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:
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
- 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
- and many more..............
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