Subject G - april 1998 - Paper 1 - Q1 The answes tells us some problems associated with using past claims experience to price mortgage indemnity guarantee covers. Some problems are: Longterm policy Long time before get in credible data DAta may be incomplete. why would these be problems when pricing using past claims experience, because surely you have all the data on these particular claims if your going to use past experience? is it that really you've to pick up on the fact that these claims just wont be there(due to the points above) in order to do your experience rating? This may have seemed like a silly question but It's just that some questions are really hard to interpret correctly. thanks
Yes, you're right. Past claims experience is scanty, so it makes it tricky. Even if you had full past claims experience, the volatility associated with MIG makes it difficult to price/reserve.
