CAS Exam 8 Fall 2012, Question 6
Study guide: Exam 8
An insurance company has a private passenger auto book of business with the following claims experience:
| Territory | Years Since Last Accident | Earned Premium at Present Rates for Two Years Since Last Accident | Earned Car Years | Number of Claims | Incurred Loss |
|---|---|---|---|---|---|
| 1 | 0 | $15,000,000 | 15,000 | 5,000 | $9,000,000 |
| 1 | 1 | $125,000,000 | 125,000 | 41,000 | $75,000,000 |
| 1 | 2+ | $230,000,000 | 230,000 | 76,000 | $138,000,000 |
| 2 | 0 | $25,000,000 | 25,000 | 7,000 | $16,000,000 |
| 2 | 1 | $310,000,000 | 300,000 | 84,000 | $187,000,000 |
| 2 | 2+ | $550,000,000 | 535,000 | 147,000 | $328,000,000 |
| 3 | 0 | $10,000,000 | 10,000 | 4,000 | $7,000,000 |
| 3 | 1 | $80,000,000 | 100,000 | 35,000 | $43,000,000 |
| 3 | 2+ | $160,000,000 | 170,000 | 60,000 | $100,000,000 |
Choose an appropriate exposure base for calculating credibility. Justify the selection.
Part a (2.5 points)
Answer this question and see the worked solution