Per-occurrence limit vs Per-occurrence deductible
I am going through the wiki for this section now and noticed that in some sections the notes refer both to the "per-occurrence deductible" as well as the "per-occurrence limit."
Am I right in assuming that these are being used interchangeably? Or is there a notable difference in the meaning of these terms.
Comments
It all depends on the context. They're the same idea but it depends on what you are trying to price. One person's limit is another person's deductible. For example, in Auto Collision insurance you may have a $1,000 deductible. From the insurer's perspective, it's a deductible in that losses are reduced by up to $1,000. From the policyholder's perspective, they have a self-insured retention policy with a limit of $1,000 and a "reinsurance" excess of loss attaching at $1,000.
Where it gets confusing is when we start talking about things like loss elimination ratios in this context. The Fisher text talks about an LER when there's a per-occurrence limit and an aggregate limit to mean the loss that's not eliminated by the per-occurrence limit, i.e. we're interested in the losses which remain after exceeding the per-occurrence limit. Whereas the Bahnemann text talks about the LER in the context of deductibles, now measuring the other side, i.e. the deductible loss that is being eliminated.
I do understand the difference between limits & deductibles for these separate sides, what I am specifically asking about is the article's use of the terminology.
The wiki states "Claims above the per-occurrence limit have the insurer cover the difference between the claim and the per-occurrence deductible." Is the sentence using "per-occurrence limit" and "per-occurrence deductible" interchangeably? What is the reason for the sudden switch in terminology mid-sentence, and does it imply that something else is happening?
Thanks for clarifying. It's really a matter of perspective. One person's limit is another person's deductible depending on which layer of loss you're pricing and whose perspective you're assuming. The bottom of p. 37 in the Fisher text contains a warning from the author to pay careful attention to whether "limit" refers to a policy limit, deductible limit, or some other limit.
To directly answer your question there was no reason for switching the terminology so we've cleaned up the wiki to improve the exposition.