CAS Exam 5 Spring 2016, Question 1
Study guide: Exam 5
Given the following information for an insurance company:
| Accident Year | Earned Premium ($000) | Ultimate Losses ($000) |
|---|---|---|
| 2013 | 1,500 | 800 |
| 2014 | 1,600 | 800 |
| 2015 | 1,800 | 1,200 |
- A benefit level change increased losses by 10% for policies written after April 1, 2013.
- A second benefit level change decreased losses by 5% for accidents occurring after January 1, 2014.
- A rate change of +5% was effective October 1, 2013.
- Annual loss cost trend is +2%.
- All policies have a term of one year.
- The company writes policies uniformly throughout the year and files rates only one time per year.
- Planned rate revision to be effective January 1, 2017.
Calculate the on-level loss ratio for accident year 2013 for the planned rate revision.
Part a (2.5 points)
Answer this question and see the worked solution
Concepts tested
- Loss Trend
- Accident Year
- Loss Ratio
- Insurance Premium
- On Level Premium
- Parallelogram Method
- Policy Provision Changes