Confused on Min Bias

[KeithRogers]

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]

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]

Does the following relationship hold?


exposure times loss costs = exposure times pure premium = losses

[tommie frazier]

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]

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]

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]

That's how I interpret it.