An overview on factors of risk in insurances and their impact to price of insurance

• Author: Juliana Bylykbashi
• Position: University of Tirana
• Pages: 345-351

ISSN 2410-759X Balkan Journal of Interdisciplinary Research Special Issue No 1

Acces online at www.iipccl.org IIPCCL Publishing, Tirana-Albania June 2015

345

An overview on factors of risk in insurances and their impact to price of

insurance

Dr. Juliana Bylykbashi

University of Tirana

Abstract

e Institution of Insurance represents a signicant service nowadays. Its main point is the transfer

of risk, oering us the face of unpredictable events at the lowest cost possible. One step of this

process is also the determination of risk factors for a good calculation of prime. e risk factors

consist in a category of facts, which inuence to the insured event. What must be respected is

everyone must pay a proportional prime with risk’s level. e price of insurance is based on a

process of right risk evaluation and management. However, in order that the market of private

insurances is functioning, the insurer needs to earn sucient incomes from prime, so that he

can cover the requirements provided from the insured ones. is means that the insurers must

be capable to calculate the average of expected losses (supposed) correctly, and pay a price for

insurance in conformity with the circumstances. Considering these circumstances make that for

the same insured risk is paid a various prime, because the risk factors change from one subject to

the other.

is paperwork will deal the factors of risk in insurances and the impact they have to the

calculation of prime by the insurance company, to the legal structure regarding such practices and

to analyze the Decision of European Court of Justice upon not considering gender as a risk factor

in insurance contract, beginning from 21st of 2012, a decision that will considerably impact on

European Market of Insurances. is Court Decision can detail the way how insurance companies

can manage the risk. ey will be recommended to nd new methods to measure the risk growing

the administrative costs a lot, which of course will be invoiced to the client.

Keywords: Risk factor, gender, age, risk management.

Introduction

e individuals purchase insurance to defend themselves from nancial costs that come

out as a result of unfavorable events, like. Life insurance provides nancial defense for

proteers, as family members are in case of death of the insured one during the term of

cover from insurance contract. e insurance of motor vehicles covers the costs deriving

from individual’s responsibility, if they cause an accident and harm the thirds. In exchange

of suitable prime, the insurance companies compensate the loss caused as a result of an

unfavorable event.(oyts,2010,3) Although in order that the market of private insurance

operates, the insurance provider needs to earn sucient incomes from primes, so

that he can cover the needs foreseen for the insured. is means that insurers must be

capable to calculate accurately the average of expected losses (supposed) and to pay a

price for the insurance in conformity with circumstances. (Birds, 2010, 189) Taking these

circumstances into consideration makes that for the same insured risk; various primes are

paid, because the risk factors change from one subject to another.