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Indicated Rate Calculator

Calculate an actuarially indicated rate from pure premium, fixed expenses, variable expenses and profit (pure premium method).

How the indicated rate calculator works

The pure premium method builds a rate from the expected loss cost per unit, loaded for fixed expenses and grossed up for variable expenses and profit.

Formula

Indicated rate = (Pure premium + Fixed expense per unit) ÷ (1 − Variable expense ratio − Profit provision).

How to use it

  1. Enter the projected pure premium per unit (developed and trended).
  2. Enter fixed expense per unit.
  3. Enter variable expense and profit provisions.
  4. Optionally enter the current rate.

Worked example

$412 pure premium + $38 fixed, with 22% variable expense and 5% profit, indicates $616 — 4.4% above a $590 current rate.

Frequently asked questions

What is the difference between fixed and variable expenses?

Fixed expenses (policy issuance, overhead) don’t change with premium; variable expenses (commission, premium tax) are a percentage of it.

Is the indicated rate the filed rate?

Not necessarily — companies may cap changes or weight the indication with other information.

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