Assumptions of Insurance Knowledge on Exam

[Bobby]

Looking at old exam problems, it seems like the questions assume a knowledge of the following things:

WC insurance is made up of two types of coverages: indemnity and medical.

Coverage A for homeowners insurance covers just the value of the home itself.

I don't remember this knowledge being covered on the syllabus readings. Are they in the syllabus readings, or were they just on past exam syllabus readings, or is this knowledge that the exam writers are going to assume we know?

[Vorian Atreides]

Old syllabus readings assumed much about the readers' understanding that specific lines were being addressed without being explicit about those lines. However, the current syllabus material (both W&M and Friedland) do a much better of job of being more explicit about what bits of the syllabus generally apply to which lines of insurance.

Note that knowing that WC provides for both medical costs (obviously "medical") and lost wages ("indemnity") from an occurrence while on the job; and that analysis could be done by "cause of loss" would result in the separation of these two sources of loss for a WC policy.

HO Cov A == building (real property) coverage of the primary residence was covered with the previously referenced "CPCU material" of the syllabus; but this is now covered in the material for Course 1--and this is assumed knowledge for Exam 5.

[tate]

Looking at old exam problems, it seems like the questions assume a knowledge of the following things:

WC insurance is made up of two types of coverages: indemnity and medical.

Coverage A for homeowners insurance covers just the value of the home itself.

I don't remember this knowledge being covered on the syllabus readings. Are they in the syllabus readings, or were they just on past exam syllabus readings, or is this knowledge that the exam writers are going to assume we know?

Can you give specific examples for WC insurance? Coverage A for HO has been moved to the modules and a question on this is highly unlikely .

Are you using a manual? Most decent manuals should tell you what past exam questions are relevant.

[Bobby]

Can you give specific examples for WC insurance? Coverage A for HO has been moved to the modules and a question on this is highly unlikely .

Are you using a manual? Most decent manuals should tell you what past exam questions are relevant.

The WC question is in the TIA study manual, page 35 of the ratemaking portion. Question #27 from the 1996 exam:

Discuss how well unlimited payroll, as an exposure bases for Workers' Compensation, satisfies the three criteria that a good exposure based should meet.

[tate]

The WC question is in the TIA study manual, page 35 of the ratemaking portion. Question #27 from the 1996 exam:

1996#27 is a question on exposure bases.You don't really have to know about WC (indemnity and medical). Just evaluate whether payroll is:
1. Proportional to Expected Loss
2. Practical
3. Has historical Precedence

From W&M pg 49

"Payroll is the commonly used exposure base for workers compensation insurance. As the number of workers increases
(decreases) or the average number of hours worked increases (decreases), both payroll and the risk of loss
increase (decrease) too. Thus, the exposure base (i.e., payroll) moves in proportion to expected losses,
and the premium will change with this exposure base change as well."

and the other two follow easily.

[Bobby]

1996#27 is a question on exposure bases.You don't really have to know about WC (indemnity and medical). Just evaluate whether payroll is:
1. Proportional to Expected Loss
2. Practical
3. Has historical Precedence

From W&M pg 49

"Payroll is the commonly used exposure base for workers compensation insurance. As the number of workers increases
(decreases) or the average number of hours worked increases (decreases), both payroll and the risk of loss
increase (decrease) too. Thus, the exposure base (i.e., payroll) moves in proportion to expected losses,
and the premium will change with this exposure base change as well."

and the other two follow easily.

Sorry, you're right. I referenced the incorrect problem. Problem 2007 - #33:

Provide one brief argument for and one brief argument against using each of the following exposure bases for worker's compensation coverage:

a. Hours-worked.
b. Limited Payroll.
c. Unlimited Payroll.

Answer key says:

a. Argument for: hours worked is more related to medical expenses.
Argument against: difficult to verify.

b. Argument for: limited payroll is related to indemnity benefit since indemnity benefit is capped at state benefit maximum.
Argument against: limited payroll is not related to medical expenses.

c. Argument for: east to verify.
Argument against: unlimited payroll does not reflect fact that indemnity benefits are capped at state maximium.


Without knowing the split between indemnity and medical covers, I'd probably say:

a. argument for: proportional to expected loss.
argument against: difficult to verify

b. argument for: historical precedence.
argument against: hours worked is more proportional to expected loss.

c. argument for: practical, easily verifiable
argument against: must make inflation assumptions to bring to current levels which is prone to error?