Question

Define the profit function of the private insurer in the line of health insurance. That is, what are the revenues and costs of the insurance firm? Based on your definition, analyze the effects of the following exogenous changes on the insurer's profit: a.) an increase in insurance rate; b.) an increase in the insurer's share price in the stock market; c.) a general increase in health care expenditures; d.) an increase in population size; e.) an increase in the country's unemployment rate; f.) a shift of the payment system from fee-for-service to capitation.

Answer 1

Profit function of the non-public insurer- The profit motive in drugs can naturally even be suspicious of private health. The insurer is the one who has done the insurance of the individuals. As daily circumstances will increase in life lead increase the role of a nondepository financial institution in the economy. Private health insurance policies cover some of the prices of treatment in a private hospital. Insurance can conjointly help cover 'extras' — other medical services like dental, physiatrics, optical, and a lot of.

Revenue of Insurance Company.

Revenue generated by the insurance company in 2 ways: Charging premiums in exchange for insurance coverage, then reinvesting those premiums into different interest-generating assets. Like all non-public businesses, insurance companies try to plug effectively and minimize body prices

Cost of Insurance Company

The cost of insurance is a fee related to sure varieties of life insurance, like variable and universal life insurance. different from premiums, these charges ar beaked to get hold of administration, mortality, and different responsibilities of the insurance company

A) Increase in Insurance Rate lead Increase in insurance company profit as a result of an insurance company is that the one who does the insurance. as charge per unit increases, it will increase profit because insurers' financial gain from investments may be sufficient to fulfill contractually secured obligations to policyholders.

B)An increase within the insurance company's share value within the securities market even has a positive result on insurer profit. Insurer profit can increase as his share value is redoubled within the securities market.

C)As there is a general increase in health care expenditures it leads to a decrease in insurers' profit. As health care expenditure increase nondepository financial institution needs to bear the claim that leads decrease in insurers profit

D.) a rise in population size increase in insurance company profit as a result of a lot of the population a lot of the insurance done as a lot of insurance done a lot of are going to be the profit of the insurance company.

E) an increase in the country's unemployment rate decrease in insurance company profit. As individuals are idle in an economy that has an impact on the nondepository financial institution. Insurer profit {will also|also can|will} get effect because of an increase in percent as insurer profit will decline.

F) a shift of the payment system from fee-for-service to tax conjointly lead decrease in insurance company profit. Because during this case insured have to be compelled to pay full quantity to the nondepository financial institution rather than paying in installment.so, this leads to a decrease in insurance company profit.