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GNPI vs GGPI 2019 April Q2 (i)

J

johnpaul1234

Member
The question asked about the differences between using GNPI and GGPI for rate monitoring

The solution has a bullet point says
"Excluding acquisition costs (using GNPI) gives a truer reflection of each insurer's profitability, as it reflects more closely the net financial position of the insurer."

Let say the premium income without acquisition cost is £100, acquisition cost is £20, and loss is £50
Is the GNPI = 100
and GGPI = 100 + 20 = 120 ?
So, LR using GNPI = 50/100 = 50%, LR using GGPI = 50/120 = 41.67% ?

I agreed with the solution that using GNPI gives truer reflection of profitability, but isnt that INCL as apposed to EXCL acquisition cost? Can anyone explain? Thanks in advance.
 
Last edited by a moderator:
I agree your figures, but I'm not sure what you're challenging here, as GNPI does indeed exclude acquisition costs (by definition)?
 
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