Hi, I am confused what the difference in "independent from the base statistic" and "Unbiasedness as a predictor of next year’s mean-expected losses". In this example, is the base class X in state Y? Thanks for any help in advance!
The actuary is analysing the complement of credibility for class X in state Y, but class X is also written in other states throughout the US. As a general rule, we always hope the complement of credibility is independent from the base statistic. So you need to consider whether, in this case, this is true. A base statistic is unbiased if its expected value is equal to the true underlying value. Unbiasedness is covered in CS1.
Hi, Thanks for the response! however i am still unsure of this question.. I think i am uncertain on what the base statistic is in this example in order to determine if the complement is independent from it, would you be able to shed some light on this please? Thanks!
I interpret the question as follows: The base statistic is the historical loss data for class X in State Y. Then the complement of credibility is: For method A: loss data for class X across all states that the company operates in. For method B: historical loss data of a similar class C (possibly adjusted to make it more applicable to class X) I agree it does take a moment to absorb the information. I had to read it a second time myself.
