Fall 2013 Q4

keshav1996keshav1996
edited February 2022 in W-08-Indication

Just this last doubt from this chapter.

In part (a) of this question, for the purposes of 2-step premium trending, why is the ending point of the trend period in step 2 trending taken as 1/1/2015 and not as the AAD which is 1/7/2015 which has been taken for losses?

Thanks

Comments

  • GrahamGraham

    Here's a link showing the start & end periods for the period 1 and period 2 trend:

    For premiums, we use AWDs (Average Written Dates) to calculate trend periods because that's more directly related to premiums than AADs (Average Accident Dates), which we use for loss trending. In this exam problem, the effective date for new rates on annual policies is Jul 1, 2014 so the AWD would be Jan 1, 2015.

    There isn't necessarily a definite right or wrong way to do this, but this is generally how premium trending is done and on the exam you should do it the way it's explained in the source text.

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