CAS Exam 5 Spring 2015, Question 5
Study guide: Exam 5
Given the following information for a boat owners insurer:
- On July 1, 2014, a rate change of +10% went into effect.
- 2014 earned premium = $1,000.
- Policies are written on an annual basis.
Part a (0.75 points)
Assuming uniform writings, calculate the calendar year 2014 on-level earned premium using the parallelogram method.
Part b (1.25 points)
Due to the seasonality of boat owners coverage, assume that the policy distribution of the book of business was as follows (with uniform distribution within each quarter):
| Quarter | Share |
|---|---|
| Quarter 1 | 10% |
| Quarter 2 | 50% |
| Quarter 3 | 30% |
| Quarter 4 | 10% |
Calculate the calendar year 2014 on-level earned premium, accounting for this assumed policy distribution.
Part c (0.5 points)
For the scenario in part b. above, describe another approach the insurer could take to calculate the on-level earned premium.
Answer this question and see the worked solution
Concepts tested
- On Level Premium
- Insurance Premium
- Earned Premium
- Calendar Year
- Parallelogram Method
- Extension of Exposures