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technique, an alternative method called
Parallelogram method is used. This method adjusts
the earned premiums of a calendar year to current
rate levels based on simple geometric relationships
and an underlying assumption that exposure is
uniformly distributed overtime.
In cases, where material changes in exposure level
have occurred over the period, or where there is
non uniform pattern of the written exposures, the
Parallelogram method may not produce a reasonable
approximation of on- level earned premium.
Q9. Discuss the concept of loss adjustment
method.
Ans. The Actuary has to determine whether to make
projections on a pure loss basis, or whether to include
allocated loss adjustment expenses with losses.
Unallocated loss adjustment expenses data are rarely
available in sufficient detail for inclusion with losses and
allocated loss adjustment expenses, and are generally
treated as part of the expense provision.
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