CHP 20: Setting Assumptions

Question 1

What should be considered when setting assumptions

Answer 1

FR UNC

Financial significance
Regulatory constraints

Use to which it is being put
Needs of customer
Consistency between the various assumptions

Question 2

Why may past data not be relevant in the future?

Answer 2

There may be insufficient quantity of data to be credible (small quantity = greater effect of random fluctuations)
Quality of data may not be perfect if it contains errors
Standard tables may not be applicable to your population

BEST ARCHER

Balance of homogenous groups in underlying data may have change
Economic situation
Social conditions (medical advances)
Trends over time

Abnormal fluctuations
Random fluctuations
Change in regulation
Heterogeneity within the group
Errors in data
Recording changes (e.g categorization of a smoker)