Since this question is quite old, just want to confirm that the answer for 3b using the most recent guidelines would be "not eligible since territory 4 falls outside of the interval of -10% to +10%". Thanks!
Using current FSRA guidelines that are effective now, the rules are: Any existing territorial base rate or differential change must be between –15.0% and +5.0%.
Using what's on the syllabus, requirements for simplified filings are no longer tested.
1) Also does rate change and differential change mean the same thing? How are they interchangeable used?
2) Are relativities mutually exclusive? If I have a set of proposed changes for coverage, territory, age etc., do EACH of these variables have to meet the criteria?
I got a question similar to this on the last exam... so I don't know if it is completely gone now.
For the +15% and +5% difference, I think you are referring to this
The +5% is the overall rate change for your entire book
The +15% is the max one individual customer can see
They do not always mean the same thing. A rate change is a rate change, usually on your entire book of business to have it earn +x% more rate. This rate change can be due to a base rate change or a differential change (as you mentioned up top). A differential change is when a variable in rating (let's say territory) is changed and this leads to a x% of more increase.
I assume you mean the criteria up top? I would like to say no, but from an overall perspective once combined, they would have to and also, lets say you take like a +50% change for territory, while I don't think there is an explicit guideline for this but most likely will be challenged as it goes against bad faith (unless really justified).
1)
I am even more confused after reading this answer.
Can you explain clearly what the new rules are now?
-> In the past (same direction, within range, within +/- 10%). Now it's 5% overall and 15% magnitude per policyholder?
2)
The fact that I got a question like this last sitting suggests it is still testable.
Territory A B C with proposed + indicated.
Coverage 1 2 3 with proposed + indicated (maybe even rate chng %)
They interchangeably used the words rate change/differential and asked if it meets the criteria. May have even given %s as a rate change instead of relativities like 1.1, .9 etc. for one of the tables.
Can you explain what you would to do here. I forgot exact structure of question. I am trying to tie the 2 together.
@CanAct06 I see where you are getting confused, the 3 rules below...
+-10%
magnitude of proposed < magnitude of indicated and
direction of proposed same as direction of indicated
are found on page 19 of the source and this relates to territory changes for major filings.
I'm not sure where the +15% and +5% differences are coming from, maybe those are for simplified guidelines (as that is what is mentioned in the original question from F2013) which are no longer tested.
My apologies, yes the 15% and 5% are from simplified like the question but these are now no longer tested as Staff_TS and sdeibert mentioned! Thanks for clarifying that point @sdeibert !
As to your 2nd question up top @CanAct06, I'm not sure I totally understand. I think yes they are mutually exclusive and don't all have to meet the criteria but overall should meet the criteria after all the changes. As mentioned rate change and differential change should not mean the same thing, but the exam writers might just interchangeably use it (I can't do anything on that as not writing the exam and can't see any recent exams but wouldn't surprise me as CAS exams have done that before). But relativity change/differential change still are a part of rate changes (as mentioned up top rate changes come from differential or base rate changes).
Your question example is not the most clear but from the pieces above..
1. See if any "base rate" changes such as territory or coverage changes and see how large those are
2. See the different variables and their differential changes and see how large those are.
3. Combine the two to see if within criteria
4. Also make sure the proposed rate change is less than the indicated rate change
Also what I mean as base rate up to and what I mean for different variables is the following: You can think of a policy being priced as the following..
base rate x variable 1 x variable 2 x etc..
Comments
Using current FSRA guidelines that are effective now, the rules are: Any existing territorial base rate or differential change must be between –15.0% and +5.0%.
Using what's on the syllabus, requirements for simplified filings are no longer tested.
did you mean + 15% in your response ??
1) Also does rate change and differential change mean the same thing? How are they interchangeable used?
2) Are relativities mutually exclusive? If I have a set of proposed changes for coverage, territory, age etc., do EACH of these variables have to meet the criteria?
I got a question similar to this on the last exam... so I don't know if it is completely gone now.
For the +15% and +5% difference, I think you are referring to this
1)
I am even more confused after reading this answer.
Can you explain clearly what the new rules are now?
-> In the past (same direction, within range, within +/- 10%). Now it's 5% overall and 15% magnitude per policyholder?
2)
The fact that I got a question like this last sitting suggests it is still testable.
Territory A B C with proposed + indicated.
Coverage 1 2 3 with proposed + indicated (maybe even rate chng %)
They interchangeably used the words rate change/differential and asked if it meets the criteria. May have even given %s as a rate change instead of relativities like 1.1, .9 etc. for one of the tables.
Can you explain what you would to do here. I forgot exact structure of question. I am trying to tie the 2 together.
@CanAct06 I see where you are getting confused, the 3 rules below...
are found on page 19 of the source and this relates to territory changes for major filings.
I'm not sure where the +15% and +5% differences are coming from, maybe those are for simplified guidelines (as that is what is mentioned in the original question from F2013) which are no longer tested.
My apologies, yes the 15% and 5% are from simplified like the question but these are now no longer tested as Staff_TS and sdeibert mentioned! Thanks for clarifying that point @sdeibert !
As to your 2nd question up top @CanAct06, I'm not sure I totally understand. I think yes they are mutually exclusive and don't all have to meet the criteria but overall should meet the criteria after all the changes. As mentioned rate change and differential change should not mean the same thing, but the exam writers might just interchangeably use it (I can't do anything on that as not writing the exam and can't see any recent exams but wouldn't surprise me as CAS exams have done that before). But relativity change/differential change still are a part of rate changes (as mentioned up top rate changes come from differential or base rate changes).
Your question example is not the most clear but from the pieces above..
1. See if any "base rate" changes such as territory or coverage changes and see how large those are
2. See the different variables and their differential changes and see how large those are.
3. Combine the two to see if within criteria
4. Also make sure the proposed rate change is less than the indicated rate change
Also what I mean as base rate up to and what I mean for different variables is the following: You can think of a policy being priced as the following..
base rate x variable 1 x variable 2 x etc..