PDA

View Full Version : Confused on Min Bias

KeithRogers
10-14-2005, 04:18 PM
I am confused between the terms: losses, loss costs and pure premiums. When data is presented in a problem, it's unclear to me what is the proper input into the min bias procedure. What is the proper relationship between these three?

L. Mo
10-14-2005, 04:20 PM
losses are the dollar losses.

pure premiums are losses per policy.

loss costs are very similar to pure premium (and may sometimes be used interchangeably), but I believe they are trended, etc, to reflect expected future loss per policy.

KeithRogers
10-14-2005, 04:26 PM
Does the following relationship hold?

exposure times loss costs = exposure times pure premium = losses

tommie frazier
10-14-2005, 04:44 PM
Does the following relationship hold?

exposure times loss costs = exposure times pure premium = losses

in the context of a problem, where they typically give you loss costs or pure premium, but not both, I would say that LC x Exp = Losses OR PP x Exp = Losses.

I would hesitate to say in general what you typed.

JABA
10-14-2005, 07:24 PM
I believe that the term Loss Cost is being used to describe the actual losses per exposure, while the term Pure Premium is being used to describe the theoretical rate (base rate * gender relativity * territory relativity (assuming of course that the model is multiplicative)). In the balance principle, the total LC = total PP by row and by column. Hope this helps.

KeithRogers
10-15-2005, 08:44 AM
May I interpret that to mean:

Lost costs are inputs for the min bias procedure
Pure premiums are the outputs using the newly calculated relativites

JABA
10-20-2005, 12:53 PM
That's how I interpret it.