GK
INSURANCE AWARENESS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The portion of an insurance premium that reflects the basic costs of loss, not including over-head or profit is called ____
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Pure Premium
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Mixed Premium
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Impure Premium
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None of the Above
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Explanation:
Detailed explanation-1: -To put it simply, loss costs are the aggregate cost needed to pay strictly for the cost of claims. In the traditional insurance marketplace, insurance companies also consider their own overhead and profit when developing premium rates. This is called the loss cost multiplier.
Detailed explanation-2: -The loss ratio formula is insurance claims paid plus adjustment expenses divided by total earned premiums. For example, if a company pays $80 in claims for every $160 in collected premiums, the loss ratio would be 50%.
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