PURE PREMIUM

The average amount of money an insurer must charge per exposure unit in order to be ale to cover the total anticipated losses for that line of business

EXPOSURE UNITS

(UNITS OF EXPOSURE)

The amount of money per unit of coverage required to cover the insurer's losses, expenses and profit for a line of business

COVERAGE UNIT

(UNIT OF COVERAGE)

A standard block of insurance protection used in rating a line of business

Amount of money that reflects the basic cost of specific individual insurance policies

The average incurred loss per exposure unit for a line of business, risk classification or coverage

Payment related changes, such as increases and decreases in reserve amounts, over the life of a claim

RISK CLASSIFICATION

(RATE CLASSES)

The formation of different premiums for the same coverage based on a homogenous group's characteristics

A number by which a base rate may be multiplied to reflect the higher or lower loss exposure of one homogeneous group compared to that of another

A rate class selected as a baseline to which all other classes are compared

The profit earned by an insurer when an asset, such as a bond or stock, is sold for more thatn its cost

Profit that is not yet earned

When the market place price of an asset exceeds its cost and insurer continues to hold the asset

The degree to which loss results are predictable.

Increases as the number of homogeneous exposure units increase