XYZ Insurance Company uses class rating to determine the rate to charge for insurance.For one type of insurance,the pure premium XYZ actuaries calculated is $75 per unit.If XYZ's expense ratio is 25 percent,what is the gross rate for this coverage?
A)$37.50
B)$55.25
C)$75.00
D)$100.00

Question

Quizplus · Accepted Answer

The gross rate is calculated by dividing the pure premium by one minus the expense ratio. Here, it's $75 / (1 - 0.25) = $75 / 0.75 = $100.

XYZ Insurance Company Uses Class Rating to Determine the Rate