- TIA EXAM 5 - WERNER CH 08

• LR method relies on loss ratio:
• Requires premium at current rate level;
• If difficult or not available, PP approach is preferred

• PP method uses pure premium:
• Requires clearly defined exposures;
• If not available, LR approach is preferred

• LR method produces indicated change to current rates
• PP produces an indicated rate:
• PP must be used with new line where there are no current rates to adjust

Consistent Data & Assumptions

If not, possible that different approaches produce different results (i.e. paralellogram vs. EOE)