policies, you would have the same losses. How are you going to find=
=
300 policyholders with a guarantee that they will be loss free -- I =
want stock in your company!!
=
mf
______________________________ Reply Separator __________________________=
_______
Subject: Wade problem
Author: steve.manilov@milliman.com at _internet
Date: 5/18/98 12:33 PM
There was a Wade problem on the exam (can't lookup the number at the mome=
nt) =
where you were to evaluate a new strategy using the Contribution Method. =
The =
company was selling 1,000 policies and had such and such losses and expen=
ses. =
The new strategy proposed cutting rates by 5% and sell 300 more policies.=
=
Expenses don't change. The question was if the new strategy is better. =
The way the problem was worded on the exam mentioned nothing about the lo=
sses. =
If we assume losses stay the same then after a simple calculation we se=
e the =
new strategy is better. If, on the other hand, losses increase proportio=
nately =
(which makes sense since the company would have more exposures of the sam=
e =
quality) then the new strategy is not better. How did you solve this pro=
blem? =
Do you think the problem was ambiguous since they mentioned nothing about=
the =
losses?
=
Steve
=
=
=
Visit the CAS Web Site at http://www.casact.org =
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To subscribe or unsubscribe from CASNET: =
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