ECON 2.1 - Insurance

The purpose of insurance is to

• build relationships

• build wealth

• transfer risk

• manage assets

Why is it important for insurance companies to have a large pool of people paying premiums

• A large pool of people paying premiums helps insurance companies to have a larger social media following.

• The premium payments of all the insured clients will cover the costs for the emergencies of the few who need it.

• The more people that pay premiums, the less likely each insured client will experience an emergency.

• If a large pool of people pays premiums, insurance company employees will get more bonuses included in their next paycheck.

What role does math play in the insurance industry?

• Insurance companies use calculus to find out how likely a client will need to use the insurance so they can set premiums to have the highest chance of making a profit.

• Insurance companies use statistics to hypothesize how likely clients are to switch over to competitive companies.

• Insurance companies use statistics to find how likely a client will need to use the insurance so they can set premiums to have the highest chance of making a profit.

• Insurance companies use algebra and geometry to calculate the distance from clients' major emergencies to nearest hospitals.