CAS Exam 8 Fall 2016, Question 15
Study guide: Exam 8
Given the following information about a worker's compensation book of business:
| Item | Value |
|---|---|
| Standard premium | $840,000 |
| Loss based assessment factor | 2.0% |
| Ratio of ULAE to Loss | 5.0% |
| General overhead expense | 2.0% |
| Risk load for credit risk | 4.0% |
| Acquisition expense | 5.0% |
| Taxes | 3.0% |
| Profit | -8.8% |
Part a (1.25 points)
Calculate the deductible for an excess workers compensation policy that minimizes the insured's loss retention with a maximum premium of $100,000.
Part b (0.5 points)
Contrast the profit load in a large dollar deductible (LDD) policy to the profit load in an excess workers compensation policy.
Answer this question and see the worked solution