1. In accordance with guidance from the profession, all posts are now being moderated as we are in the exam period. You may not see your post appear for a day or two. See the 'Forum help' thread entitled 'Using forums during exam period' for further information. You must not discuss any of the current exams until the last exam has been sat.
    Dismiss Notice

April 2019 Q3

Discussion in 'SA3' started by BenL, Sep 11, 2019.

  1. BenL

    BenL Made first post

    Hi All,
    I’m working through Q3ii) and I would like some clarity on the marking schedule for the issues in exposure rating the Travel policy.

    The first point in the marking schedule states, “Direct business for consumer policyholders generally won’t have any experience so would not carry out any kind of burning cost experience pricing on an individual policy basis for an individual consumer policy”

    The second point states, “...although would have a lot of data to develop an exposure based pricing model”

    I am completely confused by the first statement. If you were selling business direct to the consumer, I agree that practically you would not perform an experience pricing exercise for each individual, you would rather develop an exposure based pricing model, per the second point. But why would you not have any experience? Are they assuming that any policy that claims will terminate after the claim and then not renew?

    Any help in clarifying this would be greatly appreciated!

    Thanks,
     
    BenL, Sep 11, 2019
    #1
  2. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    What they're saying is that you probably won't have any claims experience for any one individual, and so cannot realistically experience rate for that individual. Instead, you would have lots of data for the direct travel insurance as a whole, in which case you can use that experience to put together a set of travel insurance premium rates, and then when each policyholder comes along for a quote, you use those rates applied to the exposure that policyholder brings, ie exposure rating. This is explained further in mini-ASET.
     
    Ian Senator, Sep 11, 2019
    #2

Share This Page