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In: Finance

In setting its rates, the Smidlap Insurance Co. used a 60% loss ratio. Smidlap’s actual loss...

In setting its rates, the Smidlap Insurance Co. used a 60% loss ratio. Smidlap’s actual loss ratio, however, was 75%. If Smidlap uses the loss ratio ratemaking method to revise its insurance rate, Smidlap would:

Select one:

a. Increase its rate by 10 percent.

b. Increase its rate by 25 percent.

c. Keep its rate the same.

d. Decrease its rate by 25 percent.

Solutions

Expert Solution

increase in % of loss ratio = 75%/60% - 1 = 25%

b. Increase its rate by 25 percent.

jeff jeffy answered 2 years ago
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