SOA Exam FAM Sample Question 96
Study guide: Exam FAM
An insurance company uses the following information to set new rates:
(i) The projected loss cost grows at an annual effective rate of 7% per year.
(ii) The table below shows loss cost data for two policy years, with corresponding weights:
| Policy Year | Loss Cost | Weight |
|---|---|---|
| PY3 | 600 | 1 - p |
| PY4 | 670 | p |
(iii) New rates will be effective on April 1, CY9. Policies are one-year policies and rates will be in effect for one year.
The projected expected loss cost is 951.
Calculate p.
- A) 0.089
- B) 0.119
- C) 0.567
- D) 0.881
- E) 0.911
Answer this question and see the worked solution