Commercial motor — indicated rate change
rateIndication — loss cost trended, loaded, and compared to the rate in force
Technical premium
$1454.92
per exposure unit
Current rate
$1274.04
per exposure unit
Indicated change
+14.2%
| Measure | Value |
|---|---|
| Permissible loss ratio | 63.5% |
| Projected loss ratio | 63.5% |
| Projected combined ratio | 94.0% |
| Expected retention after the change | 86.3% |
| Projected written premium | $82.80m |
Rate adequacy
1.142
1.00 = adequate
Combined
94.0%
The rate rise you cannot fully collect
Demand elasticity is -0.40: every point of rate costs 0.40 points of retention. So an indicated 14.2% does not arrive as 14.2% more premium — retention falls to 86.3% and projected written premium is $82.80m. A rate indication that stops at the indicated percentage is answering the actuarial question and leaving the commercial one to be discovered.
Why it matters
The permissible loss ratio is 1 less expense, target and catastrophe load — 63.5% here. Everything above it is the rate change, and everything in it is a decision someone made about expenses and profit rather than an observation about losses.
Stated limit
One trend applied to one aggregate loss cost. Frequency and severity are not separated here, and they move for different reasons — a severity trend driven by repair inflation and a frequency trend driven by exposure produce the same indication and call for completely different responses.