Question

XYZ Insurance Company uses class rating to determine the rate to charge for insurance.

For one type of insurance the pure premium XYZ actuaries calculated is $75 per unit.
If XYZ's expense ratio is 30%, what is the gross rate for this coverage?
O a. $107.14
O b. $96.28
O C. $85.19
O d. $115.62​

Answer 1

Answer: a. $107.14

Step-by-step explanation:

The gross rate for insurance coverage represents the amount that the insurance provider needs to pay for losses as well as the amount needed to pay for expenses such as sales expenses and still be able to have a profit.

Given the expense ratio and the pure premium is:

= Premium / ( 100 - expense ratio)

= 75 / (100 - 30%)

= $107.14