CAS Exam 5 Fall 2019, Question 12
Study guide: Exam 5
Given the following information:
| Vehicle Type | Vehicle Use | State A Exposures | State A Losses ($) | Countrywide Exposures | Countrywide Losses ($) |
|---|---|---|---|---|---|
| Car | Pleasure | 2,500 | 500,000 | 30,000 | 6,600,000 |
| Car | Work | 1,000 | 500,000 | 25,000 | 16,250,000 |
| Truck | Pleasure | 0 | 0 | 40,000 | 14,400,000 |
| Truck | Work | 3,000 | 300,000 | 50,000 | 8,500,000 |
- An actuary is developing a pure premium estimate for trucks used for work in state A.
- The actuary is using experience from all other states as a complement of credibility.
Part a (1.25 points)
Calculate the complement of credibility using Harwayne's Method.
Part b (0.5 points)
Briefly describe two advantages of using the current rate as a complement of credibility instead of calculating the complement with Harwayne's method.
Answer this question and see the worked solution