Revision as of 18:16, 25 July 2024 by Admin (Created page with "An insurer is considering a rate change for annual policies that will be written in calendar year 4. The experience period used to determine the rate change is accident year 1. If loss cost inflation is 1.5% per year, what is the trend factor ? <div class="d-none"> <ul style="list-style-type:upper-alpha"> <li>1.0535</li> <li>1.0612</li> <li>1.0675</li> <li>1.0693</li> <li>1.077</li> </ul> </div>")
ABy Admin
Jul 25'24
Exercise
An insurer is considering a rate change for annual policies that will be written in calendar year 4. The experience period used to determine the rate change is accident year 1. If loss cost inflation is 1.5% per year, what is the trend factor ?
- 1.0535
- 1.0612
- 1.0675
- 1.0693
- 1.077
ABy Admin
Jul 25'24
The experience period is accident year 1 and the midpoint of the experience period is 07/01/CY1. Since the policies are annual, the forecast period is the beginning of calendar year 4 to the end of calendar year 5 with a midpoint equal to the end of calendar year 4. Hence the trend factor equals 1.015 4.5 = 1.0693.