CAS Exam 8 Fall 2016, Question 3
Study guide: Exam 8
A private passenger automobile insurer sells policies through two distribution channels: independent insurance agents and directly to consumers via the internet.
The company's rates already incorporate expense differentials between the two channels but the head of sales has asked their actuary to file different pure premium factors for the two groups.
The actuary wishes to evaluate the acceptability of the request against the American Academy of Actuaries "Risk Classification Statement of Principles."
Part a (1 point)
Identify and briefly describe two considerations supporting inclusion of distribution channel in the pure premium factors.
Part b (1 point)
Identify and briefly describe two considerations against inclusion of distribution channel in the pure premium factors.
Answer this question and see the worked solution