CAS Exam 5 Spring 2017, Question 5
Study guide: Exam 5
Given the following information:
- Experience period on-level trended earned premium = $250,000.
- Experience period trended and developed losses and LAE = $200,000.
- Experience period earned exposure = 8,000.
- Variable expense provision = 19%.
- Fixed expenses for the experience period = $16,000.
- Profit and contingency factor = 4%.
Part a (0.75 points)
Calculate the indicated average rate level change using the loss ratio method.
Part b (0.75 points)
Calculate the indicated average rate using the pure premium method.
Part c (0.5 points)
Briefly describe one situation where the loss ratio method cannot be used and one situation where the pure premium method cannot be used.
Answer this question and see the worked solution