Question

How does a life insurance company ascertain its profit or loss?

Answer 1

By preparing Trading and Profit & Loss Account....

Answer 2

Answer:

Through combined ratio method

Explanation:

An insurance company makes profit or loss through set off its revenue against claims.

Insurance company tries to sell their policies in market such that the total premiums collected by company in a year are set off against the total amounts of claims paid and expenses.

Insurance company use combined ratio method

Combined ratio = Claims+Expenses = Premium.

The goal of a combined ratio of “1” it means claims + expenses = premium is perceived as the perfect model because it means they are not over or under pricing their policies.

Through this company makes profit for itself.

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