1997 #32 - Clark
This question asks to calculate the loss cost given a bunch of data. I am ok with everything except the premium on-level factor.
The question states "There will be a rate change of +10% on 1/1/97. Prior to this change, the last rate change was +5.0% on 7/1/89."
The historical accident years given run from 1991 through 1995, and the reinsurance treaty will be effective 1/1/97.
What I did, was on-level all premiums by multiplying by 1.1, but the all 10 solution multiplies by 1.05?
This makes no sense to me; if a policy was written in say 1988, I would multiply by 1.1/1.05 which is close to 1.05 but not quite. But in this case, all policies are written subsequent to the 5% increase and so the same policy written in 1997 would be at a rate 10% higher.