You use the following information to calculate projected loss costs:

1. Based on historical experience, the slope of the straight line fitted to the natural log of the loss cost is 0.182.
2. The loss cost per unit exposure for the two most recent experience periods is:

   Accident Year	Loss Cost per Unit Exposure
   AY3	400
   AY4	450

3. The current experience period is weighted 90% and the prior experience period is weighted 10%.

New rates for one-year policies take effect May 1, CY5 and are in effect for one year. Calculate the projected loss cost for these new rates.

• 527
• 577
• 615
• 632
• 666

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Key: D

The midpoint of AY3 is July 1, AY3, the midpoint of AY4 is July 1, AY4, and May 1, AY6 is the midpoint of the effective period.

AY3 lost cost projected to May 1, AY6 is 400exp(0.182*2.8333) = 669.90

AY4 lost cost projected to May 1, AY6 is 450exp(0.182*1.8333) = 628.23

Projected loss cost = (0.9)(628.23) + (0.1)(669.90) = 632.40

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.