How insurance companies make money?
It will be long puzzle for many of us that how insurance companies make money.Insurance companies Underwrite the policies from policyholder and collect small amount called "Premium" as they are transferring the risk from policy holder either it may be house or a property or a liability.This premium is accumulated and re invested in Equity,derivatives ,Bonds, National schemes and a small portion kept as "Ready to use" reserve.The amount in "Ready to use" reserve is used to pay the claims.
The remaining portion of amount is invested in Equity,derivatives ,Bonds, National schemes . This will give you better returns for the capital that is invested.One more positive aspect for insurance company is that they wont pay immediately as soon as the get the claim. They have 1 month of duration to pay the claim that are raised from the applicant. For some of the claims , the payment can be extended for years.
Hard part of Insurance companies is to invest the amount (capital) that they have so that they will better and higher returns keeping the capital safe.So, Insurance companies diversify the capital to fixed deposits which are secure and low returns to the equity which is risky but gets higher returns.
So Proper balance has to be maintained while investing.Its is equally important to maintain the "Ready to use" reserve so that Insurance companies can pay for the claims.If the insurance companies fail to pay the claims then the company will go insolvency.So, the Insurance company will lose the faith from the people which will have Greater impact on the business.
Are you hoping to start the Insurance business in India?? Then Accmulate the capital of 200 crores to start the insurance business in India as per IRDAI norms.
The remaining portion of amount is invested in Equity,derivatives ,Bonds, National schemes . This will give you better returns for the capital that is invested.One more positive aspect for insurance company is that they wont pay immediately as soon as the get the claim. They have 1 month of duration to pay the claim that are raised from the applicant. For some of the claims , the payment can be extended for years.
Hard part of Insurance companies is to invest the amount (capital) that they have so that they will better and higher returns keeping the capital safe.So, Insurance companies diversify the capital to fixed deposits which are secure and low returns to the equity which is risky but gets higher returns.
So Proper balance has to be maintained while investing.Its is equally important to maintain the "Ready to use" reserve so that Insurance companies can pay for the claims.If the insurance companies fail to pay the claims then the company will go insolvency.So, the Insurance company will lose the faith from the people which will have Greater impact on the business.
Are you hoping to start the Insurance business in India?? Then Accmulate the capital of 200 crores to start the insurance business in India as per IRDAI norms.
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