Assignment Project
The chief actuary has assigned you the project of developing rates for liability coverage for theirnew classic and antique car liability coverage program. The chief actuary provides you with this information obtained from the company they just purchased that had been providing this type of classic car coverage in the past. Your job is to calculate:
1.The rate per exposure unit using the pure premium method
2. The rate change for the overall book of business using the loss ratio ratemakingmethod
3.The actuary also want you to consider a judgment rating method for insuring the physical damage for the antique and classic autos. What variables or other considerations would go into this judgment rate
Information provided by the chief actuary
Incurred losses $1,200,000
Earned car units (number of cars insured - while standard auto policies consider driving record, age, and the like - this insurer sees liability being the same on the average for all vehicles because they are so valuable and not driven to extremes) 10,000
Earned premiums $1,400,000
Pure premium $1,600,000
Expected loss ratio .76
Profit and contingencies factor .08
Expenses per exposure unit $42