Notes on Exposure and Premium Bases

When critical conditions and insurable objects exist in such relationship that accidents may result there is said to be exposure. The term critical conditions is intended to cover, rather broadly, the presence of or the absence of anything, objective or subjective, generally external to the insurable object, which contributes to the accident frequency and/or the accident severity. It is intended to cover also any part or quality of the insurable object which likewise contributes to accident frequency and/or accident severity. Insurable objects will be used to denote any objects, human beings included, which may be damaged or injured, including complete destruction. If the whole insurance field is to be covered, it is necessary to extend the meaning of this term to include nonmaterial things.