ch4 doubts

keshav1996keshav1996
edited March 2021 in W-04-Exposures
  1. Spring 2015 (Q3) part c.--> I was confused with the language given in the sample answers for this part and could only make out the following from what they said in Sample Answer 2: Uniformity assumption in calculating 2014 earned car years is inappropriate as from 2014 onwards, company shifted to annual policies rather than 6-monthly policies issued prior to 2014. So, old renewals from only second half of 2013 will occur till the end of first half of 2014 and all further policies will be annual (so no more renewal business in 2014!), thereby making uniform earning assumption invalid for 2014. The assumption MAY BE appropriate from 2015 onwards. Please tell whether my conclusion is correct or not?
  2. Spring 2014 3b)--> The question asks for a date range for mid term cancellation. Does the term 'mid term' cancellation mean half way through the policy term or at any date when the policy is in force?

Comments

  • GrahamGraham

    question 1

    • What you're saying sounds right. The key is that all renewals will be in the first half of 2014 and there won't be any in the second half. That means writings will be heavily skewed to the first half of 2014. It will probably take a few years the writings to even out. I doubt writings would be uniform as early as 2015.

    question 2

    • In this problem, "mid-term" means any point during the policy term.
    • Hint to solve this problem: Calculate A, B, C, D for various examples of effective and cancellation dates. Some examples will satisfy A<0<B<C<D and some will not. In this way, you can narrow down the possibilities and eventually understand the pattern in general.
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