Page 23 - Ebook IC S01
P. 23

Survey And Loss Assessment IC-S01


                  Nonlife policies are usually of shorter duration of one year.



                  There  are  some  policies  with  longtail  which  means  the  liability  of  the  insurers


                   does  not  end  with  the  duration  of  the  policy  period.  It  may  extend  to  several


                   years or even after the expiry of the policy period.


                  In  non-  life  insurance  there  are  three  major  classes  -  fire,  marine  and


                   miscellaneous insurance





               Assumptions play an important role in the insurance business. Insurance premium is


               generally calculated on the basis of probability of happening of a certain event. The


               insurers  assume  that  in  case  of  a  similar  situation  tomorrow  what  may  be  the


               expected loss that the company may suffer. Premium is based on such assumption.





               The probability of the risks depends on the frequency of the occurring of the peril


               and its subsequent impact. The frequency of occurrence of the peril and extent of


               damage depends on a number of factors. Some of these factors are controllable and


               some are uncontrollable. For example earthquakes and floods are not controllable,


               since  it  is  the  act  of  god.  But  a  fire  in  a  factory  may  be  controlled  if  proper  risk


               management measures are taken in the factory.





                  Premiums are decided on the basis of probabilities.


                  Probability depends on hazard.












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