How Do You Calculate Property And Casualty Insurance Rates?
Wouldn’t you like to know where your broker or agent get the rates they give you? It’s not what you think: they aren’t trying to rob you. There are legitimate mathematical techniques to analyze loss and other information used to determine insurance rates. You may be given a quote based on the pure premium method. Calculate the pure premium. This is the amount your insurer needs to pay claims. Divide the dollar amount of incurred losses by the number of earned exposure units. This is the exposure unit that the insurance company provides a full year of coverage. For example, if you have a loss of $3 million and your exposure unit is $100,000 then your pure premium is $30. Estimate the expenses per exposure unit. This amount is what the insurance company is required to pay for such as taxes/fees to the government and legal fees to defend a claim. It is based on prior experience. So if you have $1.8 million worth of expenses you divide that by $100,000 so your expense per exposure would be
