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3 Cards in this Set
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Why not use alae experience in pricing policy |
Credibility may be low because only a few claims Alae to paid losses is very volitle Underlying layer of loss may be capped which may distort the alae to loss ratio if looking to obtain an uncapped alae to loss ratio There may be times where paid alae exceeds paid loss which is evidence of litigation and aggressive defense that could inflate the alae to loss ratio |
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Situation where you would not want to use an exposure curve when given loss ratios over time |
Lr are volitle so determining an expereince Lr would be difficult. The limits profile may not be at a location level, but at a risk level instead. This may lead to skewed results since risks may have more than one location |
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