Change in Policy Holder Surplus
In order to have a strong financial institution such as an insurance company, it is very important that owners should have a strong capital and funds at hand. Money is indeed an essential requirement to start a business and to keep it rolling. Knowing the fact that there are a lot of competitive companies in the industry, it is a must to be ready.
In any business, the capital is the most important thing to be at hand before you can start planning and adding the other essential things such as the building, the working force, the taxes, the agents and most especially the customers. You have to carefully plan all of these that will suit your capital because money makes all of these things to happen.
If you take a closer look into the real world of insurance, the companies are always taking into account their assets, expenses and the premium the insured are paying. Insurance, as defined, is an equitable transfer of the risk of loss from one entity to another in exchange of a payment from the policyholders. The factor to be considered in determining the amount to be charged for a certain amount of insurance coverage called premium is the insurance rate. These three major factors namely; assets, expenses and premium should be hand-in hand as this will affect the standing of the company. The insurance company would always take into account that they will never be brought down or fail with the different insurance policies they offer. Insurance companies are still business companies. You buy from them to be secured from any damages and losses paying the premium while the insurance company is also making sure that they profit given the fact that you are paying them.
Aside from the premium rates the insured are paying, another major concern of an insurance company owner is the surplus. What is a surplus? A surplus is the remaining amount or the reserves of the company have available to pay any claims after the insurer’s liabilities are subtracted from its assets. It is a cushion that protects the policyholder against crisis.
If there are any change in policyholders’ surplus, this indicates that the sum of the assets of an insurer exceed the liabilities. The change in the policyholder’s surplus is the ratio or the percentage from the prior year-end coming from investment gains, operating earnings; net contributes capital and other miscellaneous sources. This percentage will measure the financial strength of the company and its ability to increase policyholders’ security.
It is hard to be an entrepreneur handling an insurance company. You need to find good agents and brokers to entice people to avail the varied types of insurance policies you are endorsing. Aside from that, letting the money roll in the business is one of the biggest challenge. You need to be clever enough and observant in the different changes either from competing companies or from the rules mandated by the government.