Automobile Bodily Injury Liability Rate-Making on a Prospective Basis [Discussion]

The paper presented by Mr. Faust is a very timely one. In this period of unsatisfactory automobile liability loss ratios, there has been considerable discussion in the industry about how to reduce the lag between the past loss experience used as a basis of ratemaking and the actual loss conditions which will exist during the time that the proposed rates will be effective. In many cases, criticism has been directed at the ratemakers, particularly the Countrywide Rating Bureaus, indicating that they are not reflecting to a suitable degree the increasing inflationary effects on both cost and frequency. It is asserted that, because of this failure, they are thereby producing outmoded and unrealistic rates.