This question has you calculating new base rates based on the loss ratio approach. My question: why do the off-balance factor for each class include both ( 1 / % change in premium if new relativities are implemented) AND (1+credibility weighted indicated change)??
The catch to this problem is both classes have their own base rates. Is this why (1+credibility weighted indicated change) is included in the off-balance factor?? Typically, the off-balance factor does not include the (1+credibility weighted indicated change).
The catch to this problem is both classes have their own base rates. Is this why (1+credibility weighted indicated change) is included in the off-balance factor?? Typically, the off-balance factor does not include the (1+credibility weighted indicated change).
Mahler 9.22 Revised Base Rate Question
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