Exam MAS-I Practice Question 20

Study guide: Exam MAS-I

A bonus-malus system has three levels with annual premiums:

After a claim-free year a policyholder moves down one level (staying at level 1 if already there). After a year with exactly one claim the policyholder moves up one level (staying at level 3 if already there). After a year with two or more claims the policyholder moves to level 3. Each policyholder's annual claim count is Poisson with mean 0.3.

Calculate the long-run average annual premium.

• A) 348.70
• B) 356.94
• C) 360.76
• D) 396.96
• E) 433.33

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Concepts tested

• Bonus-Malus System
• Markov Chain
• Stationary Distribution
• Transition Probability Matrix
• Poisson Distribution

More questions from this set

• Exam MAS-I Practice Question 19
• Exam MAS-I Practice Question 21