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to 6/30/2000. Now let us consider a single claim with
accident date 7/1/1998 that will be settled on 11/31/2000.
If a similar claim with accident date 7/1/1998 had
occurred during the effective period of indicated rates,
we could have expected an equivalent settlement lag
and would have projected the settlement date as 12/31/
2002.

The ratemaking problem is to project the ultimate
settlement value as of 12/31/2002 based upon the single
observed claim, which occurred on 7/1/1998 - a total
projection period of 54 months.

The loss development factor reflects the underlying
severity trend during the 30 months between the
occurrences on 7/1/2000 to settlement on 12/31/2002.
The trend factor will reflect the severity trend between
the midpoint of the exposure period (7/1/2000) , which
accounts for the remaining 24 months of the projection
period. Though both the trend and the loss development
factors do reflect underlying severity trends, there is no
overlap between the two, and both are equally required.

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