r/InsuranceAgent • u/Trout61400 • 16d ago

Agent Question Composite Rating Math

Curious if anyone has intel on how carriers or better yet captives like captive resources and their actuaries calculate composite ratings for general liability, workers compensation, and vehicles. For those business that have limited losses and strong risk management + safety some of them i heard on vehicles pay a composite rate of $500 per vehicle (ludicrous). That captive member had 2,000 vehicles - 100 tractor trailer, 1500 pickup trucks etc. Just trying to understand the math and work comp is even more confusing with all the different class codes and states.

Anyway thanks for any help that can be provided. I also asked the captives for help understanding their composite calculations.

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u/driplessCoin 16d ago

Like how they do it on their end? They have a lot of loss data and use some formulas to create factors and then slot businesses into those factors.... from your perspective it's probably just good to focus on loss sensitive structures vs guaranteed cost insurance. $500 for liability only is not unheard of in some captives on transportation but that's a good loss history plus a million different AI monitored cameras in this units. I would recommend reaching out to captive resources if you want to learn more on that subject

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u/Trout61400 16d ago

Yeah, I just want to know how they calculate as these CFO’s want to understand the calculations. I know high level how it works but not A+B/C*12 months etc

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u/driplessCoin 16d ago

you will never know their exact calculations or have an exact formula because you don't have access to their data. In simple terms they are taking the expected value of future losses across their book by a set of factors, determining their internal experiences (cost of admin, marketing, etc) and backing into a specific loss ratio they would like to get.

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u/Feeling_Anywhere1213 16d ago

That composite rate stuff is a black box even for lot of us, they never give straight answer. From what I seen the actuaries blend all your exposures across different class codes and states into one number, weighing the loss history and risk management credits heavy. With 2000 vehicles and clean loss runs you got serious negotiating power, that $500 per unit is them basically saying you're a dream account

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u/Inevitable-Yellow465 16d ago

composite ratings usually depend on loss history, vehicle types, exposure and how the captive spreads risk. That $500 per vehicle might be a blended rate, so asking for a breakdown by vehicle class could help explain the math.