[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Overall Rate Level Indication**
## Definition
==Overall Rate Level Indication== is the calculated percentage change in rates suggested by ratemaking analysis, before any adjustments for credibility, operational constraints, or business judgment.
## Calculation
### Loss Ratio Method
```
Indicated Change = (Projected Loss Ratio / Target Loss Ratio) - 1
Example:
Projected: 72%
Target: 65%
Indication: (72% / 65%) - 1 = 10.8%
```
### Pure Premium Method
```
Indicated Change = (Indicated Rate / Current Rate) - 1
Example:
Indicated rate: $450
Current rate: $400
Indication: ($450 / $400) - 1 = 12.5%
```
## Credibility-Weighted Change
```
Final = Z × Indicated + (1-Z) × Complement
Example:
Indicated: +10%
Credibility: 75%
Complement: +3% (industry)
Final: 0.75(10%) + 0.25(3%) = 8.25%
```
## Related Concepts
- [[Rate Change#Definition]]
- [[Credibility#Definition]]
- [[Loss Ratio Method#Definition]]
- [[Pure Premium Method#Definition]]
## References
- Werner & Modlin, Chapters 4-5