Credibility Theory

Discussion in 'SP8' started by E-Law, Sep 25, 2014.

  1. E-Law

    E-Law Member

    Hello, I'm just a bit confused about the language used in the notes...

    Section 2.5 of Chapter 18 (page 25) says "When one has at least the number of claims needed for full credibility, then one assigns 100% credibility to the observations".

    Should I take this to mean "When one has at least the amount of exposure such that the expected number of claims needed for full credibility is reached, then one assigns 100% credibility to the observations"?


    The example box on page 14 doesn't help much either: "we need to have an observed value of at least 2,654 claims, if we are to assign 100% credibility to our estimate of frequency" Again, should this be "observed value of at least 2,654 expected claims"? If not, what does "observed" mean?


    The calculations in this chapter all seem to disregard the continuity correction too. If I forgot the formula and just tried to derive it in the exam, does it matter if I use the correction or not? It would change 90% chance of within 5% from 1082 to 1062 for a Poisson distribution.


    Best regards,
    Ewan
     
  2. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    Yes, that's right.

    That's right.

    Normally they tell you whether or not to use the continuity correction (and normally, you don't have to). If in doubt, best to use it - or at least say that you're assuming it's not needed.
     

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