Quote:
Originally Posted by SweepingRocks
Dumb conceptual question: Do the parallelogram and extension of exposures method result in the same outcome when bringing premium to the current rate level?

Quote:
Originally Posted by James Bedford
No. The parallelogram method is a rough approximation while the extension of exposures is precise. The extension of exposures method rerates each historic exposure using the current rating algorithm and factors while the parallelogram method adjusts each by the average change for the group (year).

Obviously a bit late, but just want to add one thing to James' answer. Parallelogram method will produce the exact same outcome as Extention of Exposures in the special case when all of it's assumptions are fully valid. In the real world this is never the case, but sometimes it's close enough to produce a passable result. I imagine a good conceptual exam question would revolve around the assumptions implicit in the parallelogram method and what constitutes a severe violation such that you shouldn't rely on it.