1. You have 5,000 jet ski policies in force for the inland waterways of New York. a. Your losses on these policies total $4,500,000. b. Your underwriting expenses were $1,300,000. c. Your profit and contingency factor is 12% Using the Pure Premium Ratemaking Method, determine the correct rate per unit. Pure Premium Ratemaking Method - Step 1 Calculate the pure premium for $100,000. Homeowners policies in Clarion County: $ Incurred losses # of exposure units Example: $975,000 paid losses and loss adjustment expense 3,000 houses insured Pure Premium = $325 for a Homeowners Policy (step 1), | Pure Premium Ratemaking Method - step 2 Estimate expenses per exposure unit based on the insurer's past expenses. Whatever loss adjustment expenses are included in the pure premium are excluded from the expenses. Investment expenses are not directly reflected in rate calculations. Example: 350,000 expenses = $116.00 per Homeowners Policy 3,000 exposure units $116. per exposure unit would be a good, arbitrary example as it is in the 20-25% range | Pure Premium Ratemaking Method - Step 3 Determine the profit and contingencies factor . We will use 10%, another arbitrary estimate armat Arrange Tools Side Show Window Help 2 Mon .47 PM Insurance Operations CH 7 2019 033020 actuarial - Compatibility Mode -Saved to my Mac de Show Review View Animations Pure Premium Ratemaking Method - 4 Add the pure premium and expenses per unit and divide that figure by 1 minus the profit and contingencies factor: $325 + $116 = 441 = $490. for $100,000 policy 1.-.10 Note the rate per $1,000 of HO coverage in Clarion county is $4.90 (490/100), so a $350,000. policy would be $1,470. E : R : T Y . U O [ P ] [ ]