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• Graham

  July 2023

  The concept of average accident date is discussed in much greater detail in the pricing material but generally it represents when accidents are expected to occur on average, within a specified period (like an accident year or policy year.)

  • If policies are written uniformly over time then the average accident date for an accident year is the midpoint of that year.
  • If the book of business is growing however, this will skew the average accident to later in the year because more policies are written later in the year versus earlier.

  The reason this is important is that reserving methods generally assume a stable environment, meaning that historical patterns are predictive of future patterns. But if the business is growing and the average accident date shifts, this impacts the stability of the data and could lead to inaccurate estimates of ultimates if no adjustments are made.