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GNPI vs GGPI 2019 April Q2 (i)

Discussion in 'SA3' started by johnpaul1234, Feb 20, 2021.

  1. johnpaul1234

    johnpaul1234 Member

    The question asked about the differences between using GNPI and GGPI for rate monitoring

    The solution has a bullet point says
    "Excluding acquisition costs (using GNPI) gives a truer reflection of each insurer's profitability, as it reflects more closely the net financial position of the insurer."

    Let say the premium income without acquisition cost is £100, acquisition cost is £20, and loss is £50
    Is the GNPI = 100
    and GGPI = 100 + 20 = 120 ?
    So, LR using GNPI = 50/100 = 50%, LR using GGPI = 50/120 = 41.67% ?

    I agreed with the solution that using GNPI gives truer reflection of profitability, but isnt that INCL as apposed to EXCL acquisition cost? Can anyone explain? Thanks in advance.
     
    Last edited by a moderator: Feb 20, 2021
    johnpaul1234, Feb 20, 2021
    #1
  2. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    I agree your figures, but I'm not sure what you're challenging here, as GNPI does indeed exclude acquisition costs (by definition)?
     
    Ian Senator, Mar 2, 2021
    #2
    Ppan13 likes this.

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