Nathan Was Hired as an Actuary with ABC Insurance

question 48

Multiple Choice

Nathan was hired as an actuary with ABC Insurance.Nathan was asked to calculate the annual premium for a new product and to explain his calculations to ABC's director of ratemaking.Nathan calculated the pure premium and presented this value as the final premium.After Nathan's presentation,the director of ratemaking said,"You left out something very important.If we sell coverage at the pure premium rate,we'll be out of business soon." What did Nathan overlook in his calculations?

• A)loading for expenses
• B)the underwriting cycle
• C)seasonality of claims
• D)investment income

Grasp fundamental ideas around constraints and objective functions in optimization problems.

Comprehend the role of risk analysis software in managing uncertainties in optimization models.

Learn about binary variables and their significance in integer optimization models.

Understand the differences between the net method and the gross method of recording purchases and sales.

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Definitions:

Significant Costs

Expenses that are sufficiently large to impact an entity's financial decisions or financial statements.

Externalities

Economic impacts of a product or service on parties who do not directly participate in the transaction, which can be negative (pollution) or positive (vaccination benefits).

Referent Power

A form of influence based on the charisma and interpersonal appeal of the leader, rather than on formal authority.

Positive Relationship

A connection between two or more entities characterized by mutual respect, cooperation, and beneficial outcomes for all involved.