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. Rating organizations such as Insurance
Services Organization, Inc. (ISO) (auto liability and general liability), and
National Council on Compensation Insurance (NCCI) (workers compensation)
develop and publish loss costs. Insurers add their own expense and profit
loadings to these loss costs to develop rates. Many insurers will file their
own rates or file deviations of the published rates with the states in which
they write business.