Excerpts from Proposition 103 Testimony

Why is the approach that you recommend and that Mr. Bacon recommends preferable? At the risk of oversimplification, the estimation of the cost of claims component of an insurance rate involves three steps: (1) the selection of the length of the experience a base used in the rate calculation (i.e. l-year, 2-years, or more), (2) the calculation of the appropriate loss development factors, and (3) the determination of the appropriate trend factors. Testimony continues…