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The Insurance Times

exposure, as appropriate. The adjustments to current
dollar and exposure levels should reflect such items as :
 economic and social inflation
 changes in the number, size, and type of entities;

and
 changes in policy limits

83. The three components of experience are exposure, and
credibility (the weighting factor) and some additional
considerations.

84. The actual (experience) and expected (exposure)
components, of the experience rating calculation are
weighted to produce the costs the entity under
consideration will pay. The weight assigned to the
experience component is called "credibility", and
commonly denoted by "Z". The weight assigned to the
exposure component is 1 - Z. This is also called the
credibility complement.

85. Credibility has three criteria that must be met:
1. Credibility must not be less than zero or greater than
one.

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