SOA Exam ASTAM Fall 2024, Question 2
Study guide: Exam ASTAM
Part a (3 points)
ABC insurance sells automobile collision coverage with ordinary deductibles of 250, 500, and 1,000. The base rate is based on a deductible of 500.
You are given the following data:
| Loss Size | Number of Losses | Ground Up Total Loss |
|---|---|---|
| 0 – 250 | 1,000 | 150,000 |
| 251 – 500 | 2,000 | 650,000 |
| 501 – 1,000 | 6,000 | 4,320,000 |
| Over 1,000 | 20,000 | 90,000,000 |
| All | 29,000 | 95,120,000 |
(i) Calculate the indicated deductible relativity for the deductible of 250.
(ii) Calculate the indicated deductible relativity for the deductible of 1,000.
(iii) Explain why the ground-up loss severity distribution might differ for different deductible levels.
Part b (2 points)
ABC also sells liability insurance with limits of 250,000, 1,000,000, and 5,000,000. The base rate is based on a limit of 250,000.
You are given the following data:
| Size of Loss | Number of Claims | Ground Up Total Losses (in Millions) |
|---|---|---|
| 1 – 250,000 | 1,200 | 180.00 |
| 250,001 – 1,000,000 | 850 | 361.25 |
| 1,000,001 – 5,000,000 | 150 | 187.50 |
| All | 2,200 | 728.75 |
(i) Calculate the increased limit factor (ILF) for the limit of 1,000,000.
(ii) Calculate the increased limit factor (ILF) for the limit of 5,000,000.
Part c (2 points)
Describe two practical considerations regarding the data to use for determining ILFs.
Answer this question and see the worked solution