CAS Exam 5 Fall 2013, Question 12
Study guide: Exam 5
An insurance company has recently entered a new state and plans to invest heavily on marketing in an attempt to aggressively grow its homeowners book of business. Relative to the low initial premium in the state, these marketing expenses will be significant.
The company's senior management proposes that the actuary develop a rate level where the expense provisions reflect only the typical variable costs. Construct a thorough argument in support of this proposal.
Part a (2 points)
Answer this question and see the worked solution