Retrospective rating doubt

keshav1996keshav1996
in W-15-Commercial

Hi,

Where is the time period of the computation of the retrospective premium, both the first time as well as the subsequent time, is holding relevance in any of the example and practice problem given? If it isn't, then, in what way can a question ask to incorporate it in the calculations, if at all?


(Also, I noticed that all the battle quizzes in this chapter contain questions from old chapters only. Were there no questions in the past specific to this chapter only?)


Thanks

Comments

  • GrahamGraham

    The quiz links in the wiki for chapter 15 were pointing to chapter 13. I've fixed them. Thx!

    Regarding the retrospective premium calculation, this is a more complicated topic that has been simplified in Werner.

    • The period of computation depends on the contract but isn't otherwise part of the calculation. In the wiki example, the first premium calculation is done 6 months into the policy period and then annually after that. In this problem, you have to find the total premium at 18 months, which would include the initial premium and the first retrospective adjustment.
    • You are given the reported losses at 18 months so you have to substitute that and all the other given information into the formulas to get the final RP (Retrospective Premium).
    • As an alternative question, you could have been given the losses at 30 months, which would be the time of the second adjustment, but again all you need to do is substitute that value into the formulas.

    The difficult parts of retrospective rating have been done in coming up with values of all the other variables like the LCF (Loss Conversion Factor) and the SP (Standard Premium). You wouldn't have to know how to calculate these for this exam.

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