An insurance company's underwriting department calculates insurance payments, or premiums, using statistics, historical data and mathematical formulas, according to Investopedia. The amount that an insurance company charges a client depends on history, age, health and other factors, and every applicant goes through this investigative process.Continue Reading
After an insurance company gathers all the necessary information about an applicant, statisticians called actuaries, who deal specifically with insurance matters, analyze the data, as Investopedia explains. An actuary calculates the chances of the applicant making a claim in the future, and applicants with higher levels of risk incur higher premiums.
Actuaries also take into account general information about the applicant's population as a whole. For instance, in the case of life insurance, an actuary consults data about mortality and sickness both in the general population and in the more specific population to which the applicant belongs, broken down by gender, ethnicity, place of residence, age, lifestyle choices and any other influential factors. The actuary then takes into account the applicant's personal information while using the more general information and statistics from the mortality and sickness tables to pinpoint how soon the applicant is likely to make a claim in order to calculate the premium that the applicant should pay.Learn more about Insurance