To create a rate for a wholesale cost of a service contract or limited warranty, you need to determine four (4) values:

• Frequency. The Frequency is the percent of the covered items that are expected to have a claim.
  
• Severity. The Severity refers to the cost to repair or replace the covered product.
  
• Target Loss Ratio (TLR). The Target Loss Ratio (TLR) refers to the expected utilization of the funds set aside for future claim payments.
  
• Provider's Fee. This is calculated as a percent of the required claim reserve and should include premium tax.

By entering selected pieces of information, you can develop a rate using a model similar to how carriers and providers develop rates.

Try the Sample Rate Builder Calculator

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