Retrospective rating doubts

keshav1996keshav1996
in W-15-Commercial

Spring 2018 Q15 part b

For the purposes of calculating the standard premium, the Werner text and wiki article says that it should incorporate any experience modification i.e we have to take the audited premium. But, the excel answers show that the standard premium has been taken as given (without multiplying with experience mod factor from part a) for calculating Basic premium. Is that an error?

Also, two general doubt about retro rated plans.

  1. In standard premium calculation, text says that actuary has to exclude any premium discount while calculating std premium. So, say, if the premium discount is 15%, so, so I multiply the standard premium by 0.85 or divide it by 1.15 ?
  2. Why is their a time lag between end of the loss reporting period and the date when the first premium adjustment for retro rated policy is usually done? Does it have to do with finalizing the reported losses (which might take a few months or so) for the purposes of premium audit ?

Thanks

Comments

  • GrahamGraham

    The standard premium in part (b) is given so you don't need an experience modification factor to do part (b).

    Other questions:

    1. The text doesn't describe the standard premium calculation in any detail. It says the standard premium is before any discounts but that it may include premium charges. In any case, it isn't discussed any further and you can assume that any exam problem will provide the standard premium as given.
    2. I don't know for certain how the lag between report and adjustment is determined. I would assume there is bookkeeping as well as actuarial work to be done. Also there may be some late reporting from the insured.
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