Teng XS WC premium formula

[gaddy]

Formula on pg 428 (pg 16 of pdf).

[EL*XL*(1+ULAE) + SP*GO]/(1-A-T-p)

Second paragraph under 2. Expense on the next page: "Since XS WC does not cover services for the underlying claims, its ULAE and GO expense would be charged on XS claims only, and are much lower than the expense charges under an LDD plan."

Why, then, is the ULAE factor multiplied by XL but the GO expense is still multiplied by SP? Is this SP different from SP for LDD (ie, is this an SP for XS only, while SP for LDD was the full-coverage premium)?

[UglyChristmasSweater]

Originally Posted by gaddy

Formula on pg 428 (pg 16 of pdf).

[EL*XL*(1+ULAE) + SP*GO]/(1-A-T-p)

Second paragraph under 2. Expense on the next page: "Since XS WC does not cover services for the underlying claims, its ULAE and GO expense would be charged on XS claims only, and are much lower than the expense charges under an LDD plan."

Why, then, is the ULAE factor multiplied by XL but the GO expense is still multiplied by SP? Is this SP different from SP for LDD (ie, is this an SP for XS only, while SP for LDD was the full-coverage premium)?

I believe that SP is the same, but GO has dropped significantly.

[gaddy]

Originally Posted by UglyChristmasSweater

I believe that SP is the same, but GO has dropped significantly.

You're right. I could have held my question until reading his examples. I'm still moderately bothered by the comment that they vary with XS loss, but it sure looks like he proxies this by reducing the GO percentage a bunch.