CAS Exam 8 Fall 2014, Question 10
Study guide: Exam 8
The National Council of Compensation Insurance (NCCI) has proposed making the following three changes to its Experience Rating Plan:
- Increasing the effect of medical-only losses.
- Giving zero credibility to excess losses.
- Keeping the primary-excess split of actual losses at a constant value of $10,000 for the next 10 years.
Part a (1.5 points)
Evaluate each of these changes with respect to the following goals of experience rating:
- Safety incentive
- Predictive accuracy
Part b (0.75 points)
Briefly discuss each of the proposed changes' effect on the experience modification of an insured that has historically experienced worse than class average claim frequency, but has never had a loss greater than $10,000.
Answer this question and see the worked solution