|Writer level||High School|
|Sources / references||SEE PAPER REQUEST|
|Description / paper instructions
My topic is about how car insurance company earns money. Because of the car accident happens every minute. How can the car insurance company earns money other than lost money? This is a kind of statistics and risk assessment issues.
I need a new writer to do the following:
1. Improve the Introduction part. It has to answer all the set questions in regard to the technology chosen (risk assessment technology). These are the question:
Give a brief background/history of the technology.
What is the technology?
Why is it interesting?
How is it used and who uses it, etc.?
How does the technology compare to previous technologies that served a similar purpose?
2. Improve Problem Statement section.
The section has to describe the problem and end with a clearly articulated Problem Statement.
How Car Insurance Company Earns Money?
The car insurance companies heavily involve in the risk assessment activities, which refer to the process using which the risks associated with each client may be identified. Without conducting efficient risk assessment, the car insurance companies may face severe financial losses as they are always obliged to pay for insured cars. Since the events of car accidents and damages have considerably increased in the present times (Bian, Yang, Zhao & Liang), the car insurance providers have been using advanced risk assessment technology. The technology of risk assessment heavily relies on the math concepts of probability and optimization. In future, the technologies of big data and artificial intelligence will further support the processes of risk assessment for the insurance service providers.
How it Works
Efficient use of probability and optimization techniques aid the insurance companies to assess risk of each of the policy holders as well as the prospective investors. Based on this analysis, the insurance companies become able to identify the most suitable stakeholders which reduces the chances of loss for them.
Car insurance providers always risk financial losses due to the nature of their business. These companies charge a monthly premium from the customers against which they are obliged to pay for any damage or loss happened to the customer’s vehicle. It would never be possible for the car insurance companies to operate without calculating the probabilities of generating profits. The companies always conduct risk assessment for each of the plans they are offering to the consumers (Osafune, Takahashi, Kiyama, Sobue, Yamaguchi & Higashino). The risks and the probability of loss is calculated based on the profile and history of each customers. Similarly, the car insurance companies need to invest in multiple places in order to sustain their business. When it comes to investing, the companies always conduct market analysis, do market survey to find out the best investment options and subsequently math is used to identify the probabilities associated with loss or success.
Concepts of Math
The insurance companies do not only generate the profits by charging premium from the customers. These companies often invest their amount in the businesses which come out to be most profitable. Furthermore, these companies often reject the application for car insurance; for example, if the company detects that a person who has applied for the insurance has a frequent history of accidents, the company rejects his insurance application; again, for this initial or periodic assessment of the consumers, it is important for the company to be able to conduct efficient risk assessment. The two important concepts of math which are most relevant for the car insurance companies are probability and optimization.
Probability is defined as the chance of occurrence and it is calculated based on the number of factors. For example, when a person applies for car insurance, the company would include various factors into account for conducting the risk assessment. These factors would most probably include age of the applicant, his/her income, previous history of accidents, health condition, etc. Each of this factor would be assigned specific probability and subsequently, the risk assessment would be conducted. The value of probability for each factor would be associated based on the past experience of the company or market research. This way, the concept of probability can be used to identify the chances of loss or profit for the company.
On the other hand, the concept of optimization is also often used while conducting the risk assessment. The optimization problems generally target at minimizing the loss or maximizing the profits for the company. For example, a company may design a problem for identifying the optimum price of premium per month for customers, if it desires to keep the profit at maximum. Since, it is not possible to achieve 100% profit, the optimization problems generally seek combined optimization of profit and loss. Hence, optimization helps the insurance companies to decide premium cost efficiently.
Although the concepts of math and physics have heavily been used by the car insurance companies for the process of risk assessment, it is expected that the risks would be analyzed more accurately in the near future. The accuracy of the risks calculated by the car insurance companies is expected to improve due to the rapid growth in the information technology. Various fields of computing relate to risk assessment and prediction of profits or loss. For example, the emergence of big data would offer the car insurance companies with a chance to do more accurate risk assessment as compared to present. The companies would be able to identify the patterns of losses they or similar companies have faced in the past. Furthermore, the concepts of big data would aid the car insurance providers to have an insight about the driving patterns of each driver they are issuing policy to (Zhang, Xu, Cheng, Chen, & Zhao). Since big data is based on huge collection of data, the car insurance companies would become able to analyze different scenarios which had occurred in the past and could identify the risk associated with each issued policy or investment.
The big data that is expected to revolutionize the car insurance industry relates to the sensors installed in the car or wearable by the drivers. The technology of risk assessment by the car insurance companies would be directly linked with the concepts of vehicular networks or internet of everything (Soleymanian, Weinberg, & Zhu). The sensors installed in the car would be collecting data about the driver’s speed as well as his health conditions (through monitoring heart rate, blood glucose level and other vital parameters). This data from the sensors can then be used by the car insurance companies to make informed decisions about whether or not issue/continue the policy for a specific driver.
Also, the technology of using math for car insurance is expected to be continued over next 50 years. As the purchasing power of consumers have been increasing, there is a strong likelihood that the number of cars on the roads would increase significantly; in turn, the insurance companies would also be getting more requests for car insurances. Due to the increase in the number of drivers, the companies would have to analyze a number of factors based on which they can make the decision on whether or not a policy should be granted. Clearly, the companies would continue using mathematical models integrated with computing technologies in order to assess the risk associated with each consumer.
The car insurance companies heavily rely on math concepts of probability and optimization for conducting their risk assessment activities efficiently. These concepts are used to identify the customers whom the policy should be issues, as well as to identify the most feasible investment options. the probability helps to provide a comparative insight about different options of customers and investment. Also, optimization helps the companies to understand that what should be the cost of premium if they want to ensure a certain value of profit and loss. It is expected that in future, the technologies of risk assessment would further advance for the car insurance companies, due to emergence of fields such as big data and artificial intelligence. In conclusion, it is not possible for the car insurance companies to conduct risk assessment without using concepts of math.
Bian, Yiyang, et al. “Good drivers pay less: A study of usage-based vehicle insurance models.” Transportation research part A: policy and practice 107 (2018): 20-34.
Osafune, Tatsuaki, et al. “Analysis of accident risks from driving behaviors.” International journal of intelligent transportation systems research 15.3 (2017): 192-202.
Soleymanian, Miremad, Charles Weinberg, and Ting Zhu. “Sensor data, privacy, and behavioral tracking: does usage-based auto insurance benefit drivers.” Marketing Science, University of British Colombia (2017).
Zhang, Heng, et al. “Big data research on driving behavior model and auto insurance pricing factors based on UBI.” International Conference On Signal And Information Processing, Networking And Computers. Springer, Singapore, 2017.