Detailed definition in the online dictionary
1. Term : Insurance technology comprises those processes and procedures that are required to create the insurance cover product. In comparison to other sectors of the economy, this technology requires just as few raw materials as input factors as semi-finished and finished products, but alongside information, the nominal good money is a dominant production factor, as the payment in the event of an insurance claim is usually made in the form of cash payments.
2. Creation of a collective reserve : The main task and market performance of insurance companies is to take over the individual reserve creation of potential policyholders for the financial consequences of random deviations from the plan target. This is made possible by summarizing the risks of policyholders in (sub-)groups that are as homogeneous as possible. This makes it possible to calculate the financial requirements of the (sub-)group with the help of probability statements, and in the event of an insurance claim, the financial consequences can be borne by each affected policyholder. This is done on the basis of the laws of large numbers as the mathematical basis for insurance production. Every insurance company has a fundamental problem that is dependent on time. Potential deviations from the plan target in the future must be forecast in the present using historical data, simulations or models in order to form an adequate collective reserve. This basic problem essentially breaks down into two components. The insurance company has to determine both the amount of the individual insurance premium (premium calculation) of a contract unit and the amount of the total security reserve (solvency) for all potential insurance benefits and thus the capital requirement in excess of the risk premiums for possible unfavorable deviations from the underlying calculation basis. The randomly accruing insurance benefits for individual policyholders in the sense of cash payments in an insured event are then paid from this collective reserve and thus ultimately by the contribution of all members of this collective, which is much lower than the individual reserve formation. Ultimately, the insurance company has to bear the so-called underwriting risk, namely the risk that the sum of all risk premiums plus the available reserves is not sufficient to pay for the damage that has occurred. The figure "Insurance Technology" documents this functioning of insurance as a collective financial reserve formation.