Development Technique - Trending Losses
Why don't we trend losses in the development technique?
For example, I'm looking at Exam 5, Fall 2015, Q17. Obviously, that trend provided isn't used in the answer, and obviously I don't see anywhere in the source text where trending is done for the development technique, what assumption would that violate if it was used?
Thanks
Comments
Development and trending are 2 different things. By definition, the development method gives you an untrended ultimate loss. To be able to apply a trend to obtain the "ultimate trended loss" as in a rate indication, you would need information about the effective date and effective period which you aren't given here.
In part (b) of the problem however, they ask you to apply the expected claims technique. In that technique, if you are given a trend, you should apply that trend to obtain a more accurate expected loss. (If you were then using that expected loss method in a rate indication, you would still need the effective date and effective period to trend the ultimate loss to the appropriate effective period.)
Lovely! That helped a ton. Thanks Graham.
Great! 😀