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

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Definitions:

Primarily Rental

This refers to income or property that is mainly used for rental purposes, often generating rental income for the owner.

Primarily Personal

Describes expenses or activities mainly for individual or non-business purposes.

Personal/Rental

Pertaining to property that is used for personal purposes at times and rented out at others, often affecting tax implications.

Schedule E

Schedule E is a form used for tax filing that reports supplemental income and loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests.