W.r.t. Ch 21, section 3.2, application of average cost per claim method - Why simple averages of gross-up factors preferred over development factors based on volume-weighted average? Can someone help me?
Hi. The Core Reading says that "the method is not uniquely defined as using a particular form of grossing-up factors or development factors. However, the grossing-up method is generally considered simpler and is used in its simple average form in the example that follows." So there are lots of different implementations that are possible, including the volume-weighted approach you've mentioned. However, the simple average approach is chosen because it's simple - that's the advantage.
