Question

What is the "pure premium" in insurance ratemaking?

a.

The premium paid by policyholders without any additional costs

b.

The premium charged to cover the expected cost of losses only

c.

The premium with a margin for profits

d.

The premium with expenses and commissions included

Posted under IC38 Life Insurance Agent Exam

Answer: (b).The premium charged to cover the expected cost of losses only Explanation:The "pure premium" represents the premium that is calculated to cover the expected cost of losses without any additional costs, such as administrative expenses or profit margins.

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Q. What is the "pure premium" in insurance ratemaking?
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