Would you pls explain how i is 2.4 yrs? From the example just preceding the question, should the relevant period not be from sept 1 2009 to August 1st, 2012? Why is it march and july in the solution?
We have data from accidents that occur between 1 June 2012 and 30 November 2013. This is an 18 month period. The average accident date is midway between these two dates i.e. 1 March 2013. Now we want to set premium rates for policies written between 1 December 2014 and 1 August 2015. The average inception date (midpoint of this period) will therefore be 1 April 2015. In this question policies are only 6 months long so the average claim date will be three months after the policy is written, hence for the average policy this will be 1 July 2015. We therefore need to inflate from 1 March 2013 to 1 July 2015 which is 2 years and 4 months.
