Finance Department

 

Date of this Version

2002

Document Type

Article

Citation

Journal of Actuarial Practice 10 (2002), pp. 63-96

Comments

Copyright 2002 Absalom Press

Abstract

A prorata formula is commonly used to calculate unearned premium reserves in property-casualty insurance. I believe, however, that an exposure-adjusted formula is more appropriate in automobile extended warranties. This paper describes the exposure-adjusted approach to calculate the unearned premium reserves of an automobile extended warranty insurance program, to test the adequacy of the calculated reserves, and to determine the allowable deferred policy acquisition expenses from an insurance company's perspective.

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