Understanding commercial insurance premiums

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Risk and uncertainty are part of everyday life. There are some risks we are all prepared to take and some risks that may severely impact our lives and livelihoods. The insurance industry exists to satisfy the fundamental need for people and businesses to protect themselves from those risks that are just too great to take.

That said, the internal workings of an insurance company and its jargon are complex. That's not for any ‘bad reason' or ulterior motive, it's simply complex to understand the variety of risks that face a wide range of businesses, set appropriate premiums, assess and attach reserves to claims... and set reserves for claims that may happen in 40 years' time that haven't even been considered at that point.

This booklet is designed to try to make the financial workings of the industry easier to understand by breaking down a typical commercial insurer's profit and loss.

Topics covered:

- A commercial insurer's typical profit and loss.

- Commercial insurance jargon explained.

- Profit and loss explained: public/products' liability; property; motor fleet; employers' liability.