RMI-4292 Lecture Notes - Lecture 7: Actuary, Data Mining, Reinsurance
28 Feb 2019
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Insurer ratemaking goals: ratemaking goals, to compete effectively, to earn a reasonable profit. Ideal characteristics of rates: stable, responsive, provide for contingencies, promote risk control, reflect differences in risk exposure, example, house with a higher risk exposure to wildfires has a higher rate than the house that doesn"t. Rate components: components, prospective loss costs, economic prior loss costs and then adjust, actuarially sound, expense provision, more easily controlled than prospective loss costs, profit and contingencies factor. Ratemaking terms: terms, exposure base, earned exposure unit, pure premium, expense provision, loss adjustment expenses, allocated, unallocated, loading for profit and contingencies, estimate a profit and estimate contingencies and adjust final rate by that factor. Factors that affect ratemaking: estimation of losses, look at past losses and adjust/trend them, delays in data collection and use, five sources, change in cost of claims. Ratemaking methods: pure premium method, fixed and variable expenses, loss ratio method, judgment method.
