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To inflate or not

J

jensen

Member
Hi

When I try to estimate large claim frequency for a GI class of business, I typically use historical annual count of large claims and express that as a percentage of total number of policies in that year. In the absence of policy count, I use total class annual premium (not inflation-adjusted) as a proxy to exposure.

My manager and myself are debating on whether to adjust the premium to bring it to today's value or not. I am against it because each year of analysis, the frequency per $ premium will be further diluted because of inflation, which doesn't make sense to me.

Anyone has any opinion on this?
 
Why not adjust? What we are doing is for the next contract period, so the value of all the historical premiums should be adjusted to the level of the next contract period.
 
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