CAS Exam 5 Spring 2018, Question 2
Study guide: Exam 5
Given the following information:
Current Rate Review
| Number of Observations | 100 |
| Indicated Average Premium before credibility | $750 |
| Expected Value of Process Variance | 7.5 |
| Variance of Hypothetical Means | 0.45 |
| Annual Loss Trend | 3% |
| Target Effective Date | July 1, 2018 |
| Current Average Premium at Present Rates | $600 |
Prior Rate Review
| Indicated Rate Change | 20% |
| Implemented Rate Change | 9% |
| Effective Date of Indication | July 1, 2016 |
| Actual Effective Date | September 1, 2016 |
- The complement of credibility is trended present rates.
Calculate the credibility-weighted indicated premium using Buhlmann credibility.
Part a (1.25 points)
Answer this question and see the worked solution
Concepts tested
- Bühlmann Credibility
- Complement of Credibility
- Expected Value of Process Variance
- Variance of Hypothetical Means
- Loss Trend