Calculate and interpret loss elimination ratios, increased limits factors, and deductible factors.
Free SOA Exam ASTAM (Advanced Short-Term Actuarial Mathematics) lesson in Coverage Modifications. 12 min read, ~1,755 words.
LER(d) = E[X ∧ d] / E[X]: fraction of pure premium eliminated by an ordinary deductible. Deductible factor = 1 − LER(d): fraction of premium retained after applying deductible. ILF(U) = E[X ∧ U] / E[X ∧ B]: multiplier on the base-limit premium to price a higher policy limit. Inflation...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 3b
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