Exam MAS-I Practice Question 76
Study guide: Exam MAS-I
Ground-up losses are exponential with mean 2,000. A policy has an ordinary deductible of 500 and a maximum covered loss of 10,000, with no coinsurance. Next year all losses will be 10% larger, and the deductible and maximum covered loss will not change.
How will the expected payment per loss and the expected payment per payment change?
- A) Both rise by exactly 10%, because every loss rises by 10%
- B) Per loss rises by less than 10%; per payment rises by more than 10%
- C) Per loss rises by more than 10%; per payment rises by exactly 10%
- D) Both rise by less than 10%, because the maximum covered loss caps the payments
- E) Per loss rises by more than 10%; per payment rises by less than 10%
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