The only sense I can make out of Feldblum's 2nd and 3rd criticisms goes
something like this:
In Miccolis' paper, the risk load was determined by judgmentally selecting
5% of the expected value pure premium for a 25,000 policy limit. That was
then used to get the risk load for other limits and layers. This is what I
believe Feldblum is referring to when he says these methods only determine
relative risk. (At least that's how I remember his criticism.)
In his third comment, it appears that he's saying not only do the standard
deviation and variance methods produce a relative measure, it's not even a
true measure of risk.
Another way of looking at this: Criticism 2 - these methods don't give an
absolute answer, Criticism 3 - these methods don't even give a measure of
risk, relative or absolute.
Mostly, I'm concerned with just memorizing the 3 criticisms.
Amy.Hoffman@reliancenational.com on 10/06/98 01:03:50 PM
To: studygroup9@lists.casact.org
cc: (bcc: John Pedrick/OPCS/INS)
Subject: Feldblum
I have a question about Feldblum's 3 criticisms of the standard
deviation/variance methods of determining risk loads.
Criticism #2 is that they determine "only relative risk, not absolute
risk".
Criticism #3 is that "these methods determine relative standard deviation
or relative variance, not relative risk."
Don't these statements contradict each other? Am I missing something? Any
clarification would be appreciated.
Thanks.
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