T15:56:56.656-05:002017-01-17T15:56:56.656-05:00For ACA, whose idea was it to put an "individ...For ACA, whose idea was it to put an "individual mandate" in an insurance scheme in the first place?Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-26839995376594461322017-01-17T15:52:32.011-05:002017-01-17T15:52:32.011-05:00I'm not explaining this from the insurers pov....I'm not explaining this from the insurers pov...<br /><br />This is from the buyer's pov....<br /><br />If the model has average loss per 1 exposure unit as $25k then the pure premium is $25/1 or $25k<br /><br />If the model has average loss per 100,000 exposure units as $1,000,000,000 then the pure premium is $1B/100,000 or $10,000<br /><br />If you are in the non-Insurance sector you want to pay the least amount you can arrange for your insurance... Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-44857043145033346792017-01-17T15:14:55.416-05:002017-01-17T15:14:55.416-05:00"Pure Premium = Losses / Exposure Units
To g..."Pure Premium = Losses / Exposure Units<br /><br />To get the Pure Premium down, you should determine/willfully seek the highest number of Exposure Units possible"<br /><br />It's good for the insurer to seek the highest number of Exposure Units possible because of the diversification effect, not because that equation.<br /><br />Remember that the Losses also grow when the number of Exposure Units grow. It is not a constant. So it is impossible for the denominator of the equation to rise while making the nominator constant.Andréhttps://www.blogger.com/profile/10935332922520483975noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-38339892719480762632017-01-17T11:18:07.323-05:002017-01-17T11:18:07.323-05:00Insurers make money on denial. Everybody knows thi...<i>Insurers make money on denial. Everybody knows this.</i><br /><br />That one way, but it is built into the structure through the pools so that people that never submit claims still pay rent.<br /><br />The rent is the higher price than necessary that is built in.<br /><br />As Matt says, if there were a single pool, the premium would be a lot lower.<br /><br />Insurance don'ts run that way now, and changing it would involve a big fight with the cos.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-74627335025452746942017-01-17T11:09:05.221-05:002017-01-17T11:09:05.221-05:00Tom, I like the way you use 'rent'.Tom, I like the way you use 'rent'.Noah Wayhttps://www.blogger.com/profile/12012500819097539976noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-17151847417511376992017-01-17T11:06:53.995-05:002017-01-17T11:06:53.995-05:00Insurers make money on denial. Everybody knows thi...Insurers make money on denial. Everybody knows this. Noah Wayhttps://www.blogger.com/profile/12012500819097539976noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-74464432041026769312017-01-17T11:00:45.162-05:002017-01-17T11:00:45.162-05:00The way that insurance works is through multiple p...The way that insurance works is through multiple pools. As pools shrink over time, premiums tend to rise. <br /><br />An insurance friend advises to switch companies on a regular basis not only because of this but because cos offer sweet deals to switch that only last a limited period although they don't tell you that when you sign on. When the premium hike comes, look for a better deal. Most people aren't up for the hassle, so they pay the rent.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-40771462290213379372017-01-17T10:59:18.409-05:002017-01-17T10:59:18.409-05:00*took*tookPenguin pophttps://www.blogger.com/profile/01438480665686684027noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-55990790812368356492017-01-17T10:58:50.969-05:002017-01-17T10:58:50.969-05:00Insurance 101. I knew this equation looked familia...Insurance 101. I knew this equation looked familiar. I did an intro class on this. Penguin pophttps://www.blogger.com/profile/01438480665686684027noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-41030240667332005192017-01-17T10:31:55.330-05:002017-01-17T10:31:55.330-05:00Nice theory.Nice theory.Noah Wayhttps://www.blogger.com/profile/12012500819097539976noreply@blogger.com