Effects of Uniform Inflation

linda.klenk@zurich.com
Wed, 10 Mar 1999 13:56:08 -0500

In response to <aroraa@doi.state.fl.us> "Ashwin Arora"
question of March 8:

Hogg & Klugman on page 160 give a table of how uniform inflation affects the
parameters of several distributions. The distribution in your question is
exponential. But an exponential distribution is a special case of the Gamma
where alpha = 1. Therefore in 1993, lambda' = lambda/1.1 = .9091. The
severity distribution in 1993 is exponential with lambda = .9091, where in 1992
it was exponential with lambda = 1. So, just calculate the limited expected
value using lambda = .9091.