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Frequency Severity Model Calculator

Work out frequency severity model instantly with clear inputs, formula shown and shareable results.

About Frequency Severity Model Calculator

Almost all insurance pricing splits risk into how often claims happen and how big they are. Multiplying frequency by severity gives the pure premium per exposure, the loss cost before expenses, profit or risk margin.

Formula

Pure premium

Pure premium = frequency × severity; Expected loss = exposures × frequency × severity

Worked example

With the default values below, Frequency Severity Model Calculator returns Pure Premium Per Exposure of $960.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Number Of Exposuresaccepts 1–10,000,000
5,000
Claim Frequency Per Exposureaccepts 0–10
0.08
Average Claim Severityminimum 0
12,000

Results

Pure Premium Per Exposure
$960.00
Expected Total Loss
$4,800,000.00
Expected Number Of Claims
400.00
Loss Cost Per 1,000 Exposures
$960,000.00

Step by step

  1. 1Values used
  2. 2Pure premium
  3. 3Pure Premium Per Exposure= 960.00
  4. 4Expected Total Loss= 4,800,000.00
  5. 5Expected Number Of Claims= 400.00
  6. 6Loss Cost Per 1,000 Exposures= 960,000.00

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why split frequency and severity?

They respond to different drivers — frequency to behaviour and exposure, severity to inflation and repair costs — so trends are modelled separately.

What still has to be added?

Expenses, commission, reinsurance cost, a risk load and profit margin, which together turn pure premium into an office premium.

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