Actuarial Adjustment
What Does Actuarial Adjustment Mean?
An actuarial adjustment refers to a modification made by an insurance company to the premiums on its policies or other key values. These adjustments are often implemented to account for unforeseen changes in insurance claim payouts or other pertinent data. In simpler terms, insurance companies use actuarial adjustments to restructure their business operations when necessary, ensuring both liquidity and profitability.
Insuranceopedia Explains Actuarial Adjustment
Things don’t always go as planned in the insurance industry. For instance, a life insurance company might have to pay 20% more in death benefits than expected in a particular year. In such cases, the company may need to make actuarial adjustments to avoid underwriting losses. Unfortunately for customers, this often results in higher premiums. However, these adjustments help maintain the company’s financial stability, which ultimately benefits customers in the long term.
