Page 150 - Group Insurance and Retirement Benefit IC 83 E- Book

Determination of Overall Rate Level

The first step in the development of manual rates for a sub-line of insurance is to

determine the overall rate change. For the major sub-lines this is usually done on a
statewide basis while for the minor sub-lines it is done on a regional or countrywide

basis. While the ratemaking procedures are not identical for the various sub-lines, it is
possible to make certain general statements which hold true for most sub-lines.

For most of its rate filings the National Bureau uses the experience of members,

subscribers, and some other companies; however, some filings include the experience of
the Mutual Insurance Rating Bureau. Experience is tabulated on a policy year basis and

the loss ratio method is used in ratemaking. A comparison is made between basic limits
incurred losses and the premiums at present manual rates, which are computed by

multiplying the earned exposures for each class in each territory by the appropriate basic
limits manual rate.

The reported losses include all allocated loss adjustment expense; for ratemaking

purposes they are multiplied by I. 16 to reflect unallocated loss adjustment expense. This
countrywide factor is obtained from the Insurance Expense Exhibit by taking the three

year average of the ratios of unallocated loss adjustment expenses to the sum of losses

and allocated loss adjustment expense.‖ The losses must bc adjusted to the present cost
level since they will be compared to premiums at present rates. This is accomplished in

two steps: first, these losses must be adjusted for subsequent changes in the level of
reserves and for incurred but not reported losses, i.e., for loss development; second, the

losses must be adjusted to reflect changes in the level at which claims are being paid, i.e.,
for the trend in average paid claim costs.

What is EDLI?

All employees to whom the Employee's Provident Fund and Miscellaneous Provision Act
, 1952 applies, have a Statutory liability to subscribe to Employee's Deposit Linked

Insurance Scheme, 1976 to provide for the benefit of Life insurance to all their
employees. Under the scheme as amended with effect from 24th June, 2000 the insurance

benefit is equal to the average balance to the credit of the deceased employee in the

Provident Fund during the last 12 months, provided that where such balance exceeds