re: Complement of Credibility - Finger Paper

TC_Bates@westfield-cos.com
Thu, 10 Dec 1998 13:57:04 -0500

It seems pretty unclear, but I don't think he's saying he is using the
current relativity as the compliment (p 263, 5th paragraph in 3rd edition).
Rather, I think he is assuming that the current relativities are correct
(i.e., no change is needed in the relativities, hence the 1.00 in the
formula.)

This may clarify it a little: If he had other information, such as the
last rate change resulted in capping of some of the relativites, assume the
relativity for territory C should have been 0.520 (base rate should have
been $65 instead of $60), he may have used the ratio in his credibility
calculation (kind of like the C factor on the Graves-Castillo paper) so he
would have instead had for his 'credible adjustment' (col 14) :

Z * (prelim adj) + (1-Z) * (ratio) or (0.662 * 0.950) + [0.338 *
(0.520/0.480)] = 0.995 (instead of 0.967)

Any other input out there?

TC

----- original message ------

Why is 1.00 used as the complement of credibility in the Finger paper. The
author states he is using the current relativity to compute the complement,
but the formula's show that 1.00 is used.

What am I missing?
Susan