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Sep 2007 past paper question 2 part ii

J

Jiang

Member
Hi, thank you in advance for your help.

I am a bit confused by the solution for this question. If assuming the claims occurring on average mid-month. Shouldn't the fourth column in the calculation table be (Month + 0.5) * earned exposure, instead of (Month - 0.5) * earned exposure?

For policies written in September 2006, it is given in the question that the policies incept on the first day of the month, so the claims should be expected at mid-month. This would mean month 9.5 is the average claim date for September claim, and not 8.5 as per the examiner's report.
 
Yes, the examiners seem to have done some sort of translation. Notice that their final answer is 10.667, which they take to be 2/3rds of the way through November (not October).

You can do the calculation in the way you suggested. This would give:

(9½ x 1,000) + (10½ x 2,500) + (11½ x 4,500) + (12½ x 7,000) = 175,000

Then 175,000/15,000 = 11.667, which corresponds to 2/3rds of the way through November, as per the answer.
 
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