What is an insurance rate?

The cost of insurance fund services is a premium (installment) paid by the client (policyholder). In fact, the client pays a certain amount for the work of the company in the event of an accident.

In all such organizations calculation of premium insurance premiums. Let's consider further what it represents.

Normative base

ABOUT premium rate It is stated in Article 11 of the Federal Law No. 4015-1 of 1992. In paragraph 2 of the norm, its definition is disclosed. According to the provisions of the article, insurance rate is contribution rate per unit of the sum insured or insurance object.

Premium size

It should be sufficient for:

• Coverage of expected claims within the insurance period.
• Creating reserves.
• Coverage of expenses of the insurance company.
• Providing a company with a certain profit.

The upper limit of the cost of insurance services is determined by two factors: the level of demand for it and the size of the bank rate on deposits.

In addition, the amount of premium is affected by:

• The structure and size of the insurance portfolio. It represents the total amount of risk.
• Management costs.

There are 2 ways to determine insurance rate is legislative and independent methods. The first is used for compulsory types of insurance, the second - for voluntary. From insurance ratecalculated by the organization on its own largely depends on its financial stability.

Net Rate

It is part of the rate aimed at creating an insurance reserve, which, in turn, is used for subsequent payments under the terms of the contract.

Two elements of this part are distinguished. insurance rate is risk rate and premium. At the expense of the first, reserves are formed from which payments are subsequently made in the event of an accident. The risk rate is considered the basis of the tariff.

The risk premium is involved in the formation of a reserve fund in case the number of accidents exceeds the planned number. If the policy provides for several different insured events, then the calculation is carried out for each risk separately.

Types of insurance

They are divided by the method of forming the fund and calculating the insurance rate. The main types are:

• Risk insurance. It includes activities other than life insurance that do not require the insurer to pay the sum insured at the end of the contract period. They are not associated with the accumulation of the amount during the term of the agreement.
• Endowment insurance. In this case, payments are provided in the case when the insured entity has survived until the end of the contract period, and when he died during this period.

In determining the amount of the contribution in the latter case, the accumulative component is included in the net rate. At the expense of it there is an accumulation of the amount that will be paid at the end of the insurance period.

Load

AT this insurance rate part includes the costs of:

• Conducting insurance business.
• Creation of a preventive measures fund.
• The insurer's profit from the operation performed.

Features of the calculation procedure

Rates are calculated using a system of statistical and mathematical methods - actuarial calculations. They allow you to establish the contribution of each insurer in the formation of the insurance fund.

Determining the calculation methodology, the company takes into account the type of risk, the term of insurance, the nature of payments and premiums.

Key factors

When calculating the tariff in risk insurance, the following are taken into account:

• Accident statistics.Determining the likelihood of their occurrence allows you to plan the amount of upcoming payments under the terms of contracts.
• The sufficiency of the amount of premiums received to form a reserve and reserve funds to cover unforeseen expenses.

The rate should cover the costs of the insurer and provide him with profit.

When calculating in accumulative insurance, the following indicators are taken into account:

• Demographic statistics - average life expectancy and mortality rate. The indicators are determined by the tables. Due to the fact that life insurance is based on the risk of death, the rate will directly depend on the gender, age, health status of the client.
• The costs of the insurer.
• Investment income. The duration of the accumulation period of the insured amount depends on the level of profitability.

The calculation also takes into account the need to create reserve reserves.

Insurance forms

The calculation of the premium may be carried out under an individual or collective agreement. In the second case, a simplified scheme applies. The calculation uses averaged indicators that do not take into account the individual risk of an insurance event.

Risk Insurance Rates Calculation

It is carried out in the presence of a number of conditions:

• Firstly, there should be statistical or other information that allows assessing the risk of an accident (q), the average insurance amount (S) and reimbursement (S c) under the terms of one contract.
• Secondly, devastating events are not supposed. We are talking about a situation where one insured event involves several others.
• Thirdly, the calculation is made with a known number of contracts that are planned to be concluded.

In the presence of statistics on risk insurance for the indicators q, S, S (c) take estimates of their values. For example:

q = M / N, where:

• total number of contracts - N;
• the number of insurance events in N contracts - M.

When insurance for other types of risks in the absence of statistical information on the results of operations performed, these indicators can be determined by the expert method or analog indicators can be used instead. In this case, expert opinion or clarification on the validity of the choice of analog values ​​is necessary.

As for the ratio of the average payment to the insurance amount (S (in) / S), it is recommended that the indicator be set at least:

• 0.3 - in case of insurance against illnesses and accidents, in medical insurance;
• 0.4 - for land transport;
• 0.6 - for water and airborne vehicles;
• 0.5 - for property, with the exception of transport;
• 0.7 - for liability insurance of owners of vehicles and other objects, financial risks.

Net rate calculation

The main part is taken as T (o), the premium is T (p). Thus, T (n) = T (o) + T (p).

The main part is equal to the average payments, which depend on the risk of the occurrence of the insured event q, the average amount S and compensation S (c). With 100 p. It is calculated as follows:

T (o) = 100 x (S (c) x S) x q.

The risk premium allows you to consider the possible excess of the number of insurance events in comparison with their average number. In addition to the above indicators (q, S, S (c)), it depends on the number of contracts, the range of indemnities and guarantees - the necessary probability with which the contributions should be enough to pay indemnities for insurance events.

Calculation of tariffs for savings insurance

In this case, other parameters are used. First of all, this is the gross rate (insurance premium). It includes the base part (net tariff) and the load on it. The latter covers the costs of the company in doing business.

The net tariff consists of two components: the risk rate (death contribution) and the funded contribution.

A feature of this type of insurance is that reserves are invested not only to extract their income, but also for the insured - the amount accumulates at a guaranteed rate of return.

Mortality table

It is a statistical list that contains the parameters of mortality of citizens in accordance with age categories.

Modern tables are systems of interconnected and ordered series of numbers. They reflect the extinction of the theoretical generation with a fixed initial number.

Tables are used to determine probable payments for deaths or surviving until the end of the contract. These calculations, in turn, serve as the basis for establishing tariffs for long-term life insurance.

Table Composition

They are usually built separately for each floor, but can be combined. The tables may include the following indicators:

• The number of survivors up to a certain age. The initial number (the root of the table) is taken, as a rule, for 100 thousand.
• The number of dying in the age range.
• The probability of surviving to the next age interval for all who have reached a certain age.
• The risk of death in the coming year is the likelihood of dying within the prescribed interval before reaching the next year. This indicator is usually called the "infant mortality rate."

The last two parameters are considered the most basic.

Insurance Codes

They are approved by Resolution of the PFR Management Board No. 2p of 2014.

Premium rate codes vary depending on the category of payers. Some of them are presented in the table.

Reduced premium rates

They are mentioned in article 427 of the Tax Code.

Lowering premium rates, for example, are set for:

• Business companies and partnerships that implement intellectual products, the exclusive rights to which are owned by the participants, the founders of these associations are budget / autonomous scientific institutions, including higher education institutions.
• Individual entrepreneurs and organizations that have concluded agreements with the SEZ management structures on the implementation of technical-innovative or tourist-recreational activities and making payments to individuals working in such special economic zones.
• Organizations operating in the field of information technology, developing and implementing the computer products they created, information databases on material or digital media, regardless of the contract, or provide services related to the development, adaptation, modification of software, their installation, testing and maintenance.

In the latter case, we are talking about domestic enterprises.

Conclusion

As you can see, tariff calculation is a rather complicated process. It takes into account quite a few factors, statistics. The whole process is strictly regulated by law and regulations.