Medical actual loss with state per claim accident limit
Hi, could you please show us how to actual primary loss and actual excess loss in this example:
claim type: medical; loss of the claim:180,000
Sate per claim accident limit:175,000
split point for primary and excess loss:5000
I understand the primary loss is min(5000,180,000)*0.3=1500, but I am confused on excess loss calculation with the state per accident limit.
Thanks!
Comments
The source material is ambiguous on this topic. However, based on the source for disease limitations, you should first apply the state per-claim accident limitation, then split into primary and excess losses, before finally reducing the med-only claim by 70%.
Using the figures you provided above:
ratable loss = min(175,000 , 180,000) = 175,000
raw primary loss = min(5,000 , 175,000) = 5,000
raw excess loss = 175,000 - 5,000 = 170,000
actual primary loss = 5,000*(1 - 70%) = 1,500
actual excess loss = 170,000*(1 - 70%) = 51,000
Wanted to pick this topic again and wanted one clarification. From your this posting it seems like you split the loss in primary and excess first and then apply 70% reduction. In current article it says 70% reduction is applied prior. Can you please confirm if the guidance has changed as your sample exams and solutions are applying 70% reduction first and most of the time then everything goes to primary and hardly anything left for excess.
Med only losses are reduced by 70% and, critically, the primary/excess split point is also reduced by 70%. So it's up to you if you use the standard primary/excess split, allocate the loss and then reduce the primary and excess components by 70%, or if you first reduce the total loss by 70% and then allocate into primary/excess using 30% of the standard split point.
Regarding the practice exams - would you mind checking you are using v2 please. That version should have addressed the issue you mentioned.