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Q&A Bank 3 Question 6(iii)

A

ActEdStudent

Member
The answer says the necessary adjustments to the risk premium are P = R
* f *CE + k * P + j + I + E.

It says that j includes variable per policy expenses such as admin, computer running costs, but wouldn't this adjustment need to be fixed, as it's not multiplied by premium or sum insured etc?
 
Yes, you're right - well-spotted.

I suppose it depends on whether you're going to count computer costs etc as variable (in which case could express it as a percentage of premium) or fixed (in which case just add it on).
 
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