Fall 2019 Q11

I am confused about the information presented in the problem regarding the calculation of EP.

If we're assuming that the $200k WP is the premium for the singular WC policy, I think the EP should also be $200k since the second bullet of the problems tells us it's all earned on the day it's written.

The solution makes complete sense to me if that second bullet wasn't there. How are we suppose to interpret it?

Comments

  • Nevermind again - I think I am confusing "collected" vs. "earned" as being synonymous with each other when they're not

  • Yes, that's correct. (The insurer is in possession of the premium payment on Apr 1, but it then must be earned month-by-month over the policy term.)

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