Licentiate Examination - IC 01 - Principles of Insurance Exam - Important Points
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Expenses include :- Payment of claims, Salaries, commission, rent and other expenses associated with managing business
Managing Funds - An insurer is effectively a trustee as it is managing a common fund on behalf of its policyholders.
The Difference in an Insurer's Revenue and Expenses is Not treated as Profit, it is held in Reserve, to cover Claims-Costs. After maintaining a Reserve, the Balance can be distributed as Profit to Share-Holders, and Bonus to Policy-Holders.
Insurance Premiums are based on the Expectation, of Loss, and Insurers use Statistical Principles, such as, 'Law of Large Numbers', to determine these.
Underwriting is the Process, used to determine Entry to the Group. Underwriting includes Assessing the Risk, to Determine the Exposure of the Group, and to Determine the Premium-Charged.
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