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Foundations of Casualty Actuarial Science

experience. These characteristics can result from
recent changes in exposure (e.g, addition of a
swimming poolin acomplex) orrisk control programs
(E.g, recent implementation of a new program).
Schedule rating is also used for entities that are too
small to qualify for experience rating or composite
rating.

(ii) Experience rating - All individual risk rating
systems are a form of experience rating because
they reflect an entity's actual experience or
characteristics that should affect the entity's
experience.

Usually, however the term ' experience rating' has
come to mean a particular type of prospective
system, discussed in this section. Experience rating
is used when the past, with appropriate adjustments,
is predictive of the future.

Actual losses, and some times ALAE for a prior
period are compared to expected losses and ALAE..

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