Patent ID: 7908157

Claim:
A computer based system for providing to a prospective insured a set of premium versus loss data for a reinsurance participation plan for workers compensation insurance coverage, said system comprising: a. an input device for receiving data about said prospective insured, said data being sufficient to categorize said prospective insured into an Expected Ultimate Loss Group, EULG; b. a first computer configured to calculate said set of premium versus loss data for said EULG, said premium versus loss data being described by the equation: premium=basic+VC(actual_losses)*actual_losses where: i. premium is a premium in said set of premium versus loss data; ii. basic is a Basic; iii. actual losses is an actual loss in said set of premium versus loss data; and iv. VC(actual_losses) is a Variable Loss Conversion Factor Function that increases with increasing actual losses for an intermediate range of said actual losses so that the maximum value of said premiums in said set of premium versus loss data is less than the maximum premium of a linear retrospective premium plan with the same Basic and EULG; and c. an output device for presenting said set of premium versus loss data to said prospective insured; and wherein said computer based system further comprises a second computer configured to calculate said set of premium versus loss data using the equation: premium= p (CDF)*GuaranteedCostpremium or its equivalent, where: p(CDF) is a premium ratio function which is defined as the ratio of premium to GuaranteedCostpremium for a given CDF; CDF is a value of the Cumulative Distribution Function of losses for insureds with said EULG; and GuaranteedCostpremium is a Guaranteed Cost premium for said EULG; and wherein said premium ratio function is approximately described over a first CDF range by the equation: p (CDF)= A *CDF+ p o where: CDF is greater than zero and less than one; A is a non-zero slope of said premium ratio function in said first CDF range; and p o is the intercept of said premium ratio function in said first CDF range.