There are two types of insurance: public insurance operated by the national and local governments, and private insurance operated by private companies.
What we are talking about here is private insurance.
Insurance is a system in which many people prepare in advance for damage to property caused by unexpected accidents, specifically, typhoon disasters, earthquake disasters, automobile accidents, etc., and by sharing insurance premiums, that is, by making insurance contracts, it is a system that compensates for damages from the insurance premiums exchanged for the damage.
In other words, mutual aid is the principle.
Insurance premiums are based on the following three basic principles.
Law of large numbers
The law of large numbers is a law that the ratio of the number of times the event is realized to the number of observations approaches the calculated probability when the number of observations increases.
There are dice. The dice are engraved with numbers from 1 to 6.
When the dice are rolled, for example, the probability of getting a number of 1 is 1/6.
And if this is done 5 times, it is quite possible that 1 will come out in all 5 times at that time.
The probability of getting a 1 when you roll the dice 10 times and 20 times is getting lower and lower.
And then 2 or 3 or some other number will come out.
What are the basic principles of insurance?
There are seven basic principles for creating an insurance contract between the insured and the insurance company.
- Maximum sincerity.
- Insured Profits.
- Proximity cause.
- Minimization of losses.
With this in mind, what are the five principles of insurance?
Five Basic Principles of Insurance
- The Insured’s Interset: The Importance of Insurance Rights.
- Maximum sincerity: with good faith.
- Law of large numbers: The law of large numbers.
- Compensation: Compensation in principle.
- Subrogation: The principle of assignment of rights.
Secondly, what are the principles of life insurance? Life insurance requires the principle of insured profit. The insured person of the contract must have some kind of personal relationship with the policyholder. In order to purchase insurance for the life of another person, you must have a personal and financial interest in the life of the other person.
In this regard, what are the most important insurance principles?
The key principles of insurance are: The main motivation for insurance is cooperation. Insurance is defined as the equitable transfer of the risk of loss from one entity to another in exchange for premiums.
Why is insurance important in life?
Whether you’re single or in a relationship, life insurance is important. If you pass away, your loved one must pay for your funeral expenses and pay off any financial debts you have, such as your debts. If you have insurance, it will not be a burden on your family.
Learn the law of large numbers from Lot <>
In addition, there is a Lotto 7 that has been booming recently.
Lotto 7 is a new number selection lottery that started on 1 April 2013. The buyer will select 7 different numbers from 1 to 37 and fill them out. The winnings are up to 1 billion yen in Nantes in the event of a carryover.
In other words, if you choose 7 out of the numbers from 1 to 37 and win all of them, you will receive a first prize.
This is very difficult. According to the person who calculated, the probability of winning the first prize is 1/10,295,472.
Currently, the number of lottery 7 draws is about 370.
And the number of occurrences of each number from 1 to 37 varies greatly depending on the number.
For example, the number 15 appears 84 times, but conversely, the number 25 appears 55 times.
What is the difference?
This means that the number of observations is still small as explained above.
Insurance and the Law of Large Numbers Summary
If this is applied to insurance, the proportion of insurance contracts concluded in a certain insurance business in which insurance accidents occur in a certain period of time approaches the calculated probability of occurrence of insurance accidents if the number of insurance contracts is sufficiently large.
Principle of Fairness
The insurance company manages the insurance while balancing the insurance premiums received from the customer and the insurance claims paid in the event of an emergency.
Then, what kind of principle do you collect the insurance premiums you receive from this entrance?
Learning from Life Insurance
For example, there are products with death benefits.
There should be no difference in health status for those who contract this product.
The reason is that insurance is for people with a certain health condition (for example, how much blood pressure is up. This is because insurance is designed so that by applying the same insurance premium rate to those who do not have a past medical history, and even if there is, it is OK as long as it is up to this disease level, it can respond to the risk of payment in case of it.
In other words, in the above terms, by making only those who are in good health as policyholders as one group, we can provide everyone with insurance premium rates for those who are in good health.
If those who are in poor health are included in this list, the insurance premium rate of those who are in good health will not be able to be maintained.
This is because the risk of dying has increased.
Therefore, if a person with poor health wants to sign up for death insurance, it is necessary to develop a new insurance product by creating a separate group from the group with the one with the above good health. Or, by receiving an insurance premium premium premium and maintaining fairness with those who are in good health, you can sign up in the group with the health condition.
Life insurance companies sell insurance that can be entered even by those who have illnesses in the past and present.
Learn from car insurance
Also, if you talk about automobile insurance, the insurance premium classification of those who have not had an accident and those who have caused an accident will change.
The person who caused the accident will be subject to a higher rate classification (*accident coefficient application period) than the person who has not had an accident for a certain period of time.
Summary of the Principles of Fairness
On the premise of such a principle of fairness, the principle of the Minister of Income and Expenditure is established. Each requires a different amount of risk to vary depending on the magnitude of the risk. The “principle of fairness” is to divide risks so that everyone is equal by balancing risks (high insurance premiums for people with high risk, low insurance premiums for people with low risk).