A Quantification of Snader's Deductible Safety Factor

In deductible pricing formulas presented in the CAS Part 9 syllabus, a "safety factor" is mentioned but not fully explained. This paper describes the purpose, scope, concepts, and applications of the safety factor in Workers Compensation deductible programs. A procedure for quantification of this factor is presented using a component approach. The authors also discuss the theory and practice of estimating each component. Further research on the subject is encouraged, and some suggestions are provided for enhancing the body of actuarial knowledge of the safety factor. Deductibles/LOB-Workers Comp/Ex/Ind. Risk Rating Plans