CAS Exam 5 Fall 2015, Question 14
Study guide: Exam 5
Given the following data for an insurer that writes auto coverage in two states:
| Underwriting Year | State A Earned Premium ($000s) | State B Earned Premium ($000s) |
|---|---|---|
| 2012 | 2,000 | 154,000 |
| 2013 | 9,000 | 152,000 |
| 2014 | 20,000 | 147,000 |
Reported CDFs as of (months):
| State | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| A | 2.43 | 1.58 | 1.14 | 1.00 |
| B | 2.47 | 1.55 | 1.17 | 1.00 |
- State A policy limit is $50,000
- State B policy limit is $25,000
Part a (1 point)
Discuss an argument for and an argument against combining State A and State B when performing an unpaid claims analysis.
Part b (0.5 points)
Discuss the expected change in severity from 2012 to 2014 when combining the experience from State A and State B.
Answer this question and see the worked solution
Concepts tested
- Reserving Data Organization
- Frequency-Severity Method
- Mix of Business
- Unpaid Claims
- Severity
- Data Segmentation