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ACPC method

C

code9063

Member
One of the weaknesses of the ACPC method mentioned in the page 62 of chapter 13 is that

- assumes that the distribution of claims is the same for each origin year or settlement year.

Can you please elaborate on this and also tell me whether this is also true for other methods?
 
Part of the method estimates an average cost per claim for each origin year. In doing so it is implicitly assuming that all claims from a given origin year come from the same underlying distribution of individual claim amounts so that they can all be represented by the same average claim amount.
 
Darren Michaels said:
Part of the method estimates an average cost per claim for each origin year. In doing so it is implicitly assuming that all claims from a given origin year come from the same underlying distribution of individual claim amounts so that they can all be represented by the same average claim amount.
Click to expand...

I don't think that it's assuming the distribution is the same, merely that the first moments coincide.

E.g. one could have a claim distribution which is exponential and the other a normal distribution. They can both have the same mean but very different distributions.
 
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