Specific Software Solutions · SIGMA Actuarial Consulting Group

This is a benchmarking question that can be answered using a loss projection. The last exhibit in a Loss Forecaster loss projection shows you various pure loss rates. A successful loss control program will show decreasing pure loss rates subsequent to the implementation of the program.

Take an average of the pure loss rates before and after beginning the program. The percentage difference will give a good indication of the success of the program. For example, say the pure loss rates are now about 15% lower than they were five years ago. If you had $3,000,000 worth of losses since the new program was implemented, then the savings are about $450,000. While this is a good rule of thumb, there are always other potential reasons that losses have decreased. Some examples are a benefit decrease (workers compensation) or a randomly good year. However, an obvious and sustained decrease in pure loss rates is due to something other than random occurrences - especially if the decreases began in the same year as a loss control initiative.

Last update: 03:15 PM Wednesday, April 25, 2007

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