AU 60 - Chapter 7 Questions with Complete
Solutions
judgement ratemaking method method for determining insurance rates that relies heavily
on the experience and knowledge of an actuary or an underwriter who makes little or no use of
loss experience data
experience period examples 3 years for auto and other types of liability
5 years for fire
20 years or more for some wind
special trending problem workers comp, legislation can change benefits of insurance
drastically
basic limit minimum amount of coverage for which a policy can be written; usually found
in liability lines
catastrophe model type of computer program that estimates losses from future potential
catastrophic events
, credibility level of confidence an actuary has in projected losses; increases as the number
of exposure units increases
increase limit factor a factor applied to the rates for basic limits to arrive at an appropriate
rate for higher limits
risk charge an amount over and above the expected loss component of the premium to
compensate the insurer for taking the risk that losses may be higher than expected
rate manual a resource for classifying accounts and developing premiums for different
types of insurance
class rate type of insurance rate that applys to all insured in the same rating category or
rating class
specific fire rate an insurance rate that is developed by ISO field reps through a physical
visit to a property and development of an individual advisory loss cost
Solutions
judgement ratemaking method method for determining insurance rates that relies heavily
on the experience and knowledge of an actuary or an underwriter who makes little or no use of
loss experience data
experience period examples 3 years for auto and other types of liability
5 years for fire
20 years or more for some wind
special trending problem workers comp, legislation can change benefits of insurance
drastically
basic limit minimum amount of coverage for which a policy can be written; usually found
in liability lines
catastrophe model type of computer program that estimates losses from future potential
catastrophic events
, credibility level of confidence an actuary has in projected losses; increases as the number
of exposure units increases
increase limit factor a factor applied to the rates for basic limits to arrive at an appropriate
rate for higher limits
risk charge an amount over and above the expected loss component of the premium to
compensate the insurer for taking the risk that losses may be higher than expected
rate manual a resource for classifying accounts and developing premiums for different
types of insurance
class rate type of insurance rate that applys to all insured in the same rating category or
rating class
specific fire rate an insurance rate that is developed by ISO field reps through a physical
visit to a property and development of an individual advisory loss cost
