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L = losses
C = claim count

56. Loss Ratio
Probably the single most widely-used statistic in the
analysis of insurance losses is the loss ratio or losses
divided by premium.

56. The Goal of the Manual Ratemaking Process
Broadly stated, the goal of the ratemaking process is
to determine rates that will, when applied to the
exposures underlying the risks being written, provide
sufficient funds to pay expected losses and expenses;
maintain an adequate margin for adverse deviation; and
produce a reasonable return on (any) funds provided
by investors.

57. Thestructureofthevariouselementsinvolvedinthemanual
rating of a specific risk is known as the rating plan.

58. Rating plans serve to allow the manual rating process to
reflect identified differences in loss propensity.

59. Basic Manual Ratemaking Methods
There are two basic approaches to addressing the

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