Actuarial Outpost > SoA DP-GH 2008 Exam #1a
 Register Blogs Wiki FAQ Calendar Search Today's Posts Mark Forums Read
 FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

Risk Management Jobs

#1
08-19-2010, 05:29 PM
 Chris100 Member Join Date: Aug 2007 Posts: 98
DP-GH 2008 Exam #1a

I am reading the solution to this problem and can't understand the SOA's arithmetic.

Premium for each carrier = claims/(1 - admin - profit - tax)*(demo factor).

Carrier 1 has:
claims = \$200
demo factor = 1.1

It this not 200/(1-.13-.04-.015)*1.1 = \$269.94?

The solution says \$223.09, and seems to come up with different premiums for Carriers 2 and 3. Does anyone know whether this solution is known to be incorrect, or whether I'm doing something wrong here?
#2
08-19-2010, 08:23 PM
 MATE Seminars Member SOA AAA Join Date: Jan 2008 Location: Idaho Falls Studying for ever Posts: 321

The values they ended up with were correct, but it appears the formatting from the candidate's answer didn't get transcribed correctly. Also, the demographic factors for carriers 2 and 3 were copied over incorrectly.

The following is what the answer should look like:
The numerator of the formula should be claims divided by demographic factor.
The denominator should be the loss ratio (1 - admin & commission - profit - tax).
Carrier 1: (200 / 1.10) / (1 - 0.13 - 0.04 - 0.015) = 223.09
Carrier 2: (180 / 0.98) / (1 - 0.13 - 0.03 - 0.015) = 222.63
Carrier 3: (220 / 1.25) / (1 - 0.12 - 0.02 - 0.015) = 208.28

Note that an alternative would be to move the demographic factor to the denominator, in which case it is multiplied by the rest of the denominator.
__________________
Mark Bird
website: www.mateseminars.com
e-mail: mateseminars@hotmail.com
#3
08-20-2010, 07:50 AM
 Chris100 Member Join Date: Aug 2007 Posts: 98

Thanks, Mark.

 Thread Tools Display Modes Linear Mode

 Posting Rules You may not post new threads You may not post replies You may not post attachments You may not edit your posts BB code is On Smilies are On [IMG] code is On HTML code is Off

All times are GMT -4. The time now is 12:59 AM.

 -- Default Style - Fluid Width ---- Default Style - Fixed Width ---- Old Default Style ---- Easy on the eyes ---- Smooth Darkness ---- Chestnut ---- Apple-ish Style ---- If Apples were blue ---- If Apples were green ---- If Apples were purple ---- Halloween 2007 ---- B&W ---- Halloween ---- AO Christmas Theme ---- Turkey Day Theme ---- AO 2007 beta ---- 4th Of July Contact Us - Actuarial Outpost - Archive - Privacy Statement - Top