Mini-Quiz 2 (2017. Spring 3 d.)
The BattleActs answer lists raise rates as an action the insurer can take, but the examiner's report, under common errors for part d., states:
Providing actions of increasing rates, changing rate plan, or addressing income statement deficiencies. To avoid insolvency, the imbalance of assets and liabilities must be addressed quickly
It seems to me that the graders felt that the effect raising rates wouldn't be fast enough to stave off insolvency.
Comments
Yes, I missed that. The examiners' report did indeed exclude raising rates. I will make a note of that in the BattleCard. Thanks.
I think they were just trying to trick people however. In retrospect, I can see that they used the term "on the verge" of insolvency to rule out answers like "raise rates" but "on the verge" does not have any actuarial meaning. Does that mean a week, a month, a year? Also, several of the answers they did accept wouldn't be "quick", like "merge with another company". That is certainly not a quick process!!! Besides, who would want to merge with a company that was on the verge of insolvency???