Pure premium loaded with expense, profit margin and cost of capital allowances, constituting the price paid by the policyholder.
The gross premium (or loaded premium) is the final insurance price paid by the policyholder. It is built by loading the pure premium (expected claim cost) with: expense loading (acquisition and administration costs), target profit loading, and regulatory capital cost loading. The simplified formula is: gross premium = pure premium / (1 − target expense ratio − target profit margin). The gross premium must also cover actuarial uncertainty (risk loading) and, in some markets, insurance taxes. It is the output of the pricing process and the starting point for commercial negotiation with the policyholder or broker.
Pure premium 360 EUR, target expense ratio 30%, profit margin 5%: gross premium = 360 / (1 − 0.30 − 0.05) = 360 / 0.65 ≈ 554 EUR.
gross premium, prime technique, prime finale, tarif, loaded premium