Work out frequency severity model instantly with clear inputs, formula shown and shareable results.
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.
Pure premium
Pure premium = frequency × severity; Expected loss = exposures × frequency × severity
They respond to different drivers — frequency to behaviour and exposure, severity to inflation and repair costs — so trends are modelled separately.
Expenses, commission, reinsurance cost, a risk load and profit margin, which together turn pure premium into an office premium.