When there's a claim, you send all members a bill for their share of the claim plus your fee. If there are no claims, you don't get paid. You're incentivized to pay out so you get your fees. But not too often or premiums will sky-rocket and you'll lose customers. Is that right?
What happens if there is a spike in claims and everyone leaves at once?
You benefit on the upside but if there are outliers and the premium would skyrocket we cap your premium at market rate through an agreement with a reinsurer. It's a standard financial tool insurers are using as well.
When there's a claim, you send all members a bill for their share of the claim plus your fee. If there are no claims, you don't get paid. You're incentivized to pay out so you get your fees. But not too often or premiums will sky-rocket and you'll lose customers. Is that right?
What happens if there is a spike in claims and everyone leaves at once?