Regards and Good Luck!!
Taso Serafim
Paul_Budde@blanch.com on 04/24/98 10:13:43 AM
To: studygroup6@lists.casact.org
cc: (bcc: Anastasios Serafim)
Subject: Miller-Davis Refined Premium Adjustment
I am trying to understand in-force premium calculations when policy
terms are less than one year.
Suppose I have a book of business writing 1000 six-month auto policies
evenly throughout the year. Since the standard exposure unit is
car-years, my written exposures in the year will be 500, as will my
earned exposures. This tells me that in the notation of Miller-Davis
f(x) = 500
g(x,y) = f(x-0.5*y) = 500
When it comes time to calculate in-force exposures at time x0, M-D says
it should be for k=0.5,
k * INTEGRAL(g(xo,y) dy) from 0 to 1.
This produces an in-force exposure of 250, even though I know I have 500
cars on the road which I am insuring every day of the year.
What gives? Anybody have any insights?
Paul