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April 2018 Q2 (iv)

A

Adithyan

Member
This answer I am putting down here is from Examiner's report:

Under Mix assumptions

How do you know that the driving history will even out over whole portfolio? Why should it even out?

How if cars have very specific market, then they can determine avg loadings by model?

Could you please also explain
"may be some residual risk selection however if the costs of high risk insurance relative to costs of car make it a material factor in decision making."

Thanks in advance for the help.
 
Driving history: You don't know, which is why they say 'may', not 'will'.

Specific market: I think they're saying that if it's quite specialist/unique, then hopefully they'll have information that may help with pricing.

Residual risk: I read this as 'the cost of the insurance compared to the cost of the car may influence the business mix'.
 
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