These firms collect premiums and pay out claims. Premiums are regulary payments to the firm because the firm is providing down-side loss protection
Insurance companies
The firms mentioned in the statement refer to insurance companies. Insurance companies collect premiums from their policyholders in exchange for providing insurance coverage that protects the policyholder from financial loss due to various risks like accidents, injuries, or damage. These risks are known as the “down-side loss” mentioned in the statement.
Premiums are usually paid annually, biannually, or monthly depending on the terms of the policy. The amount of the premium is determined by various factors, including the level of coverage being provided, the likelihood of a claim being made, and the policyholder’s risk profile.
When a policyholder experiences a loss that is covered by their insurance policy, they can file a claim with the insurance company. The insurance company will review the claim and determine if it is covered under the policy. If the claim is accepted, the insurance company will pay out the necessary funds to cover the losses based on the terms of the policy.
In summary, insurance companies collect premiums in exchange for providing insurance coverage that protects policyholders from financial loss due to various risks. When policyholders experience losses that are covered by their insurance policies, they can file claims, and the insurance company will pay out the appropriate amount based on the terms of the policy.
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