Exam DISC-DA Practice Question 230
Study guide: Exam DISC-DA
A pricing actuary finds that a new rating characteristic is strongly correlated with loss costs in several years of data, but no one can explain why it should cause losses. The characteristic is not prohibited by any applicable law. Under ASOP No. 12, Risk Classification, what is the actuary's position?
- A) It may be used if its relationship to expected outcomes is shown; causality is not required
- B) It may not be used until a cause-and-effect relationship with losses has been established
- C) It may be used only if the actuary obtains the regulator's prior written approval
- D) It may not be used because unexplained characteristics are unfairly discriminatory
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