Page 149 - ic92 actuarial

Foundations of Casualty Actuarial Science

The experience period is the three complete policy periods
at the time the calculation is made. The actual losses
are the reported losses evaluated at 18, 30, and 42 months
from the beginning of the policy year.

The expected losses are the actual payroll by class for
the experience period years multiplied by the
retrospective manual expected loss rates by class for
the prospective period. The retrospective expected loss
rates reflect the losses expected to be reported at the
18, 30 and 42 month evaluations of the latest three
available policy periods. So w and C ( and hence, B)
result from the specific credibility formulae.

Q11. What steps should be taken to design an
individual risk rating system?

Ans. The following steps need to be taken to design an
individual risk rating system :
(i) Determine the goals for the system.
(ii) Determine what is to be allocated.
(iii) Determine what kinds of exposure and experience

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