8GM 2002 Q7b

[Soccerboy]

This is with regard to members from one of two options from Group 6 switching options

The model solution shows a benefit factor adjustment, why is there not an age/sex adjustment as well

[James Madison]

We aren’t given the demographic factors for the older experience.

[Soccerboy]

Originally Posted by James Madison

We aren’t given the demographic factors for the older experience.

Forgive me for being a little lost (and slow)..but my impression was that folks were going fromone option to another, we have had to adjust for the benefit deductible factor, going from one option to the other..we also have age/zex factors that are different from one option to another, why are we not adjusting for this, all we are doing is switching people, doesnt that affect their age sex factor?

Im not understanding where demographic factor of older comes into play

[James Madison]

Soccerboy,

Ignore my earlier comment, it makes no sense (I was thinking about problem #3 from the 2001 8G/M exam).

So would the following be the demographic adjustment to Option 1?
1.00727=1.05/((1920*1.05+60*0.8)/1980)
Leading to an Option 1 trend of 29.016% versus 28.085%?

And the demographic adjustment to Option 2 would be:
.87179=0.8/((480*1.05+540*0.8)/1020), leading to an Option 2 trend of 18.176% versus 35.56%?

[Soccerboy]

That is what I was expecting but it doesnt have this part in the workup..do you agree that there should have been a demographic adjustment?

[James Madison]

Soccerboy,

I think it’s a valid adjustment.

[Soccerboy]

OK thanks

Another problem Im havng with the SOA solution is that to 2001 Q3c
Yuo are told to rate Group 2 and 3 but it appears that they are trending the Pooling charge backwards, I feel this is wrong, it should be trended from 1/1 to the effective date, not backwards to the experience period..do you or anyone else agree?

[James Madison]

Soccerboy,

In 8G/M 2001 #3c they are not handling the pooling charge correctly, but they do trend the manual claims correctly (both should be handled the same). My answer to 3c is shown below.

The Group 2 composite premium is 265.47
=((186000/100/12*1.009^12*1.012^7+35*1.012^1)*0.25+0.75*(263*1.0 5*1*0.75*1.012^1)+18)/(1-0.13)

The Group 3 composite premium is 254.88 =((567000/300/12*1.009^12*1.012^8+35*1.012^2)*0.5+0.5*(263*1.1*0 .9*0.75*1.012^2)+15)/(1-0.1)

[Soccerboy]

Thats how i set it up too, Im not worried about the final answer since there is rounding issues but I agree with your workup