CAS Exam 5 Fall 2015, Question 5
Study guide: Exam 5
An insurance company writes annual policies. The history of law and coverage changes affecting benefit levels is as follows:
| Effective Date | Direct Impact of Benefit Change |
|---|---|
| February 15, 2014 | +6.5% |
| October 1, 2014 | +4.3% |
Part a (1.25 points)
Calculate the direct benefit change loss adjustment factor for fourth accident quarter 2014, assuming both changes only affect losses on policies written on or after the effective date of the change.
Part b (1.25 points)
Calculate the direct benefit change loss adjustment factor for first policy quarter 2014, assuming both changes affect all claims that occur on or after the effective date of the change.
Part c (0.5 points)
In doing a rate level calculation, the actuary for this insurance company has selected an annual loss trend based on unadjusted pure premium data from 2012 through 2014. Assess the appropriateness of this selection and suggest an adjustment, if necessary.
Answer this question and see the worked solution