Loss Elimination Ratio and the Effect of Inflation
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Short-Term Insurance and Reinsurance Coverages. 11 min read, ~1,579 words.
LER =: the fraction of expected losses the deductible absorbs. Fixed deductible + inflation: replace with in the LEV; the LER always drops. Indexed deductible: the LER stays constant, but dollar payments still grow at rate. Leveraged inflation: with a fixed deductible, insurer costs grow faster than rate. Direction check...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 1c
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