In projecting historical losses to the proposed rate period, wouldn't adjusting for law changes (which affect benefit amts) and adjusting for trend conflict with each other? Or do they not and this is another example of the overlap fallacy? The overlap fallacy is talked about for trend and development adjustments, but what about trend and law changes?
By applying a trend factor to historical losses, you account for the increase in pure premium over time. I would think pure premium (claim cost per exposure) increases because of inflation AND because of benefit changes, thus a trend factor would capture the effect of law changes. Also, I suppose I am mainly talking about Workers Comp, since for most LOB's, law change adjustments aren't necessary usually, according to the text.
By applying a trend factor to historical losses, you account for the increase in pure premium over time. I would think pure premium (claim cost per exposure) increases because of inflation AND because of benefit changes, thus a trend factor would capture the effect of law changes. Also, I suppose I am mainly talking about Workers Comp, since for most LOB's, law change adjustments aren't necessary usually, according to the text.
Adjustments to Historical Losses: Law change vs Trend
0 commentaires:
Enregistrer un commentaire