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exposure measure for extended warranty

G

Gareth

Member
Q&A1.19 says it is number of appliances, i was thinking price years per appliance might be a better measure (i.e. price of appliance x number of years of cover x number of appliances).

What do you think?
 
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Certainly makes sense to put appliance-years. As to price, I guess it depends on whether you think price of appliance affects the risk. Is a big plasma screen more likely to be faulty than a toaster? Certainly more expensive to put right, so maybe you're right.
 
Gareth,
I think your suggestion gives a more accurate measure of exposure given that a good exposure measure should be proportional to both expected claim frequency and severity. No. of appliances alone doesn't really achieve this but from a 'practicality' point of view, no. of appliances may be all what's collected (perhaps someone working in personal lines can give what's used in the real world for extended warranty business?).

Factoring in appliance age might also give a more accurate exposure measure....
 
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