Help!! 8GM - Credibility Theory

[yunr]

Can you explain:
1. What's the difference between rate making and experience rating?
2. What do they mean when they compare classical and Baysian theory? Can you give me an example?
3. If I am understanding it correctly, for rate making, homogeneous classes produce higher credibility; but the other way around for experience rating? Why?
I would really really appreciate it if you can help me!!!

:-?

[llll]

My understanding is that rate making is to determine rates for the whole block by class based on overall experience and experience of classes. It is like community rating by class. Experience rating (as in SN 207) is to determine a specific group's rate based on the group experience and the experience of group's class.

If classes are homogenous, we believe that class's experiences are very credible, compared with overall experience and individual group's experience. Therefore, in ratemaking, each class's credibility is high, relative to overall experience. While individual group's experience has relatively low credibility, compared with its class experience. So homogenous classes will result in high credibility factors in rate making and low credibility factors in experience rating.

[yunr]

Thanks!! that makes sense!