Bailey & Simon Cred of Single Car Year

Question 1

What 3 conclusions do Bailey & Simon come to regarding the credibility of a single private passenger car year?

Answer 1

1. The experience of a single car for 1 year has significant and measurable credibility for experience rating.
2. Individual risk experience is more credible when there is more variance in loss experience within a risk class, which occurs in less refined risk classification systems.
3. The credibilities for varying years of experience should increase in proportion to the # of years of experience (in the paper, they observe about a 40% increase from 1 to 2 years, and about a 16.7% increase from 2 to 3 years)