Revision as of 18:26, 25 July 2024 by Admin (Created page with "An insurer is considering a rate change for semi-annual policies that will be written from 08/01/CY5 to 07/31/CY6. The experience period used to determine the rate change is policy year 1. If loss cost inflation is 4% per year, what is the trend factor ? <ul style="list-style-type:upper-alpha" class="d-none"> <li>1.17 </li> <li>1.1853</li> <li>1.1867</li> <li>1.201</li> <li>1.2167</li> </ul>")
ABy Admin
Jul 25'24
Exercise
An insurer is considering a rate change for semi-annual policies that will be written from 08/01/CY5 to 07/31/CY6. The experience period used to determine the rate change is policy year 1. If loss cost inflation is 4% per year, what is the trend factor ?
- 1.17
- 1.1853
- 1.1867
- 1.201
- 1.2167
ABy Admin
Jul 25'24
Since the policies are semi-annual policies, some policies written in calendar year 1 may give coverage until 06/30/CY2. In particular, the midpoint of the experience period is 10/01/CY1. Similarly, the forecasting period is 08/01/CY5 to 01/31/CY7 and the midpoint is 05/01/CY6. Hence the trend factor equals 1.04 14/3 = 1.201.