Question

In: Economics

How can insurance companies offer a guarantee to pay for certain medical expenses? How do they...

How can insurance companies offer a guarantee to pay for certain medical expenses? How do they determine the appropriate premium to charge?

Solutions

Expert Solution

Insurance companies provide cover for the risks. Their main aim is to minimize the risk of the policy holders. For this reason they charge premium from policy holders. The amount of premium depends upon person to person. The amount of premium is calculated by statistical and mathematical methods. They collect the data of the person who wants to be insured. The data is about his life history, age, occupation, health etc. By considering these factors the amount of premium is decided. For example A 20 year old car racer wants medical insurance then the premium charged from him will be high as compared to 20 year old person who drives a normal car in the city. This is because the life of car racer is more risky and there are greater chances of him meeting an accident. Therefore while Entering the contract, a deep inspection is done related to the person's life, vehicle reports, past accidents, family background etc. After collecting all this, the report is anaylised by the actuaries and they predict the chances of happening the event and the amount that the insured can pay.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Medical expenses: $12,000, not including medical insurance. Their medical expenses are remarkably low. Medical insurance: They...
Medical expenses: $12,000, not including medical insurance. Their medical expenses are remarkably low. Medical insurance: They have a high deductible plan. The insurance premiums are $6,000 annually Is there any way that they can get any type of tax benefit for medical/insurance expenses?    Explain.
Employees currently pay their own medical and health insurance premiums The company does not offer group...
Employees currently pay their own medical and health insurance premiums The company does not offer group life insurance The company would like to offer dependent care assistance under Sec. 129 for its employees What advice would you give the company President about starting a fringe benefit program for the employees? What are some of the tax benefits to the company and the employees? Would a cafeteria plan be an option for this company?
With a certain medical insurance​ policy, the customer must first pay an annual ​$100 ​deductible, and...
With a certain medical insurance​ policy, the customer must first pay an annual ​$100 ​deductible, and then the policy covers 60​% of the cost of dental work. The first dental insurance claims for a specific year submitted by a person are for two procedures. The first procedure cost ​$700​, and the second procedure cost ​$990. How​ much, in​ total, will he need to pay for these​ procedures?
With a certain medical insurance​ policy, the customer must first pay an annual $350 deductible, and...
With a certain medical insurance​ policy, the customer must first pay an annual $350 deductible, and then the policy covers 80% of the cost of x-rays. The first insurance claims for a specific year submitted by a person are for two x -rays. The first x-ray cost $680 and the second x-ray cost $930. How much, in total, will he need to pay for these x-rays?
With a certain medical insurance​ policy, the customer must first pay an annual ​$100 ​deductible, and...
With a certain medical insurance​ policy, the customer must first pay an annual ​$100 ​deductible, and then the policy covers 80​% of the cost of​ x-rays. The first insurance claims for a specific year submitted by a person are for two​ x-rays. The first​ x-ray cost ​$620​, and the second​ x-ray cost ​$960. How​ much, in​ total, will he need to pay for these​ x-rays?
A politician claims that medical insurance companies do not cover a majority of the cost and...
A politician claims that medical insurance companies do not cover a majority of the cost and the average patient has to pay more than $10,000 in hospital bills. Using the critical value method, test this claim at the 5% level of significance. Why might having high hospital charges be an issue for patients? Mean= 13266.97 Standard Deviation= 12110.01
Life assurance companies offer contracts from time to time which guarantee income to the policyholder. The...
Life assurance companies offer contracts from time to time which guarantee income to the policyholder. The attraction of these products and the rate offered at any time             vary too. There are useful vehicles for investment of lump sum. Review the various options available in the marketplace.                  
how do you calculate travel for medical purposes ? What is the Deduction for medical expenses...
how do you calculate travel for medical purposes ? What is the Deduction for medical expenses at a nursing home ? What are The rules for deduction of surgical fees? What are The rules and calculation of mortgage interest? which deductions are itemized and which are subject to the 2% floor?
What advantages do you consider that there are agreementsbetween insurance companies and medical entities for...
What advantages do you consider that there are agreements between insurance companies and medical entities for determining the prices of services?What advantages do you consider that there are agreements between insurance companies and medical entities for determining the prices of services?
an indication that insurance companies anticipate adverse selection is (a) they do not require a co-pay...
an indication that insurance companies anticipate adverse selection is (a) they do not require a co-pay (b) they classify clients into different risk types according to pre-existing conditions (c) they do not require a deductible (d) the do not classify clients into different risk types according to thier claim history.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT