Calculate the balance back factor

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Reference no: EM131443466

Question: 1. Class A is the base class. Using both the pure premium and loss ratio methods, determine the new differential for Class B and Class C given the following information:

Class	Existing Differential	Current Base Rate	Experience Period Loss Ratio at Current Rates	Pure Premium	Earned Exposures
A	1.00	100	0.71	126	400
B	0.91	91	0.66	107	260
C	1.18	118	0.59	124	340

The regulator has required that you decrease aggregate premiums by 5%. What rates should be established to meet this target, assuming earned exposures do not change? Clearly state the balance back factor, the aggregate premiums that are projected to be collected for each Class and be sure to show your calculations.

Reference no: EM131443466

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