Economic Issues Simulation Paper HCS/440 University of Phoenix
Individuals are encouraged to get insured, which serves as their proactive assurance of the possible risks that they may face in the future. By getting insurance, the person is able to minimize these risks. For instance, one may opt to buy insurance in order to have a fall back in case of a large loss or casualty, thus they can still be secure of a regular premium. Quite ironically, insurance has been one of the profit avenues of some companies. Profit can be gained in the insurance business because gaining the premium from the probability of a certain loss will still have a higher possibility of the same event to
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Consequently, improving the benefit system will also greatly reduce the profit margin of the company. The profit policy of Castor Collins now is the equivalence to the total premiums deducted with the probability of getting sick (of the clients) multiplied by frequency that the insurance holders get sick. The new plan implemented by Feuerman aims to reduce the illness probability of their clients by eliminating the high cost health insurance. Every business will naturally have its excess cost in order to smoothly run a business. These costs are referred to as loading costs. In an insurance business, this cost will depend greatly on the number of customers and the kind of insurance claims. Being in a perfect competition market structure, the Castor Collins will naturally need pass on the costs to the customers, or else it would be tough for them to grow and compete. The technique would be to avoid covering costs for those events that are known to occur more frequently. It is crucial for Castor Collins to carefully analyze their customers, in order to come up with the most appropriate policy that is geared towards covering the loading cost from the mere rate they give to customers.
There are around 1000 individuals working for Constructit, which are paying $4000 for their annual premium. Almost 32% of the Constructit company employees showed stable