C5 - manual rates - order of operation >+-^*?

[Phil]

Hi, folks,

OK, look. You start with a manual claim table. For example, as described in Group Insurance, ch. 19.

You have to do the following to it in order to get the gross rates.

1. Add expenses, risk margins, profits

2. Subtract something to represent investment income expected to be earned

3. Adjust the manual rates based on demographics, size, product features, etc. specific to the insured group

4. Credibility-weight your cpy's experience with industry data.

IN WHAT ORDER ARE THE ABOVE TASKS TO BE DONE?

Many thanks for your help :smile:

[Anonymous]

Roughly, like this:

Start with product features (benefit period, waiting period, level of coverage for dental or EHC, stuff like that). Take your manual table and adjust for all this, to get what is often called "net manual".

Take the experience for the group, weight by credibility, gives you "net renewal premium" (different from net manual).

Figure out the capital required (reserves, amounts necessary for excess receivables periods, amounts on deposit if any, and calculate your spread income (earned less credited). This can be subtracted from required profit.

Add on the expense load and the profit load.

Hope this helps. I wouldn't know either, except I do this kind of stuff at work.

[Phil]

Thank you so much!

You should consider writing a supplement to the Group Insurance book, for actuarial students. We would pay good money for it.