Insurance
The whole thing, in causal order
31 ideas, 37 causal links. Below is the longest single chain through them — 12 ideas where each one genuinely causes the next. Everything else either feeds into that chain or hangs off it.
The spine
Read top to bottom. The line under each idea is why it causes the one below it.
- 01UnderwritingUnderwriting decides which risks to accept; pricing decides whether they're taken on at a rate that pays.
- 02Rate Adequacy / PricingUnder-price the risk and the claims still arrive at full size — the shortfall shows up as a high loss ratio.
- 03Loss Ratio (Claims Ratio)The loss ratio is one of the two halves that add up to the combined ratio.
- 04Combined RatioThe ratio is a percentage; multiply its gap from 100% by earned premium and it becomes the underwriting result in rupees.
- 05Underwriting ResultThe underwriting result is the first of the insurer's two profit engines to land in net profit.
- 06Net Profit (Insurer)Retained profit adds to available capital, which is the numerator of the solvency ratio.
- 07Solvency RatioA solvency ratio near the 150% floor caps how much new premium the insurer can write — capital is the growth throttle.
- 08Gross Written PremiumGWP is the gross figure; strip out the reinsurance ceded and the portion of risk still unexpired, and what's left is the premium actually earned.
- 09Net Earned PremiumEvery rupee of premium written adds unearned-premium and claims reserves — growing the book is what grows the pool.
- 10Technical Reserves / Policy LiabilitiesThe technical reserves are what the float physically is on the balance sheet — the money set aside against future claims, waiting to be invested.
- 11Insurance FloatThe float is the pool that actually gets invested; investment income is the return earned on it.
- 12Investment Income
What feeds the spine
Levers and rules that push on the chain from outside it. Nothing causes these — they are where the causation starts.
- Commissions & Distribution Cost Expense RatioCommissions are the biggest single line inside the expense ratio, so distribution cost moves it more than any overhead does.
- Expense Ratio Combined RatioThe expense ratio is the other half that adds to the combined ratio, alongside the loss ratio.
- Expenses of Management (EoM) Limits Expense RatioThe EoM limit is the regulatory lid on the expense ratio — total commissions plus expenses can't exceed the allowed percentage of premium.
- IBNR Reserves Loss Ratio (Claims Ratio)IBNR is part of claims incurred; under-reserve it and today's loss ratio looks flattering, until the late claims surface and it bites.
- Motor Third-Party (Tariff) Loss Ratio (Claims Ratio)Motor third-party is priced by IRDAI, historically below its own claims cost, so it's a mandated drag on the loss ratio.
- Product & Pricing Regulation Rate Adequacy / PricingThe File-&-Use / Use-&-File regime shapes how freely an insurer can move price, and therefore whether rates can reach adequacy.
- Reinsurance Net Earned PremiumPremium ceded to reinsurers, including the mandatory GIC Re cession, is stripped out of the gross figure before you reach net earned premium.
- Required Solvency Margin Solvency RatioThe required solvency margin is the denominator of the solvency ratio — available capital measured against it.
What comes off it
Consequences and scorecards. The chain reaches these, and stops.
Standalone ideas
10 ideas with no causal link to the spine. They are reference — things you look up, not things that cause anything. Worth knowing that upfront rather than hunting for a connection that was never authored.