Chapter 30

Hi, can you kindly help me understand:

• the first point in page 3 of this chapter: “Experience will be monitored as part of the control cycle to: develop earned asset shares”
• part of the solution in page 9: “Thus looking at an investigation based on the last five years of data, for instance, will imply a reaction time three years slower than if we were to use just two years of data.”
  

 

Also, on page 20 there’s an explanation about notional rent. However, I don’t understand why the company needs to pay for rent when it already owns the building. Isn’t the building an asset to the company and where will the rent collected go? How will the notional rent look like on a balance sheet, like depreciation?

 

Thank you, Mark!

Also on page 14 there's an example where expenses are per premium, per SA and per policy. I would expect for example the solution for total initial expenses to be then 500*P(new)+100*S(new)+200*N(new) instead of what is provided in the notes as per premium multiplied by the premium should give the actual expense, right? I understand the formula I provided is still wrong as that would give me the total initial expenses for the whole portfolio instead of for just that policy. I would understand the solution given if the word "Per" wasn't there, maybe my understanding of the word Per is wrong.

 

Can you kindly explain this sentence on page 21 as well? "As stated earlier in this section, these costs (investment department, stamp duty, commission etc) would be directly allocated to investment expenses and hence allowed for in assessing the investment return to use for pricing etc."

Thank you so much in advance

 

Can you kindly explain:
1. This sentence at the end of the solution to Practice Question 30.2: "These expenses should be inflated to the midpoint of the period for which premium rates are expected to be in force."
2. These sentences in the solution to Practice Question 30.4:
(a) "Cumulative analyses may also be conducted."
(b) "Divide lapses by relevant exposed-to-risk..."
3. These sentence in 30.6(ii):
(a) "Allow for any expected effects of changes in claim control in the future."
(b) "Historical one-off internal and external events would be taken into account." Does taking these into account imply having an extra margin in the assumption?

Thank you very much in advance!