CAS Exam 5 Spring 2013, Question 3
Study guide: Exam 5
An actuary has submitted the following analysis for a rate level indication:
| Calendar/Accident Year | Calendar Year Earned Premium | AY Reported Losses and Paid ALAE | AY Reported Loss and Paid ALAE Ratio |
|---|---|---|---|
| 2010 | $1,023,549 | $703,902 | 68.8% |
| 2011 | $1,086,756 | $773,430 | 71.2% |
| 2012 | $1,222,930 | $749,249 | 61.3% |
| Item | Value |
|---|---|
| Three-Year Average Reported Loss and Paid ALAE Ratio | 67.1% |
| Fixed Expense Provision | 11.0% |
| Variable Expense Provision | 15.0% |
| Underwriting Profit Provision | 8.0% |
| Variable Permissible Loss Ratio | 77.0% |
| Indicated Rate Change | 1.4% |
Recommend five improvements to the analysis and briefly explain the purpose of each.
Part a (2.5 points)
Answer this question and see the worked solution
Concepts tested
- Overall Rate Level Indication
- Loss Trend
- On Level Premium
- Loss Ratio
- Loss Development
- Loss Ratio Method