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Showing posts from November, 2017

### Role of Generalised Linear Model in non-life pricing Phase3

Phase1: http://www.actuarysense.com/2018/10/role-of-generalised-linear-model-in-non.html
Phase2: http://www.actuarysense.com/2018/11/role-of-generalised-linear-model-in-non.html So we know that the purpose of GLM is to find the relationship between mean of the response variable and covariates.

Linear Predictor: Let’s denote it with, “η” (eta). So, linear predictor is actually a function of covariates. For example, in the normal linear model where function is Y = B0 + B1x. So linear predictor will be η = B0 + B1x. Always note that linear predictor has to be linear in its parameter. In this case parameters are B0 and B1. But still the question is how I came up with B0 + B1x as a function? First of all, note that broadly there are two types of Covariates. 1. Variables: It takes the numerical value. For example: age of policyholder, years of ex…

### Difference between Insurance and Assurance ?

INSURANCE :It is a financial protection against something that might happen. Ex: Car insurance for car crash or House insurance for your house going on fire. QUESTION  is whether TERM is INSURANCE or ASSURANCE: A life insurance policy, for example, provides coverage to an individual for a specified period of time. If the individual dies during that specific period, the insurance carrier will pay the amount of money agreed upon in the contract. If the insured individual lives past the specified time period, the insurance policy becomes void, and the provider is not obligated to make any payment.
so Term is Insurance.
ASSURANCE:It is protection against something that will happen. For ex: Life assurance because you will die. A life assurance policy will always result in a payment being made because the investment is combined with the sum insured.
Note: In insurance sector , Both Insurance and Assurance are used Interchangeably. To counter this, companies now offer detailed guides to their cu…

### What is Insurance and how it works ?

Definition:

A promise of Compensation for specific Potential future losses in exchange for a periodic payment.A Contract Between Two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party  on happening of an uncertain event(death) or expiry of certain period (in case of life insurance) or to indemnify the other party on happening of an uncertain event(in case of general insurance)
How Insurance works: Sharing of risks by pooling of fundsWhen pool is managed by individuals , it is called  Mutual InsuranceWhen it is managed by a company, it is called general/life insurance