CAS Exam 8 Fall 2017, Question 17
Study guide: Exam 8
A workers' compensation policy has the following limits and expected losses:
| Per-Occurrence Limit | $300,000 |
|---|---|
| Expected Unlimited Aggregate Losses | $700,000 |
| Expected Limited Aggregate Losses | $500,000 |
| Aggregate Deductible Limit | $800,000 |
| State Hazard Group Differential | 0.95 |
Table of Expected Loss Groups
| Expected Loss Group | Range of Values |
|---|---|
| 31 | 630,000-720,000 |
| 30 | 720,001-830,000 |
| 29 | 830,001-990,000 |
| 28 | 990,001-1,180,000 |
| 27 | 1,180,001-1,415,000 |
| 26 | 1,415,001-1,744,000 |
Table of Insurance Charges
| Entry Ratio | Expected Loss Group 31 | 30 | 29 | 28 | 27 | 26 |
|---|---|---|---|---|---|---|
| 0.43 | 0.5675 | 0.5626 | 0.5584 | 0.5543 | 0.5497 | 0.5456 |
| 0.60 | 0.4865 | 0.4799 | 0.4737 | 0.4676 | 0.4613 | 0.4553 |
| 1.14 | 0.2658 | 0.2552 | 0.2448 | 0.2341 | 0.2234 | 0.2128 |
| 1.60 | 0.1644 | 0.1537 | 0.1367 | 0.1322 | 0.1215 | 0.1107 |
| 2.67 | 0.0822 | 0.0769 | 0.0684 | 0.0661 | 0.0608 | 0.0554 |
Part a (1.5 points)
Calculate the total expected loss cost for this policy using the Insurance Charge Reflecting Loss Limitation (ICRLL) adjustment procedure.
Part b (0.5 points)
Describe how the ICRLL procedure is used to adjust expected losses for a workers' compensation policy.
Answer this question and see the worked solution