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Credibility based on accuracy.
Abstracts and Reviews particular, it is shown that premiums for medical expense insurance and hospitalization benefits can be assessed by means of suitable procedures, taking into account the effect of ageing on the expected claim cost. A Bayesian inference model, generalizing the traditional Poisson-gamma model, supports a “pure” experience rating procedure, while other related systems are defined in order to meet practical requirements. Several numerical examples illustrate some interesting features of “pure” experience rating and related systems. (Author) Keywords: Sickness Insurance, Experience Rating. 061026 (M31, MlO, B20) Parametrizing
the
Workers
71
estimator predicts the underlying experience. First, an equation is shown which expresses the credibility assigned to each estimator in terms of the average prediction error of the other estimator and the average squared difference between the two estimators. That equation is verified using the classic Bayesian credibility n/(n+k)formula and a formula for weighting prior observations of time series that was developed by the author. An enhancement to the classic Bayesian method for class credibilities is shown. Finally, the author shows that optimal credibility is proportional to the accuracy of each estimator, less the extent to which both estimators make the same errors. (Author) Keywords: Credibility, Loss Estimation.
Compensation
Experience Rating Plan. Gillam W.R., Casualty Actuarial Society Proceedings,
061028 (M31)
Vol. LXXIX, Part I, 1992, pp. 21-56. This paper describes the development of the revised Workers Compensation Experience Rating Plan. The plan is based on sound statistical theory, certain modeling assumptions, and thorough empirical testing. It is heartening that the empirically derived with most of the parametrization is consistent assumptions needed to simplify the algebraic foundation. The paper begins with an heuristic derivation of a general modification formula based on losses split into and excess portions. It delineates the primary assumptions about the components of loss ratio variance leading to the algebraic form of the formulae tested. Iterative testing is used to parametrize those formulae. A simple preliminary test procedure is described to clarify the basic concepts. The operative test procedure is then specified, and results of iterative testing using that procedure are displayed for the selected formulae. The parametrized formula finally approved by the National Council on Compensation Insurance (NCCI) was subject to certain adjustments to maintain continuity during the transition form the old to new plans. Credibilities have been scaled to account for differences in state benefit levels and the effect of inflation. (Author) Keywords: Workers Compensation, Experience Rating.
actuary should know.
061027 (M31, MlO) Credibility based on accuracy. Boor LA., Casualty Actuarial Society Proceedings, Vol.
LXXIX, Part 2, 1992, pp. 166-185. This paper shows that the optimal credibility split between two estimators is related to how well each
Workers compensation
experience
rating: what every
W.R., Casualty Actuarial Society Proceedings, Vol. LXXX, Part 2, 1992, pp. 215-254. Workers Compensation experience rating affects the distribution of billions of dollars of insurance premium. It is a large-scale application of actuarial science, one which has evolved since the very first days of the Casualty Actuarial Society. A fair amount of material exists on the theory underlying the plan, and some of that material is required reading for actuarial students. This paper tries to bridge the gap between theory and practice. Most of the insureds eligible for experience rating do not think in terms of overall performance of the plan. They may agree individual risk equity is fine as long as it does not affect them adversely. Actuaries can help relate the theoretical underpinnings of the plan to the bottom-line effect on the individual insured. The exposition begins with a discussion of performance testing. It then puts experience rating into the context of the premium transaction for a policy, then turns to a discussion of overall financial impact. The latter part of the paper details the activity necessary to administer experience rating, including the calculation of plan parameters, the assembly of experience data, and the promulgation of rating forms. The paper is intended to be expository, describing concepts, vocabulary, and details of the plan from an actuarial perspective. (Author) Keywords: Experience Rating, Performance Testing. Gillam
the
Workers
71
estimator predicts the underlying experience. First, an equation is shown which expresses the credibility assigned to each estimator in terms of the average prediction error of the other estimator and the average squared difference between the two estimators. That equation is verified using the classic Bayesian credibility n/(n+k)formula and a formula for weighting prior observations of time series that was developed by the author. An enhancement to the classic Bayesian method for class credibilities is shown. Finally, the author shows that optimal credibility is proportional to the accuracy of each estimator, less the extent to which both estimators make the same errors. (Author) Keywords: Credibility, Loss Estimation.
Compensation
Experience Rating Plan. Gillam W.R., Casualty Actuarial Society Proceedings,
061028 (M31)
Vol. LXXIX, Part I, 1992, pp. 21-56. This paper describes the development of the revised Workers Compensation Experience Rating Plan. The plan is based on sound statistical theory, certain modeling assumptions, and thorough empirical testing. It is heartening that the empirically derived with most of the parametrization is consistent assumptions needed to simplify the algebraic foundation. The paper begins with an heuristic derivation of a general modification formula based on losses split into and excess portions. It delineates the primary assumptions about the components of loss ratio variance leading to the algebraic form of the formulae tested. Iterative testing is used to parametrize those formulae. A simple preliminary test procedure is described to clarify the basic concepts. The operative test procedure is then specified, and results of iterative testing using that procedure are displayed for the selected formulae. The parametrized formula finally approved by the National Council on Compensation Insurance (NCCI) was subject to certain adjustments to maintain continuity during the transition form the old to new plans. Credibilities have been scaled to account for differences in state benefit levels and the effect of inflation. (Author) Keywords: Workers Compensation, Experience Rating.
actuary should know.
061027 (M31, MlO) Credibility based on accuracy. Boor LA., Casualty Actuarial Society Proceedings, Vol.
LXXIX, Part 2, 1992, pp. 166-185. This paper shows that the optimal credibility split between two estimators is related to how well each
Workers compensation
experience
rating: what every
W.R., Casualty Actuarial Society Proceedings, Vol. LXXX, Part 2, 1992, pp. 215-254. Workers Compensation experience rating affects the distribution of billions of dollars of insurance premium. It is a large-scale application of actuarial science, one which has evolved since the very first days of the Casualty Actuarial Society. A fair amount of material exists on the theory underlying the plan, and some of that material is required reading for actuarial students. This paper tries to bridge the gap between theory and practice. Most of the insureds eligible for experience rating do not think in terms of overall performance of the plan. They may agree individual risk equity is fine as long as it does not affect them adversely. Actuaries can help relate the theoretical underpinnings of the plan to the bottom-line effect on the individual insured. The exposition begins with a discussion of performance testing. It then puts experience rating into the context of the premium transaction for a policy, then turns to a discussion of overall financial impact. The latter part of the paper details the activity necessary to administer experience rating, including the calculation of plan parameters, the assembly of experience data, and the promulgation of rating forms. The paper is intended to be expository, describing concepts, vocabulary, and details of the plan from an actuarial perspective. (Author) Keywords: Experience Rating, Performance Testing. Gillam