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Ch2 3.6 risk factors

B

Beanny

Member
Hi there

The notes mention
"Sometimes an exposure measure used in practice does not satisfy the ideal property of proportionality exactly. The exposure measure can then be used as a rating factor as well."

What is meant by this?

Also, in section 1.3 the notes mention that the term "average" means "damage or loss" in marine insurance. Could you please give an example of how this is used?

Thanks
 
Some exposure measures aren't great in that they don't perfectly correlate with the risk exposure. In addition to using that exposure measure, you can also use it as a rating factor, and so hopefully use it as a partial predictor of losses (and so affect the premium). You don't really need the word 'then' in the second sentence of the text, perhaps that's what's making it not so clear.

The ActEd text gives an example of 'average'. You can also google the term (make sure you stick to marine examples). 'Havaria' was the name given to the amount of loss (or share) paid to each suffering party when something marine-related was lost/destroyed. Other examples: particular average, general average.
 
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