Tiller

[Examinator]

I hate this article.

Given that, I have a question on one of the past exam problems from this text. 2001 #13. It asks you to calculate the AELR given some information. The All 10 calculates it as expected basic limits loss and ALAE multiplied by the D-ratio, divided by the subject premium. Easy enough. The CSM calculates it the same way, except it applies the off-balance factor that's given in the problem. First of all, what is this off-balance factor, and should it be used?

Also, my previous Tiller/Feldblum question remains concerning the definition of standard premium. http://www.actuarialoutpost.com/actuarial_discussion_forum/showthread.php?t=49670 Thanks.

[Rice]

In an old post on the CAS board, someone explained:


The correct answer to the Tiller question is D. The off-balance factor should not be used.

Tiller states that either:

1) the off-bal factor is applied to manual premium (in which case it's already in the subject premium listed in the problem)

or

2) the off-bal factor is applied as a last step, to the experience mod.

[Rice]

I should add that they have never asked us to apply an off-balance factor for Tiller, and in the problem in question they accepted both methods (applying and not applying the factor).