Question

How are margins adjusted in practical scenarios for insurance pricing?

a.

Adjusting individual parameter assumptions followed by risk discount rate adjustment

b.

Direct adjustment to the risk discount rate

c.

Utilizing only the stochastic approach for all parameters

d.

Ignoring risk considerations during pricing

Answer: (a).Adjusting individual parameter assumptions followed by risk discount rate adjustment Explanation:In practical scenarios, margins are adjusted by first modifying individual parameter assumptions to account for risks, followed by the application of the risk discount rate to discount cash flows.

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Q. How are margins adjusted in practical scenarios for insurance pricing?

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