CAS Exam 5 Spring 2016, Question 10
Study guide: Exam 5
Given the following:
| Class | Premium at Current Rate Level | Reported Loss and ALAE | Number of Claims | Current Relativity |
|---|---|---|---|---|
| A | $1,257,600 | $964,200 | 924 | 1.00 |
| B | $879,500 | $632,800 | 623 | 1.10 |
| C | $254,900 | $201,400 | 185 | 1.80 |
- Full credibility standard is 800 claims.
- Partial credibility is determined based on the square root rule.
Part a (2 points)
Calculate the indicated rate change for each class to achieve a revenue-neutral overall change.
Part b (0.5 points)
Briefly discuss two benefits of multivariate classification ratemaking.
Answer this question and see the worked solution
Concepts tested
- Classification Ratemaking
- Complement of Credibility
- Full Credibility Standard
- Loss Ratio Method
- Credibility
- Generalized Linear Model