The insurance costs of the property in question are determined using a process such as actuarial calculations. It is with the help of them that the cost of services of the insurance company is calculated, as well as the amount of contributions that the policyholder will have to pay. And so that inadvertently you did not count anything superfluous, it would be nice to figure out how actuarial calculations in insurance are carried out.
To begin with, we emphasize that the relationship between insurers and the insured is based on a system of statistical and mathematical laws that have formed historically. Calculation of insurance is carried out using special mathematical formulas that reflect the mechanism of accumulation and expenditure of the
reserve fund of the insurer in the long term. This mainly concerns life insurance. However, in a broad sense, actuarial calculations can be applied to any type of insurance to determine its rates under certain conditions. Using them, the share of each insured in the creation of a reserve fund is also calculated, i.e. there is a differentiation of
tariff rates in the
insurance business.As for the term “actuarial calculations” itself, it came from the name of the profession. Actuary (from lat. "Actuarmus" - "accountant") is a specialist who develops mathematical and
statistical methods for calculating the size of the necessary reserves, loans and credits. These people solve problems that we most often call "actuarial" in insurance.
Actuarial calculations and their principles were first considered in the works of scientists of the 17th century: E. Halley, Jan de Witt, D. Graunt. In his book, Graunt studied mortality bulletins, and Witt pondered the determination of the size of insurance premiums depending on the rate of increase in money and the age of the insured. Actuarial calculations were further developed in the works of Halley, whose mortality table is still used today.
To calculate the amount of contributions, the following indicators are used: the frequency of occurrence of insurance events, the coefficient of cumulation of risks, the loss ratio and its frequency. In practice, insurance statistics are also often used, as well as general indicators that characterize tariffs in the insurance business as a whole.
And finally, it should be noted that the determination of tariffs in insurance is one of the most difficult and controversial issues requiring close attention from the insurer. Therefore, specialists in this field should strive to apply the most modern achievements of computer technology, statistics and mathematics. In personal and property insurance, several different methods are used, because in the first case it will be useful, for example, to look at demographic statistics, and in the second it is not at all important. Therefore, in personal insurance, special tables of average life expectancy and mortality are used to calculate net rates, and in property insurance, tables of the rate of return in this industry are used.