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2006 - September - Q1iii)

P

phos2

Member
Could someone explain how they got the the earned rate change for the 2003 AY to be +38%?

My reasoning is that the 2003 AY EP is from policies written in 2002 and from policies written in 2003, so we make the assumption that half earns for each underwriting year you get (25% + 10%) /2 = 17.5% earned rate change.

However it seems they have used the 2001 UWY rate change of +50% and averaged that with the +25% 2002 UWY rate change to get the 38%. With the usual assumptions of annual policies, even earning patterns etc, why is the 2001 UWY impacting the earned rate change for 2003 AY?
 
Your logic is correct, I think you have just misinterpreted the premium rate change information.

The information is suggesting that the premium rate change from 2001 to 2002 is 50%, ie that premiums in the 2002 underwriting year (half of which will be earned in 2002 and half in 2003) are 50% higher than those in the 2001 underwriting year and so on.
 
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