CAS Exam 8 Fall 2019, Question 9
Study guide: Exam 8
An insurer's risk classification system contains four classes (A, B, C, and D). The insurer is considering using experience rating to rate all four classes.
Given the following:
| Low Variance of Hypothetical Means within Class | High Variance of Hypothetical Means within Class | |
|---|---|---|
| Low Expected Value of Process Variance | Class A | Class B |
| High Expected Value of Process Variance | Class C | Class D |
From the insurer's perspective, briefly explain the class for which experience rating is expected to be the most useful and the class for which experience rating is expected to be the least useful.
Part a (1 point)
Answer this question and see the worked solution