The customization of insurance rates as a management tool of underwriting

Abstract

Introduction. The domestic insurance market is always characterized by an increased level of competition between insurance companies as for the attraction of customers, which greatly exacerbated during crisis periods of the market. The crisis leads to lower solvency of potential consumers of insurance services in the segment of corporate insurance and retail insurance. If the current economic situation is the same, the profitability of the insurance will gradually decrease. In such periods it is advisable to realize a mitigation of an underwriting policy to reduce the level of risks that are assumed by insurance. If the economic conditions are stable than negative and undesirable risks for insurance are not accepted. But if there is a financial crisis than the insurance companies have to review the criteria for an unacceptable risk.

Purpose. The aim of the article is to improve the scientific and methodical approach for customization of insurance rates, that gives a possibility to set limits on the size of insurance premiums when the underwriter should take a positive decision on the adoption of risk insurance.

Method (methodology). The research methods of comparison, abstraction, theoretical and logical generalization are used.

Results. According to the results of the study the relationship between the insurance rate and the underwriting result of the insurance activity is grounded. It is formulated the scientific approach for customization of insurance rates on the basis of the marginal utility of insurance protection. The use of this approach in the management of underwriting will allow to set the optimal values of insurance rates. It will help to increase the sales of insurance products and at the same time to minimize the loss ratio of the insurance amount.