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Assume that Big Mutual Insurance expects losses of $500,000,000 over 3,100,000 units. In its ratemaking function,...

Assume that Big Mutual Insurance expects losses of $500,000,000 over 3,100,000 units. In its ratemaking function, Big Mutual uses a 35% expense ratio. Compute the Pure Premium and Gross Rate for Big Mutual.

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Expert Solution

Pure premium = 500,000,000 /3100,000

Pure premium = 161.29

Gross rate = Pure premium / (1- expense ratio)

Gross rate = 161.29 / (1 - 0.35)

Gross rate = 248.14

jeff jeffy answered 2 years ago
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