CAS Exam 8 Fall 2015, Question 5
Study guide: Exam 8
An actuary estimated the loss cost for workers compensation insurance using a multi-dimensional credibility method.
Given the following:
- There were 2 classes in Hazard Group X.
- There were no major or minor permanent partial losses.
- Premium information was not available.
- Holdout sample of odd years was used as a proxy of the true mean.
Claim Count by Injury Type for Hazard Group X
| Class | Even Year 1: Fatal (F) | Even Year 1: Permanent Total (PT) | Even Year 1: Temporary Total (TT) | Even Year 2: Fatal (F) | Even Year 2: Permanent Total (PT) | Even Year 2: Temporary Total (TT) |
|---|---|---|---|---|---|---|
| Class 1 | 2 | 10 | 1,000 | 1 | 12 | 1,000 |
| Class 2 | 3 | 10 | 1,000 | 2 | 13 | 1,000 |
| Total | 5 | 20 | 2,000 | 3 | 25 | 2,000 |
Optimal Weights for Estimation of Permanent Total Injury Ratio
| Fatal | Permanent Total |
|---|---|
| 0.2 | 0.3 |
Part a (1 point)
Determine the ratio of permanent total injury to temporary total injury for Class 2 using a multi-dimensional credibility method.
Part b (1 point)
Fully describe the steps involved in performing a quintile test to evaluate the actuary's work.
Part c (0.5 points)
Briefly describe one shortcoming of the individual class sum of squared errors test and briefly describe why the quintiles test is a better way to evaluate the actuary's work.
Answer this question and see the worked solution
Concepts tested
- Workers Compensation Classification
- Credibility
- Holdout Sample
- High Dimensional Variables
- Model Benchmarking