CAS Exam 5 Fall 2018, Question 17
Study guide: Exam 5
Given the following information as of December 31, 2017:
| Calendar Year | Earned Premium ($000) | On-Level Adjustment |
|---|---|---|
| 2014 | 127,500 | 0.710 |
| 2015 | 117,600 | 0.660 |
| 2016 | 64,300 | 0.850 |
| 2017 | 58,900 | 1.000 |
| Accident Year | Ultimate Claim Counts | Ultimate Severity ($) |
|---|---|---|
| 2014 | 2,200 | 32,600 |
| 2015 | 1,970 | 35,300 |
| -1.3% | Annual claim count trend |
| 6.0% | Annual severity trend |
| 15% | Estimated savings on claims occurring after January 1, 2017 due to legislative change |
Part a (3 points)
Estimate the ultimate claims for accident years 2016 and 2017 using an appropriate frequency-severity technique.
Part b (0.5 points)
Briefly describe two key assumptions of frequency-severity techniques.
Answer this question and see the worked solution