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A popular product known as insurance-有一个受欢迎的产品名叫保险

A popular product known as insurance-有一个受欢迎的产品名叫保险
导读:保险本质上是通过补偿金保护被保险人的各种风险因素。这篇essay主要就保险受大众欢迎而进行探讨,该essay由英国论文网代写留学生作业频道Finance Essay频道整理推荐。

Introduction
Insurance, a technical term used to describe a financial product that essentially protects the insured from various risk factors through compensation payments. A question of interest then arises “Why would providers of insurance offer such an obscure product that can hardly be seen as profitable from a layman's perspective?” The solution is simple, yet logical. Providers of insurance need to create a sufficient provision that will be able to strengthen the foundation of their business. Until now, continuous efforts have been made by actuaries to develop models that measure uncertainties in insurance payouts, more technically known as claims. As a result, actuarial models that incorporate future variability are being used profusely.

Actuarial models are now widely used to investigate different types of problem insurance companies might incur. Taking into consideration that actuarial models should be of practical use, they need to be consistent, realistic, accurate, and results based. Actuarial models are usually classified into deterministic models and stochastic models. The former correspond to a traditional approach of solving long term financial implications because of its simplistic nature. They look at “best estimates” for the underlying parameters and generate the most probable outcome. However, they ignore the probabilistic approach of occurrences and thus, not a very suitable model. The latter represent the opposite of deterministic models, random variations in variables are allowed for. This creates an opportunity to model real-world events.

Of late, adoption of stochastic modelling techniques has increased rapidly due to a gradual shift from using deterministic models. Stochastic models are basically instruments to work out the likelihood of undesirable occurrences after performing a list of operations, allowing for a random element and time element. Generally, they are used to attach probability distributions for various cash flows and capital instruments. The basic history of a stochastic model derives from random walks. The expansion of random walks into whole new concepts such as time-homogenous and time-inhomogeneous Markov models and compound Poisson models has led to continuously growing research on stochastic models. (For in-depth theories of stochastic models, please refer to CT4 or previously known as Core Reading 2000: Subject 103 from the Institute of Actuaries).

To highlight a clear relationship between insurance and stochastic modelling, the concept of insurance being a type of risk management used to hedge against the possibility of loss needs to be understood. In insurance, the term risk pooling is used to classify clients into different cohorts of risk. That is, clients agree to bear losses in equal amounts, each paying the average loss. By forming a pooling arrangement, businesses can diversify their risk. (See Harrington & Niehaus (2003) pg 54-74, regarding pooling arrangements and diversification of risk)



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