CAS Exam 8 Fall 2019, Question 10
Study guide: Exam 8
An actuary has created new models to calculate the experience modification factor for two lines of business.
Given the following:
- Line of business 1 (currently does not use experience rating)
- Line of business 2 (currently uses experience rating)
| Line of Business 2 | Efficiency Test |
|---|---|
| Current Plan | 0.0346 |
| Proposed Plan | 0.1184 |
For both lines of business, assume that the cost of implementation is negligible.
Part a (0.5 points)
For line of business 1, evaluate whether the new experience modification should be implemented.
Part b (0.5 points)
For line of business 1, describe a way to improve the results of the experience modification.
Part c (0.5 points)
For line of business 2, evaluate whether the proposed plan should be used.
Answer this question and see the worked solution