SOA Exam FAM Sample Question 76
Study guide: Exam FAM
Company XYZ sells homeowners insurance policies. You are given:
i) The loss costs by accident year are:
| Accident Year | Loss Cost |
|---|---|
| AY1 | 1300 |
| AY2 | 1150 |
| AY3 | 1550 |
| AY4 | 1800 |
ii) The slope of the straight line fitted to the natural log of the loss costs is 0.1275.
iii) AY4 experience is weighted 80% and AY3 experience is weighted 20% for rate development.
New rates take effect November 1, CY5 for one-year policies and will be in effect for one year.
Calculate the expected loss cost for these new rates.
- A) 2124
- B) 2217
- C) 2264
- D) 2381
- E) 2413
Answer this question and see the worked solution