A quote or quotation is the process by which the price of an asset, product or service is determined in a market. In the financial sector, it represents the market value of an asset at a given point in time, while in the insurance sector it’s used to calculate the premium for a policy based on the risk and the cover taken out. In the context of employment, it’s a compulsory contribution that provides access to benefits such as a pension, healthcare or unemployment benefit.
The calculation of the quotation varies depending on the context in which it’s applied:
- In financial markets: it’s determined by supply and demand on the stock market. Factors such as the company’s performance, the general economic situation and investors’ expectations influence its performance. The quotation can be expressed in absolute terms (price) or relative terms (indices).
- In insurance: it’s calculated based on the type of policy, the policyholder’s profile, the level of cover and other risk factors such as age, claims history or geographical location. The quote is usually set out in a pre-contractual document with a limited period of validity, generally between 15 and 30 days.
- In social security: it’s based on a percentage of the worker’s salary (within minimum and maximum limits known as contribution bases), with contributions from both the employer and the employee, in different proportions depending on the type of contribution. Social security schemes vary (such as general or self-employed categories), as do the types of covers provided (covering general or occupational contingencies, unemployment, etc.).
Depending on the context, contributions serve different purposes:
- In financial markets: to assess the performance of a financial asset and make investment decisions based on its historical performance and future expectations.
- In insurance: to determine the price of an insurance policy before it’s taken out and to offer the customer a comparison of different cover options, enabling them to choose the one best suited to their needs and budget.
- In social security: to ensure the sustainability of the social protection system through a pay-as-you-go mechanism, financing current benefits with contributions from active workers and generating entitlements to future benefits.
Quotation and contributions, in any of their meanings, provide valuable information for economic decision-making, whether for investors, policyholders or for the planning of public policies on social security.
