CAS Exam 5 Spring 2013, Question 7

Study guide: Exam 5

An actuary is reviewing workers compensation indemnity loss experience for a rate level indication analysis. Given the following information:

A benefit change having an impact of +5.0% applies to all indemnity losses for accidents occurring after July 1, 2011.
A benefit change having an impact of +2.0% applies to indemnity losses on policies written after October 1, 2012.
No other benefit changes are expected within the next few years.
The annual impact on benefits due to wage inflation has been +2.0% and is expected to continue.
The proposed effective date for revised loss costs is July 1, 2013.
Policies are annual.
Revised loss costs would be in effect for one year.
Losses occur uniformly throughout the year.

Accident Year	Estimated Ultimate Losses at Pre-July 1, 2011 Benefit Levels ($000s)
2010	$1,875
2011	$1,875
2012	$2,000

Calculate the 2010, 2011, and 2012 accident year projected ultimate losses to be used in the rate level indication.

Part a (3 points)