Abstract

Journal of Actuarial Practice

Volume 10, Numbers 1 and 2, 2002

A Note on the Parallelogram Method for Computing the On-Level Premium

David P.M. Scollnik and Wai Man Sara Lau

Abstract

This paper discusses the differences appearing in the descriptions of the parallelogram method for the determination of earned premium at current rate levels given by McClenahan (1996) and Brown and Gottlieb (2001). It observes that the former is consistent with the method of extending exposures while the latter is not. An illustration is provided. This paper also discusses two other approaches to the determination of the earned premium.

Key words and phrases: earned premium, extending exposures, ratemaking.

Corresponding Author:

David P.M. Scollnik

Department of Mathematics and Statistics

University of Calgary

2500 University Drive N.W.

Calgary, Alberta T2N 1N4

CANADA