In the Parallelogram method, which step corresponds to calculating the premium portion in each square for rate levels?

• A. Determine timing and amount of rate changes
• B. Compute the cumulative rate level index
• C. Calculate the portion of premium in each square that corresponds to each rate level
• D. Calculate the on level factor

Answer: (C)

In the Parallelogram method, the goal is to split the total premium into portions that correspond to each rate level. You visualize a grid where each square represents a part of the premium tied to a specific rate level, and the area of those squares determines how much premium goes to that level. Calculating the portion of premium in each square that corresponds to each rate level is the step where you actually perform that distribution, turning the total premium into rate-level-specific amounts. That’s why this option is the best fit. The other steps deal with when rate changes occur, indexing the rate levels, or applying level factors, which are separate tasks from allocating the premium across rate levels.