CAS Exam 8 Fall 2016, Question 8
Study guide: Exam 8
Given the following average severity, an actuary wants to validate if anti-selection impacts its Increased Limits Factors for a given insurance coverage:
| Severity limited to: | Policy Limit = $25,000 | Policy Limit = $50,000 |
|---|---|---|
| $10,000 | $4,000 | $6,000 |
| $25,000 | $6,500 | $8,000 |
| $50,000 | $9,000 | $10,500 |
50% of the policies have a $25,000 policy limit and 50% of the policies have a $50,000 policy limit.
Part a (1.25 points)
Demonstrate if anti-selection impacts the ILFs.
Part b (1.5 points)
Identify and briefly describe two possible forms of anti-selection for ILFs and give one example for each.
Answer this question and see the worked solution