B.14.Gillam & Snader 3

Card Set Information

Author:
Exam8
ID:
166072
Filename:
B.14.Gillam & Snader 3
Updated:
2012-08-14 21:09:16
Tags:
high deductible policy excess
Folders:

Description:
Fundamentals of Individual Risk Rating, Part III
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user Exam8 on FreezingBlue Flashcards. What would you like to do?


  1. Why demand for high ded policies incr?
    • trend toward self-ins to provide savings to insd
    • insd tx saving since liability for ins ded on unpd clm is tax ded
    • positive cash flow to insr
    • reduction of assessments for residual mkt pools
  2. Deductible vs excess policies
    • ded usually for smaller retentions for risk w high frequency. Insr settles loss and is reimb for ded
    • excess usually for high retention, self ins. Insr only settles clms over retention
  3. Calculation of ELR (ded / xs policy)
    • straight ded: k = [Lr + (N-n)r] / L
    • k = LER, N = # clm, n = # clm < retention, Lr = loss < ret
    • disappearing ded: k = {Lr + LR - (LR - rNR) / [R / (R - r)]} / L
    • LR = loss btwn r and R, NR = # clms btwn r and R
    • fk = tempered LER (insr still responsible if insd can't pay)
  4. Determination of discount (D = 1 - P' / P) (ded policy)
    • assume A, T, P proportional to P
    • assume other exp are fixed portions of full cov prem
    • P = [(E - a)P + eP] / (1 - A - T - p)
    • P' = [(1 - fk)(E - a)P + eP] / (1 - A - T - p)
    • D = fk(E - a) / (1 - A - T - p)
  5. Determination of discouts (xs policy)
    • case 1: A, T, p, i, u, gh prop to P, other are fixed
    • P = (EP + eP) / (1 - A - T - p - i - u - gh)
    • P' = [(1 - fk)EP + eP] / (1 - A - T - p - i - u - gh)
    • D = fkE / (1 - A - T - p - i - u - gh)
    • case 2: A, T, p prop to P, i, u, gh prop to XS loss, other fixed
    • D = fkE(1 + iE + uE + ghE) / (1 - A - T - P)
  6. Determination of discount (ex-med covg)
    • LER only applies to med PP
    • ex-med PP = total PP - portion of med PP
    • why portion: adverse selctn, may req pmt of some med, liable
    • only A and T are prop to P, other expenses not reduced
    • P = (E + eP) / (1 - A - T)
    • P' = (E - kEM + eP) / (1 - A - T)
    • D = [(1 - A - T - e) / (1 - A - T)] * (kEM / E)
  7. Adjustment under retro rating
    • c' = adjusted loss conversion factor so that loss dollars provided by c = loss dollars from c of ex-med pol
    • let J = c - 1, J' = c' - 1 = J * E / (E - kEM)
    • J' = J(1 - A - T - e) / [(1 - D)(1 - A - T) - e]

What would you like to do?

Home > Flashcards > Print Preview