LOSSES RATIO MUST BE PREDICTABLE - PART 2

GREETING INSURANCE ,See you soon in our website " Closer to Insurance " . We will discuss further on our previous website Losses Should Predictive Ratios . In the first part discussed the appraiser values ​​a loss or loss rates in order to provide payment when a loss occurs that is represented through the Loss rate ( loss ratio ) . This time we will continue the discussion about the important concepts in the world of insurance is the law of large numbers ( the law of large numbers ) .The concept is important in determining the probability of this is the law of large numbers ( the
law of large numbers ) . According to the law of large numbers , the more the number of observations were made ​​on an event , the more likely that these observations resulted in estimates of the true probability . For example , if you flip a coin , the coin falls with the possibility of being on the front is 50-50 , and this probability can be estimated .Two or even 12 tosses , not necessarily produce the same results between the front and rear of the coin . But if you flip the coin 1000 times , you can expect a possible result of the face 500 and the possibility of the back above the 500 also . Melampar The more often your coins , you will be able to observe a clear mekain number is above the face , and the back is above are the same , and you are getting close to determining a true possibility .Law of large numbers applied to the insurance company as a prediction of future possible losses on the day . The insurance company collects specific information about a group of people , in order to recognize patterns that have suffered losses . Based on this information , the insurance company can predict the amount of loss that will arise on the type of group that is similar to the more accurate .So the insurance company can predict the amount to be dying , disabled, or sick of that group . Within a few years , insurance companies have noted how much insured that died at each age . Then the insurance companies to compare this data with the data of the national population by noting age died .Guided by these statistics the insurance company can arrange the tables that show exactly that of a large group of people ( 100,000 or more ) , how many people died in each age . This table is called mortality tables that describe the rate of death , or the possibility of death by age . Insurance companies can also mengembagkan same table , called Table morbidity that describes the level of accident or onset of pain experienced by a group of people , who are categorized by age .By using tables mortakita and morbidity tables , insurance companies can predict the value of the loss, a decent set premiums and ready to pay the claim . By this means the insurance companies use statistics to set premiums , or better known as "Pricing Life Insurance " ( specify rate Life Insurance Premium ) .See you again on the last discussion of the nature of insurance that loss is not catastrophic .
GREETING INSURANCENATURE OF INSURANCE

    1. Losses must contain uncertainty .
    2. Losses should be limited .
    3. Loss must be significant ( mean ) .
    4. The ratio of the loss must be predictable .
    5. Loss is not a disaster for the party .