Probable Loss and the Law of Large Numbers

By Sarah Martin

A Large, Homogeneous Group of Exposure Units

To facilitate the prediction of the probable loss through use of the law of large numbers, it is essential that there be a large number of similar units exposed to the same peril. If a company can insure only ten houses against damage by fire, very little prediction is possible. As noted in the discussion of the degree of risk, the larger the number of units involved, the less deviation there will be in the actual experience.

It is absolutely essential that there be a large group of exposure units. Not only is a large group of units necessary, but the units must be similar. In fire insurance, there must be a large number of similar properties. It is not possible to predict losses if the subjects for insurance present a hodgepodge of structures of various constructions, usages, and values. In life insurance, there must be a large number of persons in each age, health, and occupational classification.

Definite Loss

The loss must be difficult to counterfeit. Death, perhaps, comes closest to perfection in meeting this requisite. Death is so difficult to feign that few insureds will attempt it which is a big reason why so many different types of life insurance are available. Only in cases in which the insured has disappeared can there be a suspicion of something other than death. In sickness insurance, however, it is sometimes difficult to tell if a loss has occurred. During the depression, it was found that sickness claims greatly increased.

Persons who could not find jobs either worried themselves sick or else, in order to collect benefits, decided to say they were indisposed. Inability to distinguish between real and fraudulent claims was in part responsible for the receivership of several insurance companies which wrote extensive amounts of disability insurance during the 1920's and the 1930's.

Disability insurance contracts today are much less liberal on the average than they were thirty years ago because of the adverse experience the companies had in those trying days. Companies are more careful both as to the kinds of disability contracts they will write and as to the people for whom they will be written.

Accidental Loss

The loss must not only be definite, but it must have been accidental, as distinguished from expected. Ideally, the loss should be beyond the control of the insured. Depreciation losses, for example, are uninsurable, since there is nothing accidental about their occurrence. Or if someone is killed in an unexpected accident at a younger age than expected, there are certain life insurance policies that compensate for that kind of tragedy.

These losses are expected. Also, when mercantile theft insurance is written, normal shoplifting losses are not covered. In credit insurance, normal credit losses are not covered; only the unexpected losses are insured. Death meets this requisite because, although death is certain, the time of death is uncertain.

Large Loss

The hazard to be insured against must be capable of producing a large loss which the insured could not pay without economic distress. Insurance against breakage of shoestrings is unknown. The loss involved is so small that it is not worth the time, effort, and expense to enter into an insurance contract to indemnify the loss. (And insureds would likely be furious at the company, since most shoestring breakage is due to wear and tear, which would not be covered by the policy.)

This example is a reductio ad absurdum, of course; but it illustrates the principle. There are, nevertheless, many coverages sold which insure small losses. Hospital policies which promise benefits of less than $150 although costing $15 a year are certainly in the small-loss class for many persons.

Automobile towing charges, with limits of $10 per disablement, seem to most insureds to involve such small losses as to make insurance inadvisable. It is uneconomic for a person to insure the small losses which he can very easily pay himself, for the cost of insurance includes not only the loss cost but also a rather substantial margin for expenses.

Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in finance, business, and different types of life insurance. For free quotes on a variety of life insurance policies, please visit http://www.equote.com/.

Insurance Probabilities

By Sarah Martin

Economically Feasible Cost

To be insurable, the chance of loss must be small. The cost of an insurance policy consists of the pure premium, or amount actually needed to make loss payments, and the expense portion. If the chance of loss approaches 100%, the cost of the policy will exceed the amount that the insurance company is obligated to pay under the contract.

For example, it would be possible for a life insurance company to issue a $1,000 policy on a man 99 years of age. The net premium alone, however, would be about $980, to which would have to be added an amount for expenses which would bring the premium total to more than the amount of insurance. To make life insurance rates attractive, the premium has to be far less than the face of the policy.

Chance of Loss Must Be Calculable

Some probabilities of loss can be determined by logic alone-for example, the probabilities involved in the flip of a coin. Others must be determined empirically, that is, by a tabulation of past experience with a projection of that experience into the future.

All types of insurance probabilities are determined on an empirical basis. There are some chances of loss, however, which cannot be determined either by logic or from past experience. Unemployment is an example. Unemployment occurs with such a degree of irregularity that, as yet, no one has succeeded in working out a method of determining its future incidence.

This is one reason why unemployment insurance is not sold by private insurance carriers. If there are no available statistics on chance of loss, it is impossible to predict losses, in spite of a large number of exposures.

Unlikely to Produce Loss to Majority Simultaneously

No insurance company can afford to insure a type of loss which is likely to happen to any great percentage of those exposed to it. True, life insurance companies insure their policyholders against death even though it is well established that every one of them will die eventually.

The life insurance company is really insuring its policyholders against premature death. Its rates and reserve accumulations are fixed in such a way that it can pay claims as the claims mature without causing financial hardship to the company.

If all the policyholders of a life insurance company should die prematurely, this company would be just as bankrupt as would a fire insurance company whose policyholders all lost their houses by fire.

Unemployment runs aground on this last barrier, too. Those individuals whose jobs were secure could never be sold unemployment insurance. Prospective customers would be drawn solely from those who felt their employment situations to be insecure.

When a business recession occurred, hosts of the insureds would lose their jobs at the same time. It would be equivalent to a life insurance company having a large percentage of its insureds die at the same time.

Insurance is an arrangement whereby the unfortunate few who lose are indemnified by the fortunate many who escape loss. Particularly those whose financial well being depends on it, which is often the case with the families of term life insurance policyholders. If the many, however, suffer the loss, then the few will prove inadequate to indemnify them properly, except at an uneconomic premium.

In order to guard against catastrophic losses, fire insurance companies, for example, seek a wide distribution of exposures and set up underwriting standards which prohibit the concentrations of business in small sections of a city. They also put a clause in their policies excluding losses due to wars, thus relieving them of the danger of catastrophic losses resulting from atomic warfare.

Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in business, finance, and term life insurance. For free life insurance rates, please visit http://www.equote.com/.

Sports Related Accident Claim

By Reethi Rai

Many of the sportsmen suffer from various kinds of injuries while playing. Injuries are certainly unavoidable while playing. However, by exercising appropriate safety, one can try to avoid the injuries. If a sportsperson still meets with an accident, one can make a claim.

Thousands of sportsmen suffer from various kinds of injuries due to foul or negligent play, inadequate instruction or supervision, unexpected violence or unsafe facilities. If you have suffered from such injuries, sports related accident claim can help a victim of an accident get suitable compensation.

Over a period of time can such injuries can affect the career of the sportsmen. It is advisable to take all the precautions. In case, you have suffered an injury due to the negligence of somebody else, you can benefit form these claims.

You no more have too fear losing out opportunities owing to injuries. These claims will help you get instant relief from any kind of sports injury. Sports facilities, leagues, teams and referees are supposed to cover any risk that sportsmen may be exposed to. If they fail to do so, you can make a claim for it. You can also approach sports injury lawyers who will fight your case and help you win claim easily. They will study your case in depth and suggest a suitable solution for your kind of situation.

If you have been a victim of Achilles tendon, hamstring injuries, broken bones, knee, groin, elbow, neck and muscular injuries, you can make a claim for it. In fact, such injuries are very common amongst sportsmen. You are very entitled to compensation for the injuries suffered.

Benefit From Accident Claim Information and Advice!

Accidents happen every day and result in thousands of people suffering personal injury every year. In most of the cases, accidents result due to the fault of the other person. Some common types of accident which may occur are:-

Road traffic accidents - injuries to vehicle occupants, pedestrians, cyclists

• Accidents at work including industrial diseases

• Accidents in public places

• Injuries caused by defective goods or products

• Medical or dental negligence

If you have been a victim of any of these kinds of accidents, you can get compensation. It is likely that you may not have a fair idea about the claims process. In such a situation, you can benefit from accident claim information and advice. You can get all the required information on claims procedure.

Compensation is payable under various headings such as pain and suffering, financial loss eg. loss of wages, medical or other expenses incurred loss of future earnings, loss of amenity. In order to claim successfully it will be necessary to prove that the person was negligent and that the negligence caused the accident resulting in the injury. 100% personal injury claim can also help you get compensation for the injuries suffered.

Reethi Rai, Expert Author

For more information: Accident claim information and advice 100% Personal injury claim

Protect Your Business With a Fidelity Bond

By Jake Robberts

Before we get started lets clarify what a Fidelity Bond is. A "Fidelity Bond" is another name for a Commercial Crime Policy. Many Agents consider it a surety bond but it is not it is a form of insurance that protects the employer from theft of a employee

"According to research conducted by the Association of Certified Fraud Examiners (ACFE), U.S. organizations lose an estimated 7 percent of annual revenues to fraud. Based on the projected U.S. Gross Domestic Product for 2008, this percentage indicates a staggering estimate of losses around $994 billion among organizations, despite increased emphasis on anti-fraud controls and recent legislation to combat fraud." -acfe.com"

A Fidelity Bond protects an employer from employee theft. Usually, insurance companies and security firms are required to obtain a fidelity bond. Essentially Fidelity Bonds guarantee the employer's money and property in the event that an employee causes damage though negligent or a dishonest. Fidelity Bonds or Employee Dishonest bonds are usually required by private obligees but are required by some government entities.

Its primary coverage is employee theft. This will pay for loss or damage to money, securities and other property directly from theft or forgery by an employee. Several other agreements can be added or included in your Fidelity policy to protect you from someone other than an employee. Such as:

Forgery or Alteration

Inside the Premises - Theft of Money & Securities

Inside The Premises - Robbery or Safe Burglary of other property

Outside The Premises - Theft of Money & Securities and Robbery of Other property

Computer Fraud

Money Orders And Counterfeit Currency

Other coverage could apply depending on the type of business and insurance company providing the policy.

Jake has been written Fidelity Bonds and Surety Bonds for over 10 years.

Benefits of Insurance Claim Management

By Derek Rogers

If due to certain circumstances, you feel the need to file for an insurance claim, you must be aware that it can be a terrible time if by any chance your insurance company refused to pay up or if they only offered you with a fraction of the required amount. This can come as quite a blow to you and your career, but there are other ways that are open and effective at the same time.

You can choose to fight for your fair share and one of the best ways to do this would be to get the help of a claims management firm. Using the helpful services, provided by the claims company, many people have got their due money as well as the compensation. Even you can avail this service to get the money that is due.

Claims Management Companies offer claims management services to the common man. These services consist of advice and services which concern claims for repayment for loss, remedy for loss, restitution, compensation or due to some other obligations. There are numerous benefits of insurance claim management; all you need to do is find the right one that suits your needs.

A claims management company can guarantee that you get back everything that had been involved in the claim. If it is necessary, the company can deal with all the professionals on your behalf. The company takes all the necessary steps to ensure that you get all the money that is due.

Although, you may think that paying extra to make the insurance company pay up may not be worth it but let me tell you that your money will make its way back to you in less time and without much effort on your part.

Here below are the benefits of taking help from a claims management company:

• In many cases, the company can perform certain calculations that can give you a proper idea as to when you can expect to receive the money and within what time span. Such expert advice from dedicated professionals can help you get a good night's sleep.


• One major benefit is that the company takes over the negotiation on your behalf and offers with all the necessary and required legal advice you may need. Whether it is the calculations of your claim or the various problems which may rise when you are taking on the employee compensation issues, you need to make your decisions very wisely and this is where your claims management service steps in to make wise and calculated decisions for you.


• Another benefit with claims management is that their presence makes the insurance company aware about you being serious about the money. Insurance companies pay only what they think you are going to accept, therefore it is wise to take help of a claims management company to get the attention you need and deserve.

It can be really difficult to get your money and compensation from the insurance agency, in order to avoid such hassles, make sure to enlist the proper help as soon as you feel the need to. To find the best company, take a look at the features offered by various claims management companies to find out which offers the best services and advice.

Derek Rogers is a freelance writer who represents a number of UK businesses. For Loss Assessor Consultants and Insurance Claim Management, he recommends Morgan Clark.