A NCCI filing proposes a 20% increase in premium level in State X based on an
equal weighting of policy year and accident year experience. The filing
includes the following information:
PY loss ratio: .65
AY loss ratio: .75
Permissible loss ratio: .70
LAE/incurred losses: .10
Trend factor in filing: 1.20
What would the premium level indication be if:
b. A 20% increase in statutory benefits becomes effective one month prior to
the filing's proposed effective date.
Here's their answer:
b. This would increase actual incurred losses by a factor of 1.2:
(.5)(.65+.75)(1.2)(1.2) -1.0 = .44
.70
My question: In Feldblum ratemaking, you have to bring premiums and losses up
to current benefit level. Shouldn't the experience premiums and losses both
be adjusted (thus no effect on the experience loss ratios?)
Thanks,
Faith