CAS Exam 5 Spring 2019, Question 13
Study guide: Exam 5
An insurer writes private passenger automobile liability coverage in two states. Given the following bodily injury (BI) and property damage (PD) information as of December 31, 2018:
State A:
| Accident Year | Earned Exposure | Ultimate Claim Count BI | Ultimate Claim Count PD |
|---|---|---|---|
| 2016 | 36,000 | 50 | 950 |
| 2017 | 37,800 | 60 | 1,140 |
| 2018 | 41,580 | 72 | 1,368 |
| Coverage | Paid Age-to-Ultimate Factors 12-to-Ult | Paid Age-to-Ultimate Factors 24-to-Ult | Paid Age-to-Ultimate Factors 36-to-Ult |
|---|---|---|---|
| BI | 5.00 | 1.50 | 1.20 |
| PD | 1.20 | 1.01 | 1.00 |
| Coverage | Ultimate Severity |
|---|---|
| BI | 15,000 |
| PD | 5,000 |
State B:
| Accident Year | Earned Exposure | Ultimate Claim Count BI | Ultimate Claim Count PD |
|---|---|---|---|
| 2016 | 100,000 | 1,250 | 5,000 |
| 2017 | 105,000 | 1,300 | 5,200 |
| 2018 | 110,250 | 1,375 | 5,500 |
| Coverage | Paid Age-to-Ultimate Factors 12-to-Ult | Paid Age-to-Ultimate Factors 24-to-Ult | Paid Age-to-Ultimate Factors 36-to-Ult |
|---|---|---|---|
| BI | 9.00 | 2.10 | 1.30 |
| PD | 1.30 | 1.01 | 1.00 |
| Coverage | Ultimate Severity |
|---|---|
| BI | 10,000 |
| PD | 2,500 |
- There is no exposure, claim count, or severity trend.
Part a (0.5 points)
Discuss an argument for performing a bodily injury and property damage combined unpaid claims analysis for state A.
Part b (0.5 points)
Discuss an argument against performing an all-state combined unpaid claims analysis for bodily injury.
Part c (0.75 points)
Fully evaluate management's assertion that State A should be charged a higher premium than State B for bodily injury coverage due to its higher ultimate severity.
Answer this question and see the worked solution