CAS Exam 8 Fall 2014, Question 7
Study guide: Exam 8
An insurer currently offers the following coverage limits at actuarially sound premiums.
| Limit | Premium |
|---|---|
| $100,000 | $350 |
| 250,000 | 700 |
Next year, underwriting would like to offer additional coverage options. The following premiums are under actuarial review.
| Limit | Premium |
|---|---|
| $500,000 | $1,000 |
| 1,000,000 | 1,800 |
Argue for and against the actuarial soundness of these new premiums as they relate to the lower-limit options.
Part a (1.75 points)
Answer this question and see the worked solution