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An ILF for a limit L relative to a base limit b is calculated as E[X; L] / E[X; b]. A 500k limit over a 500k deductible corresponds to the layer of loss between 500k and 1m. So we need the expected loss limited to 1m less the expected loss limite…
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A retrospective plan pays out on all claims. The premium charged varies according to their loss experience. So a retrospective plan doesn't eliminate any claims. Whereas an LDD plan does eliminate a portion of the claims by transferring them back…
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Let's break this apart. Mod = Z * (AER - EER) / EER.
AER = (Expected future loss + Loss History) / CSLC.
The CSLC shouldn't change based on the extra development. The Z value and EER are determined from the tables using the CSLC so a…
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Great question! Adding a second degree polynomial to AOI is definitely correct and even a third degree one would likely be acceptable.
A hinge function at age 15 corresponds to a change in slope at 2.71 = ln (15) which is roughly where the …
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The Gini Index doesn't say if a rating plan will be adequate or profitable. Instead, it quantifies how well the rating plan segments between the best and the worst risks. The higher the Gini index, the better the segmentation.
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We're hoping to have the Holmes and Casotto wiki articles ready within the next two weeks. A number of the various Exam 8 study guide providers have been engaged in seeking some clarifications from the authors and the CAS which is why it isn't av…
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Hi, welcome to BattleActs! Our system is a bit different to those used by other study providers but we think you'll enjoy it once you know how the various features are supposed to work.
We recommend beginning by reading the wiki articles as…
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Great questions!
When we're producing quantile plots we're only using the output of a single model. If we want to compare quantile plots for two different models then we need to ensure they're on the same basis/scale. A contrived example wo…
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Let's focus on the fundamentals here and bring together an answer which comes from several of the CAS samples.
Standard loss ratio = loss / standard premium
Standard premium = manual premium * experience mod
Manual loss ratio = …
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Great question - we should improve the wiki exposition as in the PDFs for the standard and present average company rates approaches there is a small but critical footnote.
ISO Rule 5B.1 says The term "company subject loss cost" is used to d…
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No, this answer would not receive credit because it appears to have the relationship round the wrong way.
A class plan that does a good job at identifying VHM and also adjusting and minimizing EPV is one which is highly refined so there is…
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b) This is a new question for us and it probably should be worded differently. The current wording means it would be acceptable to stop at ln(u).
c) The intent here was for candidates to present their understanding of perspective plots. Th…
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Med only losses are reduced by 70% and, critically, the primary/excess split point is also reduced by 70%. So it's up to you if you use the standard primary/excess split, allocate the loss and then reduce the primary and excess components by 70%,…
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To be honest we're not sure. The limited information released by the CAS makes us think you're not guaranteed to have such an appendix. However, if they want you to work with something more complicated than the exponential distribution then they …
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If we use E[L] then we're working with the expected ratable losses. However, we're told the value of the final retrospective premium which means we need to use the actual ratable losses the policy experienced.
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This isn't an error. The graph is not to scale, so the diagonal line is not the line y = x.
You need to compute the x-coordinate associated with y = 75k.
Remember, when working with Lee diagrams we really should rescale the axis so …
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Yes, ideally we would use a Limited Table M. However, it is reasonable to assume the Table M calculated in part a may be applied.
We can't derive a Limited Table M from the claim data given in the question because we only know the total los…
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For GLM_ModelRefinement6, you are correct. The denominator has n - the number of parameters in the bigger model so we need to subtract an additional 3. I've updated the solution file online.
For GLM_ModelRefinement5, this is nuanced. It's i…
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Would you mind checking you have the latest version of the practice exam please. It's currently v2.
The ILFs were backwards in the original version.
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Yes, the consistency test question are still applicable. While the Bahnemann text does not have anything explicitly labeled as the "consistency test", it does describe how to test on pages 170-171. Further, exercise 6.10 asks you to compute the l…
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A franchise deductible and a straight deductible will eliminate the same small value claims if the deductibles are the same size. However, here the franchise deductible is $1,500 while the straight deductible is $500.
Assuming that say cla…
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As the ratio of phi to sigma increases we move toward the GLM estimate. We can think of phi (the within variance) as approximately n and sigma (the between variance) as approximately k in the formula Z = n / (n+k). As sigma (the variance between…
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Thanks for clarifying. It's really a matter of perspective. One person's limit is another person's deductible depending on which layer of loss you're pricing and whose perspective you're assuming. The bottom of p. 37 in the Fisher text contains a…
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You're right. It's a typo on our part. It should say audited payroll, not audited premium.
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This is really difficult to say as the CAS hasn't released good guidance and prior exam takers can't comment on their experience under the current non-disclosure agreement.
What we know: Currently, when you view the Pearson VUE sample exam …
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Great question. The question here is vague because it doesn't tell you how to demonstrate equity. However, it is worth a lot of points. Calculating the efficiency test statistic for each plan and making a recommendation would likely receive all o…
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No. The basic premium is meant to cover fixed charges which do not vary with losses. Since the claim adjustment expenses incurred will depend on the volume and nature of the actual claims, we can't reasonably produce a prospective fixed charge fo…
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Your logic is correct but your terminology is a little off. The problem states $100k is the basic limit. However, we're given ILFs that have been rebased at a 250K policy limit. This could be because 250k is a more common policy limit for policyh…
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If you compute the sort ratio as Model B / Model A then your deciles will be in reverse compared to when you compute using Model A / Model B. This is fine. You should verify that your 1st decile matches the 10th decile of the solution, your 2nd m…