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12. Credibility must not be less than zero or greater than
one
0<Z<1
13. Credibility should increase as the size of risk increases,
all else being equal.
dZ > 0
dE
14. The percentage change for any loss of a given size should
decrease as the size of risk increases.
( )d Z < 0
dE E
15. Determine the experience modification 288
M = AP + B + (Ae X w) + [ (1 - w) X Ee ]
Ep + B + (Ee X w) + [ (1 - w) X Ee]
Where
M = Experience Modification Factor
Ap = Actual Primary Loss
Ep = Expected Primary Loss
A = Actual Excess Loss
e
E = Expected Excess Loss
e
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