Werner Ch 8
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Loss Ratio versus Pure Premium Methods
- LR method relies on loss ratio: Requires premium at current rate level; If difficult or not available, PP approach is preferred
- PP method uses pure premium: Requires clearly defined exposures; If not available, LR approach is preferred
- LR method produces indicated change to current rates
- PP produces an indicated rate: PP must be used with new line where there are no current rates to adjust
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