CAS Exam 8 Fall 2014, Question 9
Study guide: Exam 8
An actuary is pricing an account that qualifies under a single-split experience rating plan. The account's actual losses during the experience rating period are:
| Claim | Loss and ALAE |
|---|---|
| 1 | $8,000 |
| 2 | 21,000 |
| 3 | 3,000 |
| 4 | 11,500 |
The following information is also available:
| Item | Value |
|---|---|
| Split point | $10,000 |
| Primary credibility | 0.80 |
| Excess credibility | 0.20 |
| Expected loss | 30,000 |
| Loss-free modification | 0.60 |
Calculate the experience modification.
Part a (2 points)
Answer this question and see the worked solution