• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Chapter 7, Insurance Cycle

T

tatos

Member
Under the reasons for the existence of the cycle, Acted notes:

- economies of scale, which encourage marginal costing

Please explain this..
 
Last edited by a moderator:
I guess that pretty much anything that affects general movements in prices, could be argued to affect the control cycle? As companies get bigger, they get more economies of scale, so marginal costing becomes more prevalent (I assume you know what this is), so prices generally don't increase as much as they might have done, so the cycle is not so marked at that stage...
 
I think it's more about the effect that it has at the other end of the cycle, i.e. when rates are soft, they are allowed to get even softer as insurers accept low premiums on the grounds that the policies are still marginally profitable. If insurers insisted on every policy making its proper contribution to fixed costs then rates would never get as soft as they sometimes do.
 
Back
Top