V. The Exposure Unit 2. a good exposure base should e be understood by ph f not essential but desirable- automatically adjust with inflation (e. g. payroll 3. You seldom get all criteria-must compromise (e.g. annual mileage is not used for car insurance) 16
16 3. You seldom get all criteria - must compromise (e.g. annual mileage is not used for car insurance) 2. A good exposure base should: e. be understood by ph f. not essential but desirable - automatically adjust with inflation (e.g. payroll) V. The Exposure Unit
VI. The Expected Effective Period There is a time lag from the most recent data to the expected effective period 2. The effective period is a policy period, normally a policy year. 3. f rates take effect. oct 15.z and are to be left unchanged for exactly one year, on one year policies, then the effective period starts Oct. 15.Z: ends oct. 15.Z+2: and has a midpoint of oct. 15, Z+1.(note: exposure starts at zero, peaks on Oct. 15, Z+l and ends at zero). 4. Claims data: actuary normally uses accident year or policy-year data
17 VI. The Expected Effective Period 1. There is a time lag from the most recent data to the expected effective period. 2. The effective period is a policy period, normally a policy year. 3. If rates take effect, Oct. 15, Z, and are to be left unchanged for exactly one year, on oneyear policies, then the effective period starts Oct. 15, Z; ends Oct. 15, Z+2; and has a midpoint of Oct. 15, Z+1. (note: exposure starts at zero, peaks on Oct. 15, Z+l and ends at zero). 4. Claims data: actuary normally uses accidentyear or policy-year data
VIl. Ingredients of Ratemaking A. LOSS-Development Factors(LDF) B. Trend Factors(TF) C Expenses D. Loading for profits and Contingencies E. Credibility Factors(CF) F Investment Income
18 VII. Ingredients of Ratemaking A. Loss-Development Factors (LDF) B. Trend Factors (TF) C. Expenses D. Loading for Profits and Contingencies E. Credibility Factors (CF) F. Investment Income