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The forth and the final step is to balance the
territorial change , so that the same overall rate
level change is retained. In practice, the application
of credibility produce either an increase or
decrease in the overall rate level. We must then
balance this adjustment.

The off balance can be calculated by multiplying the
credible adjustments with the premiums at current
rates. The premiums on current business is used
rather than historical premiums to provide the best
estimate of future territorial premium volumes.

This multiplied factors are divided by current
premiums to determine the off balance factor. The
balance adjustment is then calculated by dividing the
credible adjustment by the off balance factor.

8. How can we calculate class relativity
through pure premium approach?

Ans : Rate relativity also may be adjusted through the pure
premium approach. The basic difference is that the loss

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