Page 228 - ic92 actuarial

The Insurance Times

repeat itself, moreover, the actual occurred event might
not have been representative of all the factors supposed
to occur in the future.

The future can have more or less variability than the
past. Most existing measures of classical efficiency use
the statistical measure of variance or some related
measure. Other measures are possible, including the
average deviation .

Variance has the advantage of being widely used in many
types of statistical applications. This variance concept
is used as an operational measure of efficiency, though
other measures could also be used. Most common
concept used is coefficient of variation, or CV, which is
the standard deviation divided by the mean. There are
many possible formulas for efficiency.

The measure most commonly used compares the
variance explained by the classification system to the
total variance underlying the insured population. If the
classification system were perfect, the efficiency would

Website: www.bimabazaar.com Call: 033-22184184 /40078428 228

Copyright@ The Insurance Times. 09883398055 / 09883380339