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How does Insurance company work?

Date: 25 Oct 2010   Posted By: Paresh Gujarati     Group: Finance and Investments    Category: Insurance   

How does Insurance company work? How does it manage to maintain the money and give insured sum to its customer?

Author: Swastika    30 Oct 2010      Member Level: Gold     Points : 2  (Rs 2)    Voting Score: 0

Insurance company started with the concept of sharing the risk.

That means they will collect premium for several member and will help some member when they get in to any trouble(it should come under the terms of Insurance company).

As per your doubt how they are able to manage such a big organization, they Generally calculate all the risk factors and collect all data about the past record and the death and accident ratio, then adding there official expenses they get into the conclusion to the collecting the premium from there members,but still there is risk factor about number of incidents, to grow there collecting money they have to invest in some sectors who are having guaranteed return,like in Government bonds,some fixed deposit, infrastructure works and also they do there Insurance of there money which is called Re-insurance which saves them from getting bankrupt.

Author: M. K.    30 Oct 2010      Member Level: Platinum     Points : 3  (Rs 3)    Voting Score: 0


An insurance company work with the every aspect of the risks and make a plan before starting the new scheme. Example in the case of Group Gratuity Scheme of LIC. The rule of gratuity is that the entitlement of group gratuity for an employee starts when any employee left the job after completion of 5 years. If the employee left the job after the service of 4 years and 11 months then the employee cannot get the group gratuity. In this case insurance company take the benefit of all the employees from starting the plan as monthly premium depends upon the strength of the employees.

The insurance company give gratuity to employees if any one left the company after completion of 5 years job.

I think you will understand the working of insurance company. all plans depends upon the data of risk cover. In case of death cover of LIC in normal case company give less risk cover and in accidental case they give high risk cover and in case of air accident they give very much high risk cover. As the ratio of air accidental death cases is very less.

With best regards

Dinesh Sood

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