CAS Exam 8 Fall 2019, Question 8
Study guide: Exam 8
Given the following for a policy:
- Basic Limit = 100,000
- Expected Basic Limit Indemnity = 65,000
- Allocated Loss Adjustment Expense (ALAE) = 20% of Indemnity
- Unallocated Loss Adjustment Expense = 1.5% of Indemnity and ALAE
- All other expenses are variable and are 15% of the premium
- Risk load = 0%
- Profit load = 2.5%
- The following table shows Indemnity-only limited expected severity:
| Limit L | E[X; L] |
|---|---|
| 100,000 | 58,750 |
| 200,000 | 100,000 |
| 500,000 | 156,250 |
| 1,000,000 | 218,750 |
Calculate the premium for this policy with a 500,000 limit over a 500,000 deductible.
Part a (1.5 points)
Answer this question and see the worked solution