CAS Exam 5 Fall 2013, Question 7

Study guide: Exam 5

Two methods of deriving expense provisions in ratemaking include the Premium-Based Projection Method and the Exposure/Policy-Based Projection Method.

Part a (1 point)

For each method, briefly describe how both fixed and variable expenses are treated.

Part b (0.5 points)

Briefly describe one shortcoming (or distortion) of each method.

Answer this question and see the worked solution

Concepts tested

• Expense Provisions
• Fixed Expenses
• Variable Expenses

More questions from this set

• CAS Exam 5 Fall 2013, Question 6
• CAS Exam 5 Fall 2013, Question 8