CAS Exam 5 Spring 2019, Question 11
Study guide: Exam 5
A risk manager has the following concerns about a quote for a large deductible policy compared to the company's current small deductible policy:
i. The expense provision in the rates includes expenses associated with claims below the deductible. ii. The rates include a provision associated with the chance of the insured becoming bankrupt. This does not appear to be relevant to the exposure being underwritten. iii. The profit margin is higher than the one used for the small deductible option.
Explain why each of the concerns may be invalid.
Part a (1.5 points)
Answer this question and see the worked solution
Concepts tested
- Deductible Rating
- Deductible
- Profit and Contingency Provision
- Large Deductible Policy
- Deductible Recovery