Elements of Time-Series Analysis is Liability and Property Insurance Ratemaking

A chain of changes since the Southeastern Underwriters Association decision has made adequate methods of statistical time-series analysis increasingly important in non-life insurance. Narrowing of safety and profit margins in rates; the steady inflation of the dollar, an adverse trend contrasting sharply with the favorable trend in mortality that has underlain life insurance ratemaking; a highly probable understatement of loss data used in ratemaking, at least for liability insurance, due both to gradual and conscious erosion of safety margins in company loss reserves and also to actual unintentional understatement of reserves by many companies whose methods of estimation have not met the needs imposed by changing conditions; changes in coverages and in combinations of coverages; and doubtless many other changes; have all combined to make time-series analysis important.