Frequency-Severity Method #2
HI,
In step 3 of method 2, should we use the trended exposure or just the exposure to get the ultimate?
The past exams have always been applying the un-trended exposure.
Thank you!
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Comments
Ah yes. Sometimes exposures need to be trended and sometimes they don't. This is actually covered in chapter 4 of the pricing material at this link:
If exposures do need to be trended (Ex: an inflation-sensitive exposure base like payroll for worker's comp like in 2017.Fall #20) you'll be given the exposure trend, or a way to estimate it. If exposures do not need to be trended, you probably won't be given an exposure trend. This would be the case for non-inflation-sensitive exposure base like car-years.
I added a link in the section on frequency-severity method #2 to clarify mention this.