YOU ASK:
What is the definition of Frequency?
WE ANSWER:
Frequency refers to the times an accident resulting to a loss happens. This is one of the important bases by which insurance premiums are computed.
The insurance company needs to know the frequency of the losses for a certain account, for a certain type of risk and for the entire book of accounts as well. This is one way the insurance company measures their performance in the year and will help in the prediction of future losses for the company within a given time frame. Premiums will be computed with contingencies, expense and profit loadings.
Frequency of losses also help the insurance company determine the pure cost of protection based on what losses are expected.
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