Pricing Models

Studies leading up to recommendations regarding rate or funding levels and pricing structures are the single most important work products for most of the clients of Bickerstaff, Whatley, Ryan & Burkhalter. For determination of overall rate or funding levels, the BWR&B team brings into play a variety of methods designed to analyze past loss experience of the entity in question - mixed with industry data as required. Then, using several methods of measuring annual trends, loss costs are projected to future policy or self-funding periods.

Past loss trends are measured separately for various loss components, e.g., average indemnity cost per claim, average ALAE cost per claim, total claim frequency, average premium at current rate, percentage of claims closed with indemnity, etc. Trends are measured either on an accident year basis or a report year basis.

For developing indicated overall average rate levels, other factors are considered other than pure loss trends, including marketing objectives, financial goals, legislative changes, and regulatory requirements. The BWR&B pricing models can accommodate various methods of incorporating total rate of return concepts in determining the appropriate loading for profit/contingencies.

In addition to determining recommended overall average rate levels, Bickerstaff, Whatley, Ryan & Burkhalter has developed several models for allocating insurance/risk costs among the covered population, including:

  • Classification plans
  • Territory relativities (usually accomplished simultaneously with class relativity studies)
  • Retrospective rating plans
  • Experience/merit rating plans
  • Deductible schedules
  • Costs by layer (increased limit factors)

Home | Overview | Loss Reserve Projection Systems | Pricing Models | Risk Simulation Models
David R. Bickerstaff | Patrick L. Whatley | Kevin M. Ryan | Christopher J. Burkhalter | Richard J. Roth Jr. | Windrie Wong | Matthew J.Stephenson | Lenora C. Kirchner

Revised - 06/03/13