Hi, I think in Chap 12 it says if we detect trends in the base data, we should investigate to see if they are likely to continue and if so we need to give as much weight as possible to the latest year or adjust the earlier years' experience. What I would like to ask is what if the the trend is a one-off change, what adjustments do we need to make? Thanks for help.
A trend and a one-off change are two different things. The treatment of a trend (the effect of which could be sudden or gradual) that is unlikely to continue into the future would probably be similar to one that is likely to continue, except that we wouldn’t have to project the effect of the trend from present day values to the new period of exposure. The treatment of an individual year that is different in some way from all of the others might be to exclude it or suitably adjust it, e.g. by appropriate treatment of any unusually large claims.
