Policy Data
Exposure Base¶
Definition
The definition of what an exposure represents in a line of business is called an Exposure base.
Criteria¶
- Proportional to expected losses
- For an LOB, should be the risk characteristic
- most directly proportional relationship to loss
- Practical
- Objective
- easy & inexpensive (verify & obtain)
- Considerate of Historical Precedence
- Costly to change existing exposure base
- Large premium swings for individuals
- Changing rating algo \(\implies\) costly from IT standpoint
- Significant adjustments in future ratemaking analysis
Insurance Exposure Bases 📊¶
| Line of Business | Common Exposure Base(s) | Other Potential Exposure Bases |
|---|---|---|
| Personal Automobile | Car-Years | Miles Driven, Vehicle Value |
| Homeowners | House-Years | Replacement Cost of Home, Square Footage |
| Personal Articles Floater | Value of Item | Appraised Value, Number of Items in a Collection |
| Commercial Property | Amount of Insurance Coverage | Square Footage, Number of Locations |
| Inland Marine | Value of Property/Goods Transported | Annual Shipping Volume, Number of Vehicles |
| Workers Compensation | Total Payroll | Number of Employees, Hours Worked |
| Commercial General Liability | Sales Revenue, Payroll, Square Footage | Number of Customers, Per-Unit Fees |
| Products Liability | Sales Revenue | Number of Units Sold, Type of Product |
| Professional Liability | Number of Professionals | Annual Revenue, Billable Hours, Project Value |
| Physician's Professional Liability | Number of Physician-Years | Number of Patients Seen, Number of Procedures |
| Cyber Liability | Annual Revenue | Number of Sensitive Records, Number of Employees |
| Directors & Officers (D&O) | Total Company Assets | Revenue, Market Capitalization, Number of Employees |
| Umbrella / Excess Liability | Limits of Underlying Policies | Type of Underlying Business Operations |