The rate of gross profit earned on the turnover during the financial year immediately before the date of damage, i.e. the ratio of gross profit to turnover. A business interruption policy pays the amount produced by applying the rate of gross profit to the reduction in turnover. Gross profit is calculated on the difference basis’.

a rate per £100 at which premiums are charged; a premium for a sum assured of £50,000 at 25p per cent is £125.

The basis upon which an insurer must contribute to loss when contribution applies. See INDEPENDENT LIABILITY METHOD.

ABI recommendations as to which of 20 groups each car model should be allocated as a factor in determining the premium. The allocation is based on car characteristics in terms of performance, design, safety, value and likely repair/replacement costs.

The evaluation of credit risk attaching to securities and institutions by established rating agencies such as Best’s, Standard and Poor’s, and Moody’s Investor Services. See CREDIT ENHANCEMENT.

The principle on which the case is decided. It makes the decision a precedent for the future development of the law.
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The principle of law on which a judgment in a lawsuit is based.

The following ratios are important for monitoring performance or calculating premiums: 1. Burning ratio. Insurance claims as a percentage of total premiums for current policies. 2. Claims (or loss) ratio. Incurred losses in relation to earned premiums. 3. Expense ratio. Insurers’ total expenses in relation to written premiums. 4. Combined or composite ratio. Sum of (2) and (3), a figure below 100 per cent indicating that an underwriting profit has been achieved.