CAS Seminar on Ratemaking

CAS Seminar on RatemakingCAS Seminar on Ratemaking

Basic Techniques for an Overall Basic Techniques for an Overall

Rate Level IndicationRate Level Indication (INT-2)(INT-2)

March 7, 2002 The Tampa Marriott Waterside

Tampa, FloridaPresented by: Presented by:

Charles Parsons, FCAS, MAAA & Linda Torkelson, FCAS, MAAACharles Parsons, FCAS, MAAA & Linda Torkelson, FCAS, MAAA

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Basic TechniquesBasic TechniquesOverall Rate Level Indication Overall Rate Level Indication

(INT-2)(INT-2)

Basic Ratemaking Equation and Its Considerations:

– Organization of Data

– Premium Adjustments

– Loss Adjustments

– Expense Considerations

– Other Considerations

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Basic Ratemaking Equation:Basic Ratemaking Equation:

Future Premiums =

Future Losses +

Future Expenses +

Underwriting Profit and Contingency Provision

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BASIC RATEMAKING METHODSBASIC RATEMAKING METHODS

Pure Premium (PP) Method PP = Loss / Exposure Units

develops indicated rate per unit of exposure (R)

R = [PP + FE] / [1-VER-Profit Ratio] Loss Ratio Method

develops indicated rate change (A) A = Experience LR / Target LR

NOTE: THE TWO METHODS PRODUCE IDENTICAL RESULTSWHEN IDENTICAL DATA AND ASSUMPTIONS ARE USED.

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ORGANIZATION OF DATAORGANIZATION OF DATA

I. CALENDAR YEAR DATA(standard accounting year)

II. POLICY YEAR DATA

III. ACCIDENT YEAR DATA

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I. CALENDAR YEAR DATA

Premium and Loss transactions that occur during the year.

Loss = Payments + change in reserves during year

Matches financial statements

Data available quickly, least time lag in development

Never changes after it is calculated at the end of a year.

Premium and Loss transactions DO NOT match

Reserve changes from prior years can distort the reliability of

the data for ratemaking and

management purposes.

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II. POLICY YEAR DATA

Premium and Loss transactions on policies with effective dates (new or renewal) during the year.

Loss = Payments + Reserves

Premium and Loss transactions DO match

Transactions from policies effective in prior years do not distort the

data for ratemaking

Data with the greatest time lag (not available until one term after end

of the year.)

Exact ultimate losses cannot be finalized until all losses settled.

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III. ACCIDENT YEAR DATA

Loss transactions for accidents occurring during the year. Premium transaction during the same 12 months.

Loss = Payments + Reserves

Premium and Loss transactions generally match

Transactions from accidents occurring in prior years do not distort

the data for ratemaking

Data with slight time lag

Exact ultimate losses cannot be finalized until all losses settled.

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SAMPLE RATE LEVEL INDICATIONSAMPLE RATE LEVEL INDICATIONASSUMPTIONS

Annual Policies. Rates to be revised as of JANUARY 1, 2002 Loss Ratio Methodology EXPERIENCE PERIOD: ACCIDENT YEAR 2000

– 2000 Earned Premium $3,690,000– Reported Incurred Losses as of 12/31/00: $1,700,000

2000 2001 2002 2003 Experience Policies Period Effective

<COVERAGE PROVIDED> Avg. Accident Avg.. Accident Date under Date is 7/1/00 Revised Rates is 1/1/2003

TREND PERIOD is 2.50 Years

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LOSSLOSS RATIORATIO METHODOLOGYMETHODOLOGYFixed Expense ApproachFixed Expense Approach

INDICATED (needed) RATE LEVEL CHANGE =INDICATED (needed) RATE LEVEL CHANGE =

Projected Experience Loss + Fixed Expense RatioProjected Experience Loss + Fixed Expense Ratio

Expected (Target) Loss + Fixed Expense RatioExpected (Target) Loss + Fixed Expense Ratio

- 1.0- 1.0

For Example:For Example: 76.5%76.5%74.7%74.7%

- 1.0 = + 2.4%- 1.0 = + 2.4%

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LOSSLOSS RATIORATIO METHODOLOGYMETHODOLOGYExperience Loss + Fixed Expense Ratio ProjectionExperience Loss + Fixed Expense Ratio Projection

Premium Adjustments– Adjust to Current Rate Level

– Premium Trend

– Coverage Drift

Loss Adjustments– Loss Development

– Loss Trend

– Deductible Adjustments

– Catastrophe Adjustments

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RATE INDICATION WORKSHEETRATE INDICATION WORKSHEETLoss Ratio Methodology - Fixed Expense ApproachLoss Ratio Methodology - Fixed Expense Approach

A. EXPERIENCE Loss + Fixed Expense Ratio = (9 + 11) / (4). . . . . . . . . . . . .

(1) 2000 Earned Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Current Rate Level Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Premium Trend Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Trended Premium @ Current Rate Level = (1)*(2)*(3) . . . . . . . . . . .

(5) Accident Year 2000 Ultimate Losses . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Allocated Loss Adjustment Expense (ALAE) Factor. . . . . . . . . . . . . .(7) Annual Loss Trend ____% Trend Period: 2.5 years (8) Exponential Trend Factor [1.0 + (7)] ** 2.5. . . . . . . . . . . . . . . . . . . . . (9) Trended Ultimate Losses and ALAE = (5) * (6) * (8) . . . . . . . . . . . .

(10) Fixed Expense Ratio (FER). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) Fixed Expenses = (1) * (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. EXPECTED (Target) Loss + Fixed Expense Ratio. . . . . . . . . . . . . . . . . . . . .

C. INDICATED RATE LEVEL CHANGE = (A / B) - 1.0. . . . . . . . . . . . . . . . .

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PREMIUM ADJUSTMENTSPREMIUM ADJUSTMENTS

Current Rate Level Adjustment

Loss Ratio Method analyzes the appropriateness of the

CURRENT RATES for use in the future.

CRL adjustment reflects rate changes NOT already included

in historical recorded premium.

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Current Rate Level Adjustment - Common Techniques Extension of Exposures

re-rate each exposure (policy) requires extensive detail and mechanization most accurate method

Parallelogram Method

easier method specific policy information not required assumes even distribution of policies written

throughout the year

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CURRENT RATE LEVEL ADJUSTMENTCURRENT RATE LEVEL ADJUSTMENT

Extension of Exposures MethodExtension of Exposures Method

2000 Earned Exposures

Class 1 Class 2Class 1 Class 2

Territory 1Territory 1 1,500 2,260Territory 2Territory 2 1,995 3,010Territory 3Territory 3 2,700 2,500


Territory 1Territory 1 $150 $300Territory 2Territory 2 $175 $350Territory 3Territory 3 $220 $440


Territory 1Territory 1 $225,000 $678,000Territory 2Territory 2 $349,125 $1,053,500Territory 3Territory 3 $594,000 $1,100,000

Current Rates

Premium @ Current Rates

Statewide totalStatewide total $3,999,625 $3,999,625

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AA BB C C

1/99 1/00 1/01 1/02 1/03


Parallelogram Method

Rate Change HistoryRate Change History

Date Change Rate Index

From 1/1/99 to 12/31/00 None 1.000 A

1/1/00 - 5% 0.950 B(1 * 0.95)

7/1/00 + 2% 0.969 C(1 * 0.95 * 1.02)

1/1/01 + 4% 1.008 Current

(1 * 0.95 * 1.02 * 1.04)

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Calculation of On-Level Factor - Parallelogram Method

I. Rate Index for 2000:I. Rate Index for 2000:

Percent Rate Area of 2000 Index

A 50.0 1.000 B 37.5 0.950 C 12.5 0.969

TOTAL 100.0 0.977

II. On-Level Factor for 2000:II. On-Level Factor for 2000: (1) Current Index 1.008 (2) 2000 Index 0.977 (3) On-Level Factor (1) / (2) 1.032

(4) 2000 Earned Premium $3,690,000

(5) 2000 Earned Premium @ Current Rate Level $3,808,080

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(1) 2000 Earned Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,690(2) Current Rate Level Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.032(3) Premium Trend Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Trended Premium @ Current Rate Level = (1)*(2)*(3) . . . . . . . . . . .


(6) Allocated Loss Adjustment Expense (ALAE) Factor. . . . . . . . . . . . . .(7) Annual Loss Trend _5.0__% Trend Period: 2.5 years (8) Exponential Trend Factor [1.0 + (7)] ** 2.5. . . . . . . . . . . . . . . . . . . . . (9) Trended Ultimate Losses and ALAE = (5) * (6) * (8) . . . . . . . . . . . .


(11) Fixed Expenses = (1) * (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



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Premium Trend

To projectproject the premium level which will exist during the period being priced due to underlying inflation sensitive exposures.

Must adjust for items such as:

Average car model year or price group Average home value Any item that would impact future premium or both

premium and losses in the future except policy countexcept policy count

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PREMIUM PREMIUM ADJUSTMENTSADJUSTMENTS

Premium Trend / Coverage DriftPremium Trend / Coverage Drift AUTO EXAMPLE - MODEL YEAR RATINGAUTO EXAMPLE - MODEL YEAR RATING

Over time, the average model year and symbol will “drift” Over time, the average model year and symbol will “drift” toward newer more expensive vehicles. toward newer more expensive vehicles.

HOMEOWNERS EXAMPLE - EXPOSURE TRENDHOMEOWNERS EXAMPLE - EXPOSURE TRENDThe exposure unit used in Homeowners is the amount of The exposure unit used in Homeowners is the amount of insurance which is tied to the value of the home.insurance which is tied to the value of the home.

Both of these situations will cause average premium in Both of these situations will cause average premium in the projection period to be higher than in the experience the projection period to be higher than in the experience period, regardless of any rate activity.period, regardless of any rate activity.

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Auto Premium Trend Example

ModelYear

ExposureDistribution

PriorRelativity

NewRelativity

CurrentC-1C-2C-3C-4C-5C-6

OlderTotal

12%10%10%10%10%10% 8%28%

100.0%

1.051.021.000.980.960.940.920.880.954

1.071.051.021.000.980.960.940.900.975

Annual Trend = 0.975 / 0.954 - 1 = 2.2%Annual Trend = 0.975 / 0.954 - 1 = 2.2%Total Trend Factor = 1.022 ^ 2.5 = 1.056Total Trend Factor = 1.022 ^ 2.5 = 1.056

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(1) 2000 Earned Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,690(2) Current Rate Level Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.032(3) Premium Trend Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.056(4) Trended Premium @ Current Rate Level = (1)*(2)*(3) . . . . . . . . . . . 4,021


(6) Allocated Loss Adjustment Expense (ALAE) Factor. . . . . . . . . . . . . .(7) Annual Loss Trend ______% Trend Period: 2.5 years (8) Exponential Trend Factor [1.0 + (7)] ** 2.5. . . . . . . . . . . . . . . . . . . . . (9) Trended Ultimate Losses and ALAE = (5) * (6) * (8) . . . . . . . . . . . .


(11) Fixed Expenses = (1) * (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. EXPECTED (Target) Loss + Fixed Expense Ratio. . .. . . . . . . . . . . . . . . . . . .


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Changes in deductible distort experienceChanges in deductible distort experience

Automobile Physical DamageAutomobile Physical Damage

Review each deductible separately, orReview each deductible separately, or

Adjust to a common basis, orAdjust to a common basis, or

Reflect deductible shift in trend factorsReflect deductible shift in trend factors

HomeownersHomeowners

Add amount of deductible back to each lossAdd amount of deductible back to each loss

LOSS ADJUSTMENTSLOSS ADJUSTMENTS

DEDUCTIBLES

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CATASTROPHES

Catastrophes should be eliminated from lossesCatastrophes should be eliminated from losses

Average provision should be used as a loss loadingAverage provision should be used as a loss loading

Provision for catastrophes should be included in the profit loadProvision for catastrophes should be included in the profit load

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LOSS ADJUSTMENTSLOSS ADJUSTMENTSLoss Development Analysis

Adjust historical losses to an expected ULTIMATE value

Reflects revisions to claim values as claims are settled

MUST be used with policy and accident year data

Reflects IBNR reporting.

Reflects development on reported claims.

Key Factors for Consideration

Observation of historical patterns

Incurred and Paid developments

Development period

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Accident Year Loss Development AnalysisAccident Year Loss Development Analysis

INCURRED METHOD - Recognizes SYSTEMATIC inaccuracy of case reserves

INCURRED LOSSES - Adjusted for Deductibles and Cats, (000’s) ACCIDENT Reported as of: YEAR 12 mos 24 mos 36 mos 48 mos 60 mos 72 mos1993 1,000 1,230 1,304 1,238 1,212 1,2121994 1,100 1,320 1,412 1,398 1,356 1,3561995 1,200 1,488 1,562 1,514 1,498 1,4961996 1,300 1,756 1,790 1,736 1,7261997 1,400 1,708 1,810 1,7561998 1,500 1,800 1,9261999 1,600 1,9682000 1,8001,800

Age to Age Development Factor =Incurred Loss @ Later Report Period divided by Loss @ Prior Report Period

AY 1998 12 mos TO 24 mos Factor = $1,800 / $1,500 = 1.201.20

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INCURRED AGE-TO-AGE FACTORS

ACCIDENT 12 to 24 to 36 to 48 to 60 to YEAR 24 mos 36 mos 48 mos 60 mos 72 mos

1993 1.23 1.06 0.95 0.98 1.00 1994 1.20 1.07 0.99 0.97 1.00 1995 1.24 1.05 0.97 0.99 1.00 1996 1.35 1.02 0.97 0.99 1997 1.22 1.06 0.97 1998 1.201.20 1.07 1999 1.23

2 Year Average 1.215 1.065 0.970 0.990

1.000

3 Year Average 1.217 1.050 0.970 0.983

1.000

4 Year Average 1.250 1.050 0.975 0.983

1.000

Middle 3 Last 5 1.230 1.060 0.970 0.983

1.000

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AVERAGED AGE-TO-AGE FACTORS

12 to 24 to 36 to 48 to 60 to 24 mos 36 mos 48 mos 60 mos 72 mos

2 Year Average 1.215 1.065 0.970 0.990 1.000

3 Year Average 1.217 1.050 0.970 0.983 1.000

4 Year Average 1.250 1.050 0.975 0.983 1.000

Middle 3 Last 5 1.230 1.060 0.970 0.983 1.000

Selected Age to Age 1.230 1.055 0.970 0.985 1.000Factor x x x x

Cumulative Age to Ultimate Factor 1.240 1.008 0.955 0.985 1.000

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LOSS DEVELOPMENT ANALYSISLOSS DEVELOPMENT ANALYSIS

(1)(1) (2) (2) (3) (3) CumulativeCumulative EstimatedEstimated

Accident Accident Incurred Incurred Age to UltimateAge to Ultimate Ultimate Loss Ultimate Loss YearYear Loss @ 12/00Loss @ 12/00 Factor Factor (1) * (2)(1) * (2) 1993 1,212 1.000 1,212

1994 1,356 1.000 1,356

1995 1,496 1.000 1,496

1996 1,726 1.000 1,726

1997 1,756 0.985 1,730

1998 1,926 0.955 1,839

1999 1,968 1.008 1,984

2000 1,8001,800 1.240 2,2322,232

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(5) Accident Year 2000 Ultimate Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 2,232(6) Allocated Loss Adjustment Expense (ALAE) Factor. . . . . . . . . . . . . .(7) Annual Loss Trend ______% Trend Period: 2.5 years (8) Exponential Trend Factor [1.0 + (7)] ** 2.5. . . . . . . . . . . . . . . . . . . . . (9) Trended Ultimate Losses and ALAE = (5) * (6) * (8) . . . . . . . . . . . .


(11) Fixed Expenses = (1) * (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. EXPECTED (Target) Loss + Fixed Expense Ratio. . .. . . . . . . . . . . . . . . . . . .


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ProjectProject to the loss level predicted to exist during pricing period to the loss level predicted to exist during pricing period

Data IssuesData Issues

Separate Claim frequency and Severity Trends?

Internal Vs. External Data ?

Paid, Incurred, Reported data ?

Calendar Vs. Accident year ?

Length of Historical period ?

Credibility ?

Extrapolations of Historical Data? (Least Squares Regression,

Time Series, Econometric Models)


Loss Trend Analysis

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LOSS TREND ANALYSISLOSS TREND ANALYSIS

Accident Ultimate LossesAccident Ultimate Losses Earned Exposures PureEarned Exposures Pure YearYear ($ 000’s)($ 000’s) (000’s)(000’s) PremiumPremium

1993 1,212 13.0 $ 93.23 1994 1,356 13.2 $102.73 1995 1,496 13.3 $112.48 1996 1,726 13.4 $128.81 1997 1,730 13.6 $127.21 1998 1,839 13.7 $134.23 1999 1,984 13.8 $143.75 2000 2,108 14.0 $150.57

Annual Trend based on Least Squares (exponential ) 6.6%

Most Recent Annual Change (150.57 / 143.75) 4.7%

Other Possible Trend SourcesOther Possible Trend Sources C.P.I. Medical Care Index 3 - 4%

C.P.I. Auto Body Work Index 4 - 5%

C.P.I. Home Maintenance & Repair Index 3 - 4%

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(5) Accident Year 2000 Ultimate Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 2,232(6) Allocated Loss Adjustment Expense (ALAE) Factor. . . . . . . . . . . . . . (7) Annual Loss Trend _5.0__% Trend Period: 2.5 years (8) Exponential Trend Factor [1.0 + (7)] ** 2.5. . . . . . . . . . . . . . . . . . . . . 1.13(9) Trended Ultimate Losses and ALAE = (5) * (6) * (8) . . . . . . . . . . . .


(11) Fixed Expenses = (1) * (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. EXPECTED (Target) Loss + Fixed Expense Ratio. . . . . . . . . . . . . . . . . .. . . .


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EXPENSE LOADINGSEXPENSE LOADINGS

Loss Adjustment ExpensesLoss Adjustment Expenses

AllocatedAllocated

With Losses for AutoWith Losses for Auto

With Unallocated for HomeownersWith Unallocated for Homeowners

UnallocatedUnallocated

Underwriting ExpensesUnderwriting Expenses

“ “Fixed”Fixed”

Variable with PremiumVariable with Premium

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EXPENSE ANALYSISEXPENSE ANALYSIS

Allocated Loss Adjustment ExpensesAllocated Loss Adjustment Expenses (If NOT included with losses in loss development section)

Product XYZProduct XYZCountrywide FiguresCountrywide Figures

(in $ millions)(in $ millions)

AllocatedAllocated LossLoss ALAEALAE toto

IncurredIncurred AdjustmentAdjustment LossesLossesYearYear LossesLosses ExpensesExpenses RatioRatio 1998 $61,200 $6,500 10.6%1999 79,000 7,800 9.9%2000 82,300 8,300 10.1%

Estimated Future ALAE Percentage 10.0%10.0%as a percentage of Incurred Losses

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(5) Accident Year 2000 Ultimate Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 2,232(6) Allocated Loss Adjustment Expense (ALAE) Factor. . . . . . . . . . . . . . 1.10(7) Annual Loss Trend _5.0__% Trend Period: 2.5 years (8) Exponential Trend Factor [1.0 + (7)] ** 2.5. . . . . . . . . . . . . . . . . . . . . 1.13(9) Trended Ultimate Losses and ALAE = (5) * (6) * (8) . . . . . . . . . . . 2,774


(11) Fixed Expenses = (1) * (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



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UNDERWRITING EXPENSESUNDERWRITING EXPENSES

Commissions and premium taxes vary directly with premiumsCommissions and premium taxes vary directly with premiums

Other acquisition and general expenses are “fixed”Other acquisition and general expenses are “fixed”

Not really fixedNot really fixed

Vary with inflationVary with inflation

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EXPENSE ANALYSISEXPENSE ANALYSISDirect Expenses

Other Than Allocated Loss AdjustmentProduct XYZ

Countrywide Figures (I.E.E. - Insurance Expense Exhibit)

(In $ Millions) EXPERIENCE PERIODEXPERIENCE PERIOD

1998 1999 20001998 1999 2000

$ % $ % $ %$ % $ % $ %Written Premium 107,400 100 121,600 100 142,400 100

Commissions 16,100 15.0 19,200 15.8 22,100 15.5

Other

Acquisition 4,200 3.9 4,700 3.9 5,300 3.7

Administrative 5,800 5.4 6,200 5.1 8,200 5.8

Unallocated Loss

Adjustment Expense 6,200 5.8 7,500 6.2 8,200 5.8 Taxes, Licenses

& Fees 3,500 3.3 4,100 3.4 4,900 3.4

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DEVELOPMENT of DEVELOPMENT of EXPECTED LOSS RATIO & EXPECTED LOSS RATIO &

FIXED EXPENSE RATIOFIXED EXPENSE RATIO

Total Variable Fixed

Commissions 15.5% 15.5% 0.0%

Other Acquisition 3.8 1.9 1.9

Administrative 5.4 0.0 5.4

Unallocated Loss Expenses 6.0 0.0 6.0

Taxes, Licenses & Fees 3.4 3.4 0.0

Profit & Contingency 4.0 4.0 0.0

Other Costs * 0.5 0.5 0.0

TOTAL 38.6% 25.3% 13.3%

TARGET Loss, ALAE & Fixed Expense Ratio = 100.0% - 25.3% = 74.7%

* Policyholder Dividends, Involuntary Market Costs, Guaranty Fund Assessments, Etc. (if allowable)

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81.2%

B. EXPECTED (Target) Loss + Fixed Expense Ratio. . . . . . . . . . . . . . . . . . . . .74.7%

A. EXPERIENCE Loss + Fixed Expense Ratio = (9 + 11) / (4). . . . . . . . . . . .


(5) Accident Year 2000 Ultimate Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 2,232(6) Allocated Loss Adjustment Expense (ALAE) Factor. . . . . . . . . . . . . . 1.10(7) Annual Loss Trend _5.0__% Trend Period: 2.5 years (8) Exponential Trend Factor [1.0 + (7)] ** 2.5. . . . . . . . . . . . . . . . . . . . . 1.13(9) Trended Ultimate Losses and ALAE = (5) * (6) * (8) . . . . . . . . . . . 2,774

(10) Fixed Expense Ratio (FER). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13.3%(11) Fixed Expenses = (1) * (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491

C. INDICATED RATE LEVEL CHANGE = (A / B) - 1.0. . . . . . . . . . . . . . . .+8.7%

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OTHER CONSIDERATIONSOTHER CONSIDERATIONS

CREDIBILITY CREDIBILITY

DEDUCTIBLESDEDUCTIBLES

TYPES (Straight, Franchise, Percentage)TYPES (Straight, Franchise, Percentage)

Must consider deductibles offeredMust consider deductibles offered

Will the offerings change; will the mix of changeWill the offerings change; will the mix of change

Deductible relativities based on Loss Elimination Ratios Deductible relativities based on Loss Elimination Ratios

LIMITSLIMITS

Basic limits data used for auto indication; Increased limits Basic limits data used for auto indication; Increased limits

reviewed separatelyreviewed separately

Basic limits review emphasizes frequency of loss, not severityBasic limits review emphasizes frequency of loss, not severity

BASIC RATEMAKING TECHNIQUESBASIC RATEMAKING TECHNIQUESSuggested ReadingsSuggested Readings

Foundations in Casualty Actuarial Science, Ratemaking by Charles L. McClenahan, Chapter 2, pages 25-90.

Statement of Principles Regarding Property and CasualtyInsurance Ratemaking, CAS Committee on Ratemaking (1988).

Insurance Operations, Webb, Harrison and Markham, CPCU Text, Chapters 10 and 11.

Introduction to Ratemaking and Loss Reserving for Property and Casualty Insurance, by Robert L. Brown, Chapter 3 - Ratemaking

Trend and Loss Development Factors, by Charles F. Cook, 1970 Proceedings of the Casualty Actuarial Society

Documents

CAS Seminar on Ratemaking