The costs of insurance for the object in question are determined through a process such as actuarial calculations. Just by using them, the cost of the insurance company's services is calculated, as well as the amount of contributions that the insurer will have to pay. And so that you do not inadvertently find anything superfluous, it would be nice to understand how the actuarial calculations in insurance are carried out.
To begin with, we emphasize that the relationship between insurers and the insured is built on the basis of a system of statistical and mathematical regularities that have been 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. Basically, this applies to life insurance. However, in a broad sense, actuarial calculations can be applied to any type of insurance to determine its tariffs under certain conditions. With their help, 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", it came from the name of the profession. Actuary (from Latin "actuarmus" - "accountant") is a specialist who develops mathematical and statistical methods for calculating the amount of required reserves, loans and credits. These people solve problems, which we often call "actuarial" in insurance.
Actuarial calculations and their principles were first considered in the works of 17th-century scientists: E. Halley, Jana de Witt, D. Graunt. In his book, Graunt studied mortality bulletins, and Witt reflected on the determination of the amount of insurance premiums , depending on the rate of increase in money and the age of the insured. Further development of actuarial calculations was obtained in the works of Halley, whose table of mortality is applied in our time.
The following indicators are used to calculate the amount of contributions: the frequency of occurrence of insurance events, the cumulative risk factor, the loss ratio and its frequency. In practice, insurance statistics are often used, as well as generalizing indicators characterizing tariffs in the insurance business as a whole.
Finally, it should be noted that the definition of tariffs in insurance is one of the most complex and controversial issues that require close attention from the insurer. Therefore, specialists in this field should strive to apply the latest 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 superfluous, for example, to look at the demographic statistics, and in the second it is not at all important. Therefore, in personal insurance for calculating the net rate use special tables of average life expectancy and mortality, and in the property - tables of the rate of return in this industry.