B.4. ISO

Question 1

The ISO mod formula

Answer 1

Question 2

What the EER adjusts for

Answer 2

The EER adjusts for the presence of the MSL. If there was no
MSL, then the EER would be equal to 1.

Question 3

Standard method to get Company Suject Loss Cost

Answer 3

Question 4

Calculating CSLC using Present Average Company Rate Method

Answer 4

Question 5

Calculating CSLC using Historical Exposures at Present Company Rates
Method

Answer 5

Question 6

Where to find definition of Basic Policy Limits

Answer 6

Rule 5A
The annual aggregate limits are not used to limit historical
losses according to Rule 5D part 1.

Question 7

Eligibility for ISO schedule and experience rating

Answer 7

Credibility of 0.03 for schedule rating
Credibility of 0.07 for experience rating

Question 8

Two components of Actual Experience Ratio

Answer 8

1. Actual historical loss and ALAE limited by basic limits and
   the Maximum Single Loss (MSL)
2. Expected future loss development from experience period
   losses

Question 9

Calculating expected future development

Answer 9

Question 10

Formula for Actual Experience Ratio

Answer 10

Question 11

Differences between ISO and NCCI Experience Rating

Answer 11

1. ISO Mod not in factor form, need to add 1.
2. ISO credibility up to 100%, NCCI less than 100%
3. ISO no-split plan, NCCI single-split plan.
4. ISO includes ALAE, NCCI does not.
5. No need to adjust for benefit levels in ISO.
6. ISO adjusts for claims-made policies.
7. ISO compares ultimate loss, NCCI uses undeveloped loss.
8. ISO responds more to frequency, NCCI responds to
   frequency and severity.

Question 12

Similarities between ISO and NCCI Experience Rating

Answer 12

1. Typically same experience period.
2. Other expenses are excluded.
3. Detrend expected loss to historical levels.
4. Both have loss limits on actual losses.