Author Question: XYZ Insurance Company uses class rating to determine the rate to charge for insurance. For one ... (Read 33 times)

jace · **on:** Jul 11, 2018

XYZ Insurance Company uses class rating to determine the rate to charge for insurance.

For one type of insurance, the pure premium XYZ actuaries calculated is 75 per unit. If XYZ's expense ratio is 25 percent, what is the gross rate for this coverage?
A) 37.50
B) 55.25
C) 75.00
D) 100.00

Question 2

Small Town used to be just thata small town 6 miles from Large City. Over the years, the area between Small Town and Large City has developed, and now Small Town is part of the suburbs surrounding Large City.

An auto insurer that operated in the area had a large increase in auto claims from Small Town insureds. The insurer did not adjust its rates, and this year will lose money because of claims attributable to higher population density. Which business rating objective did this insurer fail to meet?
A) simplicity
B) stability
C) responsiveness
D) encouragement of loss control