CAS Exam 5 Fall 2018, Question 10
Study guide: Exam 5
A company writes homeowners insurance in a large state divided in half by a mountain range. The company currently uses two geographic rating territories, one on either side of the mountains, as the range has an effect on weather patterns. Each territory has sufficient exposures for its loss experience to be considered fully credible.
Part a (0.5 points)
Briefly discuss two disadvantages of the company's current territorial rating approach.
Part b (2 points)
Discuss the process by which an actuary would develop new rating territory definitions for this state. Briefly explain a consideration for each step in the process.
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