A Refined Model for Premium Adjustment [Discussion]

Many ratemaking problems accompany the expansion of an insurance company into a new line of business. Not the least of these is the problem of accounting for the distortion in on-level factors created by a rapidly expanding exposure base. The authors suggest an interesting extension of the familiar parallelogram method of adjusting the rate level which introduces a third dimension representing the rate at which new exposures are entering the insurer's book of business. Their method is theoretically sound and appears to be rather easy to use as shown by the authors' example. The authros are to be commended for the elegance with which they attacked this rather thorny problem.