AIDA 182 SCRIPT 2026 FULL CORRECT
ANSWER SET
◉Ideal Characteristics. Answer: Stable - expensive to change rates.
Indication ( amount to charge to cover costs)
Responsive - best possible estimates of losses, based on most recent
claims experience. review rates annually
Provide for contingencies - for unexpected costs
Promote risk control - providing lower rates for policyholders who
exercise sound risk control
Reflect differences in exposure
◉Rate Components. Answer: Side note: ALAE associated with a
specific claim, ULAE cannot be readily associated
3 components
, insurance rates = prospective loss costs + expenses + profit +
contingencies
prospective loss costs = amount needed to pay future claims and loss
adjustment expenses
expenses = acquisition expenses, overhead, and premium taxes
◉Ratemaking Terms. Answer: Exposure base
Earned exposure unit
Pure premium - per expo unit required to pay losses
Expenses provision - added to pure premium to pay expenses
LAE - expenses associated with adjusting claims
Profit and contingencies
◉Investment Income. Answer: Insurer performs 2 operations -
insurance and investment
underwriting profit - income earned for premiums paid minus
incurred losses and uw expenses
◉Factors that Affect Ratemaking. Answer: 1. Estimation of losses
ANSWER SET
◉Ideal Characteristics. Answer: Stable - expensive to change rates.
Indication ( amount to charge to cover costs)
Responsive - best possible estimates of losses, based on most recent
claims experience. review rates annually
Provide for contingencies - for unexpected costs
Promote risk control - providing lower rates for policyholders who
exercise sound risk control
Reflect differences in exposure
◉Rate Components. Answer: Side note: ALAE associated with a
specific claim, ULAE cannot be readily associated
3 components
, insurance rates = prospective loss costs + expenses + profit +
contingencies
prospective loss costs = amount needed to pay future claims and loss
adjustment expenses
expenses = acquisition expenses, overhead, and premium taxes
◉Ratemaking Terms. Answer: Exposure base
Earned exposure unit
Pure premium - per expo unit required to pay losses
Expenses provision - added to pure premium to pay expenses
LAE - expenses associated with adjusting claims
Profit and contingencies
◉Investment Income. Answer: Insurer performs 2 operations -
insurance and investment
underwriting profit - income earned for premiums paid minus
incurred losses and uw expenses
◉Factors that Affect Ratemaking. Answer: 1. Estimation of losses
