A Note on Full Credibility for Estimating Claim Frequency [Discussion]

Credibility is the foundation stone of casualty actuarial science. To the theoretician it offers endless opportunities to advance the mathematical basis of our art; to the practioner it provides a means for charting a course between the twin requirements of insurance pricing: stability and responsiveness. To assign too much credibility to an insurer’s experience is to court insolvency; to give too little is to risk adverse selection and a declining portfolio. A prime determinant of the appropriateness of a credibility procedure is the level at which full credibility is established.