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Phil
09-04-2002, 09:37 PM
SN 8GM 209 (Economic Incentives in Health Insurance)
Page 13 where they describe Durational Claims Model.

Bottom of page, "2nd year price = $135.88 / 0.75 = $181.17"


Why is it not "135.88 / 0.70", since 0.70 is the loss ratio?
Why is it not "price = claim cost / loss ratio"?
Where did 0.75 come from? :-? :-? :-? :cry:

Thanks so much. You guys are the best.
-Phil

Phil
09-05-2002, 01:13 PM
The one time I wanted Abducens to respond, and she's nowhere to be seen. How irresponsible.

Abducens
09-05-2002, 01:22 PM
Sorry, slow on the draw. Who is your proctor for your 8G/8M? Don't worry. If you get a question like this during the real exam, I'm sure they'd be happy to help you figure it out. Failing that, just hand copy the textbook and bring that in with you. You took the time to write it, they can't keep you from using it.

By the way, have you seen the new Actex Course 3 manuals? I thought the red cover was a little audacious, but it was well written. I might buy one just to keep next to the toilet.

hopper
09-05-2002, 01:37 PM
Phil,
I was kinda confused by the example, too. But my coworker pointed about that the calculated rate is the break-even rate.Therefore, profit was not included. With expneses at 25%, th loss ratio is actually 75% (1-expenses).

Phil
09-05-2002, 03:02 PM
Ooh, thanks, hopper. It's good to know you're doing well, Ab. Talk to you soon.

-Phil