Fall 2016 Q13 b)
How do I know to use an exposure weighted average for total change (to get 1.3%)? Should relativities and ind rel chg for TOTAL always be calculated using an exposure weighted average?
(For Spring 2017 Q7, there was no note of using an exposure weighted average to calculate total ind rel change)
Comments
There is no other option. The only way to get the overall change is to weight the relativities by exposures. You never just take a simple average.
The 2017 problem didn't specifically tell you to take an exposure-weighted average but it was the only thing that made sense. (I suppose if you have premiums rather than exposures, you can take a premium-weighted average.)