Loss Elimination Ratio and the Effect of Inflation
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Short-Term Insurance and Reinsurance Coverages. 8 min read, ~1,228 words.
LER =, fraction of expected losses the deductible absorbs. Fixed deductible + inflation: replace with in the LEV. LER always drops. Indexed deductible: LER stays the same, but dollar payments still grow at rate. Leveraged inflation: insurer costs grow faster than when deductible is fixed. Direction check: inflation up, LER...
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- Content
- Example 1
- Example 2
- Common Mistakes
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- Exam Shortcuts
Learning objectives
- 1c
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