CAS Exam MAS-II Spring 2019, Question 5
Study guide: Exam MAS-II
You are provided with the following claims frequency data about the portfolio of a large commercial auto insurer:
- The claims frequency of each vehicle is independently and identically distributed.
- The overall average claims frequency is 0.2 claims per earned car year.
- The variance of the hypothetical means is 0.3.
- The expected value of the process variance is 1200.
- The limited-fluctuation credibility standard is 1083 claims.
You are asked to change the credibility methodology from limited-fluctuation to Bühlmann-Straub for a policyholder with 200 claims in 1800 earned car years in its prior loss experience.
Calculate the percentage change in the estimate of claims frequency for this policyholder due to the change in methodology.
- A) Less than -5%
- B) At least -5%, but less than 0%
- C) At least 0%, but less than 5%
- D) At least 5%, but less than 10%
- E) At least 10%
Answer this question and see the worked solution
Concepts tested
- Bühlmann-Straub Credibility
- Limited Fluctuation Credibility
- Partial Credibility
- Full Credibility Standard