Property and Casualty Insurance Test 11

The contents coverage limit is a percentage of the dwelling limit

This function is so important that most jurisdictions now require by law that a qualified actuary attest.

The criterion that is advantageous for an exposure base, especially in times of rapid inflation, is that it should automatically adjust to changes in the cost of settling claims

Based on past information. The actuary will have data from a historic experience period

Thus the actuary normally chooses between policy year and accident year data, each with its own advantages and dis­ advantages.

Unfortunately, much of the latest data used will be incomplete or immature in the sense that the final claim cost will not be known and a claim cost estimate must be used.

Depending on the method used, this predicted value could be estimated using a procedure that implicitly assigns equal weight to each year in the experience period

The trend factor is normally the single most important input parameter in the ratemaking process and one of the few that allows for significant subjective modification

If, however, these data are sparse, the actuary may prefer a greater volume, which may require using older data.

The credibility of data is a function of the uncertainty associated with the underlying frequency and severity distributions