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Credibility Assessment in Claims Analysis

The document contains exercises related to credibility standards in claims analysis, including calculations using the square-root rule and determining full credibility standards based on observed claims. It discusses various scenarios, including adjustments for larger blocks and confidence levels, resulting in specific credibility values. Key results include a credibility of approximately 38.7% for 300 observed claims and a full credibility standard of around 4905 claims.

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24 views2 pages

Credibility Assessment in Claims Analysis

The document contains exercises related to credibility standards in claims analysis, including calculations using the square-root rule and determining full credibility standards based on observed claims. It discusses various scenarios, including adjustments for larger blocks and confidence levels, resulting in specific credibility values. Key results include a credibility of approximately 38.7% for 300 observed claims and a full credibility standard of around 4905 claims.

Uploaded by

3l10th
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

HOMEWORK 7

1. Exercise 2.6.1
Full-credibility standard: 2000 claims
Observed claims: 300

Square- root rule


𝑛 300
𝑍=√ =√ = √0.15 ≈ 0.387
𝑛𝐹 2000
Answer
𝑍 ≈ 38.7%

2. Exercise 2.6.2
For the original block

𝑛1
𝑍1 = 0.36 → = 𝑍12 = (0.36)2 = 0.1296
𝑛𝐹
A block ten times larger has

𝑛2
= 10 ∗ 0.1296 = 1.296
𝑛𝐹
New credibility

𝑛2
𝑍2 = √ = √1.296 = 0.36 ∗ √10 ≈ 1.14
𝑛𝐹

3. Exercise 2.6.2
Determine the full credibility standard

2 2
𝑧1− 𝛼 (1 + 𝐶𝑉𝑋 )
2
𝑛𝐹 =
𝑘2
Where:
Confidence level 𝑝 = 97% → 𝑧0.985 = 2.17
Precision band 𝑘 = 0.04
1 1
𝐶𝑉𝑋2 = = = 0.6667
𝛼 1.5
(2.17)2 (1 + 0.6667) 4.71 ∗ 1.6667
𝑛𝐹 = ≈ ≈ 4905 𝑐𝑙𝑎𝑖𝑚𝑠
0.042 0.0016

Credibility for 150 claims


150
𝑍=√ ≈ 0.175
4905

4. Exercise 2.6.2
Full credibility standard
For a Poisson frequency and a two Normal aproximation:

𝑘√𝜇 = 𝑍1−𝛼, 𝑘 = 0.05 , 𝑝 = 90% → 𝑍0.95 = 1.645


2
1.645 2
𝜇 = 𝑛𝐹 = ( ) ≈ 1083 𝑐𝑙𝑎𝑖𝑚𝑠
0.05
Credibility for 500 claims

500
𝑍=√ ≈ √0.462 ≈ 0.68
1083

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