PowerPack Practice Problems: Loss Ratio Method - Easy Version
Should we ever assume they want us to use the loss ratio method if we're not provided with premiums? Using the pure premium method when only provided with Losses and Earned Exposures seems more intuitive but ends up with very different results, so I'm not sure which one I should be using in a situation like that provided. Thanks!
Comments
Is there a particular exam problem where they gave you a choice? I believe in most exam problems they set things up to direct you to one method or the other.
You wouldn't necessarily get the same answer with the loss ratio and pure premium methods but you would think they'd be reasonably close. If they aren't, that would be a signal to look into the results more closely. As an example, if you're trending, the final results can be very much affected by loss, premium, and exposure trend selections.