Home Inspectors near me Miami Homestead
Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. home inspectors near me Miami Homestead.
An entity which provides insurance is known as an insurer, insurance company, or insurance carrier. A person or entity who buys insurance is known as an insured or policyholder. Home inspection near me Miami Homestead The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms and must involve something in which the insured has an insurable interest established by ownership, possession, or preexisting relationship. home inspectors near me Miami Homestead
Home inspection near me Miami Homestead The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. home inspectors near me Miami Homestead.
Underwriting and investing Home inspection near me Miami Homestead The business model is to collect more in premium and investment income that is paid out in losses, and also to offer a competitive price which consumers will accept. Profit can be reduced to a simple equation:
Profit = earned premium + investment income – incurred loss – underwriting expenses.
Insurers make money in two ways:
- Through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks Home inspection near me Miami Homestead
- By investingthe premiums they collect from insured parties Home inspection near me Miami Homestead
The most complicated aspect of the insurance business is the actuarial science of ratemaking (price-setting) of policies, which uses statistics and probability to approximate the rate of future claims based on a given risk. After producing rates, the insurer will use discretion to reject or accept risks through the underwriting process. home inspectors near me Miami Homestead
Home inspection near me Miami Homestead At the most basic level, initial ratemaking involves looking at the frequency and severity of insured perils and the expected average payout resulting from these perils. Thereafter an insurance company will collect historical loss data, bring the loss data to present value, and compare these prior losses to the premium collected in order to assess rate adequacy. Loss ratios and expense loads are also used. Rating for different risk characteristics involves at the most basic level comparing the losses with “loss relativities”—a policy with twice as many losses would therefore be charged twice as much. More complex multivariate analyses are sometimes used when multiple characteristics are involved and a univariate analysis could produce confounded results. Other statistical methods may be used in assessing the probability of future losses. home inspectors near me Miami Homestead.
Upon termination of a given policy, the amount of premium collected minus the amount paid out in claims is the insurer’s underwriting profit on that policy. Underwriting performance is measured by something called the “combined ratio,” which is the ratio of expenses/losses to premium A combined ratio of less than 100% indicates an underwriting profit, while anything over 100 indicates an underwriting loss. A company with a combined ratio of 100% may nevertheless remain profitable due to investment earnings. home inspectors near me Miami Homestead
Home inspection near me Miami Homestead Insurance companies earn investment profits on “float.” Float, or available reserve, is the amount of money on hand at any given moment that an insurer has collected in insurance premiums but has not paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest or other income on them until claims are paid out. The Association of British Insurers (gathering 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the London Stock Exchange Home inspection near me Miami Homestead
In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of the float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Home inspectors near me Miami Homestead.
Naturally, the float method is difficult to carry out in an economically Home inspection near me Miami Homestead depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the underwriting, or insurance, cycle. Home inspection near me Miami Homestead
Claims and loss handling is the materialized utility of insurance; it is the actual “product” paid for. Claims may be filed by insureds directly with the insurer or through brokers or agents. The insurer may require that the claim is filed on its own proprietary forms or may accept claims on a standard industry form, such as those produced by ACORD. Home inspection near me Miami Homestead
Insurance company claims departments employ a large number of claims adjusters supported by a staff of records management and data entry clerks. Incoming claims are classified based on severity and are assigned to adjusters whose settlement authority varies with their knowledge and experience. The adjuster undertakes an investigation of each claim, usually in close cooperation with the insured, determines if coverage is available under the terms of the insurance contract, and if so, the reasonable monetary value of the claim, and authorizes payment. Home inspection near me Miami Homestead
The policyholder may hire their own public adjuster to negotiate the settlement with the insurance company on their behalf. For policies that are complicated, where claims may be complex, the insured may take out a separate insurance policy add-on, called loss recovery insurance, which covers the cost of a public adjuster in the case of a claim. Home inspection near me Miami Homestead
Adjusting liability insurance claims is particularly difficult because there is a third party involved, the plaintiff, who is under no contractual obligation to cooperate with the insurer and may, in fact, regard the insurer as a deep pocket. The adjuster must obtain legal counsel for the insured (either inside “house” counselor outside “panel” counsel), monitor litigation that may take years to complete, and appear in person or over the telephone with settlement authority at a mandatory settlement conference when requested by the judge.
If a claims adjuster suspects under-insurance, the condition of average may come into play to limit the insurance company’s exposure. Home inspection near me Miami Homestead
In managing the claims handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, fraudulent insurance practices are a major business risk that must be managed and overcome. Disputes between insurers and insureds over the validity of claims or claims handling practices occasionally escalate into litigation (see insurance bad faith). Home inspection near me Miami Homestead.
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