B.4. ISO Flashcards
The ISO mod formula
What the EER adjusts for
The EER adjusts for the presence of the MSL. If there was no
MSL, then the EER would be equal to 1.
Standard method to get Company Suject Loss Cost
Calculating CSLC using Present Average Company Rate Method
Calculating CSLC using Historical Exposures at Present Company Rates
Method
Where to find definition of Basic Policy Limits
Rule 5A
The annual aggregate limits are not used to limit historical
losses according to Rule 5D part 1.
Eligibility for ISO schedule and experience rating
Credibility of 0.03 for schedule rating
Credibility of 0.07 for experience rating
Two components of Actual Experience Ratio
- Actual historical loss and ALAE limited by basic limits and
the Maximum Single Loss (MSL) - Expected future loss development from experience period
losses
Calculating expected future development
Formula for Actual Experience Ratio
Differences between ISO and NCCI Experience Rating
- ISO Mod not in factor form, need to add 1.
- ISO credibility up to 100%, NCCI less than 100%
- ISO no-split plan, NCCI single-split plan.
- ISO includes ALAE, NCCI does not.
- No need to adjust for benefit levels in ISO.
- ISO adjusts for claims-made policies.
- ISO compares ultimate loss, NCCI uses undeveloped loss.
- ISO responds more to frequency, NCCI responds to
frequency and severity.
Similarities between ISO and NCCI Experience Rating
- Typically same experience period.
- Other expenses are excluded.
- Detrend expected loss to historical levels.
- Both have loss limits on actual losses.