[[Actuarial Notes Wiki|Wiki]] / [[Actuarial Resources]] / [[Textbooks]] / **Basic Ratemaking (Werner, Modlin - 2016)** ## Basic Ratemaking 5th Edition, May 2016. > [Basic Ratemaking 5e.pdf](https://www.casact.org/sites/default/files/old/studynotes_werner_modlin_ratemaking.pdf) ### 1. Introduction 1. Rating Manuals 2. Basic Insurance Terms - [[Exposure]] - [[Premium]] - [[Claim]] - [[Loss]] - [[Loss Adjustment Expense]] - [[Underwriting Expenses]] - [[Underwriting Profit]] 3. [[Fundamental Insurance Equation]] - Ratemaking is Prospective - Overall and Individual Balance 4. Basic Insurance Ratios - [[Frequency]] - [[Severity]] - [[Pure Premium]] (or Loss Cost) - [[Average Premium]] - [[Loss Ratio]] - [[Loss Adjustment Expense Ratio]] - [[Underwriting Expense Ratio]] - [[Operating Expense Ratio]] - [[Combined Ratio]] - [[Retention Ratio]] - [[Close Ratio]] ### 2. Rating Manuals 1. Rules 2. Rate Pages 3. Rating Algorithms 4. [[Underwriting Guidelines]] 5. Homeowners Rating Manual Example 6. Medical Malpractice Rating Manual Example 7. U.S. Workers Compensation Rating Manual Example ### 3. Ratemaking Data 1. Internal Data 2. Data Aggregation 3. External Data ### 4. Exposures 1. Criteria for [[Exposure Base|Exposure Bases]] 2. Exposures for [[Large Commercial Risks]] 3. Aggregation of Exposures 4. [[Exposure Trend]] ### 5. Premium 1. [[Premium Aggregation]] 2. Adjustments to Premium ### 6. Losses and LAE 1. Loss Definitions 2. Loss Data Aggregation Methods 3. Common Ratios Involving Loss Statistics 4. Adjustments to Losses 5. [[Loss Adjustment Expenses]] ### 7. Other Expenses and Profit 1. Simple Example 2. Underwriting Expense Categories 3. All Variable Expense Method 4. Premium-Based Projection Method 5. Exposure/Policy-Based Projection Method 6. Trending Expenses 7. Reinsurance Costs 8. Underwriting Profit Provision 9. Permissible Loss Ratios ### 8. Overall Indication 1. Pure Premium Method 2. Loss Ratio Method 3. Loss Ratio versus Pure Premium Methods ### 9. Traditional Risk Classification 1. Importance of Equitable Rates 2. Criteria for Evaluating Rating Variables 3. Typical Rating (or Underwriting) Variables 4. Determination of Indicated Rate Differentials 5. Worksheet Example ### 10. Multivariate Classification 1. A Review of the Shortcomings of Univariate Methods 2. Minimum Bias Procedures 3. The Adoption of Multivariate Methods 4. The Benefits of Multivariate Methods 5. GLMs 6. Sample GLM Output 7. A Sample of GLM Diagnostics 8. Practical Considerations 9. Data Mining Techniques 10. Augmenting Multivariate Analysis with External Data ### 11. Special Classification 1. Territorial Ratemaking 2. Increased Limits Ratemaking 3. Deductible Pricing 4. Size of Risk for Workers Compensation 5. Insurance to Value (ITV) ### 12. Credibility 1. Necessary Criteria for Measures of Credibility 2. Methods for Measuring Credibility in an Actuarial Estimate 3. Desirable Qualities of a Complement of Credibility 4. Methods for Developing Complements of Credibility 5. Credibility When Using Statistical Methods ### 13. Other Considerations 1. Regulatory Constraints 2. Operational Constraints 3. Marketing Considerations ### 14. Implementation 1. Example Imbalance 2. Non-Pricing Solutions 3. Pricing Solutions 4. Calculating New Rates for an Existing Product 5. Calculating New Rates Based on Bureau or Competitor Rates 6. Communicating and Monitoring ### 15. Commercial Lines Rating Mechanisms 1. Manual Rate Modification Techniques 2. Rating Mechanisms for Large Commercial Risks ### 16. Claims-Made Ratemaking 1. Report Year Aggregation 2. Principles 3. Determining Rates 4. Coordinating Policies