Bailey and Simon Flashcards Preview

Exam 8 > Bailey and Simon > Flashcards

Flashcards in Bailey and Simon Deck (14):
1

Experience Mod

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2

Premium adjustements for relative frequency calculation

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3

Maldistribution

Exposure correlation (i.e. between territory and merit)

4

Choosing premium base for frequency

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5

Mod formula

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6

Bailey and Simon assumptions for calculating R

1. Class total claim frequency to ECY is the same each year

2. Claim counts are Poisson distributed

7

R formula

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8

Experience rating credibility dependencies

Volume of data

Variance of loss experience within a class (Experience rating distinguishes the individual risk from the class average risk)

9

2-year, 3-year credibilities relative to 1-year

The closer the 2- and 3- year relativities are to 2.0 and 3.0, respectively, the more stable the book:

1) Risks entering/exiting portfolio

2) Risk characteristics changing over time

10

3 conclusions of Bailey and Simon paper

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11

Buhlmann credibility formula

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12

Hazam conclusions

1. Credibility increases in proportion to years only for low credibility values

2. Simple Buhlmann credibility shows that double or triple the data doesn't result in exactly double or triple credibility (since k does not change for different samples of n sizes taken from the X variable)

Z = n / (n + k)

13

K, Buhlmann credibility

K = EVPV / VHM

= E[Var(X¦µ)] / Var(E[X¦µ])

14

Why individual risk experience is more credible when there is m ore variance in loss experience

Experience rating distinguishes the individual risk from the class average risk