Fw: Classification/Territorial Ratemaking
Mike Harrington ( michael.harrington@MCIONE.com )
Wed, 18 Feb 1998 19:21:15 -0600
> Some members of the group had problems receiving my reply yesterday.
> Hopefully this one will go through in a readable file format !
>
> Mike
>
> ----------
> > From: Harrington, Michael <mharring@calfarm.com>
> > To: 'Harrington, Mike (Home)' <michael.harrington@mcione.com>
> > Subject: FW: Classification/Territorial Ratemaking
> > Date: Wednesday, February 18, 1998 5:08 PM
> >
> >
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> >
> > ----------
> > From: Harrington, Michael
> > Sent: Tuesday, February 17, 1998 6:38 PM
> > To: studygroup6@lists.casact.org; Gardner, Brad
> > Cc: Tweedt, Randy; Oswald, Apryle; Serebryakova, Nina; Burkhalter,
> > Derek
> > Subject: RE: Classification/Territorial Ratemaking
> >
> > Two key points to remember about EXPOSURE adjustment in pure premium
> > ratemaking problems are:
> > * If you adjust earned exposures to the base class level, the ratio of
> > the resulting pure premiums will give you indicated CHANGES TO THE
> > CURRENT class relativites (e.g. Finger).
> > * If you DO NOT adjust earned exposures to the base class level, the
> > ratio of the resulting pure premiums will give you indicated class
> > relativites (e.g. Hurricane).
> >
> > Alternatively, two key points to remember about PREMIUM adjustment in
> > loss ratio ratemaking problems are:
> > * If you adjust earned premiums to the base class level, the ratio of
> > the resulting loss ratios will give you indicated class relativites
> > (e.g. McClenahan).
> > * If you DO NOT adjust earned premiums to the base class level, the
> > ratio of the resulting loss ratios will give you indicated CHANGES TO
> > THE CURRENT class relativites (e.g. Finger, Homan).
> >
> > Either way you should get the same answer (provided all the
> > assumptions are the same, etc). Note that in this context, territory
> > is also a "class".
> >
> > Try doing McClenahan's example on Page 64 WITHOUT adjusting the Earned
> > Premiums, and you will get the indicated CHANGE to the current
> > relativities. Apply this change to the current relativities and you
> > will get the same answer as he gets.
> >
> > Hope this helps.
> >
> > Mike
> > ----------
> > From: Gardner, Brad
> > Sent: Tuesday, February 17, 1998 4:54 PM
> > To: studygroup6@lists.casact.org
> > Subject: Classification/Territorial Ratemaking
> >
> > McClenahan states- If the loss ratio method is used for
> > class/territorial ratemaking, the on-level earned premium for each
> > classification must be adjusted to the base classification level
> > before
> > the experience loss ratios are calculated (page 63).
> >
> > Does Finger make this same adjustment when the loss ratio method is
> > used? I know Finger uses base exposures for the pure premium method.
> > Same idea different method??????
> >
> > Homan (Homeowners) uses the loss ratio method for territorial
> > indications yet I do not think he makes an adjustment to the premiums
> > to
> > be on a base territorial level??? Should premiums be adjusted???
> >
> > In the hurricane paper, a pure premium (loss costs) method is used
> > for
> > territorial indications. Are base exposures used here???? Should base
> > exposures be used??
> >
> > Please Help!
> >
> > Brad
> >
> >
> >
> >