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Risk factor, rating factor and exposure measure

G

Gabriella Knipe

Member
Hi

I need help understanding the difference between a risk factor, a rating factor and an exposure measure.

Kind regards
 
Hi Gabriella,

Risk factors and rating factors are similar. A risk factor is something that is expected to have an influence on the intensity of risk, in an insurance contract. For my motor insurance, this could be something like how dangerously I drive, or if I speed a lot.

A rating factor is something that is used to come up with a premium for the policy. Now, when it comes to my car insurance, I can't objectively state how much of a dangerous driver I am, or how much I speed. So, rating factors are used as a proxy. Rating factors could be age, number of years licence held, if I have children etc.

Exposure measure is the basic unit used by insurers to measure the amount of risk insured. For example, in fleet motor, the exposure measure may be number of cars in the fleet, or the value of the vehicles in the fleet.

I hope this helps.

Thanks
Aman
ActEd Tutor
 
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