Graham
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Without seeing an "incorrect answer", It's hard to know exactly what the examiners' report meant by "confusing the concept of uniform issuing of policies with uniform earning of premium". After policy is written, the premium is i…
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Yes, because that policy period gives rise to all the policies that would be in-force on Feb 1, 2012.
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That's a good idea because it's a more direct (and accurate) way of answering the question but it would take a lot longer than providing the type of answer in the examiners' report. The "quick" answer, which seems to be the one the graders…
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Great! 😀
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Development and trending are 2 different things. By definition, the development method gives you an untrended ultimate loss. To be able to apply a trend to obtain the "ultimate trended loss" as in a rate indication, you would need informat…
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Yes, click on this link or paste it into your browser to download it: https://www.battleacts5.ca/Excel/Book_of_Triangles_1_(Diagnostics).xlsm
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In 2019-Fall-Q7, you were given the ELR (expected loss ratio): 60%. You then use this ELR in the BF formula but in the BF formula, you need regular EP, not OLEP (because the EP needs to "match" the losses which are not developed or trended…
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Ok, there's a lot there that you're asking: Why are risk characteristics sometimes not adequately reflected in past experience? This can happen for a variety of reasons. In cases of large commercial risks, the data may indeed be "thin," me…
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Yes, Sample Answer 2 touches on an important aspect of the frequency-severity technique. When using the frequency-severity method to calculate claims, the basic idea is to separate the two components: Frequency: How often a claim occurs. Severity: T…
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Yes, better loss experience means the insurer pays out less so using that data in the next rate indication means the rate need is less.
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No, don't do that. If they didn't give you the exposures then I wouldn't try to estimate them. That's just making the problem unnecessarily complicated.
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Using Premium as Weights vs. Using Exposure: When using premiums as weights, you're weighting each territory's (or class's) relativity based on the premium volume they contribute. However, as you've rightly pointed out, if the premium is a function …
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The EOE method means that you calculate the premium using the rating formula (including the additive expense fee) both on April 1, 2017 and the current date. The on-level factor is then just the latter divided by the former. And you don't necessaril…
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The average experience modification factor can be calculated by taking the average of the provided factors over the years. From the data provided: 2011: 0.99 2012: 0.98 2013: 0.97 Average Experience Modification Factor = (0.99 + 0.98 + 0.97) / 3 = 2…
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Your method is completely correct but you forgot to rebase your indicated relativities in column Y in your solution. If you do that, you will get the same answer as in the sample solution.
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Alright, let's break this down step by step: Should the trended tail severity increase as the development age increases? Generally speaking, as claims age or mature, they tend to become more expensive. This is due to various factors like increased m…
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I would need to see your Excel file with your full solution to be able to answer. But if you got the same answer as the sample solution then your method is likely correct. If your answer was different then it is likely incorrect. If your answer is i…
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Those are actually the CAS solutions not my solutions, but it looks like in the first solution 6(1), they used the step table to calculate the ultimates, whereas in the second solution 6(2), they used the development method. In either case, you need…
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The projected fixed expense is the actual expense the insurer incurs for things like printing the policy forms. Let's say it's $100. But we don't just add $100 to the cost of the policy otherwise there would be no profit so the amount actually added…
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Yup, that's pretty much the explanation.
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The final proposed base rates are different because they are both approximations. Neither one is necessarily more accurate than the other. As far as which method to use in an exam question, it's a bit less of an issue now that the exam is given in E…
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Which problem is this? It isn't 2018-Fall-Q12. Note: The exam problems are in consistent when they give you a percentage for the quota-share, and this problem has an error. If the quota-share percentage is 60% then according to the Friedland text, t…
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Yes, you are correct. In simple terms you can think of it like this: (overall change) = (base rate change) x (relativity change) So if you want 0% overall change and the relativity change is 10% then to compensate, the base rate change needs to be 1…
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In sample answer 2, they did back out the base rate change but it was embedded in the calculations and not explicit. I would just ignore sample answer 2 and study my sample answer shown below. (You can click on it to make it larger.) https://www.bat…
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Part (a) is just a standard application of the adjusted pure premium method. It's in part (b) where you take into account that the overall change has to be 0%. You do this by calculating the off-balance and adjusting the base rate (not the relativit…
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Your observation is spot-on: the assumption that the total premium for territory A will simply increase to 1.1×2,700,000 with a 10% rate change overlooks the potential impact on policy renewals. Typically, rate changes could affect customer behavior…
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Ok, thanks. By the way, the problems in the Power Pack don't have the typo if you want some more practice. It's the Excel files in the very last row of the table here: https://www.battleacts5.ca/wiki5/BattleActs_PowerPack#Pricing_Problems_.28Excel_F…
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I don't know which other exam questions you're looking at but a general answer to your questions are as follows: The approach you take can depend on several factors, including the data you have, the credibility of that data, and the specific risks y…
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Sure, for classical credibility, the estimate you get for future loss experience is a weighted average between your prior estimate and the new data you've gathered. However, the classical credibility approach doesn't give you a way to gauge how &quo…
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Ah, I see. You're right - that's a typo. It should be 1.074 (rounded.) I will fix that. It may take a couple of days because the change needs to be uploaded to the server. Thanks.