CAS Exam 5 Fall 2018, Question 1
Study guide: Exam 5
An insurer is considering changing the exposure base for boat owners line of business from boat-years to the insured value of the boat.
The insurer offers the following coverages for boat owners:
- Liability coverage pays for damages to another boat or injuries of people not on the insured's boat.
- Physical damage coverage pays for damages to the insured's boat caused by common risks, such as sinking, fire, storms, theft, and collision.
Part a (2.5 points)
Using three criteria for a good exposure base, evaluate the effectiveness of the proposed change in exposure base for both liability and physical damage coverages and provide a recommendation for the preferred exposure base.
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