CAS Exam 5 Spring 2015, Question 3
Study guide: Exam 5
Given the following information for an insurance product:
| Time Period | Written Car Years |
|---|---|
| January 1 through June 30, 2013 | 106.0 |
| July 1 through December 31, 2013 | 107.5 |
| January 1 through June 30, 2014 | 210.0 |
| July 1 through December 31, 2014 | 45.0 |
- All policies written before January 1, 2014 had a six-month policy term.
- All policies written from January 1, 2014 onwards had an annual policy term.
Part a (1.25 points)
Calculate the earned car years for calendar year 2014, assuming that policies were written uniformly throughout each period.
Part b (1.25 points)
Assume new policies in 2014 were written uniformly over the year and the retention ratio prior to the policy term change was 77%. Assess the effect of the policy term change on the retention ratio.
Part c (0.5 points)
Assess the appropriateness of the assumption of uniform writings in the calculation of calendar year 2014 earned car years.
Answer this question and see the worked solution