Graham
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Question 3: Fall 2015 (Q10) part a. Sample Answer for Graph 2-->"The LR relativity is considerably above the indicated GLM relativity for the “>10,000” level, implying that “mileage” may be correlated with other exposure variables (the ca…
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Question 2: Spring 2017 (Q8) part c.--> "An insurer may operate in a territory or LOB where regulators deem the multivariate ratemaking is inequitable, and may require the insurer to use community rating." How can multivariate ratemakin…
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Question 1: Fall 2019 (Q11) part c.--> Isn't the first sample answer given wrong? It is as as follows- "One way results can lose profit for factors below the base. Industry 1-4 are given lower factors than the GLM. They can also lose profit…
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I'm not sure using the ECR method is a good idea. If you use the ECR method, you'll get 140,085 for the ultimate instead of 153,562. Then the IBNER will be different so the final estimate of unpaid ULAE will be different also. Even though they didn'…
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For the example from the Werner text (also referenced in the wiki) the double-counting effect arises as follows: First observe that high AOI homes have worse loss experience than medium and loss AOI homes. That means the relativity for high AOI home…
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Question 3: Fall 2019 (Q7) --> #1 Can we trend both reported losses as well EP (while also on-levelling it) the reported BF method and calculate the Ult Loss and then divide by trended OLEP to calculate ULR? In other words, would trending before …
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Short answer: I think both methods would be acceptable. What you did versus what was shown in the examiner's report are somewhat close but not algebraically equivalent. But as you noticed, the 2014.Spring exam seems to do it one way while the 2015.S…
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Question 1 (version 2): I lost it after the text said that regulators may not permit some factors to be used in rating algorithm but allow them to be used while underwriting. What are ‘risk placement’ placement decisions and then the statement I quo…
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Question 2: Fall 2017 (Q9) part a.--> Can't we use AGE as exposure base because firstly, age relates to experience and experience to prob of causing losses, and secondly, the data on nurses' age is easy to obtain and verify? Age and gender are no…
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Question 1: Underwriting variables may be used to guide risk selection decisions, but could also guide risk placement decisions. In some cases, placing a risk into a different company or tier may affect the rate (though the criteria are not consider…
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You are over-thinking this. It's meant to be an easy problem. The key concept is this: total actual profit & loss is different from U/W profit & loss. If the total actual loss ratio is 83% then they indeed made a total profit of 17% but that…
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Question 3: Fall 2019 (Q5) --> #1 Can we trend both reported losses as well EP (while also on-levelling it) the reported BF method and calculate the Ult Loss and then divide by trended OLEP to calculate ULR? In other words, would trending before …
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Question 1: What does this mean - "Pure premium method cannot be used if looking at a certain variable that is highly correlated with another. PP method assumes uniform dist between variables. Would need to instead use Adjusted Pure Premium met…
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Question 1: Spring 2017 (Q4) part d.--> It asks whether the company meets U/W profit expectations with a negative U/W profit provision of i.e -5%. But, if we input the values of Ult loss, WP, and U/w expenses into the fundamental insurance equati…
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Question 7: Spring 2013 (Q7) --> The examiners' report says the following in the last paragraph - Several candidates correctly calculated the average benefit level for losses in each of the given accident years, but then multiplied the given loss…
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Question 5: Spring 2015 (Q8) part a. --> In Sample Answer 5, what does the following line mean - "...a short-term provision will be large in the years following many large losses and small in years following times with fewer large losses.&qu…
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Question 3: Fall 2016 (Q4) part c. --> It states in the sample answer that due to fewer higher deductible policies being sold in PY 2014, frequency trend increases and severity trend decreases. But, how does that lead to the conclusion that PP tr…
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Yes, you're correct about the HO example. I have corrected it. Thank you for pointing it out.
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Question 1: The wiki article says CATs are high frequency low severity events (with a high total loss). But, isn't that the definition of attritional claims? On an aggregate basis, even att. claims can make a high total loss depending upon the amoun…
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First, I should point out that they definitely intended for you to use 1-step trending. You know this because they only provided information about historical trends. There was no further information given that would enable you to estimate prospectiv…
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I have copied your follow-up questions below: Q5: Can you please send over the diagram for area calculation either here or over email? I am still not able to make it. Probably that would make your explanation easier to take in. Q8: Why are we projec…
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Question 1: Trending expenses is different. You can review expense trending here: Werner07.OtherExpenses#Trending_Expenses Question 2: Can you be more specific? What do you think is wrong?
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Question 10: Fall 2017 (Q1) part b.--> . Shouldn't aging insureds receive higher age factors and thus have higher premiums and so, how does this scenario lead to a negative premium trend in average premium @ CRL? If we're talking about car insura…
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Yup, I believe that should get you through! (It also doesn't hurt to briefly explain your interpretation on the exam. The graders seem to be more forgiving if you explain yourself and show you understand the concepts even if you get a different answ…
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Question 6: Is there any trick to apply parallelogram method in general where policy distribution is uneven throughout the year, (For eg- in questions like Spring 2015 (Q5) part b. and Spring 2014 (Q1) part b.), because I couldn't correctly distribu…
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Yes, I see that further down in the examiner's report, they actually say "in-force exposures" even though in the actual question for part (b) they use the term "in-force car-years". Normally 1 written exposure means the same thin…
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Question 3: Fall 2017 (Q3) part b.--> They have assumed that there's no premium audit in sample answer 3 before concluding that WP=EP for PY2015 as of 31.12.2016. What does this assumption mean in general and its context here? The general concept…
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Question 1: Fall 2019 (Q2) part d.--> It asks whether taking avg(current year in-force premium, prior yr in force premium) appropriate for calculating EP for current year. Did not understand the rationale in the sample answer. Consider first the …
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That isn't a bad idea. I will put it on my list of potential enhancements. The reason I didn't do it initially is that PY aggregation is usually easier than CY aggregation. That's because when you draw the PY diagram, the PY lines and the policy &qu…
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Unfortunately, they were trying to trick you here. If the question had asked for in-force exposures (which is usually the way the question is asked) you would not have to take into account the policy term. This is the case for the web-based problem …