Chapter 6 Key Points

Question 1

what are the four elements of price

Answer 1

risk premium
expenses
profit
roce

Question 2

what is roce

Answer 2

return on capital employed

Question 3

which level must risk premium be set at

Answer 3

will adequately cover losses even if they are not paid for some considerable time after the expiry of the period of insurance

Question 4

what is burning cost

Answer 4

experience based rating method
translated incurred losses into a rate against a measure of exposure appropriate to the risk
or compare premium against incurred claims over the same period

Question 5

how can shortcomings of the burning cost method be addressed

Answer 5

underwriters should use all the data they have available to make a sounds judgment on the risk proposed

Question 6

key factors for underwriters to consider

Answer 6

inflation rates
exchange rates
change in cover or limits
risk management
reserving

Question 7

what is claim triangulation

Answer 7

claims experience that has been compiled to demonstrate the number of claims reported and the incurred loss at a given point in time, year on year for consecutive periods of insurance

Question 8

what is ibner

Answer 8

incurred but not enough reserved