Pricing Aggregates on Deductible Policies

The same methods used to price retrospectively rated Workers Compensation policies can also be used to price large deductible policies that include aggregate loss limitations. In particular, a table of insurance charges (“Table M”) or a modified Table M can be used to determine the incremental cost of adding an aggregate loss limit to a large deductible policy. In this study note I will start with some background, then describe the similarities of the problems, show two examples, and conclude with some general comments on using these methods to price either deductible or retro policies. I would like to thank Vadim Mezhebovsky, Eric Brosius, and especially Paul Ivanovskis for their generous help in editing this study note.