Difference between revisions of "ASOP12.RiskClass"
(→Section 3: Analysis of Issues and Recommended Practices) |
(→Section 3: Analysis of Issues and Recommended Practices) |
||
| Line 70: | Line 70: | ||
:: <span style="color: red;">'''R'''</span>elationship to costs ''(Ex: miles driven relates to expected claim costs)'' | :: <span style="color: red;">'''R'''</span>elationship to costs ''(Ex: miles driven relates to expected claim costs)'' | ||
:: <span style="color: red;">'''O'''</span>bjectivity ''(Ex: miles driven for auto)'' | :: <span style="color: red;">'''O'''</span>bjectivity ''(Ex: miles driven for auto)'' | ||
| − | :: <span style="color: red;">'''P'''</span>racticality ''(Ex: # of cars in household, note that miles driven may not be practical because it is self-reported)'' | + | :: <span style="color: red;">'''P'''</span>racticality ''(Ex: # of cars in household, – note that miles driven may not be practical because it is self-reported)'' |
::: <span style="color: red;">'''-'''</span> | ::: <span style="color: red;">'''-'''</span> | ||
:: <span style="color: red;">'''L'''</span>aws ''(does the risk classification system satisfy applicable laws – Ex: cannot use race)'' | :: <span style="color: red;">'''L'''</span>aws ''(does the risk classification system satisfy applicable laws – Ex: cannot use race)'' | ||
Revision as of 16:30, 14 July 2020
Reading: Actuarial Standard of Practice No. 12, Risk Classification
Contents
Pop Quiz
Study Tips
ASOPs generally have these sections:
- Section 1. Purpose, Scope, Cross References, and Effective Date
- Section 2. Definitions
- Section 3. Analysis of Issues and Recommended Practices
- Section 4. Communications and Disclosures
- Appendices
Sections 3 & 4 contain most of the relevant information. The definitions in Section 2 are usually obvious and familiar, and are covered in either the Werner of Friedland source texts anyway. You can skip Section 1 and the Appendices. The appendices usually contain either very general background information or comments on the draft version of the ASOP.
Estimated Study Time: 30 minutes (you may occasionally refer back to this ASOP while studying the main pricing and reserving material)
BattleTable
Based on past exams, the main things you need to know (in rough order of importance) are:
- fact A...
- fact B...
reference part (a) part (b) part (c) part (d) E (2016.Fall #10) considerations:
- for risk classification
In Plain English!
Section 2: Definitions
The 4 most important definitions (out of 10) in this ASOP are:
risk(s):
- - individuals or entities covered by financial or personal security systems
risk classification system:
- - a system for assigning risks to groups based on expected cost
risk characteristics:
- - measurable characteristics for assigning a risk to a risk class (within a risk classification system)
risk class:
- - a set of risks grouped together under a risk classification system
Just make sure you can write out these definitions.
Section 3: Analysis of Issues and Recommended Practices
You have memorize the following to be able to answer the 2016.Fall exam question.
Question: identify considerations in selecting risk characteristics for a risk classification system [Hint: ROP-LIB]
- Relationship to costs (Ex: miles driven relates to expected claim costs)
- Objectivity (Ex: miles driven for auto)
- Practicality (Ex: # of cars in household, – note that miles driven may not be practical because it is self-reported)
- -
- Laws (does the risk classification system satisfy applicable laws – Ex: cannot use race)
- Industry practices (should consider current industry practices before deviating from such)
- Business practices (should consider company's business practices before deviating from such)
