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IAI Actuarial Core Principles · Risk Modelling and Survival Analysis · Graduation and graduation tests

When graduating by reference to a standard table, which is a typical reason an actuary chooses this method for a small Indian insurer's annuitant portfolio?

Reference to a standard table suits small portfolios because the insurer's own data are too sparse for a fully independent fit. The table supplies the age shape, and a few parameters adjust it to the experience, though goodness-of-fit tests are still required.

  1. AThe insurer's own data are too sparse to support a fully independent parametric fitCorrect
  2. BStandard tables always match the portfolio's mortality exactly
  3. CIt removes the need for any goodness-of-fit testing
  4. DIt guarantees that graduated rates are never smooth
  5. It avoids any use of crude rates

Explanation

With limited data, borrowing the shape from a standard table and adjusting it with a few parameters gives stable rates. Testing is still needed, and crude rates are still used to fit the adjustment.

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