loss conversion factor (LCF)

A loss conversion factor (LCF) is used in the retrospective rating formula that provides a charge to cover unallocated claims and the cost of the insurer's claim services.

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Since the charge is developed as part of the formula, the amount the insured will pay for unallocated loss expenses is a function of losses. The loss conversion factor and the basic premium factor are inversely related to each other; increasing one decreases the other.

Related Terms

The basic premium factor (BPF) is used in the retrospective formula to represent expenses of the...