CAS Exam 5 Spring 2016, Question 3
Study guide: Exam 5
A personal automobile insurance company is considering changing its exposure base from car-years to hours driven.
Part a (1.5 points)
Evaluate hours driven using three criteria of a good exposure base.
Part b (0.75 points)
The company is also considering keeping its current exposure base as car-years but including hours driven in its risk classification system. Briefly discuss the appropriateness of adding this risk characteristic to the company's risk classification system using three considerations from the Actuarial Standard of Practice No. 12: Risk Classification (for All Practice Areas).
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