Revision as of 18:55, 25 July 2024 by Admin (Created page with "According to the pure premium method, the indicated rate differential for geographic region <math>i</math> is the projected pure premium for region <math>i</math> divided by the projected pure premium for the base region: {| class="table table-bordered" |- ! Region <math>i</math> !! <math>R_{i,I} </math> |- | A || 18/17 |- | B|| 1 |- | C || 20/17 |} Given a targeted overall change factor of 1.08, the indicated change factor for the base rate equals <math display = "bl...")
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Exercise

ABy Admin
Jul 25'24

Answer

According to the pure premium method, the indicated rate differential for geographic region [math]i[/math] is the projected pure premium for region [math]i[/math] divided by the projected pure premium for the base region:

Region [math]i[/math] [math]R_{i,I} [/math]
A 18/17
B 1
C 20/17

Given a targeted overall change factor of 1.08, the indicated change factor for the base rate equals

[[math]] 1.08 \cdot \frac{\sum_{i} w_i R_{C,i}}{\sum_{i} w_i R_{I,i}} = 1.0962. [[/math]]

The change factor for region [math]i [/math] equals the change factor for the base level multiplied by the change factor of the indicated differential for region [math]i[/math]:

Region Change Factor Rate Change
A 1.0553 +5.53%
B 1.0962 +9.062%
C 1.0747 + 7.47%
00