Licentiate Examination - IC 11 - Practice of General Insurance Exam - Important Points
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Stop Loss covers are related to the total amount of claims in a year over and above a particular limit or loss ratio.
The two ways of measuring risk within a risk register are probability and severity.
Pure premium rating method : This approach reflects the expected losses. It is a calculation of the pure cost of, say, property or liability insurance protection. This is without any loading for the insurance company's expenses, premium taxes, contingencies and profit margins. The pure premium is calculated as follows : Pure Premium = Total Amount of Losses Incurred per Year / Number of Units of Exposure
Exposure is the measurement of how big a risk is. For example in Property insurance : The Sum Insured on the Building or Contents, in Employer's Liability or Workmen's Compensation : The wage roll on a particular trade classification, in Products Liability Insurance : Turnover on the relevant product line
The exposure and the benefits may not always be the same e.g. in Products Liability the turnover may be the best form or exposure measurement but the benefit will be based on the Limit of Liability.
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