A 2015 Q10 part ii

Discussion in 'SP8' started by jonathans, Sep 5, 2017.

  1. jonathans

    jonathans Member

    if claims inflation is 2% per year, I don't need to inflate the cost to the mid point of when I think claims will be paid?

    Thanks!
     
  2. Hemant Rupani

    Hemant Rupani Senior Member

    For Accident Year data to policy year premium rating, we adjust to mid-point afwmter making uniform pattern assumptions.

    But, in this question data is sorted policy year and rate is also for a policy year.
    So, with 'all other factors being constant' assumption - you can make it by differencing policy year in years.
     
  3. jonathans

    jonathans Member

    I'm sorry but I didn't understand your answer :(
     
  4. Hemant Rupani

    Hemant Rupani Senior Member

    I will try to write in different way:-

    If you expect particular claims payment delay, say, 'x' from policy inception, and assumed patterns are similar. Policy year after y years will also have claims payment delay from policy inception 'x'. So, basically inflation needed for y years. No need for mid-point, this is applicable to any earning, incurring, paying pattern as long as remains same.

    Difference between claims payment date for policy year n and policy year m(where m>n) is m-n, when the pattern of earning, incurring and paying is same for all years.
    That is why 1.02^(5-1) is used to make 1st policy year value to as-at 5th and so for other years.
     
    jonathans likes this.

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