CAS Exam 5 Spring 2014, Question 1
Study guide: Exam 5
An insurance company writes annual policies. The history of rate changes is as follows:
| Effective Date | Overall Rate Change |
|---|---|
| January 1, 2010 | +4.2% |
| March 1, 2011 | +0.3% |
| January 1, 2012 | -1.7% |
| June 1, 2013 | +1.0% |
Part a (1 point)
Calculate the on-level factor to current rate level for calendar year 2011 earned premium, assuming all policies are written uniformly throughout the year.
Part b (2 points)
Assume that 25% of policies are written on the first day of the year and the remaining policies are written evenly throughout the year. Calculate the on-level premium factor to current rate level for policies in-force on February 1, 2012.
Part c (0.5 points)
Assuming all policies are written uniformly throughout the year, and without performing additional calculations, discuss the effect on the on-level premium factor for calendar year 2011 if the policy term was 2 years instead of annual.
Answer this question and see the worked solution