loss costs
Also called "pure premium," the actual or expected cost to an insurer of
indemnity payments and allocated loss adjustment expenses (ALAEs). Loss costs do not
include overhead costs or profit loadings. Historical loss costs reflect only
the costs and ALAEs associated with past claims.
Prospective loss costs are estimates of future loss costs, which are derived
by trending and developing historical loss costs. The organizations that used
to be called rating bureaus now develop and publish loss costs instead of insurance
rates. Insurers add their own expense and profit loadings to these loss costs
to develop rates, which are then filed with regulators.
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