Do you know the types of risk faced by a General Insurance company ?

 Better to understand some types of General Insurance product first.

  • Third party Insurance ( You are driving a car and caused an accident then third party will be indemnified)
  • Aviation insurance ( related to Aeroplanes)
  • Marine Insurance ( related to ships)
  • Travel Insurance ( related to your travel journey)
  • Cyber Risk Insurance (related to cyber attacks)
  • Commercial property insurance (related to Fire in the house or any damage)
  • Contents insurance (related to moveable property such as contents in your house : theft risk)
  • and many more................

Some of the specific risks we are discussing today:

Motor Insurance

Claim frequencies being higher than expected
    • Society becoming more aware about claiming under insurance so they are now more litigous
    • Rainy season which caused a lot of motor accident
    • Flood, storms, riots
    • or your Policy document wording is loose that you (i.e. Insurer) has to pay claims that you has not intend to do. (So, what happens is that you created a document regarding terms and conditions but those T&C are misunderstood by policyholder then it is a big risk)
(Always remember that whenever talk about risks, think about its amount (i.e. severity) and frequency (i.e. likelihood)

Claim severity being higher than expected
    • It can be due to let's say court award inflation being higher than expected
    • Any catastrophes, accumulations happen
    • Catastrophe mean an incident which is defined in a policy document such as Flood and that caused a big loss within a short period of time

General risks

    • Errors in Pricing
    • Errors in Reserving
    • Wrong Data used to model the parameters
    • Liquidity risk such as major event happened but your company does not have enough financial resources as of now to pay immediately
    • Credit risk such as default by a third party
    • Expenses being higher than expected
    • Withdrawals being higher than expected
    • Moral Hazard
    • Fraud
    • Anti-selection
  • and many more..............

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