You use the following information to calculate projected loss costs:
- Based on historical experience, the slope of the straight line fitted to the natural log of the loss cost is 0.182.
- The loss cost per unit exposure for the two most recent experience periods is:
Accident Year Loss Cost per Unit Exposure AY3 400 AY4 450 - The current experience period is weighted 90% and the prior experience period is weighted 10%.
New rates for one-year policies take effect May 1, CY5 and are in effect for one year. Calculate the projected loss cost for these new rates.
- 527
- 577
- 615
- 632
- 666
You are given the following earned premiums for three calendar years:
Calendar Year | Earned Premium |
CY5 | 7,706 |
CY6 | 9,200 |
CY7 | 10,250 |
All policies have a one-year term and policy issues are uniformly distributed through each year.
The following rate changes have occurred:
Date | Rate Change |
July 1, CY3 | + 7% |
Nov. 15, CY5 | – 4% |
October 1, CY6 | + 5% |
Rates are currently at the level set on October 1, CY6.
Calculate the earned premium at the current rate level for CY6.
- 9300
- 9400
- 9500
- 9600
- 9700
You use the following information to determine a rate change using the loss ratio method.
Accident Year Earned Premium at Current Rates Incurred Losses Weight Given to Accident Year AY8 4252 2260 40% AY9 5765 2610 60% - Trend Factor: 7% per annum effective
- Loss Development Factor (to Ultimate):
AY8: 1.08
AY9: 1.18 - Permissible Loss Ratio: 0.657
- All policies are one-year policies, issued uniformly through the year, and rates will be in effect for one year.
- Proposed Effective Date: July 1, CY10
Calculate the required portfolio-wide rate change.
- –26%
- –16%
- –8%
- –1%
- 7%
You are given:
- Policies are written uniformly throughout the year.
- Policies have a term of 6 months.
- The following rate changes have occurred:
Date | Amount |
October 1, CY1 | +7% |
July 1, CY2 | +10% |
September 1, CY3 | –6% |
Rates are currently at the September 1, CY3 level.
Calculate the on-level factor needed to adjust CY2 earned premiums to the current rate level.
- 0.97
- 0.98
- 0.99
- 1.00
- 1.01
Company XYZ sells homeowners insurance policies. You are given:
-
The loss costs by accident year are:
Accident Year Loss Cost AY1 1300 AY2 1150 AY3 1550 AY4 1800 - The slope of the straight line fitted to the natural log of the loss costs is 0.1275.
- 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.
- 2124
- 2217
- 2264
- 2381
- 2413
An insurance company uses the following information to set new rates:
- The projected loss cost grows at an annual effective rate of 7% per year.
- 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 - 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.
- 0.089
- 0.119
- 0.567
- 0.881
- 0.911
An insurance company sells one-year policies that have uniformly distributed effective dates. The following rate changes have occurred:
Date | Rate Change |
June 1, CY1 | +10% |
August 1, CY2 | r |
Rates are currently at the level set on August 1, CY2. The earned premium at current rates for CY2 is 1.03 times the CY2 earned premium.
Calculate r.
- 1.7%
- 2.4%
- 3.3%
- 5.3%
- 7.5%