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Old 04-29-2019, 11:57 AM
mheasley mheasley is offline
Join Date: Jan 2013
Location: MT
College: Brigham Young University
Posts: 99
Default Fall 2017 Exam #12d

I'm trying to understand something here. Either the solution is wrong or I am wrong. Chances are I'm wrong but I can't seem to wrap my head around why.

I'm not going to write the whole solution here so you will need to look up the model solution if you want to follow along. Any insight you have would be helpful

2012 EP @ current rate level = 240,000
Since it is already at the current rate level I would think that all that is left to trend is from 7/1/2016 to 9/1/2018.

Shouldn't the solution be...
Total 2012 trended on level EP = 240000*0.9836 = 236064?

Last edited by mheasley; 04-29-2019 at 02:21 PM..
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Old 05-05-2019, 06:50 AM
fird126 fird126 is offline
Join Date: May 2013
College: University of Michigan Alumni
Posts: 6


Current rate level ensures that the premium is on-level i.e it reflects only the rate changes. The trend on the other hand takes into account the changes in business mix, policy limit, deductibles, discount, etc. and not the rate change. Therefore, we need to apply the trend factors to the current rate level to obtain the trended AND on-level earned premium.

Hope this helps.
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