The Advantages of Calendar-Accident Year Experience and the Need for Appropriate Trend and Projection Factors in the Determination of Automobile Liability Rates

The basic principles for automobile liability insurance rate making have been well presented by Mr. Philipp K. Stern in his paper "Current Rate Making Procedures in Automobile Liability Insurance."* The principles and procedures as presented by him are applicable to the utilization of both calendar-accident year and policy year statistics. The purpose of this paper is to outline the advantages to be realized by using calendar-accident year experience instead of policy year experience and to discuss the reasons why trend and projection factors are essential if rate levels are to be proper during the period they are to apply.