What is the key difference between Gross Premium and Net Premium in insurance?

"Gross Premium" represents the total premiums paid by policyholders, while "Net Premium" is the amount retained by the insurance company after reinsuring a portion of its policies. "Gross Premium" refers to premiums collected from new policies, while "Net Premium" represents premiums from renewed policies. "Gross Premium" is the premium earned before deducting operating expenses, while "Net Premium" is the profit after deducting expenses. "Gross Premium" is the premium collected from high-risk customers, while "Net Premium" is collected from low-risk customers.

Why is a high persistency ratio generally considered favorable for an insurance company?

"Persistency Ratio" indicates a higher percentage of claims being settled, reflecting positively on the company's reputation. A high "Persistency Ratio" suggests that policyholders are satisfied with the services and are likely to renew their policies, leading to stable long-term revenue. A high "Persistency Ratio" implies that the insurance company has a large Asset Under Management (AUM), indicating financial stability. A high "Persistency Ratio" signifies that the company has a low Combined Ratio, indicating efficient cost management.

What does a Combined Ratio of more than 100% indicate for a general insurance company?

The company is experiencing underwriting losses, meaning claim payouts exceed the premiums collected. The company has a high solvency ratio, indicating strong financial health. The company has a low underwriting expense ratio, suggesting efficient cost management. The company has a high persistency ratio, indicating strong customer retention.

How does the concept of "Value of New Business (VNB)" contribute to understanding the financial performance of a life insurance company?

VNB represents the total revenue generated from new policies issued during a specific period. VNB measures the present value of anticipated future profits from new policies, providing insights into the profitability of new business. VNB reflects the total number of new policies issued by the insurance company, indicating its market reach. VNB indicates the average premium amount paid by policyholders for new policies, reflecting the company's pricing strategy.

What is the significance of the "Solvency Ratio" in evaluating the financial health of an insurance company?

The "Solvency Ratio" measures the company's ability to generate profits from its core insurance operations. The "Solvency Ratio" indicates the efficiency of the company's claims settlement process. The "Solvency Ratio" assesses the company's ability to meet its long-term financial obligations, including claim settlements. The "Solvency Ratio" reflects the company's market share and competitive position within the insurance industry.