Development factors, in the traditional sense of paid and incurred loss
development factors are relatively unimportant in the analysis of most
warranty products. The key actuarial issue in the pricing of warranty
is the determination of the premium earning patterm, or
(almost)equivalently, the determination of the incidence of losses over
the policy period. For most typical insurance coverages, this pattern
is linear, or reasonably close to linear, but for most warranty
products, it substantially departs from linear.
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