Property & Liability insurance involves the equitable transfer of risk, where many policyholders share the financial losses of a few through premium contributions. P&L insurance company investments total around $789 billion, with most assets invested in securities to pay claims if needed. Net premiums written for all lines were around $300 billion. P&L policies are short-term, and claims payments can vary greatly depending on catastrophes. Various rating systems like schedule, experience and retrospective ratings adjust premiums based on risk factors of individual policies.

1. Property & Liability Insurance1

2. Insurance???Equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium.Science of spreading of the risk.Method of sharing of financial losses of a FEW from a COMMON FUND formed out of contribution of the MANY who are equally exposed to the same loss.2

3. Types…3

4. Types…4

5. P & L insurance…P & L insurance company investments totaled about $ 789 billion.Most assets are invested in securities that can be quickly sold to pay claims if a major catastrophe occurs.Net premiums written for all lines totaled about $ 300 billion.P & L insurance contracts are short-term in nature.P & L claims payments can vary widely depending on catastrophe losses.5

6. Property & Liability insurance…6

7. Reserves in P & L insurance…7

8. Merit RatingorRisk Factor Rating System

9. Based on Class Rating.Premiums Adjusted according to individuals.Factors of losses are diverse.Yield a greater spread of losses.Example---

10. Merit Rating Schedule Experience Retrospective Rating Rating Rating

11. Schedule RatingUses Class Rating as An average Base.Premiums Adjusted to specific details of loss exposure.Used mainly in property insurance.Considered Factors generally are,SizeLocationNumber of peopleMaintenancePurpose

12. Experience RatingActual loss amount for 3 previous policy periods mainly considered.Loss ratio MethodCredibility FactorTypically used For,Liability InsuranceWorkers CompensationGroup InsuranceAuto Insurance

13. Retrospective RatingBurglary InsuranceActual loss experience for that period.Limited by minimum and maximum chargeable amount.Part premium at the beginning of period,Other part at end, considering actual loss for that period.

14. CLASS RATINGClass Rating means that exposures with similar characteristics are placed in the same underwriting class, and each is charged the same rate. The rate charged reflects the average loss experience for the class as a whole.

16. ILLUSTRATION FOR Pure PremiumQUESTION:-Assume that in auto collision insurance, 500,000 automobiles in a given underwriting class generate incurred losses and loss-adjustment expenses of $30 million over a one-year period. What will be the pure premium and gross rate ?.

17. ILLUSTRATION FOR LOSS RATIOQUESTION:-Assume that a line of insurance has incurred losses and loss-adjustment expenses in the amount of $800,000, and earned premiums are $ 1 million. The actual loss ratio is 0.80, or 80 percent. If the expected loss ratio is 0.70, or 70 percent, What will be the rate change?

18. Judgement Rating Method…Each exposure is individually evaluated and the rate is determined largely by the underwriter’s judgement;Used when the loss exposure are diverse;Widely used in marine insurance.18

19. Effect on Underwriting Profit or Loss19

20. Let us assume that – A new property insurance company begins operating on January 1.

21. It plans to sell only one-year property insurance policies.

22. In establishing the rates, the insurer has an expected loss ratio of 60%, an expected expense ratio of 35%, and expects to earn an underwriting profit of 5%.

23. During the year, $10 million of property insurance premiums are written.

24. Losses and loss adjustment expenses incurred total $ 3 million , and expenses incurred are $ 3.5 million. What is the insurer’s underwriting profit or loss ? 20

25. Statutory underwriting profit or loss = Earned premiums – Losses incurred and loss-adjustment expenses incurred – Expenses incurred21

26. ( in $ ‘000 ) Premiums written $ 10,000Deduct unearned premiums - $ 5,000Earned premiums $ 5,000Losses incurred $ 3,000Expenses incurred $ 3,500Total losses and expenses - $ 6,500Statutory underwriting loss ( $ 1,500)22

27. (in $‘000)Statutory underwriting loss - $ 1,500 Equity in the unearned $ 1,750 premium reserveAdjusted underwriting profit $ 25023

28. Life Insurance“Life insurance is a policy that people buy from a life insurance company, which can be the basis of protection and financial stability after one's death.”Life insurance is a contract between the policy owner and the insurance company.24

29. Principles of Life Insurance25

30. Life Insurance Provides…Financial security for the family .

31. Source of investment.

32. Tax concessions.

33. look after the retirement savings.

34. Personal and business loan .

35. Nominal Premium Rates.26

36. Types of life Insurance…27

37. Term insuranceTerm life insurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term.Features :Period of Protection is temporary.

38. Policy can be renewed after the term completed.

39. It does not provides survival benefits . 28

40. Whole Life InsuranceWhole life insurance is a cash value policy that provides lifetime protection.Provides coverage for as long as you live and continue to make timely premium payments.Features :Premiums generally are level and payable for life.

41. Dividends.

42. Guaranteed Cash Values29

43. Types of Whole Life InsuranceVariable Life Insurance: It provides permanent protection to the beneficiary upon the death of the policy holder.Fixed Premium policy in which the death benefits and cash surrender value vary.Universal Life Insurance :It defined as flexible premium policy that provides protection under a contract that unbundles the protection and savings components.Variable Universal Life Insurance : This policy is similar to universal life policy but with two major exceptions :The policy owner has a variety of investment option for investment of the cash values.There is no minimum guaranteed rate of interest .30

44. 31