Joseph Cheng
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.
Key words and phrases: exposure, unearned premium reserves.
Corresponding Author:
Joseph Cheng
J.S. Cheng & Partners Inc,
© Copyright Absalom Press, Inc.