SOA Exam FAM Sample Question 69
Study guide: Exam FAM
You use the following information to determine a rate change using the loss ratio method.
(i)
| Accident Year | Earned Premium at Current Rates | Reported Losses | Weight Given to Accident Year |
|---|---|---|---|
| AY8 | 4252 | 2260 | 40% |
| AY9 | 5765 | 2610 | 60% |
(ii) Trend Factor: 7% per annum effective
(iii) Loss Development Factor (to Ultimate):
AY8: 1.08
AY9: 1.18
(iv) Permissible Loss Ratio: 0.657
(v) All policies are one-year policies, issued uniformly through the year, and rates will be in effect for one year.
(vi) Proposed Effective Date: July 1, CY10
Calculate the required portfolio-wide rate change.
- A) –26%
- B) –16%
- C) –8%
- D) –1%
- E) 7%
Answer this question and see the worked solution