• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Assignment X3

S

studentmb

Member
Hi

I have a couple of questions about assignment X3

1) on Q3.6 there is a reasonableness check which includes dividing by 0.7 - where does this number come from?
the check is 293 = ( claim freq * claim sev )/0.7

2) in Q3.7b we use a normal approximation to a discrete distribution but no continuity correction is used. This contradicts pg19 of chapter 11 where we do use one...can you explain why you do in one case and not the other please?

Thanks
:)
 
1) The 0.7 is an approximate loss ratio. If we ignore the reinstatement premium, then the loss ratio would be 1-0.25-0.15 (ie 1-acquisition costs - allowance for fixed expenses and profit) = 0.6. It needs to be slightly higher than this though, because we'll also have any reinstatement premium. So 0.7 is a reasonable enough approximation.

2) Q3.7 ignores the continuity correction. Strictly speaking, you should include it.
 
You must log in or register to reply here.
Back
Top