Question

Can anyone explain the replacement value cost factors related to the loss control?

Suppose the gross amount is higher than the net commercial reinsurer payment from its loss history information. It covers some, but few events were higher than expected, which concluded as maximum financial loss.
For example, in years 1 and 3, the loss events happened two and one times, respectively. Still, they are around a thousand dollars (most of them nearby million but not million). And those amounts cover by net commercial reinsurer payment a little bit less than half amount. However, in year 2, loss events happened three times, and within those events, one of them cost a thousand dollars.
Overall, how's the loss history?

Answer 1

a) Replacement cost is related with the replacement value of the assets, it the the amount that the insurance company has to pay to the entity for replacing the assets, or sometimes it the cost that insurer has to pay to the policyholder for making the loss good. The Replacement value policy is a contract between insurance companay and client, that in case of any loss incurred to insured assets, the company has to pay a claim to the entity to repair the assets.

If company determines the amount of policy honestly, then there would be win - win situation for both the parties. Such policy is designed to benefit the customers, that in order to purchase a new asset, the policyholder will not have to spend extra money to get the asset replaced, but the insurance company is not required to pay for intangibles,

part b) In a period of three years, the loss incurred in the
year 1 There are three losses in total i.e 2 in first year and 1 in third year

Total amount of loss = Approx $ 3,000( not exactly $3.000),

but the insurance company claimed the amount of little less than half the amount lost. which is approximately less than $ 1.5 million.

In the year 2, the loss took place thee times a year and one of which is more than $ 1 million, against which no claim is received.

Therefore total loss during three year would be approx less than $ 5 millions, and insuracne company has admitted a claim of less than $ 1.5 million