Rate Indication
Loss-ratio and pure-premium rate indications with trend, development, and credibility-weighted rate change.
On-level factor
Indication
| Step | Value |
|---|---|
| On-level earned premium | 10,200,000 |
| Developed losses | 6,696,000 |
| Trended, loaded losses | 8,365,730 |
| Trended on-level premium | 10,200,000 |
| Projected loss ratio | 82.02% |
| Indicated rate change | 16.91% |
Indicated rate change
+16.9%
Sensitivity: trend vs. LDF
| Trend Δ \ LDF × | 0.95 | 1.00 | 1.05 |
|---|---|---|---|
| -2pp | 6.9% | 12.0% | 17.0% |
| -1pp | 9.2% | 14.4% | 19.6% |
| +0pp | 11.6% | 16.9% | 22.2% |
| +1pp | 14.0% | 19.4% | 24.9% |
| +2pp | 16.4% | 22.0% | 27.6% |
Assumptions & limitations
- A single annual trend rate applies uniformly to all loss dollars over the trend period; frequency and severity trends are not separated.
- The parallelogram method assumes uniform policy issuance (writings) throughout the year and 12-month policy terms.
- Expense provisions (fixed/variable) and profit load are assumed constant as a percentage of premium, per the standard permissible loss ratio formula.