- TIA EXAM 5 - WERNER CH 08

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  1. Pure Premium Method´╗┐
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  2. Loss Ratio Method
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  3. 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 defi ned 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
  4. What does the equivalency of these methods depends on?
    Consistent Data & Assumptions

    If not, possible that different approaches produce different results (i.e. paralellogram vs. EOE)
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- TIA EXAM 5 - WERNER CH 08
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- TIA EXAM 5 - WERNER CH 08
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