Frequency Severity Expected Loss Calculator

Multiply expected claim frequency by average claim severity to obtain the expected loss.

Description

Estimate aggregate expected loss by multiplying expected claim frequency, exposure, and average claim severity.

Frequency-Severity Expected Loss helps you estimate aggregate expected loss by multiplying expected claim frequency, exposure, and average claim severity.

Use this calculator for a transparent frequency-severity decomposition of expected loss. It helps explain whether changes in claim count, exposure volume, or average cost drive a projected total.

When to use Frequency-Severity Expected Loss

Use this calculator for a transparent frequency-severity decomposition of expected loss. It helps explain whether changes in claim count, exposure volume, or average cost drive a projected total.1

How the calculation works

Expected claim count equals frequency per exposure unit multiplied by exposure. Multiplying that count by expected severity gives aggregate expected loss under the chosen segment and period.2

Expected loss = frequency × exposure × severity

Inputs and interpretation

Frequency and exposure must use reciprocal units, such as claims per vehicle-year and vehicle-years. Severity should use the desired loss basis, currency, trend date, and coverage definition.

Limitations and assumptions

The product of selected means does not express volatility or tail risk and may be biased when frequency, severity, exposure mix, inflation, or claim closure are inconsistent. It also does not provide a confidence interval or reserve distribution.

References

  1. Actuarial Standard of Practice No. 25: Credibility Procedures — Actuarial Standards Board

  2. Actuarial science — Wikipedia contributors

Similar or alternative tools

Don't forget to set a bookmark for tool.io!
Privacy | Imprint | Cookies