GAP Insurance—Techniques and Challenges
Casualty Actuarial Society E-Forum, Winter 2011-Volume 2 9
Month
(1)
Balance
(2)
Balance
Earnings
(3)
Ruleof
78s
(4)
Abbreviat
edRule
of78s
(5)
Example
Book
Value
(6)
Deduct
(7)
GAP
Severity
(8)
Example
Book
Value
Earnings
13 8,269 2.6% 2.6% 3.2% 6,278 500 2,491 3.0%
14 8,119 2.5% 2.6% 3.1% 6,152 500 2,467 3.0%
15 7,969 2.5% 2.5% 3.0% 6,029 500 2,439 2.9%
16 7,817 2.4% 2.5% 2.9% 5,909 500 2,409 2.9%
17 7,665 2.4% 2.4% 2.8% 5,790 500 2,374 2.9%
18 7,511 2.3% 2.3% 2.7% 5,675 500 2,337 2.8%
19 7,357 2.3% 2.3% 2.6% 5,561 500 2,296 2.8%
20 7,202 2.2% 2.2% 2.5% 5,450 500 2,252 2.7%
21 7,046 2.2% 2.2% 2.4% 5,341 500 2,205 2.7%
22 6,889 2.1% 2.1% 2.3% 5,234 500 2,155 2.6%
23 6,731 2.1% 2.1% 2.2% 5,129 500 2,102 2.5%
24 6,573 2.0% 2.0% 2.1% 5,027 500 2,046 2.5%
25 6,413 2.0% 2.0% 2.0% 4,926 500 1,987 2.4%
26 6,252 1.9% 1.9% 1.9% 4,828 500 1,925 2.3%
27 6,091 1.9% 1.9% 1.8% 4,731 500 1,860 2.2%
28 5,928 1.8% 1.8% 1.7% 4,637 500 1,792 2.2%
29 5,765 1.8% 1.7% 1.6% 4,544 500 1,721 2.1%
30 5,600 1.7% 1.7% 1.5% 4,453 500 1,648 2.0%
31 5,435 1.7% 1.6% 1.4% 4,364 500 1,571 1.9%
32 5,269 1.6% 1.6% 1.4% 4,277 500 1,492 1.8%
33 5,102 1.6% 1.5% 1.3% 4,191 500 1,410 1.7%
34 4,933 1.5% 1.5% 1.2% 4,107 500 1,326 1.6%
35 4,764 1.5% 1.4% 1.1% 4,025 500 1,239 1.5%
36 4,594 1.4% 1.4% 1.0% 3,945 500 1,149 1.4%
37 4,423 1.4% 1.3% 0.9% 3,866 500 1,057 1.3%
38 4,250 1.3% 1.3% 0.8% 3,788 500 962 1.2%
39 4,077 1.3% 1.2% 0.7% 3,713 500 865 1.0%