Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 1 of 1
Full-Text Articles in Insurance
Unearned Premiums And Deferred Policy Acquisition Expenses In Automobile Extended Warranty Insurance, Joseph Cheng
Unearned Premiums And Deferred Policy Acquisition Expenses In Automobile Extended Warranty Insurance, Joseph Cheng
Journal of Actuarial Practice (1993-2006)
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.