The cost of insurance services is expressed in the amount of the insurance premium (contribution). The premium is the price of the services of the insurer, which it agrees to provide in the event of the events specified in the contract. It is based on the tariff rate (or tariff).
Insurance rate is the premium rate expressed in rubles that is paid from the insurance amount unit.
The premium should be such that it could cover the possible claims of the insured, create reserves and cover the costs of the company to conduct business, as well as provide a profit.
The price of an insurance service depends on the demand for it and the amount of interest on bank deposits. It is also affected by the structure of the insurance portfolio (set of risks) and management expenses.
If insurance rates are established by law (centrally), then the rate on voluntary insurance can be calculated by the insurer himself, while it significantly affects the financial stability of insurance operations.
Tariffs are calculated using statistical and mathematical methods, which are commonly called actuarial calculations. They allow you to determine the share of the insured in the total insurance fund. Choose a method based on insurance risk, terms, nature of payments and premiums.
The full insurance rate is usually called the "gross rate." It consists of net rates and loads. The net rate includes the risk rate (insurance fund) and the risk premium (reserve fund). The load consists of the costs of doing business (profit) and a reserve of preventive measures.
The net rate is that part of the tariff that is used to form reserves for further payments in the event of insured events. Due to the risk rate included in it, the formation of reserves for insurance payments is made. A reserve fund created through a risk premium is necessary in the circumstances of the actual excess of the number of estimated payment cases.
The load is the part of the amount that is included in the insurance rate to cover the costs of doing business, generating profits and creating a warning fund for the insurer.
Insurance is carried out either individually or collectively. In the latter case, the premium is calculated according to a simplified scheme, based on averaged data.
The insurance rate for risky types (other than life insurance) is calculated based on statistics or other information on a particular type of insurance.
In cumulative life insurance, the net tariff rate is determined differently, based on tables. The gross rate includes the base part (net rate) and the load to it, covering the costs of doing business. The net rate also consists of two parts - the funded contribution and the risk rate (death contribution).
CTP insurance rates are set centrally by the Russian government, that is, they are the same for all insurance companies. This means that, knowing the current CTP rates, you can independently calculate the cost of the policy for a specific insurance contract. It should be borne in mind that, in addition to tariffs, many other factors affect the cost of the policy, such as the age of the driver; driving experience; the number of persons admitted to management; region; vehicle specifications etc. Rates in this type of insurance differ depending on whether there have been any accidents in the driving history. Thus, the OSAGO formula includes a base rate multiplied by various coefficients that correct it.
The tariff policy of insurance companies is based on the following principles. This is the principle of ensuring the self-sufficiency of operations and their profitability, equivalence of insurance relations between all parties to the contracts, the availability of tariffs for all comers and their stability over time.