How Do Insurance Companies Run a Risk Management Business?

 The insurance business is the business of managing and transferring risk from customers to insurance companies.  Some of the work systems and how to manage risk by this insurance company you need to know:

  • The customer is officially registered as a participant in the insurance program after signing the agreement which is written in the form of an insurance policy.

  • Customers who are registered with the insurance program are required to pay a premium.  All premiums from customers will be included in the insurance pool.  New or old members have the same status, that is, the insurance company is promised to be paid a sum of money if the insured loss occurs, provided that the premium that is the obligation has been paid.

  • Joining an insurance program is like buying big money with small money.  That is, the risk can occur at any time.  It could be that you just joined the insurance program yesterday and today there is a risk, so you can claim it.  This is the advantage that can be obtained from the insurance program.

  • The insurance company will consider every risk of the product being carried out by collecting data and making it in the form of risk statistics which contain:
  1. Predict the number of people who will actually make a claim in a period.  Insurance companies must be careful in estimating the number of people who will suffer losses in the first year, the following year, and so on
  2. Prediction of the number of customers who do not claim in a period so that the insurance company can pay claims with a much larger nominal than the premium received from the policyholder
  3. Detailed statistics on customer information so that they can be grouped according to risk characteristics to calculate premium rates based on risk groups.  The term is risk classification or underwriting.  By charging a risk-appropriate premium, the insurance company can act fairly to all policyholders

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