Question

    What is the primary method to calculate the pure premium

    for a group of insured?
    A Divide the total premium collected by the number of insured. Correct Answer Incorrect Answer
    B Divide the total claims incurred per year by the number of units of exposure Correct Answer Incorrect Answer
    C Divide the total investment income by the number of insured Correct Answer Incorrect Answer
    D Divide the total expenses incurred by the number of insured. Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Divide the total claims incurred per year by the number of units of exposure. The pure premium represents the expected cost of claims per unit of exposure. It is calculated by dividing the total claims incurred during a specific period by the total number of units of exposure (e.g., number of vehicles, number of homes).

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