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UPR Calculation CH1 pg13

Pooja

Made first post
An insurance company calculates its UPR using an individual, policy by policy approach. Calculate the UPR as at 31 December 2018 for the following annual policies:

(b) Premium £3,500. Commission 10%. Started 1 July 2018. Risk starts at zero and increases daily by a constant linear amount over the policy year.

Can someone explain how to solve this ?

solution given - £2,362.50 (75% of risk is outstanding at year-end, so the UPR is 75% of 90% of £3,500. Did not understand how 0.75 came ?
 
The book Pricing in General Insurance has an example spreadsheet with earned premium calculations if you want to see an alternative presentation.
 
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