CAS Exam 5 Fall 2018, Question 6

Study guide: Exam 5

Two methods of deriving expense provisions in ratemaking include the premium-based projection method and the exposure-based projection method.

Part a (1 point)

For each method, briefly describe how both fixed and variable expenses are treated.

Part b (0.5 points)

Briefly describe one shortcoming (or distortion) of each method.

Answer this question and see the worked solution

Concepts tested

• Expense Provisions
• Fixed Expenses
• Variable Expenses
• Exposure Base

More questions from this set

• CAS Exam 5 Fall 2018, Question 5
• CAS Exam 5 Fall 2018, Question 7