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Old 08-07-2019, 09:21 PM
wally world wally world is offline
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Originally Posted by jerrytuttle View Post
Identifying changes in the mix of business is important. Has the mix changed by territory? Deductible? Coverage? Some other variable?

It is not hard to make up a simple example of a low average premium size group and a high average premium size group, and then what happens to the overall average premium size when you write proportionally more business in the low group.
Absolutely. But the question I guess is do I expect the distribution shift to continue over time? And if so, have I also accounted for the commensurate shift in losses that I should expect because I am writing higher deductibles or lower limits or in lower priced territories?

In this case, the actuary who presented this indication to me was willing to take a pretty aggressive stance on premium trends, but then basically ignored a pretty compelling negative pure premium trend. Idk.
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Old 08-08-2019, 09:00 AM
sticks1839 sticks1839 is offline
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Absolutely. But the question I guess is do I expect the distribution shift to continue over time? And if so, have I also accounted for the commensurate shift in losses that I should expect because I am writing higher deductibles or lower limits or in lower priced territories?

In this case, the actuary who presented this indication to me was willing to take a pretty aggressive stance on premium trends, but then basically ignored a pretty compelling negative pure premium trend. Idk.
There might be some cognitive bias going on. Two components: 1) premium trend is generally considered fully credible, but the loss trend is not; therefore one is likely to believe one and not the other when they defy expectation 2) loss trends are generally expected to be positive when viewed as an analog for inflation. Taken together, you get what the actuary presented.

If you have the exposure data over time by rating variable, you can try to quantify the shifts that are happening. If you applied your current rating factors to each exposure over time, what is happening to the avg factor for each component? This could tell you how your book is shifting and give insight to the expected loss trend as well. Then you can decide if this is a persistent shift based on your company's market dynamics or a one-time shift based on a specific rate change.
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