ST3 Sept 2008: Q5 (i)

Discussion in 'SP7' started by jensen, Apr 4, 2012.

  1. jensen

    jensen Member

    Hi

    The solution for contract B, the 2004 UPR c/f is 7.5/12 months.

    Why is this so? I thought the contract incepts on April 1, hence it should be 4.5/12 carried forward to the next year.

    What am i missing?

    Thanks.
     
    jensen, Apr 4, 2012
    #1
  2. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    Hi Jensen,

    Policies written under binding authority B will incept, on average, midway through August. Therefore, by the end of December they will have earned 4.5 months, and will have 7.5 months still to earn.

    Kind regards,

    Katherine.
     
    Katherine Young, Apr 4, 2012
    #2
  3. jensen

    jensen Member

    Hi Katherine

    Thanks for that.

    So it's mid Aug becoz thats the avg inception date between April 1 to Dec 31? I kept thinking about the mid point between April 1 to Mar 30. Oops.

    J
     
    Last edited by a moderator: Apr 4, 2012
    jensen, Apr 4, 2012
    #3
  4. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    Yep, you've got it.
     
    Katherine Young, Apr 4, 2012
    #4
  5. jensen

    jensen Member

    Katherine

    Is it incorrect if I had assumed that on average, B policies incept on Oct 1 each year (hence 3 months is earned each year and 9 months is c/f), instead of that in the solution where the first year is mid August, then subsequent years is 1 July? I find the indicative solutioon rather inconsistent this way.

    For part (ii), could you please show me one calculation on how to get the investment income? Couldn't follow the description to get the answers.

    Thanks.
     
    Last edited by a moderator: Apr 5, 2012
    jensen, Apr 5, 2012
    #5
  6. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    Yes, this is incorrect. Binder B incepted on 1 April 2004. So business will be written in that calendar year from 1 April to 31 Dec. So, this MUST be, on average, written in mid-August. You would not have scored marks for any other approach.

    For subsequent years, we take note of the fact that the binding authorities are renewable annually. So business will be written throughout the year, and on average, will be written on 1 July.

    So the solution is not inconsistent, it just shows that it's important to take note of the detail in the question.

    This was a difficult question, but, put simply, we calculate the investment return by applying 4.5% of (net cashflow during the year/2 + claims reserve at the start of the year + UPR at the start of the year).

    For a full description of this solution, I urge you again to use the ASET. I'm sure you'll find it very useful.

    Good luck!

    Katherine.
     
    Last edited: Apr 10, 2012
    Katherine Young, Apr 10, 2012
    #6
  7. MorningtonCrescent

    MorningtonCrescent Member

    Yeah the ASET was really good for this question. I don't think I'd ever have understood (ii) otherwise.
     
    MorningtonCrescent, Apr 10, 2012
    #7
  8. ProCyclist

    ProCyclist Member

    Dear Acted tutors,

    For us sitting ST7 well after the aset for 2008 has come and gone can we get a pdf of the answers for this question?
     
    ProCyclist, Sep 13, 2015
    #8
  9. Kimcfall

    Kimcfall Member

    Agree with ProCyclist- Would really appreciate a PDF of this exam solution! Many thanks
     
    Kimcfall, Sep 14, 2015
    #9
  10. Darren Michaels

    Darren Michaels ActEd Tutor Staff Member

    Hi there

    If you email the ActEd admin team (acted@bpp.com) they can advise you on how you can still purchase a copy of the ASET that covers the 2008 exams.
     
    Darren Michaels, Sep 16, 2015
    #10

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