What does Loss Conversion Factor mean? Read on to discover the definition & meaning of the term Loss Conversion Factor - to help you better understand the language used in insurance policies.
Loss Conversion Factor
A factor used in the retrospective rating formula that provides a charge to cover unallocated claims and the cost of the insurer's claim services. Since the charge is developed as part of the formula, the amount the insured will pay for unallocated loss expenses is a function of losses. The loss conversion factor and the basic premium factor are inversely related to each other; increasing one decreases the other.
We hope the you have a better understanding of the meaning of Loss Conversion Factor.