What is index insurance in SAP FS-PM - Policy Management?

SAP Term: index insurance

• Component: FS-PM

• Component Name: Policy Management

• Description: Non-life insurance: With this form of insurance, the sum insured and the insurance premium area adjusted to match the price index from the Federal Statistical Office, within a specific period normally from one insurance year to another. This should ensure that the actual value of an insured object remains the same, thus avoiding underinsurance.

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• Key Concepts: 
  Index insurance is a type of insurance policy offered by SAP FS-PM Policy Management. It is a risk management tool that provides protection against losses due to changes in an index or other measure of economic activity. The policy pays out a predetermined amount when the index falls below a certain level. 
  
  How to use it: 
  Index insurance can be used to protect against losses due to changes in an index or other measure of economic activity. The policyholder pays a premium and, if the index falls below a certain level, the policy pays out a predetermined amount. The policyholder can choose the index, the level at which the payout will be triggered, and the amount of the payout. 
  
  Tips & Tricks: 
  When selecting an index for an index insurance policy, it is important to choose one that is closely related to the risks that you are trying to protect against. For example, if you are trying to protect against losses due to changes in commodity prices, you should select an index that tracks those prices. 
  
  Related Information: 
  Index insurance is just one of many risk management tools available in SAP FS-PM Policy Management. Other tools include reinsurance, catastrophe bonds, and parametric triggers. Each of these tools has its own advantages and disadvantages, so it is important to research each one before making a decision.