Gillam and Snader III, All10

[frank_exams]

Can anyone with All10 help? These questions are from the Gillam and Snader III section.

1995 #33, I get D = 0.3054 because I took ALAE out of E. In general, ALAE is not eliminated in a LDD WC policy because the insurer services the whole claim, then seeks reimbursement. I'm not sure why All10 didn't do this.

1997, #12, 2. is false according to Gillam and Snder. But in Teng, p. 418, 2. is listed as a reason why employers like LDD plans. (One can reasonably conclude that employers liking them would then contibute to the growth in interest in LDD plans.)

Frank

[glad]

Hey Frank,
I'm just starting this paper, but the reason you don't subtract the 5% from the 60% loss ratio is that the 60% loss ratio already excludes all expenses. So you are right in that for a deductible program, you are supposed to use (E-a), but E-a is given as 60%.

I'll look at the other question tomorrow.

[frank_exams]

aha! Thanks. Need to clear the eyes before the exam.

[USTC]

Can anyone with All10 help? These questions are from the Gillam and Snader III section.

1997, #12, 2. is false according to Gillam and Snder. But in Teng, p. 418, 2. is listed as a reason why employers like LDD plans. (One can reasonably conclude that employers liking them would then contibute to the growth in interest in LDD plans.)

Frank

I am also confused by the second question.

It'll be glad to know the answer.

:tup:

[GefilteFish144]

Can anyone with All10 help? These questions are from the Gillam and Snader III section.

1997, #12, 2. is false according to Gillam and Snder. But in Teng, p. 418, 2. is listed as a reason why employers like LDD plans. (One can reasonably conclude that employers liking them would then contibute to the growth in interest in LDD plans.)

Frank

I am also confused by the second question.

It'll be glad to know the answer.

:tup:

Don't have the question in front of me, but keep in mind that the Teng paper wasn't on the syllabus back then. It was just one of those many questions where the examiner was reading a bunch of things off a list and created a question based on that. Good thing about the current exam format is that we no longer have to deal with those "According to" questions where you have to remember which author said what.

[Maitre_Absolut]

Good thing about the current exam format is that we no longer have to deal with those "According to" questions where you have to remember which author said what.

Is that true?

I actually find it helpful when they refer to an author...

[3tac]

Yep, they've done away with this except for in case of VERY specific questions such as maybe a Lee diagram. This is true for all the upper exams.

PS - You have heard about the 15 min reading time too, right?

[Maitre_Absolut]

Yep, they've done away with this except for in case of VERY specific questions such as maybe a Lee diagram. This is true for all the upper exams.

PS - You have heard about the 15 min reading time too, right?

Yes but i never realized during 5 and 6 that they didnt reference authors anymore

[Purple Princess]

I actually find it helpful when they refer to an author...

Me too especially when the topic is discussed in more than one article. I was doing the 2003 exam yesterday and I came upon a Butsic question but I couldn't for the life of me figure out it was from Butsic so I tried to do it with Robbin and nothing worked.

[GefilteFish144]

I actually find it helpful when they refer to an author...

Me too especially when the topic is discussed in more than one article. I was doing the 2003 exam yesterday and I came upon a Butsic question but I couldn't for the life of me figure out it was from Butsic so I tried to do it with Robbin and nothing worked.

Yes that's a drawback but overall I think using the Learning Objectives/Knowledge Statements gives a clearer picture of what a candidate is expected to know rather than just tell candidates to read every page and every footnote of every reading. LO/KS are much more useful on Exam 8 than Exam 9 but still provides some benefits to go with the drawbacks.

[bg23516]

I've been looking at this question (1995 #33) now, and the All10 solution makes no sense to me...
Calculated the amount of discount for a straight deductible policy.
Given:
k=.475
f=.9
Expected Loss Ratio excluding all expense = .6
Full Coverage Losses = 10M
Expenses as % of full coverage premium are:
ALAE a = 5%
ULAE u = 2%
Inspection i =4%
Acquisition A=15%
Taxes T=3%
Profit p=5%
Home office admin h=6%

I did this as follows:
Full Coverage Premium = 10M / (1-a-u-i-A-T-p-h) = 10/.6 = 16,666,667.
This full coverage premium implies a loss ratio of 60%, as given in the problem.
Under the assumption that the deductible eliminates only losses, and not any of the expenses (unrealistic for such a small deductible, but this is the assumption they make).
Discounted Premium = (1-fk)*Loss + (a+u+i+A+T+p+h)*Full Premium = (1-.9*.475)*10M + .4*16,666,667 = 12,391,667
Then the discount is 25.65%

The All10 solution uses the shortcut formula:
D= fk(E-a)/(1-A-T-p) = (.9*.475*.6)/ (1-.15-.03-.05) = .333

They do this because the G&S paper assumes that A, T, and p vary with premium. The question specifies that A, T, and p vary with FULL COVERAGE PREMIUM. In addition, for a 500$ deductible, why would A and T (and p) change at all between full coverage and deductible coverage?

Any thoughts? [I hate G&S3... I think it is made overly complicated... Teng is much better]

[carrytheCrøss]

The question specifies that A, T, and p vary with FULL COVERAGE PREMIUM.No, it does not. The question simply expresses all expense categories as percentages of full coverage premium. This break-up is helpful because of G&S's assumption that, while calculating a deductible premium, A, T, and p vary with the deductible premium. Thus, what you wrote is not the same as what is printed, so you must be very careful in reading and interpreting the question.


I did this as follows:
Full Coverage Premium = 10M / (1-a-u-i-A-T-p-h) = 10/.6 = 16,666,667.
This full coverage premium implies a loss ratio of 60%, as given in the problem.This is correct.


Under the assumption that the deductible eliminates only losses, and not any of the expenses . . .
Discounted Premium = (1-fk)*Loss + (a+u+i+A+T+p+h)*Full PremiumThis is incorrect, and you probably now see the error after recognizing that A, T, and p must vary with the deductible premium per G&S's assumption for a deductible policy.

Let P' = Deductible Premium. Per G&S, P'=\frac{(1-fk)(E-a)P+eP}{1-A-T-p}. e denotes all expenses other than A, T, and p. You have recognized that E-a = .6, and we see that A-T-p = .23; thus, e = .17.

Thus, P'=\frac{(1-fk)(E-a)P+eP}{1-A-T-p}=\frac{(1-.9*.475)*.6P+.17P}{1-.23}=.667P. So, D=1-\frac{P'}{P}=1-.667=.333, which agrees with the solution.

Hopefully this helps. Please be careful in reading these G&S questions. I know this was a helpful reminder for myself.

[bg23516]

I see what you are saying, except my point is that the assumptions are not stated the same way as in G&S.

G&S: The usual assumptions made with respect to deductible coverage for liability insurance are:
a) The provisions for acquisition, taxes and profit vary with premium.
b) The provision for all other expenses are fixed portions of full coverage premium.

Question:
Expenses, expressed as percentages of full coverage premium, are:
allocated, unallocated, inspection, acquisition, taxes, profit, home office.

These two are not the same. I know it's an issue of semantics, but if you had seen this question without reading G&S 3, and did it from first principles, you might have done it differently.

I appreciate the input... I get irritated when examiners are unclear.

[Utopial]

yeh based on the wording of the question i did the same as bg23516.
i understand that G&S's assumption is that A,T,p must vary with premium for a deduc policy, but that doesn't mean that we should have to pick up and correct errors in how they word the question then proceed to answer it.