Chapter 14 Estimating the Premium Asset on Retrospectively Rate Policies - M. Teng and M. Perkins

Advantages of retro rating plan

Retro formula: (14.1)

Retro rating formula approach

• \(\star\) PDLD formulas (14.4), (14.5), and (14.6)

• Basic premium factor vs charge (charge is after tax)

• Understand the shape and pattern of \(PDLD\)

Empirical approach

• Assume premium lags (typically 9 month)

• Ratio selection

• \(\star \star\) Cumulative PDLD (14.7) and calculating it recursively (14.8)

• Practical application

  • First adjustment period might cover more than one policy period

Teng Perkins improvements and assumptions

• Understand pattern of the PDLD

Feldblum’s adjustment to the empirical \(CPDLD_1\) (14.9)