How to Choose a Trend Factor

The first half of this paper is meant to be a descriptive compendium of those considerations which for one particular line go into the selection of a trend number once the mechanics of the formulas have been mastered. One sees too often in rate indication analyses the correct formulas used without the requisite thought as to the issues affecting their correct application. The second half, concerning credibility, is more speculative, and describes my current thinking as to the application of credibility to trend indications. It too is instructive in that it presents the sorts of issues one has to deal with in making this significant decision. My concern is in deriving the most reasonable number given the available information; i.e. a number (or set of numbers) such that when used in a rate indication analysis, gives the most informative and accurate results to those who make decisions on its basis.