The Losses of Allotment of Profit are Simplicity, Equity, Suitability, Popularity and Flexibility

The losses of allotment of profit are simplicity, equity, suitability, popularity and flexibility.

  1. SimplicityIt is desirable from the expenses point of view and from understanding point of view.
  1. EquityThe most important principle is ‘Equity’. Due weightage should be given to each policyholder according to his contribution to surplus. But in practice, this cannot be rigidly adhered to. So, a broad equity or rough justice in distribution of divisible surplus is taken into account.
  1. SuitabilityA system of distribution of surplus should be suitable according to the nature, size and age of the insurance business.
  1. PopularityThe system should not be confirmed merely to the actuarial understanding but it should be popularly known to the policyholders.
  1. FlexibilityThe better system of divisible profit will be that which can be change or altered according to the requirement.

In practice hundred per cent equity is not possible. So the flexibility,  simplicity and popularity are generally practiced.

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