Graham
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You can use any of the 3 AYs to come up with the ECR because the question states the ECR is the same for all AYs. If you do the calculation for all 3 AYS, you will see that the ECR = 10.0 in each case.
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The answer to this question will likely make more sense once you've covered later chapters in the reserving text, so make a note of this exam problem and make sure to come back to it when you review the reserving material. In any case, this was not …
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You're welcome! 😀
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The trick here is that to calculate the average severity in the larger interval (700, 850), you have to break that interval into 2 smaller intervals as follows: (700, 800) (800, 850) The reason the breakpoint is 800 is that AOI = 800 for part (ii). …
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Hello @brb2241 I'm sorry I didn't see your question until today. I will provide an answer sometime Friday. @Graham
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The short answer is that there may not be a good alternative since the problem didn't provide much information concerning tail factors. It's certainly reasonable to consider an adjustment to the tail factor and I'm sure they wouldn't have deducted p…
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Was this based on an exam problem? It looks like there was a rate change on 7/15 of negative 6% and that the policies are annual. I think the rate change would need to be 7/1 to get areas of 0.875 in the upper portion and 0.125 in the lower portion …
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I think the quote you provided is correct but it's a bit strange the way it was phrased and I'm not sure your rephrasing quite captures the intent. (I'm also not sure where you got this quote from. I couldn't find it in the Friedland text.) When the…
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Yes, that's correct. I actually snuck in that exact observation at the very end of the example problem. See green box: https://www.battleactsmain.ca/battleacts5.ca/forum5/uploads/052/J1S76BREK1R4.png The relativity for B definitely is 1.0 because th…
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The disposal rate method works in this problem but unless there is a reason to use it, it's quicker to use the method given in the examiners' report. In past exam problems, they often tell you explicitly to use the disposal rate method when they wan…
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No, you can do a screen grab like you did. That's helpful. Yes, writing out your question somehow makes you think through the issue differently versus just doing it in your head! What you said is correct. I thought through it myself by noticing the …
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That's correct. The key is that the exposure base is car-years. So another way to say it is that each 6-month policy represents 1/2 a year of coverage so the insurer is exposed for only 1/2 year for each of these policies.
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I think the examiner's report is wrong about this. The fact that this was listed as a common mistake and that the examiner's report provided such a detailed explanation indicates to me there must have been a lot of discussion about this. So here's w…
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Since it is so close to the exam, my recommendation is to follow sample answer 1 (since that's the clearest) and ignore the others. There is an example in the wiki that's very similar to this exam problem. See this section: https://www.battleacts5.c…
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Your reasoning is correct up until the very last thing you stated: the true CDFs should be lower so the %reported should be higher so the used-up premium should be higher so the true ECR should be lower If the true ECR is lower than what you used in…
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Those are the formulas given in the text so that's what you should use when solving a problem.
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Hi Keshav, Both use the insured's loss experience but they do so in different ways: With experience rating, the insured's past experience is used as input to the rating process. They are then charged a rate prior to coverage beginning and this rate …
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The AWD of a CY historical period is the same as the midpoint of the CY historical period.
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Ok, I see where you're coming from. Sounds like you've got it now.
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In these problems, sometimes what you're supposed to do is a little fuzzy. However, I don't think rebasing the relativities as a first step would have occurred to me - I would have taken the current relativities "as is" for calculating the…
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Is there a particular exam problem where they gave you a choice? I believe in most exam problems they set things up to direct you to one method or the other. You wouldn't necessarily get the same answer with the loss ratio and pure premium methods …
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Awesome! 😁
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Oh, ok. That's good. I looks like you understand this topic very well. I think you actually can apply the parallelogram method to the 2013 problem but because none of the data has been subjected to the new levels, the ALL (Average Loss Level) is 1.0…
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I feel like you're starting to go down a rabbit hole here so let me try to pull you back. For premiums, there are specific methods covering all the different situations for bringing earned premiums to current rate level. Any type of problem you get …
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The 2013 problem was easier precisely because the given loss information was "pre-benefit". So to get to post-benefit levels, you can simply apply the given benefit level changes to all the data. The difficulty with the data in the 2016 pr…
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You increased the wrong quantity. The court decision says that future payments will increase and future payments are represented by the unpaid amounts. So it's the unpaid amounts in the final step that need to be increased by 20%. (By doing what you…
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I wasn't careful in my original answer. I explained why they didn't use trended premiums, but I kept referring to on-leveled premiums. So here's what I think about this problem: Generally, if you're given the expected claims ratio, it appears you ar…
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True, in practice you would want to know more about the reinsurance treaty before rushing off into a calculation...
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When you say a ratio approach, do you mean ceded losses divided by gross losses? If so, I'm not sure that would be a great approach. You could try it and see how that compares to the given answers. In any case, I don't think the ceded losses have en…