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Canadian merit rating
 A: 3 or more years since acc/license
 X: 2 or more years since acc/license
 Y: 1 year since acc/license
 B: 0 yrs since acc/license

Bailey & Simon  Normalizing frequency
 freq is measured relative to thousands of dollars of EP
 (+) avoids maldistribution created by having higher freq territories producing more X, Y, B risks w higher premium

Merit modification
 Mod = ZR + (1  Z)
 Z = (1  M) / (1  R)
 Z = credibility, R = ratio of actual/exp loss
 R ~ Poisson = 1 / (1  e^{μ})
 Credibility incr at decr rate as # yrs incr

Bailey & Simon statements
 (1) Z should vary approximately in proportion to the avg clm freq of the class, except for narrowly defined classes
 (2) within any class Z assigned to accident free experience should vary approximately in proportion to the # of yrs clm free
 if follow poisson (1) and (2) are equivalent
 if (2) doesn't hold a) risks are entering and leaving b) true chance of loss varies within a yr or from 1 yr to next
 failure comes from diff spread of risk (1) across classes (2) over time

