IC-11 Formula Sheet
Ten formulas, what each one is for, and a worked example.
IC-11 is mostly about practice, not maths, but a handful of calculations come up again and again: under-insurance, contribution between insurers, premium refunds and an insurer's ratios. These ten formulas cover them.
A worked under-insurance example follows the table.
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The 10 Formulas
1
Formula
Premium
Expression
Premium = Sum insured × Rate
Use it for
Basic premium, with the rate per mille or per cent as stated.
2
Formula
Pro-rata premium
Expression
Annual premium × Days on cover ÷ 365
Use it for
Mid-term additions, or a refund when the insurer cancels.
3
Formula
Average clause (under-insurance)
Expression
Claim = Loss × Sum insured ÷ Value at risk
Use it for
Reducing a claim when the sum insured is below the property's value.
4
Formula
Rateable contribution
Expression
Insurer's share = Loss × Its sum insured ÷ Total sum insured
Use it for
Splitting a loss when two or more policies cover the same property.
5
Formula
Claim after excess
Expression
Claim = Assessed loss − Excess (or deductible)
Use it for
The part of each claim the insured bears.
6
Formula
Earned premium
Expression
Written premium × Days elapsed ÷ Policy days
Use it for
Premium the insurer has earned so far.
7
Formula
Loss ratio
Expression
Incurred claims ÷ Earned premium × 100
Use it for
How much of the premium goes on claims.
8
Formula
Expense ratio
Expression
Management expenses (incl. commission) ÷ Net written premium × 100
Use it for
The insurer's cost of acquiring and running the business.
9
Formula
Combined ratio
Expression
Loss ratio + Expense ratio
Use it for
Underwriting profit (below 100%) or loss (above 100%).
10
Formula
Motor IDV
Expression
IDV = Manufacturer's listed price × (1 − Depreciation %)
Use it for
Insured declared value of a vehicle, with depreciation by age.
| # | Formula | Expression | Use it for |
|---|---|---|---|
| 1 | Premium | Premium = Sum insured × Rate | Basic premium, with the rate per mille or per cent as stated. |
| 2 | Pro-rata premium | Annual premium × Days on cover ÷ 365 | Mid-term additions, or a refund when the insurer cancels. |
| 3 | Average clause (under-insurance) | Claim = Loss × Sum insured ÷ Value at risk | Reducing a claim when the sum insured is below the property's value. |
| 4 | Rateable contribution | Insurer's share = Loss × Its sum insured ÷ Total sum insured | Splitting a loss when two or more policies cover the same property. |
| 5 | Claim after excess | Claim = Assessed loss − Excess (or deductible) | The part of each claim the insured bears. |
| 6 | Earned premium | Written premium × Days elapsed ÷ Policy days | Premium the insurer has earned so far. |
| 7 | Loss ratio | Incurred claims ÷ Earned premium × 100 | How much of the premium goes on claims. |
| 8 | Expense ratio | Management expenses (incl. commission) ÷ Net written premium × 100 | The insurer's cost of acquiring and running the business. |
| 9 | Combined ratio | Loss ratio + Expense ratio | Underwriting profit (below 100%) or loss (above 100%). |
| 10 | Motor IDV | IDV = Manufacturer's listed price × (1 − Depreciation %) | Insured declared value of a vehicle, with depreciation by age. |
Worked Example: Under-Insurance
Stock worth ₹10,00,000 is insured for ₹8,00,000. A fire causes a loss of ₹4,00,000.
- 1
Check for under-insurance
The sum insured, ₹8 lakh, is 80% of the value at risk, ₹10 lakh.
- 2
Apply average
Claim = 4,00,000 × 8,00,000 ÷ 10,00,000 = ₹3,20,000.
- 3
Read the result
The insured bears ₹80,000 of the loss, in the same 20% proportion they left uninsured.
Quick practice on risk inspection and hazards. No signup.
Average Applies to the Loss, Not the Sum Insured
The pay-out is the loss scaled down by the under-insurance ratio, and it can never exceed the sum insured. Check whether the question applies an excess before or after average: the order changes the answer.
FAQs
Does the average clause apply to every policy?expand_more
No. It applies where the policy contains it, typically fire and other property policies. Many personal lines policies don't apply average.
What is the difference between contribution and average?expand_more
Average deals with one policy that's too small. Contribution shares a loss between several policies covering the same risk.
Is the short-period refund the same as pro-rata?expand_more
No. When the insured cancels, insurers usually refund on a short-period scale, which keeps more premium than pro-rata. Pro-rata is typical when the insurer cancels.
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