Actuarial Outpost SOA 282 #237 and #238 Policy fee problem
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#1
11-05-2011, 11:28 PM
 Raejay Member CAS SOA Join Date: May 2011 Location: Shenzhen Studying for FAP College: Jinan University Posts: 142
SOA 282 #237 and #238 Policy fee problem

Well,before I see these two questions,I think expense-loaded premium or policy fee problems are easy.

But the two problem confused me.The questions split the premium into first year and renewal year.

In ASM 10th ed,lesson 47,Abe gives out a formula for calculating policy fee.
In table 47.1:
If a policy fee is used to fund per-policy expenses,then equate an annuity of policy fees with
1.An annuit of per-policy expenses.
2.An annuity of policy few times percent of premium expense.

I think that policy fees are used to fund per-policy expenses and part or per premium expenses,but the solution only considers the policy fees to fund per-policy expenses.When referring to policy problems,which method to use?

Here is what the two questions asks:
#237
Calculat the expense-loaded first year net premium including policy fee assuming that per-policy expenses are matched separately by first year and renewal policy fees.
#238
Calculat the expense-loaded renewal year net premium including policy fee assuming that per-policy expenses are matched separately by first year and renewal policy fees.

Could anyone give me an interpretation about the two questions.
Thank you.
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Last edited by Raejay; 11-05-2011 at 11:50 PM..
#2
11-06-2011, 12:40 AM
 Raejay Member CAS SOA Join Date: May 2011 Location: Shenzhen Studying for FAP College: Jinan University Posts: 142

Em,well,seem I am stupid.
After lunch,I think out the point,make a stupid thinking mistake.
__________________
ASA: Prelims | VEEs | FAP - FA
CFA: Level I | Level II
FRM: Level I

Exams are in an endless way, I want my childhood back...
#3
11-06-2011, 03:10 AM
 d45 Member SOA Join Date: Sep 2010 Location: Europe Studying for Life Favorite beer: Espresso Posts: 154

Calculate the expense loaded premium excluding per policy expenses.For the first year what % of premium minus per premium % expenses you will earn?

100 % - 25 % = 75 %

What is the per policy expense for the first year ? It is 15.

Divide 15 / .75 = 20

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